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Gannett Announces Fourth Quarter and Full Year 2020 Results

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Strong fourth quarter Revenue and Adjusted EBITDA performance
Debt reduction and refinancing expected to result in $90 million of annual cash interest savings in 2021
Paid digital-only subscriptions reach 1.1 million, an increase of 29% to prior year

Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the fourth quarter and full year ended December 31, 2020.

"During a challenging 2020, we achieved strong operational execution, significant cost and debt reductions, improved operating trends and financial position, and we enter 2021 with good momentum, prepared to implement our subscription-led growth plan," said Michael Reed, Gannett Chairman and Chief Executive Officer. "We are making significant progress on our transition from a traditional media business to a digitally focused content platform, having already surpassed one million digital subscribers. We are committed to becoming a subscription-led business that drives audience growth and engagement by delivering deeper content experiences to our consumers and offering the products and marketing expertise our business partners desire."

He continued, "We have outlined five key operating priorities: accelerating digital subscriber growth, driving digital marketing services growth, optimizing our traditional print operations and advertising businesses, prioritizing investments into growth businesses that support our vision, and building our inclusive and diverse culture. In 2021, you will hear us speak to these priorities regularly and share data points with you to track our progress. We expect this strategy to create significant stockholder value in the coming years by driving increased revenues from digital products, bringing our Company’s total revenue trend back toward growth, and allowing us to continue significant debt reduction."

Financial Highlights

in thousands

Fourth Quarter 2020

Full Year 2020

Revenues

$

875,447

$

3,405,670

Net loss attributable to Gannett

(122,174)

(670,479)

Adjusted EBITDA(1) (non-GAAP)

148,829

413,895

Net cash flow provided by operating activities

(16,510)

57,770

Free cash flow(1) (non-GAAP)

(24,541)

20,795

(1)

Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure included herein.

Fourth Quarter 2020 Consolidated Results

Note: During the comparable period in 2019 until November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media"), and Gannett Co., Inc. ("Legacy Gannett") was a separate publicly traded company. On November 19, 2019, we completed the acquisition of Legacy Gannett and changed our name to Gannett Co., Inc.

  • Fourth quarter revenues of $875.4 million rose 25.2% as compared to the prior year quarter reflecting the acquisition of Legacy Gannett.

    • Same store pro forma revenues (as defined and reconciled on Table No. 5 below) decreased 16.3%, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry. This is an improvement of 330 basis points over the third quarter 2020 trend.

  • Digital advertising and marketing services revenues reached $223.3 million in the fourth quarter, or 25.5% of total revenues.

  • Net loss attributable to Gannett of $122.2 million in the fourth quarter reflects a $74.3 million non-cash loss on the derivative associated with our convertible notes and a $42.1 million loss associated with the early extinguishment of debt.

  • Adjusted EBITDA totaled $148.8 million, an increase of 50.6% compared to the prior year and represented a 17.0% margin.

    • Adjusted EBITDA grew $7.4 million, or 5.4%, year-over-year on a pro forma basis.

Full Year 2020 Consolidated Results

  • Full year 2020 revenues of $3.406 billion rose 82.3% as compared to the prior year reflecting the acquisition of Legacy Gannett.

    • Same store pro forma revenues decreased 18.5%, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry.

  • Digital advertising and marketing services revenues reached $808.4 million in 2020, or 23.7% of total revenues.

  • Net loss attributable to Gannett of $670.5 million in 2020 reflects a second quarter non-cash write-down related to the second quarter 2020 impairment of goodwill and intangible assets of $393.4 million, as well as a $74.3 million non-cash loss on the derivative associated with our convertible debt and a $43.8 million loss associated with the early extinguishment of debt, offset by non-operating pension income of $72.1 million.

  • Adjusted EBITDA totaled $413.9 million and represented a 12.2% margin.

Balance Sheet & Cash Flow

  • As of December 31, 2020, the Company had cash and cash equivalents of $170.7 million.

  • During the fourth quarter of 2020, the Company repaid $653.4 million in principle under its $1.075 billion 11.5% term loan (the "Acquisition Term Loan") using the proceeds from the issuance of the $497.1 million 6% senior secured convertible notes due 2027 (the "2027 Convertible Notes"), along with real estate and other asset sales and cash on hand.

  • Total debt outstanding as of December 31, 2020 was $1.575 billion, comprised of:

    • $1.075 billion Acquisition Term Loan;

    • $497.1 million of 2027 Convertible Notes; and

    • $3.3 million of 4.75% senior secured convertible notes (the "2024 Convertible Notes").

  • Cash flow provided by operations was $57.8 million for the year ended December 31, 2020 compared to $25.5 million for the prior year primarily due to a decrease in pension and postretirement payments of $44.2 million and an increase in tax refunds of $5.2 million, offset by an increase in interest paid of $177.9 million and an increase in severance payments of $73.1 million. The remainder of the change was due to the acquisition of Legacy Gannett, as well as overall timing of receipts and payments.

  • Capital expenditures were $8.0 million in the fourth quarter of 2020 and $37.0 million for the year ended December 31, 2020, primarily for product development, technology investments, and operating infrastructure.

  • Subsequent to December 31, 2020, the Company further amended its debt structure by:

    • Reducing its Acquisition Term Loan debt by an additional $32.6 million utilizing net proceeds from real estate sales; and

    • Refinancing the remaining Acquisition Term Loan with a five-year, senior secured term loan facility in an aggregate principal amount of $1.045 billion (the "5-Year Term Loan"), at LIBOR+700 with a 0.75% LIBOR floor.

    • Total debt outstanding at February 25, 2021, after giving effect to those changes is $1.545 billion, which includes the $1.045 billion 5-Year Term Loan, $497.1 million of 2027 Convertible Notes, and $3.3 million of 2024 Convertible Notes.

    • Cash interest during 2021 is expected to be $90.0 million less than 2020 due to the interest rate savings from the 5-Year Term Loan and 2027 Convertible Notes, and the approximately $250.0 million in debt reduction made since the acquisition of Legacy Gannett.

    • The Company also expects to sell an additional $100 million to $125 million in non-core assets during 2021 that are anticipated to accelerate debt pay down and further reduce cash interest costs.

    • Targeting first lien net leverage of 1.0x by the end of 2022.

Fourth Quarter 2020 Publishing Segment

  • Publishing segment revenues totaled $794.2 million in the fourth quarter.

  • Circulation revenues totaled $338.5 million in the fourth quarter.

    • Same store pro forma circulation revenues decreased 13.6% in the fourth quarter, primarily driven by single copy sales, reflecting the impact of the COVID-19 pandemic on businesses that buy and sell copies of our publications, and the overall secular declines in the volume of home delivery due to subscriber declines.

  • Print advertising revenues totaled $237.6 million in the fourth quarter, reflecting continued secular pressures.

    • Same store pro forma print advertising revenues decreased 26.9% compared to the prior year fourth quarter, a 400 basis point improvement over the third quarter of 2020, reflecting secular industry trends and the negative impact of the COVID-19 pandemic on all categories.

  • Digital advertising and marketing services revenues were $146.5 million in the fourth quarter.

    • Same store pro forma digital advertising and marketing services revenues decreased 2.0% versus the same period in the prior year, an improvement from the 13.5% year-over-year decline we experienced in the third quarter of 2020.

  • Other revenues contributed $71.6 million in the fourth quarter.

  • Digital-only subscriptions totaled approximately 1.1 million at the end of the fourth quarter, up 29% year-over-year.

  • Publishing segment Net income attributable to Gannett was $104.9 million and Adjusted EBITDA was $147.4 million, representing an Adjusted EBITDA margin of 18.6% for the fourth quarter.

Fourth Quarter 2020 Digital Marketing Solutions Segment

  • Digital Marketing Solutions segment revenues were $107.3 million in the fourth quarter.

    • Same store pro forma Digital Marketing Solutions segment revenues decreased by 10.3% compared to the prior year fourth quarter, versus the 17.4% decline that we experienced in the third quarter of 2020. Fourth quarter 2020 trend improvement was driven by overall growth in our core ReachLocal business, offset by continued impacts from the COVID-19 pandemic.

  • Digital Marketing Solutions segment Net income attributable to Gannett was $0.6 million and Adjusted EBITDA was $9.5 million, representing an Adjusted EBITDA margin of 8.9% for the quarter.

Integration of Legacy Gannett Update

  • Realized $61 million in savings in the fourth quarter, bringing our total 2020 integration savings to approximately $177 million.

    • On an annualized basis, that will result in over $245 million of ongoing savings.

  • Management remains confident in its ability to implement additional measures by the end of 2021 that are expected to result in over $300 million in aggregate annualized synergies.

Earnings Conference Call

Management will host a conference call on Thursday, February 25, 2021 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 1-855-319-1124 (from within the U.S.) or 1-703-563-6359 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Gannett Fourth Quarter and Full Year 2020 Earnings Call" or access code "6922159". 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, April 8, 2021 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code "6922159".

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 46 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 the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc., which are marketed under the LOCALiQ brand, and runs the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures. To connect with us, visit www.gannett.com.

Same Store Pro Forma Revenues

Same store pro forma revenues are based on (i) the sum of GAAP revenues for New Media and Legacy Gannett prior to New Media's acquisition of Legacy Gannett and (ii) GAAP revenues for Gannett for the current period, excluding (1) revenues related to the acquisitions that occurred in 2019, including Legacy Gannett, from the beginning of 2020 through the first year anniversary of the applicable acquisition date, (2) exited operations, (3) currency impacts, and (4) deferred revenue impacts related to the acquisition of Legacy Gannett.

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 statements regarding measures expected to result in over $90 million in annualized cash interest savings, our ability to achieve our operating priorities and increase stockholder value, our digital revenue performance, shifts in our revenue mix and the timing of realizing such shifts, the potential sales of non-core assets, including the anticipated use of any proceeds from such sales, integration of our acquisitions, our ability to achieve $300 million of synergies through measures expected to be implemented by the end of 2021, our expectations, in terms of both amount and timing, with respect to debt repayment, real estate sales and debt refinancing, growth of our digital-only subscriptions, digital marketing services, and events and promotions businesses, the impact from and our response to the COVID-19 pandemic, our strategy, and future revenue trends and our ability to influence trends. 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 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and 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. 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.

CONSOLIDATED BALANCE SHEETS

Gannett Co., Inc.

In thousands (except per share amounts)

Table No. 1

Assets

December 31,
2020

December 31,
2019

Current assets:

Cash and cash equivalents

$

170,725

$

156,042

Accounts receivable, net of allowance for doubtful accounts of $20,843 and $19,923, respectively

314,305

438,523

Inventories

35,075

55,090

Prepaid expenses and other current assets

116,581

129,460

Total current assets

636,686

779,115

Property, plant, and equipment, net

590,272

815,807

Operating lease assets

289,504

309,112

Goodwill

534,088

914,331

Intangible assets, net

824,650

1,012,564

Deferred tax assets

90,240

76,297

Other assets

143,474

112,876

Total assets

$

3,108,914

$

4,020,102

Liabilities and equity

Current liabilities:

Accounts payable and accrued expenses

$

378,246

$

453,628

Deferred revenue

186,007

218,823

Current portion of long-term debt

128,445

3,300

Other current liabilities

48,602

42,702

Total current liabilities

741,300

718,453

Long-term debt

890,323

1,636,335

Convertible debt

581,405

3,300

Deferred tax liabilities

6,855

9,052

Pension and other postretirement benefit obligations

99,765

235,906

Long-term operating lease liabilities

274,460

297,662

Other long-term liabilities

151,847

136,188

Total noncurrent liabilities

2,004,655

2,318,443

Total liabilities

2,745,955

3,036,896

Redeemable noncontrolling interests

(1,150)

1,850

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 outstanding at December 31, 2020 and
December 31, 2019

Common stock, $0.01 par value, 2,000,000,000 shares authorized; 139,494,741 shares issued and
138,102,993 shares outstanding at December 31, 2020; 129,386,258 shares issued and 128,991,544
shares outstanding at December 31, 2019

1,395

1,294

Treasury stock, at cost, 1,391,748 and 394,714 shares at December 31, 2020 and December 31, 2019, respectively

(4,903)

(2,876)

Additional paid-in capital

1,103,881

1,090,694

Accumulated deficit

(786,437)

(115,958)

Accumulated other comprehensive loss (income)

50,173

8,202

Total equity

364,109

981,356

Total liabilities and equity

$

3,108,914

$

4,020,102

CONSOLIDATED STATEMENTS OF OPERATIONS

Gannett Co., Inc.

In thousands (except per share amounts)

Table No. 2

Three months ended

Year ended

December 31,
2020

December 31,
2019

December 31,
2020

December 31,
2019

(Unaudited)

Operating revenues:

Advertising and marketing services

$

461,088

$

370,324

$

1,710,244

$

952,644

Circulation

338,468

255,574

1,391,996

704,842

Other

75,891

73,376

303,430

210,423

Total operating revenues

875,447

699,274

3,405,670

1,867,909

Operating costs

498,733

398,322

2,034,272

1,079,593

Selling, general and administrative expenses

232,514

226,611

999,789

602,106

Depreciation and amortization

58,113

43,148

263,819

111,882

Integration and reorganization costs

71,753

38,999

145,731

52,212

Acquisition costs

891

45,300

11,152

60,618

Asset impairments

2,585

540

11,029

3,009

Goodwill and intangible impairments

100,743

393,446

100,743

Net (gain) loss on sale or disposal of assets

(7,220)

1,384

(5,680)

4,723

Total operating expenses

857,369

855,047

3,853,558

2,014,886

Operating income (loss)

18,078

(155,773)

(447,888)

(146,977)

Interest expense

54,623

33,283

228,513

63,660

Loss on early extinguishment of debt

42,110

6,058

43,760

6,058

Non-operating pension income

(17,716)

(8,460)

(72,149)

(9,085)

Unrealized loss on Convertible notes derivative

74,329

74,329

Gain on sale of investments

(7,995)

Other income, net

(1,506)

(249)

(8,499)

(426)

Non-operating expense

151,840

30,632

257,959

60,207

Loss before income taxes

(133,762)

(186,405)

(705,847)

(207,184)

Benefit for income taxes

(11,250)

(90,924)

(33,450)

(85,994)

Net loss

$

(122,512)

$

(95,481)

$

(672,397)

$

(121,190)

Net loss attributable to redeemable noncontrolling interests

(338)

(393)

(1,918)

(1,348)

Net loss attributable to Gannett

$

(122,174)

$

(95,088)

$

(670,479)

$

(119,842)

Loss per share attributable to Gannett - basic

$

(0.92)

$

(1.05)

$

(5.09)

$

(1.77)

Loss per share attributable to Gannett - diluted

$

(0.92)

$

(1.05)

$

(5.09)

$

(1.77)

Dividends declared per share

$

$

$

$

1.52

CONSOLIDATED STATEMENTS OF CASH FLOWS

Gannett Co., Inc.

In thousands

Table No. 3

Year ended

December 31,
2020

December 31,
2019

Operating activities:

Net loss

$

(672,397)

$

(121,190)

Adjustments to reconcile net loss to operating cash flows:

Depreciation and amortization

263,819

111,882

Facility consolidation costs

3,629

148

Share-based compensation

26,350

11,324

Non-cash interest expense

24,086

3,851

Non-cash acquisition related costs

26,411

Benefit for deferred income taxes

(30,175)

(87,765)

Net (gain) loss on sale or disposal of assets

(5,680)

4,723

Unrealized loss on Convertible notes derivative

74,329

Non-cash loss on early extinguishment of debt

43,760

6,058

Asset impairments

11,029

3,009

Goodwill and intangible impairments

393,446

100,743

Pension and other postretirement benefit obligations

(117,522)

(100,452)

Change in assets and liabilities:

Accounts receivables, net

111,506

12,608

Inventory

19,965

5,150

Prepaid expenses

4,078

7,016

Accounts payable and accrued liabilities

(66,377)

44,311

Deferred revenue

(19,348)

(8,326)

Other assets and liabilities

(6,728)

6,034

Net cash provided by operating activities

57,770

25,535

Investing activities:

Acquisitions, net of cash acquired

(796,502)

Purchases of property, plant, and equipment

(36,975)

(13,978)

Proceeds from sale of publications, real estate and other assets

196,344

27,486

Insurance proceeds received for damaged of property

1,643

Change in other investing activities

(876)

(2,066)

Net cash used for investing activities

160,136

(785,060)

Financing activities:

Payments of debt issuance costs

(2,307)

(121,223)

Borrowings under term loans

1,792,000

Borrowings under revolving credit facility

153,900

Repayments under term loans

(681,050)

(481,058)

Repayments under revolving credit facility

(153,900)

Repayments of convertible debt

(197,950)

Proceeds from convertible debt

497,094

Issuance of common stock, net of underwriters' discount

4

Payments of dividends

(91,936)

Changes in other financing activities

(15,083)

(920)

Net cash (used for) provided by financing activities

(201,342)

898,913

Effect of currency exchange rate change

1,498

(3,494)

Increase in cash, cash equivalents and restricted cash

18,062

135,894

Balance of cash, cash equivalents and restricted cash at beginning of year

188,664

52,770

Cash, cash equivalents and restricted cash at end of year

$

206,726

$

188,664

SEGMENT INFORMATION

Gannett Co., Inc.

Unaudited, In thousands

Table No. 4

Three months ended

Year ended

December 31,
2020

December 31,
2019

December 31,
2020

December 31,
2019

Operating revenues:

Publishing

$

794,179

$

653,877

$

3,080,447

$

1,792,652

Digital Marketing Solutions

107,318

69,336

428,605

149,242

Corporate and Other

2,820

2,018

10,960

4,554

Intersegment eliminations

(28,870)

(25,957)

(114,342)

(78,539)

Total

$

875,447

$

699,274

$

3,405,670

$

1,867,909

Adjusted EBITDA:

Publishing

$

147,428

$

113,334

$

459,195

$

268,916

Digital Marketing Solutions

9,514

4,024

24,361

(3,279)

Corporate and Other

(8,113)

(18,537)

(69,661)

(41,766)

Total

$

148,829

$

98,821

$

413,895

$

223,871

Depreciation and amortization:

Publishing

$

45,756

$

37,442

$

221,746

$

101,881

Digital Marketing Solutions

7,775

3,714

25,878

6,534

Corporate and Other

4,582

1,992

16,195

3,467

Total

$

58,113

$

43,148

$

263,819

$

111,882

SAME STORE REVENUES

Gannett Co., Inc.

Unaudited, in thousands

Table No. 5

Three months ended

Year ended

December 31,
2020

December 31,
2019

% Change

December 31,
2020

December 31,
2019

% Change

Total revenue(a)

$

875,447

$

1,054,252

(17.0)

%

$

3,405,670

$

4,182,220

(18.6)

%

Acquired revenues

***

(16,350)

***

Currency impact

(1,698)

***

(832)

***

...

Exited operations

(1)

(21,400)

(100.0)

%

(12)

(29,894)

(100.0)

%

Deferred revenue adjustment

221

10,791

(98.0)

3,597

10,791

(66.7)

Same store pro forma revenue

$

873,969

$

1,043,643

(16.3)

%

$

3,392,073

$

4,163,117

(18.5)

%

Advertising and marketing
services revenue(a)

$

461,088

$

566,211

(18.6)

%

$

1,710,244

$

2,227,318

(23.2)

%

Acquired revenues

***

(3,283)

***

Currency impact

(1,187)

***

(481)

***

Exited operations

(1)

(12,872)

(100.0)

%

(12)

(20,326)

(99.9)

%

Deferred revenue adjustment

28

1,262

(97.8)

1,202

1,262

(4.8)

Same store pro forma
advertising and marketing
services revenue

$

459,928

$

554,601

(17.1)

%

$

1,707,670

$

2,208,254

(22.7)

%

Circulation revenue(a)

$

338,468

$

384,376

(11.9)

%

$

1,391,996

$

1,574,054

(11.6)

%

Acquired revenues

***

(1,803)

***

Currency impact

(423)

***

(347)

***

Exited operations

(2,343)

(100.0)

(2,824)

(100.0)

Deferred revenue adjustment

193

9,529

(98.0)

2,395

9,529

(74.9)

Same pro forma store
circulation revenue

$

338,238

$

391,562

(13.6)

%

$

1,392,241

$

1,580,759

(11.9)

%

Other revenue(a)

$

75,891

$

103,665

(26.8)

%

$

303,430

$

380,848

(20.3)

%

Acquired revenues

***

(11,264)

***

Currency impact

(88)

***

(4)

***

Exited operations

(6,185)

(100.0)

%

(6,744)

(100.0)

%

Same store pro forma other revenue

$

75,803

$

97,480

(22.2)

%

$

292,162

$

374,104

(21.9)

%

(a)

Revenue for 2019 represents unaudited pro forma Revenues, which assumes that the acquisition of Legacy Gannett, along with transactions necessary to finance the acquisition, occurred at the beginning of 2019.

***

Indicates a percentage change greater than 100.

USE OF NON-GAAP INFORMATION

The Company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures, which may not be comparable to similarly titled measures reported by other companies, should not be considered in isolation from or as a substitute for the related GAAP measures and should be read together with financial information presented on a GAAP basis.

The Company defines its non-GAAP measures as follows:

  • Adjusted EBITDA is a non-GAAP performance measure the Company believes offers a useful view of the overall operations of our business. The Company defines Adjusted EBITDA as Net income (loss) attributable to Gannett before: (1) Income tax expense (benefit), (2) Interest expense, (3) Gains or losses on early extinguishment of debt, (4) Non-operating pension income (expense), (5) Unrealized (gain) loss on Convertible notes derivative, (6) Other Non-operating items, primarily equity income, (7) Depreciation and amortization, (8) Integration and reorganization costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets, (12) Share-based compensation expense, (13) Acquisition costs, (14) Gains or losses on the sale of investments, and (15) certain other non-recurring charges. The most directly comparable GAAP measure is Net income (loss) attributable to Gannett.

  • Free cash flow is a non-GAAP liquidity measure that adjusts our reported GAAP results for items we believe are critical to the ongoing success of our business. The Company defines Free cash flow as Net cash provided by operating activities as reported on the Statement of Cash Flows less capital expenditures, which results in a figure representing Free cash flow available for use in operations, additional investments, debt obligations, and returns to stockholders. The most directly comparable GAAP financial measure is Net cash from operating activities.

Management’s Use of Non-GAAP Measures

Adjusted EBITDA and Free cash flow are not measurements of financial performance under GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), cash flow from operating activities, or any other measure of performance or liquidity derived in accordance with GAAP. We believe these non-GAAP financial measures as we have defined them are helpful in identifying trends in our day-to-day performance because these items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance.

Adjusted EBITDA provides us with a measure of financial performance, independent of items that are beyond the control of management in the short-term such as depreciation and amortization, taxation, non-cash impairments, and interest expense associated with our capital structure. This metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one of the metrics we use to review the financial performance of our business on a monthly basis.

We use Adjusted EBITDA as a measure of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results.

Limitations of Adjusted EBITDA and Free Cash Flow

Each of our non GAAP measures have limitations as an analytical tool. They should not be viewed in isolation or as a substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) include: the cash portion of interest / financing expense, income tax (benefit) provision, and charges related to asset impairments, which may significantly affect our financial results.

A reader of our financial statements may find this item important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA and Free Cash Flow are not alternatives to net income, income from operations, or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. Readers of our financial statements should not rely on Adjusted EBITDA or Free Cash Flow as a substitute for any such GAAP financial measure. We strongly urge readers of our financial statements to review the reconciliations of Net income (loss) attributable to Gannett to Adjusted EBITDA and Cash provided by operations to Free Cash Flow along with our consolidated financial statements included elsewhere in this report. We also strongly urge readers of our financial statements to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA and Free Cash Flow are not a measures of financial performance under GAAP and are susceptible to varying calculations, the Adjusted EBITDA and Free Cash Flow measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.

NON-GAAP FINANCIAL INFORMATION

ADJUSTED EBITDA

Gannett Co., Inc.

Unaudited, in thousands

Table No. 6

Three months ended December 31, 2020

Publishing

Digital
Marketing
Solutions

Corporate and
Other

Consolidated
Total

Net income (loss) attributable to Gannett

$

104,884

$

582

$

(227,640)

$

(122,174)

Benefit for income taxes

(11,250)

(11,250)

Interest expense

15

54,608

54,623

Loss on early extinguishment of debt

42,110

42,110

Non-operating pension income

(17,643)

(73)

(17,716)

Unrealized loss on Convertible notes derivative

74,329

74,329

Other non-operating (income) expense, net

(839)

(2,100)

1,433

(1,506)

Depreciation and amortization

45,756

7,775

4,582

58,113

Integration and reorganization costs

21,803

1,076

48,874

71,753

Acquisition costs

891

891

Asset impairments

2,585

2,585

Net (gain) loss on sale or disposal of assets

(9,417)

2,153

44

(7,220)

Share-based compensation expense

3,538

3,538

Other items

284

28

441

753

Adjusted EBITDA (non-GAAP basis)

$

147,428

$

9,514

$

(8,113)

$

148,829

Three months ended December 31, 2019

Publishing

Digital
Marketing
Solutions

Corporate and
Other

Consolidated
Total

Net loss attributable to Gannett

$

(52,036)

$

(1,392)

$

(41,660)

$

(95,088)

Benefit for income taxes

(90,924)

(90,924)

Interest expense

24

33,259

33,283

Loss on early extinguishment of debt

6,058

6,058

Non-operating pension income

(1,861)

(6,599)

(8,460)

Other non-operating (income) expense, net

1,855

(775)

(1,329)

(249)

Depreciation and amortization

37,442

3,714

1,992

43,148

Integration and reorganization costs

14,420

965

23,614

38,999

Acquisition costs

45,300

45,300

Asset impairments

540

540

Goodwill and intangible impairments

100,743

100,743

Net (gain) loss on sale or disposal of assets

1,289

(8)

103

1,384

Share-based compensation expense

8,790

8,790

Other items

10,918

1,520

2,859

15,297

Adjusted EBITDA (non-GAAP basis)

$

113,334

$

4,024

$

(18,537)

$

98,821

NON-GAAP FINANCIAL INFORMATION

ADJUSTED EBITDA

Gannett Co., Inc.

Unaudited, in thousands

Table No. 6 (continued)

Year ended December 31, 2020

Publishing

Digital
Marketing
Solutions

Corporate and
Other

Consolidated
Total

Net loss attributable to Gannett

$

(108,606)

$

(42,494)

$

(519,379)

$

(670,479)

Benefit for income taxes

(33,450)

(33,450)

Interest expense

142

228,371

228,513

Loss on early extinguishment of debt

43,760

43,760

Non-operating pension income

(71,858)

(291)

(72,149)

Unrealized loss on Convertible notes derivative

74,329

74,329

Gain on sale of investments

(195)

(7,800)

(7,995)

Other non-operating income, net

(6,029)

(2,278)

(192)

(8,499)

Depreciation and amortization

221,746

25,878

16,195

263,819

Integration and reorganization costs

60,852

6,663

78,216

145,731

Acquisition costs

11,152

11,152

Asset impairments

10,312

717

11,029

Goodwill and intangible impairments

352,947

40,499

393,446

Net (gain) loss on sale or disposal of assets

(7,541)

1,727

134

(5,680)

Share-based compensation expense

26,350

26,350

Other items

7,425

1,449

5,144

14,018

Adjusted EBITDA (non-GAAP basis)

$

459,195

$

24,361

$

(69,661)

$

413,895

Year ended December 31, 2019

Publishing

Digital
Marketing
Solutions

Corporate and
Other

Consolidated
Total

Net income (loss) attributable to Gannett

$

22,523

$

(14,006)

$

(128,359)

$

(119,842)

Benefit for income taxes

(85,994)

(85,994)

Interest expense

123

63,537

63,660

Loss on early extinguishment of debt

6,058

6,058

Non-operating pension income

(2,486)

(6,599)

(9,085)

Other non-operating (income) expense, net

1,517

(775)

(1,168)

(426)

Depreciation and amortization

101,881

6,534

3,467

111,882

Integration and reorganization costs

23,487

2,202

26,523

52,212

Acquisition costs

(38)

60,656

60,618

Asset impairments

3,009

3,009

Goodwill and intangible impairments

100,743

100,743

Net (gain) loss on sale or disposal of assets

4,036

(5)

692

4,723

Share-based compensation expense

11,324

11,324

Other items

14,083

2,809

8,097

24,989

Adjusted EBITDA (non-GAAP basis)

$

268,916

$

(3,279)

$

(41,766)

$

223,871

NON-GAAP FINANCIAL INFORMATION

FREE CASH FLOW

Gannett Co., Inc.

Unaudited, in thousands

Table No. 7

Three months ended
December 31, 2020

Year ended December
31, 2020

Net cash flow (used for) provided by operating activities (GAAP basis)

$

(16,510)

$

57,770

Capital expenditures

(8,031)

(36,975)

Free cash flow (non-GAAP basis)(a)

$

(24,541)

$

20,795

(a)

Free cash flow for the fourth quarter of 2020 was negatively impacted by $53.5 million of integration and reorganization costs. Free cash flow for the full year of 2020 was negatively impacted by $132.2 million of integration and reorganization costs, $6.1 million of acquisition costs, and $2.6 million of other one-time adjustments.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210225005327/en/

Contacts

For investor inquiries:
Ashley Higgins
Investor Relations
212-479-3160
investors@gannett.com

For media inquiries:
Stephanie Tackach
Director, Public Relations
212-715-5490
stackach@gannett.com