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Gannett Announces Fourth Quarter 2021 Results

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·17 min read
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49% Digital-Only Paid Subscriber Growth to Over 1.6 million Paid Subscribers

Total Digital Revenues Surpassed $1.0 billion in 2021, 32% of Total Revenues and Up 9% Year-over-Year and Up 11% Over Prior Year Same Store(1)

Repaid $57.5 million in Debt During the Quarter and adopted a $100 million Share Repurchase Program in 2022

MCLEAN, Va., February 24, 2022--(BUSINESS WIRE)--Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the fourth quarter ended December 31, 2021.

"During 2021 we made excellent progress executing on our strategy to evolve our business. We continued to make meaningful progress against our key operating pillars and we expect to carry this momentum forward. We achieved several key milestones in 2021, including total digital revenues surpassing $1 billion with growth exceeding 9% year-over-year and 11% on a same store basis(1) year-over-year. Further, our digital-only circulation revenue surpassed $100 million in 2021 and paid digital-only subscribers surpassed 1.6 million. We expect continued strong growth in these categories. In addition, we repaid over $235 million in debt during 2021, and through two refinancing efforts, lowered our cost of debt to approximately 5.8% and our first lien net leverage has dropped to 1.7x at year end," said Michael Reed, Gannett Chairman and Chief Executive Officer.

"A benefit of the significant progress we have made with regard to our strategy is better visibility going forward. As part of our enhanced guidance, we expect 2022 free cash flow to nearly double from 2021, and for free cash flow to grow through 2025 at a 40% compound annual growth rate. We expect to surpass 2 million paid digital subscribers this year, and to grow at an annual rate of approximately 40% through 2025."

"With the significant growth in free cash flow expected in 2022, we plan to further invest in our growth segments. We expect to invest $80 million across content, marketing, data, product, and digital marketing solutions sales and support operations during 2022 to drive meaningful growth. We believe that our strategy and these investments help position our business to reach the anticipated inflection point in our total Revenue and Adjusted EBITDA during 2024. We also believe we will have sustained revenue growth beginning in 2024."

"The anticipated significant growth in free cash flow is also expected to allow us to continue our aggressive debt repayment strategy. We ended 2021 with approximately $131 million in cash on the balance sheet. Considering our liquidity position, lower leverage profile and our recently announced $100 million stock repurchase program, along with expected increased free cash flows, we believe we are well-positioned to maximize shareholder returns."

Fourth Quarter 2021 Financial Highlights:

  • Total revenues of $826.5 million decreased 5.6% compared to the prior year quarter

    • Same store revenues(1) decreased 4.3% compared to the fourth quarter of 2020

  • Total digital revenues were $272.6 million or 33% of total revenues, up 5.0% over the same period in the prior year on a same store(1) basis

  • Net loss attributable to Gannett of $22.4 million and margin loss of 2.7%

  • Adjusted net income attributable to Gannett(1) of $42.8 million

  • Adjusted EBITDA(1) totaled $115.4 million, a decrease of 22.5% compared to the fourth quarter of 2020

    • Adjusted EBITDA margin(1) of 14.0%

  • Cash used for operating activities of $5.9 million and free cash flow(1) usage of $18.2 million

Additional Business Highlights:

  • Digital-only paid subscribers were up 49% compared to the prior year quarter and exceeded 1.6 million at the end of the fourth quarter of 2021

    • Digital-only circulation revenues of $27.6 million grew 25.5% compared to the prior year quarter. For the full year 2021, digital-only circulation revenues surpassed $100 million, growing 33.5% compared to 2020

  • 183 million average monthly unique visitors in the fourth quarter of 2021 across USA TODAY NETWORK (based on December 2021 Comscore Media Metrix®) and the U.K. digital properties

  • Digital Marketing Solutions segment revenues were $113.2 million, and on a same store basis(1) increased 7.2% in the fourth quarter of 2021 compared to the same period in the prior year

    • Total core platform customers was 15,200 in the fourth quarter of 2021, up 14.0% from the same quarter prior year

    • Net income attributable to Gannett margin within the segment was 6.6% in the fourth quarter of 2021 versus 0.5% in the same quarter of the prior year

    • Adjusted EBITDA margin(1) within the segment increased to 12.6% in the fourth quarter of 2021 versus 8.9% in the same quarter of the prior year

  • During the fourth quarter of 2021, the Company repaid approximately $57.5 million of debt compromised of:

    • $9.8 million in debt under the previous five-year senior secured term loan (the "5-Year Term Loan"), prior to the refinancing of the New Senior Secured Term Loan (see defined term below)

    • Approximately $35.9 million in principal under its five-year senior secured term loan facility in an aggregate principal amount of $516 million (the "New Senior Secured Term Loan") using the proceeds from real estate and other asset sales

    • Further, the Company entered into separate, privately negotiated agreements with certain holders of its 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes") and repurchased $11.8 million aggregate principal of its outstanding 2027 Notes for $15.3 million in cash, including accrued interest during the fourth quarter of 2021

    • Total real estate and other asset sales totaled $45.5 million in the fourth quarter of 2021 and $106.6 million for the full year ended December 31, 2021

    • Total debt principal outstanding as of December 31, 2021 was $1.369 billion, comprised of (i) $480.1 million under the New Senior Secured Term Loan, (ii) $400.0 million aggregate principal amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes"), (iii) $485.3 million aggregate principal amount of the 2027 Notes, and (iv) $3.3 million aggregate principal value of the remaining 4.75% convertible senior notes due 2024

  • As of December 31, 2021, the Company had cash and cash equivalents of $130.8 million

    • First Lien Net Leverage(2) was 1.7x as of December 31, 2021

  • Subsequent to December 31, 2021:

    • In accordance with the Term Loan Amendment (see defined term below), the Company expects to make an excess cash debt payment of approximately $31 million during the first quarter of 2022

    • Adopted stock repurchase program for the repurchase of up to $100 million of the Company's common stock

    • Amended our New Senior Secured Term Loan (the "Term Loan Amendment") to provide for incremental term loans in an aggregate principal amount not to exceed $50 million and to transition the interest rate base from LIBOR to Adjusted Term SOFR due to regulatory requirements. The Term Loan Amendment also expanded the definition of "Permitted Restricted Payments" to include up to $50 million of Company stock repurchases consummated on or prior to December 31, 2022. Following this transaction, total debt outstanding as of February 4, 2022 was $1.419 billion, which includes the $530.1 million New Senior Secured Term Loan, $485.3 million of 2027 Notes, $400.0 million of 2026 Senior Notes and $3.3 million of 2024 Notes

(1)

See "Use of Non-GAAP Information" below for information about this non-GAAP measure.

(2)

As of December 31, 2021, the First Lien Net Leverage ratio was calculated by subtracting cash on the balance sheet from the sum of both our New Senior Secured Term Loan and the 2026 Senior Notes and dividing that by Q4 2021 LTM Adjusted EBITDA. Our 2027 Notes are second lien as of the completion of the New Senior Secured Term Loan refinancing in October 2021.

Financial Highlights

in thousands

Fourth Quarter 2021

Full Year 2021

Revenues

$

826,539

$

3,208,083

Net loss attributable to Gannett

(22,448

)

(134,962

)

Adjusted EBITDA(3) (non-GAAP)

115,411

433,712

Adjusted Net income attributable to Gannett(3) (non-GAAP)

42,785

113,986

Cash (used in) provided by operating activities

(5,894

)

127,453

Free cash flow(3) (non-GAAP)

(18,189

)

87,893

(3)

Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA, Adjusted Net income 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's outlook is based on management’s current expectations and beliefs and are subject to numerous risks and uncertainties, many of which are beyond the Company's control. The following statements are forward-looking and actual results may differ materially, including as a result of changes in market conditions and other risks and uncertainties, including the factors set forth under "Cautionary Statement Regarding Forward-Looking Statements" below. The Company undertakes no obligation or duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations, except as required by law. Additionally, the Company's estimates assume no substantial negative pandemic-related business impact and do not factor in the impact of any future acquisitions or dispositions. The Company's outlook reflects an expected $80 million in investments across content, marketing, data, product, and digital marketing solutions sales and support operations in 2022 and anticipated capital expenditures of $40 million to $45 million for full year 2022. The Company believes these investments are critical to achieving long-term growth for the Company and will help create an inflection point in both its total Revenue and Adjusted EBITDA within 2024. Following 2024, the Company's outlook projects ongoing and sustainable growth in total Revenue, Net Income, Cash provided by operating activities, Free cash flow, and Adjusted EBITDA. Including the Company's estimate of $40 million to $45 million annually in capital expenditures, the Company's outlook projects a compound annual growth rate in free cash flow of over 40% from 2021 to 2025. In addition, the Company's estimates assume 6 million digital only subscribers by year end 2025, a 40% compound annual growth rate from 2020.

in thousands

Full Year 2021 Results

Full Year 2022 Outlook

First Quarter
2022 Outlook

Revenues

$3.21B

$3.07B to $3.16B

$745 to $755M

Same-store total revenues(3) Year-Over-Year

(3.9) %

(2)% to +1%

(3)% to (1)%

Net income (loss) attributable to Gannett

($135M)

$50M to $70M

~($5M)

Net cash flow provided by operating activities

$127M

$205M to $225M

~$1M

Free cash flow(3)(4) (non-GAAP)

$88M

$160M to $180M

~($10M)

Adjusted EBITDA(3)(5) (non-GAAP)

$434M

$380M to $400M

$55M to $60M

Ending Digital only subscribers

1.6M

2.0M to 2.2M

1.7M

(3)

Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA, Adjusted Net income (loss) attributable to Gannett, Same-store total revenues, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure.

(4)

Capital expenditures are assumed at $40 million to $45 million for full year 2022. Figure does not include asset disposition proceeds which we estimate will be approximately $50 million in 2022.

(5)

Refer to "Business Outlook" on Table 11 and Table 12 below for a reconciliation of non-GAAP outlook measures to corresponding GAAP measures.

Earnings Conference Call

Management will host a conference call on Thursday, February 24, 2022 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 Fourth Quarter Earnings Call" or access code "13724043". 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, March 10, 2022 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 "13724043".

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 USA TODAY, local media organizations in 45 states in the U.S., and Newsquest, a wholly owned subsidiary operating in the United Kingdom with more than 120 local news media brands. Gannett also owns digital marketing services companies branded LOCALiQ, and runs one of 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, 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, any future share repurchases, including under our stock repurchase program, expectations regarding our free cash flows, revenues, income attributable to Gannett, same-store revenues and cash flows, expectations regarding our growth rate and inflection point, including 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, our strategy, our ability to achieve our operating priorities, our long-term opportunities, and future revenue trends and our ability to influence trends. Words such as "expect(s)", "plan(s)", "believes(s)", "will", "target", "outlook" 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.
CONSOLIDATED BALANCE SHEETS

Table No. 1

In thousands, except share data

December 31,
2021

December 31,
2020

Assets

Current assets:

Cash and cash equivalents

$

130,756

$

170,725

Accounts receivable, net of allowance for doubtful accounts of $16,470 and $20,843, respectively

328,733

314,305

Inventories

37,662

35,075

Prepaid expenses and other current assets

80,110

116,581

Total current assets

577,261

636,686

Property, plant, and equipment, net

415,384

590,272

Operating lease assets

271,935

289,504

Goodwill

533,709

534,088

Intangible assets, net

713,153

824,650

Deferred tax assets

32,399

90,240

Pension plan and other assets

284,228

143,474

Total assets

$

2,828,069

$

3,108,914

Liabilities and equity

Current liabilities:

Accounts payable and accrued liabilities

$

357,014

$

378,246

Deferred revenue

184,838

186,007

Current portion of long-term debt

69,456

128,445

Other current liabilities

51,218

48,602

Total current liabilities

662,526

741,300

Long-term debt

769,446

890,323

Convertible debt

393,354

581,405

Deferred tax liabilities

28,812

6,855

Pension and other postretirement benefit obligations

71,937

99,765

Long-term operating lease liabilities

254,969

274,460

Other long-term liabilities

117,410

151,847

Total noncurrent liabilities

1,635,928

2,004,655

Total liabilities

2,298,454

2,745,955

Redeemable noncontrolling interests

(1,150

)

Commitments and contingent liabilities

Equity

Preferred stock, $0.01 par value, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were issued and outstanding at December 31, 2021 and December 31, 2020

Common stock, $0.01 par value per share, 2,000,000,000 shares authorized; 144,667,389 shares issued and 142,299,399 shares outstanding at December 31, 2021; 139,494,741 shares issued and 138,102,993 shares outstanding at December 31, 2020

1,446

1,395

Treasury stock, at cost, 2,367,990 and 1,391,748 shares at December 31, 2021 and December 31, 2020, respectively

(8,151

)

(4,903

)

Additional paid-in capital

1,400,206

1,103,881

Accumulated deficit

(921,399

)

(786,437

)

Accumulated other comprehensive income

59,998

50,173

Total Gannett stockholders equity

532,100

364,109

Noncontrolling interests

(2,485

)

Total equity

529,615

364,109

Total liabilities and equity

$

2,828,069

$

3,108,914

GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Table No. 2

Three months ended December 31,

Year ended December 31,

In thousands, except per share amounts

2021

2020

2021

2020

(Unaudited)

Advertising and marketing services

$

430,674

$

461,088

$

1,651,161

$

1,710,244

Circulation

307,276

338,468

1,249,674

1,391,996

Other

88,589

75,891

307,248

303,430

Total operating revenues

826,539

875,447

3,208,083

3,405,670

Operating costs

470,305

498,733

1,901,564

2,034,272

Selling, general and administrative expenses

249,880

232,514

902,064

999,789

Depreciation and amortization

49,506

58,113

203,958

263,819

Integration and reorganization costs

13,817

71,753

49,284

145,731

Asset impairments

842

2,585

3,976

11,029

Goodwill and intangible impairments

393,446

Loss (gain) on sale or disposal of assets, net

8,002

(7,220

)

17,208

(5,680

)

Other operating expenses

9,598

891

20,952

11,152

Total operating expenses

801,950

857,369

3,099,006

3,853,558

Operating income

24,589

18,078

109,077

(447,888

)

Interest expense

26,378

54,623

135,748

228,513

Loss on early extinguishment of debt

22,712

42,110

48,708

43,760

Non-operating pension income

(23,713

)

(17,716

)

(95,357

)

(72,149

)

Loss on convertible notes derivative

74,329

126,600

74,329

Other non-operating income, net

(14,747

)

(1,506

)

(18,701

)

(16,494

)

Non-operating expense

10,630

151,840

196,998

257,959

Income (loss) before income taxes

13,959

(133,762

)

(87,921

)

(705,847

)

Provision (benefit) for income taxes

36,683

(11,250

)

48,250

(33,450

)

Net loss

$

(22,724

)

$

(122,512

)

$

(136,171

)

$

(672,397

)

Net loss attributable to noncontrolling interests

(276

)

(338

)

)

(1,918

)

Net loss attributable to Gannett

$

(22,448

)

$

(122,174

)

$

(134,962

)

...