Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the second quarter ended June 30, 2023.
"We are pleased to report strong operational and financial results for the quarter. In the second quarter, Adjusted EBITDA grew by 40% year-over-year, reflecting a margin of approximately 11%, a sizable increase compared to the prior year's margin of about 7%. Additionally, free cash flow increased by 189% year-over-year, while our strategic initiatives drove ongoing sequential improvements in same-store revenue trends. As a result, our total digital revenues returned to growth in the second quarter and account for nearly 40% of total revenues, representing an all-time high. We believe we are making great progress on our strategy, and our results signify a notable turning point in our business trajectory," said Michael Reed, Gannett Chairman and Chief Executive Officer.
"In the second quarter, our digital businesses continued to deliver solid results. Digital-only subscription revenues experienced growth of 17% year-over-year on a same store basis, while our digital marketing solutions business achieved record high core platform revenues and ARPU, and sustained strong Adjusted EBITDA margins. We also repaid $15 million of debt, and combined with our improving Adjusted EBITDA performance, we materially reduced our first lien net leverage to 2.26x, while maintaining a healthy liquidity position."
"We continue to build on the strong foundation we laid over the past year and our focus persists on profitability, digital revenue growth and continuing to enhance our balance sheet. We believe that focus is evident in our results, enabling us to raise our full year guidance again this quarter. We expect sustained improvement in same store revenue trends throughout the second half of the year, alongside more substantial growth in our digital revenue trends. Our strong performance expected in the latter half of this year also extends to Adjusted EBITDA and free cash flow, reinforcing our confidence in achieving a first lien net leverage well below 2.0x by the end of 2023."
Second Quarter 2023 Highlights:
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Total revenues of $672.4 million decreased 10.2% compared to the second quarter of 2022
- Same store revenues(1) decreased 8.6% compared to the second quarter of 2022, reflecting a sequential improvement of 70 basis points compared to the first quarter of 2023
- Total digital revenues were $262.1 million, or 39.0% of total revenues, up 0.8% over the same period in the prior year on a same store(1) basis
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Net loss attributable to Gannett of $12.7 million improved by $41.0 million versus the net loss attributable to Gannett of $53.7 million in the second quarter of 2022
- Adjusted net loss attributable to Gannett(1) of $6.0 million
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Adjusted EBITDA(1) totaled $71.2 million, an increase of 39.9% compared to the second quarter of 2022
- Adjusted EBITDA margin(1) of 10.6% improved 380 basis points compared to the 6.8% Adjusted EBITDA margin(1) in the second quarter of 2022
- Cash provided by operating activities of $46.1 million
- Free cash flow(1) of $38.4 million, an increase of 188.8% compared to second quarter of 2022
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Strengthened our executive leadership team through the strategic appointments of:
- Chris Cho as President of Digital Marketing Solutions
- Imtiaz Patel as Gannett Media Chief Consumer Officer
- Kristin Roberts as Gannett Media Chief Content Officer
- Jason Taylor as Gannett Media Chief Sales Officer
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| (1) | See "Use of Non-GAAP Information" below for information about these non-GAAP measures. |
| (2) | See "Key Performance Indicators" ("KPI") below for information about our use of KPIs. |
| (3) | Core platform revenues is defined as revenue derived from customers utilizing our proprietary digital marketing services platform that are sold by either our direct or local market teams. |
Second Quarter 2023 Gannett Media Highlights:
- Digital-only subscription revenues of $37.9 million grew 16.6% year-over-year and increased 17.3% year-over-year on a same store basis(1)
- Digital-only paid subscriptions(2) of 1.95 million at the end of the second quarter of 2023, up 4.6% compared to same period in the prior year
- Digital-only average revenue per user(2) of $6.35 increased 6.2% year-over-year, reflecting the execution of our refined acquisition strategy with a heightened focus on profitability and digital-only average revenue per user(2)
- 185 million average monthly unique visitors in the second quarter of 2023 with 134 million average monthly unique visitors coming from our USA TODAY NETWORK (based on June 2023 Comscore Media Metrix®) and 51 million average monthly unique visitors resulting from our U.K. digital properties(4)
Second Quarter 2023 Digital Marketing Solutions Highlights:
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Digital Marketing Solutions segment revenues of $122.8 million grew 4.0% year-over year and increased 4.6% year-over-year on a same store basis(1)
- Total core platform revenues(3) of $121.6 million in the second quarter of 2023, up 4.4% compared to the same quarter in the prior year
- Total core platform average customer count(2) of 15.3 thousand increased sequentially by 4.1% compared to the first quarter of 2023
- Core platform average revenue per user(2) was $2,642, a 10.4% increase year-over-year
- Customer budget retention(5) was 95.6%, an increase of 70 basis points compared to the second quarter of 2022
- Net income attributable to Gannett within the segment was $9.3 million in the second quarter of 2023 and Net income attributable to Gannett margin within the segment was 7.6% in the second quarter of 2023 versus 3.6% in the same quarter of the prior year
- Adjusted EBITDA(1) within the segment of $15.5 million in the second quarter of 2023, increasing 8.1% compared to the same period in the prior year. Adjusted EBITDA margin(1) within the segment increased to 12.6% in the second quarter of 2023 versus 12.1% in the same quarter of the prior year
Second Quarter 2023 Capital Structure Highlights:
- As of June 30, 2023, the Company had cash and cash equivalents of $106.6 million
- Total principal amount of debt outstanding as of June 30, 2023 was $1,219.7 million including $731.1 million in first lien debt, which resulted in a First Lien Net Leverage(6) of 2.26x - a decline of 15.7% compared to 2.68x in the fourth quarter of 2022
- During the second quarter of 2023, the Company repaid $15.1 million of debt through its scheduled quarterly amortization payment on its five-year senior secured term loan facility (the “New Senior Secured Term Loan”)
- Subsequent to June 30, 2023, the Company repaid $8.2 million of its New Senior Secured Term Loan using the proceeds from real estate asset sales
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| (4) | Newsquest used Adobe Analytics to identify unique visitors in the second quarter of 2023. |
| (5) | Customer budget retention is calculated as 1 minus the average of churned budgets in a given month divided by starting budgets in the same period, averaged across the quarter. |
| (6) | As of June 30, 2023, the First Lien Net Leverage ratio was calculated by subtracting cash on the balance sheet from the sum of both our Senior Secured Term Loan and 6% first lien notes due November 1, 2026 (the “2026 Senior Notes”) and dividing that by Q2 2023 LTM Adjusted EBITDA. Our 6% Senior Secured Convertible Notes due 2027 are second lien as of the completion of the Senior Secured Term Loan refinancing in October 2021. |
Financial Highlights
in thousands | Second Quarter 2023 | ||
Revenues | $ | 672,357 | |
Net loss attributable to Gannett | (12,677 | ) | |
Adjusted EBITDA(7) (non-GAAP basis) | 71,151 | ||
Adjusted Net loss attributable to Gannett(7) (non-GAAP basis) | (5,978 | ) | |
Cash provided by operating activities | 46,068 | ||
Free cash flow (7) (non-GAAP basis) | 38,418 | ||
| (7) | Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA, Adjusted Net loss attributable to Gannett, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure. |
Business Outlook
The Company is raising its 2023 full year outlook with respect to net income (loss) attributable to Gannett, cash provided by operating activities, free cash flow, and Adjusted EBITDA. The Company is reiterating its 2023 full year outlook with respect to revenues, same store total revenues year-over-year, and first lien net leverage. The Company's estimates do not factor in the impact of any future acquisitions or dispositions.
Full Year 2023 Outlook | Prior Full Year 2023 Outlook(11) | |
Revenues | $2.75B to $2.80B | $2.75B to $2.80B |
Same store total revenues(8)(9) Year-Over-Year (non-GAAP basis) | (5%) to (3%) | (5%) to (3%) |
Net income (loss) attributable to Gannett | ($10M) to $20M | ($15M) to $15M |
Cash provided by operating activities | $130M to $150M | $125M to $145M |
Free cash flow(8)(9)(10) (non-GAAP basis) | $90M to $110M | $85M to $105M |
Adjusted EBITDA(8)(9) (non-GAAP basis) | $290M to $310M | $285M to $305M |
First lien net leverage | <2.0x | <2.0x |
| (8) | Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA, Same store total revenues, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure. |
| (9) | Refer to "Business Outlook" on Tables 11, 12 and 13 below for a reconciliation of non-GAAP outlook measures to corresponding GAAP measures. |
| (10) | Capital expenditures are assumed at $40 million for full year 2023. Figure does not include asset disposition proceeds which we estimate will be approximately $65 million to $75 million in 2023. |
| (11) | Projections were based on Company estimates as of May 4, 2023. |
Earnings Conference Call
Management will host a conference call on Thursday, August 3, 2023 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. The conference call may be accessed by dialing 1-877-451-6152 (from within the U.S.) or 1-201-389-0879 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Gannett Second Quarter Earnings Call" or access code "13733335". A simultaneous webcast of the conference call will be available to the public on a listen-only basis at investors.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, August 17, 2023 by dialing 1-844-512-2921 (from within the U.S.) or 1-412-317-6671 (from outside of the U.S.); please reference access code "13733335".
About Gannett
Gannett Co., Inc. (NYSE: GCI) is a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. With an unmatched reach at the national and local level, Gannett touches the lives of millions with our Pulitzer Prize-winning content, consumer experiences and benefits, and advertiser products and services. Our current portfolio of media assets includes the USA TODAY NETWORK, which includes USA TODAY, and local media organizations in 43 states in the United States, and Newsquest, a wholly-owned subsidiary operating in the United Kingdom. We also own digital marketing services companies under the brand LocaliQ, which provide a cloud-based platform of products to enable small and medium-sized businesses to accomplish their marketing goals. In addition, our portfolio includes what we believe is the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures. To connect with us, visit www.gannett.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, our Business Outlook, statements regarding our business outlook, digital revenue performance and growth, growth in our Digital Marketing Solutions segment, growth of and demand for our digital-only subscriptions and digital marketing and advertising services, expectations regarding our free cash flows, revenues, net income (loss) attributable to Gannett, same-store revenues and cash flows, expectations regarding our long-term growth, expectations regarding growth in revenues and Adjusted EBITDA, our ability to create long-term stockholder value, our expectations, in terms of both amount and timing, with respect to debt repayment, our expected capital expenditures, expectations regarding real estate and other asset sales, our strategy, our ability to achieve our operating priorities, our long-term opportunities, economic impacts, our ability to navigate volatility, achieve our financial goals, optimize our capital structure and achieve optimal financial performance, our cost management programs, our cost structure and future revenue trends and our ability to influence trends. Words such as "expect(s)", believe(s)", "continue(s)", "persist(s)", "will", "anticipate", "outlook", "making", "target", "estimate(s)", "project(s)" and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s most recent Annual Report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Except to the extent required by law, the Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
GANNETT CO., INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
Table No. 1 | |||||||
In thousands, except share data | June 30, 2023 | December 31, 2022 | |||||
Assets | (Unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 106,633 | $ | 94,255 | |||
Accounts receivable, net of allowance of $13,170 and $16,697 as of June 30, 2023 and December 31, 2022, respectively | 250,164 | 289,415 | |||||
Inventories | 29,449 | 45,223 | |||||
Prepaid expenses | 51,846 | 46,205 | |||||
Other current assets | 43,693 | 32,679 | |||||
Total current assets | 481,785 | 507,777 | |||||
Property, plant and equipment, net of accumulated depreciation of $387,919 and $360,522 as of June 30, 2023 and December 31, 2022, respectively | 254,402 | 305,994 | |||||
Operating lease assets | 223,174 | 233,322 | |||||
Goodwill | 533,796 | 533,166 | |||||
Intangible assets, net | 569,757 | 613,358 | |||||
Deferred tax assets | 71,731 | 56,618 | |||||
Pension and other assets | 172,193 | 143,320 | |||||
Total assets | $ | 2,306,838 | $ | 2,393,555 | |||
Liabilities and equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 302,308 | $ | 351,848 | |||
Deferred revenue | 137,478 | 153,648 | |||||
Current portion of long-term debt | 63,752 | 60,452 | |||||
Operating lease liabilities | 46,556 | 44,872 | |||||
Other current liabilities | 5,606 | 6,218 | |||||
Total current liabilities | 555,700 | 617,038 | |||||
Long-term debt | 647,811 | 695,642 | |||||
Convertible debt | 408,992 | 405,681 | |||||
Deferred tax liabilities | — | 1,439 | |||||
Pension and other postretirement benefit obligations | 47,989 | 50,710 | |||||
Long-term operating lease liabilities | 205,753 | 219,109 | |||||
Other long-term liabilities | 113,696 | 108,563 | |||||
Total noncurrent liabilities | 1,424,241 | 1,481,144 | |||||
Total liabilities | 1,979,941 | 2,098,182 | |||||
Commitments and contingent liabilities | |||||||
Equity | |||||||
Preferred stock, $0.01 par value per share, 300,000 shares authorized, of which 0 shares and 150,000 shares were designated as Series A Junior Participating Preferred Stock at June 30, 2023 and December 31, 2022, respectively, none of which were issued and outstanding at June 30, 2023 and December 31, 2022 | — | — | |||||
Common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 158,436,428 shares issued and 149,125,668 shares outstanding at June 30, 2023; 153,286,104 shares issued and 146,223,179 shares outstanding at December 31, 2022 | 1,584 | 1,533 | |||||
Treasury stock, at cost, 9,310,760 shares and 7,062,925 shares at June 30, 2023 and December 31, 2022, respectively | (17,370 | ) | (14,737 | ) | |||
Additional paid-in capital | 1,418,577 | 1,409,578 | |||||
Accumulated deficit | (1,001,734 | ) | (999,401 | ) | |||
Accumulated other comprehensive loss | (73,694 | ) | (101,231 | ) | |||
Total Gannett stockholders' equity | 327,363 | 295,742 | |||||
Noncontrolling interests | (466 | ) | (369 | ) | |||
Total equity | 326,897 | 295,373 | |||||
Total liabilities and equity | $ | 2,306,838 | $ | 2,393,555 | |||
GANNETT CO., INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(Unaudited) | |||||||
Table No. 2 | Three months ended June 30, | ||||||
In thousands, except per share amounts | 2023 | 2022 | |||||
Advertising and marketing services | $ | 353,310 | $ | 383,609 | |||
Circulation | 233,612 | 274,624 | |||||
Other | 85,435 | 90,427 | |||||
Total operating revenues | 672,357 | 748,660 | |||||
Operating costs | 426,096 | 476,002 | |||||
Selling, general and administrative expenses | 184,127 | 227,836 | |||||
Depreciation and amortization | 39,784 | ||||||
