Gannett Co., Inc. (NYSE:GCI) Q1 2022 Earnings Conference Call May 5, 2022 8:30 AM ET Company Participants Matthew Esposito - IR Mike Reed - Chairman and CEO Doug Horne - CFO Conference Call Participants Doug Arthur - Huber Research Lee Cooperman - Omega Family Operator Greetings and welcome to Gannett Co., Inc. 1Q Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host Matthew Esposito with Investor Relatio ...

| --- | --- | |------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q1 2022 Earnings | | | | | | | | | | | | May 5, 2022 | | Disclaimer and Notes 2 In General. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the "Presentation." Gannett Co., Inc. is referred to in this Presentation as "Gannett," "we," "us," "our" o ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides Gannett Co., Inc.'s unaudited condensed consolidated financial information for the quarter ended March 31, 2022 [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Gannett Co., Inc.'s unaudited condensed consolidated financial statements for the quarter ended March 31, 2022, including balance sheets, statements of operations, cash flows, and equity, along with detailed notes explaining business operations, accounting policies, revenue recognition, debt, and segment reporting [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and equity as of March 31, 2022 Condensed Consolidated Balance Sheets (In thousands) | In thousands | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $152,191 | $130,756 | | Accounts receivable, net | $293,462 | $328,733 | | Total current assets | $562,345 | $577,261 | | Total assets | $2,783,443 | $2,828,069 | | **Liabilities and equity** | | | | Total current liabilities | $641,804 | $662,526 | | Long-term debt | $783,010 | $769,446 | | Convertible debt | $396,297 | $393,354 | | Total liabilities | $2,268,717 | $2,298,454 | | Total equity | $514,726 | $529,615 | | Total liabilities and equity | $2,783,443 | $2,828,069 | - Total assets decreased by **$44.6 million** from December 31, 2021, to March 31, 2022, primarily due to decreases in accounts receivable, property, plant and equipment, and intangible assets[12](index=12&type=chunk) - Total liabilities decreased by **$29.7 million**, driven by reductions in current liabilities and deferred tax liabilities, partially offset by an increase in long-term debt[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Details the company's financial performance, including revenues, expenses, and net loss for the period Condensed Consolidated Statements of Operations (In thousands, except per share amounts) | In thousands, except per share amounts | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Total operating revenues | $748,077 | $777,084 | | Total operating expenses | $750,055 | $769,143 | | Operating income (loss) | $(1,978) | $7,941 | | Non-operating expenses | $8,731 | $159,751 | | Loss before income taxes | $(10,709) | $(151,810) | | Benefit for income taxes | $(7,607) | $(9,109) | | Net loss attributable to Gannett | $(2,967) | $(142,316) | | Loss per share attributable to Gannett - basic | $(0.02) | $(1.06) | | Loss per share attributable to Gannett - diluted | $(0.02) | $(1.06) | - Total operating revenues decreased by **3.7%** year-over-year, from **$777.1 million** in Q1 2021 to **$748.1 million** in Q1 2022[14](index=14&type=chunk) - Net loss attributable to Gannett significantly improved from **$(142.3) million** in Q1 2021 to **$(3.0) million** in Q1 2022, primarily due to the absence of a **$126.6 million** loss on convertible notes derivative in 2022[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $32,429 | $61,316 | | Cash provided by (used for) investing activities | $(6,220) | $2,516 | | Cash used for financing activities | $(3,818) | $(74,699) | | Increase (decrease) in cash, cash equivalents and restricted cash | $21,399 | $(10,553) | | Cash, cash equivalents and restricted cash at end of period | $165,018 | $196,173 | - Cash provided by operating activities decreased by **$28.9 million**, from **$61.3 million** in Q1 2021 to **$32.4 million** in Q1 2022[15](index=15&type=chunk) - Cash used for financing activities significantly decreased from **$74.7 million** in Q1 2021 to **$3.8 million** in Q1 2022, mainly due to lower repayments under term loans and deferred financing costs[15](index=15&type=chunk) [Condensed Consolidated Statements of Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Outlines changes in stockholders' equity, including common stock and accumulated deficit Condensed Consolidated Statements of Equity (In thousands, except share data) | In thousands, except share data | Balance at December 31, 2021 | Balance at March 31, 2022 | | :--- | :--- | :--- | | Common stock (shares) | 144,667 | 151,017 | | Common stock (amount) | $1,446 | $1,510 | | Additional paid-in capital | $1,400,206 | $1,397,516 | | Accumulated deficit | $(921,399) | $(924,366) | | Total Gannett stockholders equity | $532,100 | $514,977 | | Total equity | $529,615 | $514,726 | - Total equity decreased by **$14.9 million** from December 31, 2021, to March 31, 2022, primarily due to net loss attributable to Gannett and other comprehensive loss[17](index=17&type=chunk) - Common stock shares outstanding increased from **144,667 thousand** to **151,017 thousand**, reflecting restricted stock awards settled and grants[17](index=17&type=chunk) [NOTE 1 — Description of business and basis of presentation](index=10&type=section&id=NOTE%201%20%E2%80%94%20Description%20of%20business%20and%20basis%20of%20presentation) Describes Gannett's business operations, segments, and the basis for financial statement presentation - Gannett is a subscription-led, digitally-focused media and marketing solutions company, operating USA TODAY, local media in 45 U.S. states, Newsquest in the U.K., and the digital marketing solutions company LOCALiQ[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - The Company reports in two segments: Publishing and Digital Marketing Solutions, with a Corporate and other category for broad corporate functions[20](index=20&type=chunk) - The COVID-19 pandemic continues to have a slight negative impact on Advertising and marketing services and Circulation revenues, particularly affecting single copy newspaper sales and in-person events[21](index=21&type=chunk) [NOTE 2 — Revenues](index=11&type=section&id=NOTE%202%20%E2%80%94%20Revenues) Provides a detailed breakdown of the company's revenue streams and their year-over-year changes Revenues by Source (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Print advertising | $173,518 | $193,196 | | Digital advertising and marketing services | $201,596 | $195,161 | | Total advertising and marketing services | $375,114 | $388,357 | | Circulation | $288,602 | $325,437 | | Other | $84,361 | $63,290 | | Total revenues | $748,077 | $777,084 | - Total revenues decreased by **$29.0 million (3.7%)** year-over-year. Print advertising declined by **$19.7 million (10%)**, and Circulation decreased by **$36.8 million (11%)**[31](index=31&type=chunk) - Digital advertising and marketing services revenues increased by **$6.4 million (3%)**, and Other revenues grew by **$21.1 million (33%)**[31](index=31&type=chunk) [NOTE 3 — Accounts receivable, net](index=12&type=section&id=NOTE%203%20%E2%80%94%20Accounts%20receivable,%20net) Details the composition of accounts receivable and changes in the allowance for doubtful accounts Allowance for Doubtful Accounts (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Beginning balance (allowance for doubtful accounts) | $16,470 | $20,843 | | Ending balance (allowance for doubtful accounts) | $11,566 | $17,124 | - The allowance for doubtful accounts decreased from **$16.5 million** at the beginning of the period to **$11.6 million** at March 31, 2022, reflecting a **$2.4 million** benefit in bad debt expense due to lower receivable balances[36](index=36&type=chunk)[37](index=37&type=chunk) [NOTE 4 — Goodwill and intangible assets](index=13&type=section&id=NOTE%204%20%E2%80%94%20Goodwill%20and%20intangible%20assets) Presents the carrying values of goodwill and intangible assets, noting any changes or impairment assessments Goodwill and Intangible Assets (In thousands) | In thousands | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total intangible assets, net | $694,521 | $713,153 | | Goodwill | $540,894 | $533,709 | - Total net intangible assets decreased by **$18.6 million**, while goodwill increased by **$7.2 million** from December 31, 2021, to March 31, 2022[38](index=38&type=chunk) - No indicators of impairment for goodwill or indefinite-lived intangible assets were present as of March 31, 2022[39](index=39&type=chunk) [NOTE 5 — Integration and reorganization costs and asset impairments](index=14&type=section&id=NOTE%205%20%E2%80%94%20Integration%20and%20reorganization%20costs%20and%20asset%20impairments) Reports expenses related to business integration, reorganization, and asset impairments Integration and Reorganization Costs (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Severance-related expenses | $5,360 | $7,097 | | Facility consolidation and other restructuring-related expenses | $6,038 | $6,307 | | Accelerated depreciation | $4,700 | $9,200 | - Total integration and reorganization costs were **$11.4 million** in Q1 2022, down from **$13.4 million** in Q1 2021, reflecting decreased severance and facility consolidation activities[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - Accelerated depreciation related to shortened asset useful lives from property sales decreased from **$9.2 million** in Q1 2021 to **$4.7 million** in Q1 2022[43](index=43&type=chunk) [NOTE 6 — Debt](index=15&type=section&id=NOTE%206%20%E2%80%94%20Debt) Details the company's debt structure, including term loans, senior notes, and recent debt activities Debt Carrying Values (In millions) | In millions | March 31, 2022 (Carrying value) | December 31, 2021 (Carrying value) | | :--- | :--- | :--- | | New Senior Secured Term Loan | $490.2 | $463.3 | | 2026 Senior Notes | $355.7 | $375.6 | | 2027 Notes | $393.0 | $390.1 | | 2024 Notes | $3.3 | $3.3 | | Total debt | $1,242.2 | $1,232.3 | - Total debt increased by **$9.9 million** from December 31, 2021, to March 31, 2022, primarily due to incremental term loans under the New Senior Secured Term Loan[44](index=44&type=chunk)[45](index=45&type=chunk) - The Company entered into amendments for its New Senior Secured Term Loan, adding **$72.5 million** in incremental term loans and transitioning the interest rate base from LIBOR to Adjusted Term SOFR[45](index=45&type=chunk) - In March 2022, the Company repurchased **$22.5 million** principal of 2026 Senior Notes in exchange for New Senior Secured Term Loans, resulting in a **$1.3 million** loss on early extinguishment of debt[58](index=58&type=chunk)[184](index=184&type=chunk) [NOTE 7 — Pensions and other postretirement benefit plans](index=18&type=section&id=NOTE%207%20%E2%80%94%20Pensions%20and%20other%20postretirement%20benefit%20plans) Provides information on the company's pension and postretirement benefit plan expenses and contributions Retirement Plan Expenses (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Total expense (benefit) for retirement plans | $(18,137) | $(23,853) | | Total non-operating (benefit) expenses | $(18,612) | $(24,364) | | Service cost - benefits earned during the period | $475 | $511 | - Non-operating pension income decreased from **$23.9 million** in Q1 2021 to **$18.2 million** in Q1 2022, mainly due to a lower expected return on plan assets from a more conservative asset allocation[76](index=76&type=chunk)[136](index=136&type=chunk) - The Company contributed **$7.6 million** to pension plans and **$2.0 million** to other postretirement plans during Q1 2022[76](index=76&type=chunk) [NOTE 8 — Fair value measurement](index=19&type=section&id=NOTE%208%20%E2%80%94%20Fair%20value%20measurement) Explains the fair value hierarchy and measurement of assets and liabilities on a recurring and nonrecurring basis - Fair value measurements are categorized into a three-tiered hierarchy (Level 1, 2, 3) based on observable and unobservable inputs[77](index=77&type=chunk) - Assets and liabilities measured at fair value on a recurring basis primarily consist of pension plan assets, with certain investments measured at Net Asset Value (NAV) as a practical expedient[78](index=78&type=chunk) - Assets held for sale, totaling **$5.9 million** as of March 31, 2022, are measured at fair value on a nonrecurring basis (Level 3) using purchase agreements or third-party valuations[80](index=80&type=chunk) [NOTE 9 — Income taxes](index=19&type=section&id=NOTE%209%20%E2%80%94%20Income%20taxes) Presents the company's income tax benefit, effective tax rate, and unrecognized tax benefits Income Tax Details (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Loss before income taxes | $(10,709) | $(151,810) | | Benefit for income taxes | $(7,607) | $(9,109) | | Effective tax rate | 71.0 % | 6.0 % | - The benefit for income taxes in Q1 2022 was **$7.6 million**, driven by pre-tax loss and the release of tax reserves, partially offset by valuation allowances on non-deductible interest expense carryforwards, resulting in an effective tax rate of **71.0%**[82](index=82&type=chunk) - Unrecognized tax benefits that could impact the effective tax rate were approximately **$49.0 million** as of March 31, 2022, up from **$45.0 million** at December 31, 2021[83](index=83&type=chunk) [NOTE 10 — Supplemental equity information](index=20&type=section&id=NOTE%2010%20%E2%80%94%20Supplemental%20equity%20information) Offers additional details on equity, including share data, loss per share, and share-based compensation Supplemental Equity and Per Share Data (In thousands, except per share data) | In thousands, except per share data | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net loss attributable to Gannett | $(2,967) | $(142,316) | | Basic weighted average shares outstanding | 136,425 | 134,075 | | Diluted weighted average shares outstanding | 136,425 | 134,075 | | Loss per share attributable to Gannett - basic | $(0.02) | $(1.06) | | Loss per share attributable to Gannett - diluted | $(0.02) | $(1.06) | - Diluted loss per share improved significantly from **$(1.06)** in Q1 2021 to **$(0.02)** in Q1 2022[86](index=86&type=chunk) - The Company recognized **$3.4 million** in share-based compensation expense for both Q1 2022 and Q1 2021[88](index=88&type=chunk) - The Board authorized a Stock Repurchase Program of up to **$100 million** of Common Stock on February 1, 2022, with no repurchases made as of March 31, 2022[92](index=92&type=chunk) [NOTE 11 — Commitments, contingencies and other matters](index=22&type=section&id=NOTE%2011%20%E2%80%94%20Commitments,%20contingencies%20and%20other%20matters) Discusses legal proceedings and other contingent matters affecting the company - Gannett is involved in various legal proceedings in the ordinary course of business, including libel, intellectual property, and employment claims[95](index=95&type=chunk) - Management believes current and threatened legal proceedings are not expected to have a material adverse effect on the Company's business, financial position, or consolidated results of operations[96](index=96&type=chunk) [NOTE 12 — Segment reporting](index=23&type=section&id=NOTE%2012%20%E2%80%94%20Segment%20reporting) Provides financial performance data for the company's Publishing and Digital Marketing Solutions segments - Gannett operates in two reportable segments: Publishing (local, regional, national, and international newspaper publishers) and Digital Marketing Solutions (LOCALiQ)[98](index=98&type=chunk)[102](index=102&type=chunk) - Adjusted EBITDA and Adjusted EBITDA margin are key non-GAAP metrics used by the Chief Operating Decision Maker (CEO) to evaluate segment performance and allocate resources[100](index=100&type=chunk)[101](index=101&type=chunk) Consolidated Adjusted EBITDA by Segment (In thousands) | In thousands | Q1 2022 Adjusted EBITDA | Q1 2021 Adjusted EBITDA | | :--- | :--- | :--- | | Publishing | $68,648 | $102,208 | | Digital Marketing Solutions | $11,180 | $9,172 | | Corporate and other | $(15,657) | $(10,915) | | Consolidated Adjusted EBITDA | $64,171 | $100,465 | - Consolidated Adjusted EBITDA decreased by **$36.3 million (36.1%)** year-over-year, with Publishing segment Adjusted EBITDA declining by **32.8%** and Digital Marketing Solutions segment Adjusted EBITDA increasing by **21.9%**[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [NOTE 13 — Other supplemental information](index=24&type=section&id=NOTE%2013%20%E2%80%94%20Other%20supplemental%20information) Includes additional cash flow details, such as cash paid for taxes and interest Cash and Restricted Cash (In thousands) | In thousands | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $152,191 | $163,505 | | Restricted cash | $12,827 | $32,668 | | Total cash, cash equivalents and restricted cash | $165,018 | $196,173 | Cash Paid for Taxes and Interest (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Cash paid for taxes, net of refunds | $846 | $(997) | | Cash paid for interest | $7,531 | $13,528 | - Cash paid for interest decreased by **$6.0 million (44.3%)** year-over-year[107](index=107&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a detailed discussion and analysis of Gannett's financial condition, results of operations, and business trends for the three months ended March 31, 2022, compared to the same period in 2021. It covers consolidated performance, segment-specific results, liquidity, capital resources, and non-GAAP financial measures [OVERVIEW](index=26&type=section&id=OVERVIEW) Introduces Gannett's strategic focus as a subscription-led, digitally-focused media and marketing solutions company - Gannett is a subscription-led and digitally-focused media and marketing solutions company, aiming to drive audience growth and engagement through deeper content experiences and digital marketing expertise[110](index=110&type=chunk) - The Company's portfolio includes USA TODAY, local media in 45 U.S. states, Newsquest in the U.K., and the digital marketing solutions company LOCALiQ, along with USA TODAY NETWORK Ventures for events[111](index=111&type=chunk)[112](index=112&type=chunk) [Business Trends](index=26&type=section&id=Business%20Trends) Highlights key industry trends impacting Gannett, including digital shifts, SMB needs, and cost inflation - Print advertising continues to decline as audiences shift to digital platforms; focus is on converting digital audiences to digital-only subscribers - SMBs require digital presence, addressed by LOCALiQ's broad suite of digital marketing services - COVID-19 pandemic negatively impacts in-person events and single copy newspaper sales - Newsprint availability is constrained globally, leading to increased costs due to inflation in energy and fuel[113](index=113&type=chunk) [Recent Developments](index=27&type=section&id=Recent%20Developments) Reports on recent company initiatives, such as the publication of its inaugural ESG report - Gannett published its inaugural 2022 ESG report, detailing efforts aligned with U.N. Sustainable Development Goals, prioritizing Reduced Inequalities, Climate Action, and Peace, Justice & Strong Institutions[114](index=114&type=chunk)[115](index=115&type=chunk) [Certain matters affecting comparability](index=27&type=section&id=Certain%20matters%20affecting%20comparability) Discusses factors like integration costs, accelerated depreciation, and foreign currency impacts on comparability - Integration and reorganization costs decreased to **$11.4 million** in Q1 2022 from **$13.4 million** in Q1 2021, primarily due to lower severance and facility consolidation expenses[116](index=116&type=chunk) - Accelerated depreciation from printing operation closures decreased to **$4.7 million** in Q1 2022 from **$9.2 million** in Q1 2021[117](index=117&type=chunk) - Foreign currency fluctuations impact revenue, expense, and operating income for international operations in the U.K., Canada, Australia, New Zealand, and India[118](index=118&type=chunk) [Outlook for 2022](index=28&type=section&id=Outlook%20for%202022) Outlines Gannett's strategic priorities and expectations for the upcoming year, focusing on digital growth and efficiency - Accelerate digital subscriber growth by leveraging its newsroom network and developing new digital subscription offerings - Drive digital marketing services growth by expanding LOCALiQ into local markets and using data to inform new advertising products - Optimize traditional print businesses through efficiency, process improvements, and aligning with digital subscription strategies - Prioritize investments in growth businesses like USA TODAY NETWORK Ventures, which saw **83% revenue increase** in Q1 2022 - Build an inclusive and diverse culture, with published inclusion goals for 2025 and an annual workforce diversity report[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - The COVID-19 pandemic is expected to continue having a slight negative impact on business operations in the near-term, particularly on event revenues and single copy newspaper sales[125](index=125&type=chunk)[126](index=126&type=chunk) - Revenues are subject to moderate seasonality, with Advertising and marketing services typically highest in the fourth quarter due to holiday advertising volumes[127](index=127&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) Provides a comprehensive analysis of the company's financial performance for the reporting period [Consolidated Summary](index=30&type=section&id=Consolidated%20Summary) Presents a high-level overview of Gannett's consolidated financial results, including revenues and net loss Consolidated Financial Summary (In thousands, except per share amounts) | In thousands, except per share amounts | Three months ended March 31, 2022 | Three months ended March 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $748,077 | $777,084 | $(29,007) | (4)% | | Advertising and marketing services | $375,114 | $388,357 | $(13,243) | (3)% | | Circulation | $288,602 | $325,437 | $(36,835) | (11)% | | Other | $84,361 | $63,290 | $21,071 | 33% | | Net loss attributable to Gannett | $(2,967) | $(142,316) | $139,349 | (98)% | | Loss per share attributable to Gannett - diluted | $(0.02) | $(1.06) | $1.04 | (98)% | - Consolidated operating revenues decreased by **4%** year-over-year, primarily driven by declines in print advertising and circulation, partially offset by growth in digital marketing services and other revenues[129](index=129&type=chunk) - Net loss attributable to Gannett significantly improved by **98%** due to the absence of a large loss on convertible notes derivative in the prior year[129](index=129&type=chunk) [Operating revenues](index=30&type=section&id=Operating%20revenues) Details the various sources of the company's operating revenues, including advertising, circulation, and other income - Advertising and marketing services revenues are generated by both Publishing (print and digital advertising, digital marketing services) and Digital Marketing Solutions (search, display, SEO, social media, website development)[130](index=130&type=chunk) - Circulation revenues come from home delivery, digital distribution, and single copy sales of publications[131](index=131&type=chunk) - Other revenues are mainly from commercial printing, distribution, events, digital content syndication, and third-party newsprint sales[132](index=132&type=chunk) [Operating expenses](index=32&type=section&id=Operating%20expenses) Describes the primary categories of expenses incurred in the company's operations - Operating costs include labor, newsprint, delivery, and third-party online media acquisition - Selling, general and administrative expenses cover labor, payroll, outside services, benefits, and bad debt - Integration and reorganization costs include severance and facility consolidation expenses - Other operating expenses include third-party debt and acquisition-related costs[133](index=133&type=chunk) [Non-operating (income) expense](index=32&type=section&id=Non-operating%20(income)%20expense) Reports financial items outside of core operations, such as interest expense and pension income Non-Operating Expenses (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Interest expense | $26,006 | $39,503 | | Loss on early extinguishment of debt | $2,743 | $19,401 | | Non-operating pension income | $(18,213) | $(23,878) | | Loss on convertible notes derivative | $0 | $126,600 | - Interest expense decreased by **$13.5 million (34.2%)** due to a lower debt balance and reduced interest rates[134](index=134&type=chunk) - Loss on early extinguishment of debt decreased by **$16.7 million (86.4%)** due to the payoff of a senior-secured term loan in Q1 2021[135](index=135&type=chunk) - The absence of a **$126.6 million** loss on convertible notes derivative in Q1 2022 significantly improved non-operating expenses[137](index=137&type=chunk) [Benefit for income taxes](index=32&type=section&id=Benefit%20for%20income%20taxes) Explains the income tax benefit and the factors influencing the effective tax rate Income Tax Benefit and Rate (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Loss before income taxes | $(10,709) | $(151,810) | | Benefit for income taxes | $(7,607) | $(9,109) | | Effective tax rate | 71.0 % | 6.0 % | - The effective tax rate increased significantly from **6.0%** in Q1 2021 to **71.0%** in Q1 2022, primarily due to the pre-tax loss and the release of tax reserves, partially offset by valuation allowances on non-deductible interest expense carryforwards[140](index=140&type=chunk) [Net loss attributable to Gannett and diluted loss per share attributable to Gannett](index=33&type=section&id=Net%20loss%20attributable%20to%20Gannett%20and%20diluted%20loss%20per%20share%20attributable%20to%20Gannett) Focuses on the company's net loss and per-share performance Net Loss and Diluted EPS (In thousands, except per share data) | In thousands, except per share data | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net loss attributable to Gannett | $(2,967) | $(142,316) | | Diluted loss per share attributable to Gannett | $(0.02) | $(1.06) | - Net loss attributable to Gannett improved from **$142.3 million** in Q1 2021 to **$3.0 million** in Q1 2022, leading to a significant improvement in diluted loss per share from **$(1.06)** to **$(0.02)**[141](index=141&type=chunk) [Segment Results](index=33&type=section&id=Segment%20Results) Provides a detailed breakdown of financial performance for each of Gannett's operating segments [Publishing segment](index=33&type=section&id=Publishing%20segment) Analyzes the financial performance of the company's traditional publishing business Publishing Segment Performance (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $670,419 | $699,585 | $(29,166) | (4)% | | Advertising and marketing services | $298,762 | $314,310 | $(15,548) | (5)% | | Circulation | $288,602 | $325,436 | $(36,834) | (11)% | | Other revenues | $83,055 | $59,839 | $23,216 | 39% | | Operating income | $25,592 | $42,355 | $(16,763) | (40)% | | Adjusted EBITDA (non-GAAP basis) | $68,648 | $102,208 | $(33,560) | (33)% | - Publishing segment total operating revenues decreased by **4%**, driven by a **10%** decline in print advertising and an **11%** decrease in circulation, partially offset by a **39%** increase in other revenues[142](index=142&type=chunk)[143](index=143&type=chunk) - Digital-only circulation revenues increased by **30%** due to a **44%** increase in paid digital-only subscribers, reaching approximately **1.75 million**[145](index=145&type=chunk) - Operating income for the Publishing segment decreased by **40%**, and Adjusted EBITDA decreased by **33%** year-over-year[142](index=142&type=chunk)[157](index=157&type=chunk) [Digital Marketing Solutions segment](index=36&type=section&id=Digital%20Marketing%20Solutions%20segment) Examines the financial performance of the company's digital marketing services business Digital Marketing Solutions Segment Performance (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $109,709 | $102,281 | $7,428 | 7% | | Advertising and marketing services | $109,709 | $101,376 | $8,333 | 8% | | Operating income | $4,414 | $1,177 | $3,237 | *** | | Adjusted EBITDA (non-GAAP basis) | $11,180 | $9,172 | $2,008 | 22% | - Digital Marketing Solutions segment total operating revenues increased by **7%**, driven by **8%** growth in advertising and marketing services revenues from core direct business and local markets[159](index=159&type=chunk)[160](index=160&type=chunk) - Operating income for the Digital Marketing Solutions segment increased significantly by **over 100%**, and Adjusted EBITDA increased by **22%** year-over-year[159](index=159&type=chunk)[165](index=165&type=chunk) - Operating costs increased by **10%** due to higher third-party media fees associated with increased revenues, while Selling, general and administrative expenses decreased by **7%** due to lower miscellaneous and bad debt expenses[161](index=161&type=chunk)[162](index=162&type=chunk) [Corporate and other category](index=38&type=section&id=Corporate%20and%20other%20category) Reports on financial results for corporate functions and other unallocated items Corporate and Other Operating Results (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $1,306 | $3,074 | $(1,768) | (57)% | | Total operating expenses | $33,290 | $38,665 | $(5,375) | (14)% | - Corporate and other operating revenues decreased by **57%**, while total operating expenses decreased by **14%**, primarily due to the absence of **$10.2 million** in third-party fees expensed in Q1 2021[167](index=167&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=38&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Assesses the company's ability to meet its financial obligations and fund operations - Primary cash requirements are for working capital, debt obligations, and capital expenditures, expected to be funded by operating activities and available financing capacity[168](index=168&type=chunk) Cash Flow Summary (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $32,429 | $61,316 | | Cash provided by (used for) investing activities | $(6,220) | $2,516 | | Cash used for financing activities | $(3,818) | $(74,699) | | Increase (decrease) in cash, cash equivalents and restricted cash | $21,399 | $(10,553) | - Cash provided by operating activities decreased by **$28.9 million**, mainly due to lower cash receipts from deferred revenues and a decrease in accounts payable, partially offset by lower severance payments and interest paid[170](index=170&type=chunk) - Cash used for financing activities decreased by **$70.9 million**, primarily due to lower repayments under term loans and deferred financing costs, despite **$22.5 million** in repayments for 2026 Senior Notes[172](index=172&type=chunk) - The Company expects capital expenditures for the remainder of 2022 to be approximately **$35.5 million**, focused on digital product development, print/technology systems, and system upgrades[200](index=200&type=chunk) - The Company does not currently pay a quarterly dividend and has no intention to reinstate it, with debt terms restricting dividend payments[198](index=198&type=chunk) [CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES](index=43&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20USE%20OF%20ESTIMATES) Reaffirms the consistency of critical accounting policies and estimates with prior reports - There have been no material changes to the critical accounting policies and use of estimates discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[203](index=203&type=chunk) [NON-GAAP FINANCIAL MEASURES](index=43&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) Defines and reconciles non-GAAP financial measures used to evaluate performance - Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures used to evaluate ongoing operating performance, excluding items not indicative of core operations[205](index=205&type=chunk)[206](index=206&type=chunk) Non-GAAP Financial Measures (In thousands) | In thousands | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net loss attributable to Gannett | $(2,967) | $(142,316) | | Adjusted EBITDA (non-GAAP basis) | $64,171 | $100,465 | | Net loss attributable to Gannett margin | (0.4)% | (18.3)% | | Adjusted EBITDA margin (non-GAAP basis) | 8.6 % | 12.9 % | - Adjusted EBITDA decreased by **$36.3 million (36.1%)** year-over-year, and Adjusted EBITDA margin decreased from **12.9%** to **8.6%**[211](index=211&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=45&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that there have been no material changes to the quantitative and qualitative disclosures about market risks since the fiscal year ended December 31, 2021, as reported in the Company's Form 10-K - No material changes to market risk disclosures were reported for the quarter ended March 31, 2022, compared to the previous Form 10-K[212](index=212&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=45&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures as of March 31, 2022, and reports no material changes in internal control over financial reporting during the quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2022[213](index=213&type=chunk) - There were no material changes in internal control over financial reporting during the first quarter ended March 31, 2022[214](index=214&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section presents additional non-financial disclosures required in the quarterly report [ITEM 1. LEGAL PROCEEDINGS](index=46&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Refers to the relevant note for details on ongoing legal matters - Information on legal proceedings is incorporated by reference from Note 11 of the condensed consolidated financial statements[217](index=217&type=chunk) [ITEM 1A. RISK FACTORS](index=46&type=section&id=ITEM%201A.%20RISK%20FACTORS) States that there are no new material risk factors since the last annual report - No material changes to the risk factors were reported for the quarter ended March 31, 2022, compared to the previous Form 10-K[218](index=218&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=46&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Confirms no unregistered equity sales or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds occurred during the period[219](index=219&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=46&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) Confirms no defaults on senior securities during the reporting period - No defaults upon senior securities occurred during the period[220](index=220&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=46&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) States that this disclosure item is not applicable to the company - Mine Safety Disclosures are not applicable to Gannett Co., Inc[221](index=221&type=chunk) [ITEM 5. OTHER INFORMATION](index=46&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Confirms no other material information to report under this item - No other information is reported under this item[222](index=222&type=chunk) [ITEM 6. EXHIBITS](index=47&type=section&id=ITEM%206.%20EXHIBITS) Lists all documents filed as exhibits to the Form 10-Q - Fourth Supplemental Indenture, dated January 31, 2022 - Amendment No. 1 to the First Lien Credit Agreement, dated January 31, 2022 - Form of Gannett Co., Inc. Employee Performance Restricted Stock Unit Grant Agreement - Certifications of Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a)/15d-14(d) and Section 1350)[224](index=224&type=chunk) [Signatures](index=48&type=section&id=Signatures) Provides the official signatures for the submitted Form 10-Q - The report was signed by Douglas E. Horne, Chief Financial Officer and Chief Accounting Officer, on May 5, 2022[228](index=228&type=chunk)

| --- | --- | |-------------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q4 2021 Earnings | | | | | | | | | | | | February 24, 2022 | | Disclaimer and Notes 2 In General. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the "Presentation." Gannett Co., Inc. is referred to in this Presentation as "Gannett," "we," ...

Gannett Co., Inc. (NYSE:GCI) Q4 2021 Results Conference Call February 24, 2022 8:30 AM ET Company Participants Mike Reed - Chief Executive Officer Doug Horne - Chief Financial Officer Trisha Gosser - Investor Relations Operator Greetings and welcome to Gannett Fourth Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to your host Trisha Gosser, Investor Relations. Please go ahead. Hello, Ms. Gosser, your line is unmuted, can you hear us? Hello, Ms. Gosser, ca ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | Commission file number 001-36097 | | --- | GANNETT CO., INC. (Exact name of registrant as specified in its charter) Delaware 38-3910250 (State or Other Jurisdictio ...

The Path Forward January 13, 2022 1 Disclaimer and Notes In General. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the "Presentation." Gannett Co., Inc. is referred to in this Presentation as "Gannett," "we," "us," "our" or the "Company". Prior to November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media") and Gannett Co., Inc ...

Gannett Company Inc. (NYSE:GCI) Q3 2021 Earnings Conference Call November 5, 2021 8:30 AM ET Company Participants Mike Reed - Chief Executive Officer Doug Horne - Chief Financial Officer Trisha Gosser - Investor Relations Conference Call Participants Doug Arthur - Huber Research Lawrence Fuller - Fuller Asset Management Operator Greetings. Welcome to the Gannett third quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presen ...

| --- | --- | --- | |------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q3 2021 Earnings | | | | | | | | | | | | | | | | | | | | | | | | November 5, 2021 | | | Disclaimer and Notes 2 In General. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken together with any such verbal or written comments, is referred to herein as the "Presentation." Gannett Co., Inc. is ...

[Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This note cautions that forward-looking statements are subject to risks and uncertainties, where actual results may differ materially - Forward-looking statements reflect current views on future growth, operations, performance, and business prospects, but are not historical facts[5](index=5&type=chunk) - Actual results, liquidity, and financial condition may differ materially due to known and unknown risks, uncertainties, and other factors[6](index=6&type=chunk) - Key risk factors include general economic and market conditions, competitive environment, COVID-19 pandemic impacts, shift from print to digital media, risks in the Digital Marketing Solutions segment, declining print advertising and circulation, debt restrictions, and ability to retain key personnel[8](index=8&type=chunk) [Part I. Financial Information](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Part I details Gannett's unaudited Q3 2021 financial statements, management's discussion, market risk, and internal controls [Item 1. Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section provides unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and equity, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The condensed consolidated balance sheets show the company's financial position as of September 30, 2021, compared to December 31, 2020, highlighting changes in assets, liabilities, and equity Key Balance Sheet Metrics (in thousands) | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | :--------- | | Total Assets | $2,910,003 | $3,108,914 | $(198,911) | -6.40% | | Total Liabilities | $2,367,369 | $2,745,955 | $(378,586) | -13.79% | | Total Equity | $544,843 | $364,109 | $180,734 | 49.64% | | Cash and cash equivalents | $141,302 | $170,725 | $(29,423) | -17.23% | | Current portion of long-term debt | $104,948 | $128,445 | $(23,497) | -18.29% | | Long-term debt | $741,636 | $890,323 | $(148,687) | -16.70% | | Convertible debt | $399,875 | $581,405 | $(181,530) | -31.22% | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) This statement summarizes the company's revenues, expenses, and net income (loss) for the three and nine months ended September 30, 2021, compared to the same periods in 2020 Operating Results for Three Months Ended Sep 30 (in thousands, except per share) | Metric (in thousands, except per share) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total operating revenues | $800,185 | $814,539 | $(14,354) | -1.76% | | Total operating expenses | $769,083 | $813,059 | $(43,976) | -5.41% | | Operating income (loss) | $31,102 | $1,480 | $29,622 | 1999.99% | | Net income (loss) attributable to Gannett | $14,687 | $(31,260) | $45,947 | -147.00% | | Basic EPS | $0.11 | $(0.24) | $0.35 | -145.83% | | Diluted EPS | $0.09 | $(0.24) | $0.33 | -137.50% | Operating Results for Nine Months Ended Sep 30 (in thousands, except per share) | Metric (in thousands, except per share) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total operating revenues | $2,381,544 | $2,530,223 | $(148,679) | -5.88% | | Total operating expenses | $2,297,056 | $2,996,189 | $(699,133) | -23.33% | | Operating income (loss) | $84,488 | $(465,966) | $550,454 | -118.14% | | Net income (loss) attributable to Gannett | $(112,514) | $(548,305) | $435,791 | -79.48% | | Basic EPS | $(0.84) | $(4.17) | $3.33 | -79.86% | | Diluted EPS | $(0.84) | $(4.17) | $3.33 | -79.86% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement details cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021, compared to the same period in 2020 Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $133,347 | $74,280 | $59,067 | 79.52% | | Net cash provided by (used for) investing activities | $39,236 | $(1,979) | $41,215 | -2082.62% | | Net cash used for financing activities | $(212,284) | $(37,471) | $(174,813) | 466.52% | | (Decrease) increase in cash, cash equivalents and restricted cash | $(39,312) | $35,269 | $(74,581) | -211.46% | [Condensed Consolidated Statements of Equity](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) This section presents changes in the company's equity for the three and nine months ended September 30, 2021 and 2020, detailing movements across components Equity Components (in thousands) | Equity Component (in thousands) | Balance at Dec 31, 2020 | Net Loss Attributable to Gannett | Equity Component of 2027 Notes | Other Comprehensive Loss, net of tax | Share-based Compensation Expense | Treasury Stock | Other Activity | Balance at Sep 30, 2021 | | :------------------------------ | :---------------------- | :------------------------------- | :----------------------------- | :----------------------------------- | :------------------------------- | :------------- | :------------- | :---------------------- | | Common stock | $1,395 | — | — | — | — | — | $51 | $1,446 | | Additional paid-in capital | $1,103,881 | — | $283,718 | — | $13,804 | $(2,034) | $(1,708) | $1,399,693 | | Accumulated other comprehensive income (loss) | $50,173 | — | — | $(578) | — | — | — | $49,595 | | Accumulated deficit | $(786,437) | $(112,514) | — | — | — | — | — | $(898,951) | | Treasury stock | $(4,903) | — | — | — | — | $(2,034) | — | $(6,940) | | **Total Equity** | **$364,109** | **$(112,514)** | **$283,718** | **$(578)** | **$13,804** | **$(2,034)** | **$(1,657)** | **$544,843** | [Note 1 — Description of Business and Basis of Presentation](index=10&type=section&id=NOTE%201%20%E2%80%94%20Description%20of%20Business%20and%20basis%20of%20presentation) Gannett is a subscription-led, digitally-focused media and marketing solutions company, with its strategy aiming to grow audience and engagement - Gannett is a subscription-led and digitally-focused media and marketing solutions company, aiming to be a premier source for clarity, connections, and solutions within communities[21](index=21&type=chunk) - The company's portfolio includes USA TODAY, local media organizations in 46 U.S. states, Newsquest (U.K. subsidiary with over 120 local media brands), and digital marketing services (ReachLocal, UpCurve, WordStream) marketed under the LOCALiQ brand[22](index=22&type=chunk)[23](index=23&type=chunk) - The COVID-19 pandemic caused a significant decline in Advertising and marketing services revenues and constraints on single-copy newspaper sales, leading to cost reduction measures, including PPP funding and debt refinancing[24](index=24&type=chunk)[25](index=25&type=chunk) PPP Loan Forgiveness (Q3 2021) | Item | Amount (in millions) | | :--- | :------------------- | | Total PPP funding received (9 months ended Sep 30, 2021) | $16.4 | | PPP loans forgiven (Q3 2021) | $15.1 | | Recognized as offset to Operating costs | $11.1 | | Recognized as offset to Selling, general, and administrative expenses | $4.0 | | Remaining PPP loans as of Sep 30, 2021 | $1.3 | [Note 2 — Revenues](index=11&type=section&id=NOTE%202%20%E2%80%94%20Revenues) This note disaggregates total operating revenues by source, including print advertising, digital advertising, circulation, and other revenues, and details deferred revenues Operating Revenues by Source for Three Months Ended Sep 30 (in thousands) | Revenue Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Print advertising | $190,044 | $208,047 | $(17,993) | -8.65% | | Digital advertising and marketing services | $221,976 | $197,180 | $24,796 | 12.57% | | Total advertising and marketing services | $412,020 | $405,227 | $6,793 | 1.68% | | Circulation | $306,702 | $336,158 | $(29,456) | -8.76% | | Other | $81,463 | $73,154 | $8,309 | 11.36% | | **Total revenues** | **$800,185** | **$814,539** | **$(14,354)** | **-1.76%** | Operating Revenues by Source for Nine Months Ended Sep 30 (in thousands) | Revenue Type | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Print advertising | $584,165 | $664,047 | $(79,882) | -12.03% | | Digital advertising and marketing services | $636,322 | $585,109 | $51,213 | 8.75% | | Total advertising and marketing services | $1,220,487 | $1,249,156 | $(28,669) | -2.29% | | Circulation | $942,398 | $1,053,528 | $(111,130) | -10.55% | | Other | $218,659 | $227,539 | $(8,880) | -3.90% | | **Total revenues** | **$2,381,544** | **$2,530,223** | **$(148,679)** | **-5.88%** | - Deferred revenues primarily stem from circulation subscriptions paid in advance, with recognition expected over the next 1-12 months[36](index=36&type=chunk) [Note 3 — Leases](index=12&type=section&id=NOTE%203%20%E2%80%94%20Leases) This note outlines the company's lease obligations for real estate, vehicles, and equipment, including operating lease assets, liabilities, and lease expense components Lease Liabilities (in thousands) | Item | Sep 30, 2021 | | :-------------------------------- | :----------- | | Operating lease right-to-use assets | $279,400 | | Short-term operating lease liabilities | $48,300 | | Long-term operating lease liabilities | $261,400 | Net Lease Cost (in thousands) | Period | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Three months ended Sep 30 | $23,073 | $24,649 | | Nine months ended Sep 30 | $70,009 | $77,457 | Future Minimum Lease Payments (in thousands) | Year Ended Dec 31, | Amount | | :----------------- | :----- | | 2021 (remaining) | $18,625 | | 2022 | $81,364 | | 2023 | $68,607 | | 2024 | $60,380 | | 2025 | $51,315 | | Thereafter | $213,647 | | **Total** | **$493,938** | | Less: Imputed interest | $(184,245) | | **Total (net)** | **$309,693** | [Note 4 — Accounts Receivable, Net](index=13&type=section&id=NOTE%204%20%E2%80%94%20Accounts%20receivable%2C%20net) This note details the allowance for doubtful accounts, calculated using specific formulas, which decreased significantly due to lower write-offs compared to the prior year - Allowance for doubtful accounts is calculated using a 'black motor formula' for advertising receivables and a 90-day aging reserve for circulation receivables[43](index=43&type=chunk) Allowance for Doubtful Accounts (in thousands) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Beginning balance | $20,843 | $19,923 | $920 | 4.62% | | Current period provision | $3,478 | $23,075 | $(19,597) | -84.93% | | Write-offs charged against the allowance | $(10,998) | $(21,139) | $10,141 | -47.98% | | Ending balance | $16,411 | $23,749 | $(7,338) | -30.90% | - Bad debt expense decreased significantly for both the three and nine months ended September 30, 2021, compared to the prior year, which reflected higher impacts from the COVID-19 pandemic[45](index=45&type=chunk) [Note 5 — Goodwill and Intangible Assets](index=14&type=section&id=NOTE%205%20%E2%80%94%20Goodwill%20and%20intangible%20assets) This note breaks down goodwill and intangible assets, net of amortization, and discusses the annual impairment assessment, with no impairment indicators as of September 30, 2021 Goodwill and Intangible Assets (in thousands) | Asset Type | Sep 30, 2021 (Net Carrying Amount) | Dec 31, 2020 (Net Carrying Amount) | Change ($) | Change (%) | | :-------------------------- | :--------------------------------- | :--------------------------------- | :--------- | :--------- | | Finite-lived intangible assets | $571,649 | $653,242 | $(81,593) | -12.49% | | Indefinite-lived intangible assets (Mastheads) | $169,942 | $171,408 | $(1,466) | -0.86% | | **Total intangible assets** | **$741,591** | **$824,650** | **$(83,059)** | **-10.07%** | | Goodwill | $533,797 | $534,088 | $(291) | -0.05% | - The company performed its annual goodwill and indefinite-lived intangible impairment assessment in Q2 2021, concluding that the fair value of all reporting units and indefinite-lived assets exceeded their carrying values[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - No indicators of impairment were present as of September 30, 2021[50](index=50&type=chunk) - In Q2 2020, the company recorded significant goodwill and intangible asset impairment charges totaling **$393.4 million** due to the COVID-19 pandemic's impact[51](index=51&type=chunk) [Note 6 — Integration and Reorganization Costs and Asset Impairments](index=15&type=section&id=NOTE%206%20%E2%80%94%20Integration%20and%20reorganization%20costs%20and%20asset%20impairments) This note details costs associated with restructuring programs, including severance, facility consolidation, asset impairment charges, and accelerated depreciation Severance-Related Expenses for Three Months Ended Sep 30 (in thousands) | Segment | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Publishing | $1,941 | $3,983 | $(2,042) | -51.27% | | Digital Marketing Solutions | $402 | $1,196 | $(794) | -66.39% | | Corporate and other | $317 | $2,103 | $(1,786) | -84.93% | | **Total** | **$2,660** | **$7,282** | **$(4,622)** | **-63.47%** | Severance-Related Expenses for Nine Months Ended Sep 30 (in thousands) | Segment | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Publishing | $10,125 | $35,401 | $(25,276) | -71.40% | | Digital Marketing Solutions | $321 | $5,333 | $(5,012) | -94.00% | | Corporate and other | $440 | $14,069 | $(13,629) | -96.87% | | **Total** | **$10,886** | **$54,803** | **$(43,917)** | **-80.14%** | - Asset impairment charges for the three and nine months ended September 30, 2021, were **$2.3 million** and **$3.1 million**, respectively, primarily due to the impairment of real estate held for sale in the Publishing segment[56](index=56&type=chunk) - Accelerated depreciation decreased significantly for both the three and nine months ended September 30, 2021, compared to 2020, due to fewer print facility shutdowns[57](index=57&type=chunk) [Note 7 — Debt](index=16&type=section&id=NOTE%207%20%E2%80%94%20Debt) This note details the company's debt structure, including the 5-Year Term Loan, 2027 Notes, and 2024 Notes, covering refinancing, reclassification, and interest expenses - On February 9, 2021, the company entered into a new **$1.045 billion** 5-Year Term Loan to repay the previous Acquisition Term Loan, resulting in a **$17.2 million** loss on early extinguishment of debt in Q1 2021[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) - As of September 30, 2021, **$899.4 million** was outstanding under the 5-Year Term Loan with an effective interest rate of **9.5%**. The loan was fully repaid on October 15, 2021, through a subsequent debt refinancing[63](index=63&type=chunk)[64](index=64&type=chunk) - The **$497.1 million** 6.0% Senior Secured Convertible Notes due 2027 (2027 Notes) initially had a derivative liability component for the conversion option. Following stockholder approval on February 26, 2021, the conversion option was reclassified to equity, resulting in a **$126.6 million** non-cash loss due to fair value increase[65](index=65&type=chunk)[76](index=76&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) Debt Interest Expense (in thousands) | Debt Type | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :---------------- | :-------------------------- | :-------------------------- | | 5-Year Term Loan | $19,200 | $50,500 | | 2027 Notes | $7,500 | $22,400 | - The 2027 Notes have an initial conversion rate of **200 shares per $1,000 principal amount** (conversion price of **$5.00 per share**) and are subject to various covenants, including minimum liquidity and dividend restrictions[68](index=68&type=chunk)[72](index=72&type=chunk)[75](index=75&type=chunk) [Note 8 — Pensions and Other Postretirement Benefit Plans](index=20&type=section&id=NOTE%208%20%E2%80%94%20Pensions%20and%20other%20postretirement%20benefit%20plans) This note details defined benefit retirement plans and postretirement benefits, highlighting an increase in non-operating pension income due to higher expected returns and lower interest costs Total Expense (Benefit) for Retirement Plans for Three Months Ended Sep 30 (in thousands) | Plan Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Pension Benefits | $(23,785) | $(18,236) | $(5,549) | 30.43% | | Postretirement Benefits | $438 | $622 | $(184) | -29.58% | Total Expense (Benefit) for Retirement Plans for Nine Months Ended Sep 30 (in thousands) | Plan Type | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Pension Benefits | $(71,429) | $(54,139) | $(17,290) | 31.94% | | Postretirement Benefits | $1,322 | $1,863 | $(541) | -29.04% | - The increase in non-operating pension income for both periods was primarily due to higher expected returns on plan assets and lower interest costs on benefit obligations[162](index=162&type=chunk) - The company contributed **$40.2 million** to pension plans and **$4.4 million** to other postretirement plans during the nine months ended September 30, 2021, including deferred contributions for the GR Plan[83](index=83&type=chunk) [Note 9 — Income Taxes](index=21&type=section&id=NOTE%209%20%E2%80%94%20Income%20taxes) This note summarizes pre-tax income (loss) and income tax provision (benefit), with the Q3 provision driven by pre-tax income and PPP loan forgiveness, and the nine-month provision by net loss and derivative revaluation Income Taxes (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income (loss) before income taxes | $17,529 | $(28,350) | $(101,880) | $(572,085) | | Provision (benefit) for income taxes | $2,984 | $3,098 | $11,567 | $(22,200) | | Effective tax rate | 17.0% | *** | (11.4)% | 3.9% | - The Q3 2021 tax provision was mainly driven by pre-tax income and impacted by PPP loan forgiveness, partially offset by valuation allowances on non-deductible interest expense carryforwards[85](index=85&type=chunk) - The nine-month 2021 tax provision was primarily due to a pre-tax net loss in Q1 2021, the non-deductible derivative revaluation, valuation allowances, and state/foreign tax expenses[86](index=86&type=chunk) - A **$32.5 million** deferred tax asset related to the 2027 Notes' embedded conversion feature was reclassified to Equity in Q1 2021[87](index=87&type=chunk) [Note 10 — Supplemental Equity Information](index=22&type=section&id=NOTE%2010%20%E2%80%94%20Supplemental%20equity%20information) This note details income (loss) per share calculations, including dilutive securities, share-based compensation, and the company's Rights Agreement to protect NOLs Income (Loss) Per Share Attributable to Gannett (in thousands, except per share) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to Gannett | $14,687 | $(31,260) | $(112,514) | $(548,305) | | Basic weighted average shares outstanding (in thousands) | 135,002 | 132,223 | 134,610 | 131,425 | | Diluted weighted average shares outstanding (in thousands) | 239,453 | 132,223 | 134,610 | 131,425 | | Basic EPS | $0.11 | $(0.24) | $(0.84) | $(4.17) | | Diluted EPS | $0.09 | $(0.24) | $(0.84) | $(4.17) | - Dilutive securities for Q3 2021 included **5.032 million** restricted stock grants and **99.419 million** shares from the 2027 Notes[92](index=92&type=chunk) Share-Based Compensation Expense (in thousands) | Period | 2021 | 2020 | | :-------------------------- | :----- | :----- | | 3 Months Ended Sep 30 | $4,600 | $3,800 | | 9 Months Ended Sep 30 | $13,800 | $22,800 | - The company adopted a Section 382 Rights Agreement to protect its **$543.5 million** net operating loss carryforwards (NOLs), which will continue until April 5, 2023[96](index=96&type=chunk)[98](index=98&type=chunk) [Note 11 — Fair Value Measurement](index=24&type=section&id=NOTE%2011%20%E2%80%94%20Fair%20value%20measurement) This note describes fair value measurements, categorizing assets and liabilities into a three-tiered hierarchy, with pension plan assets measured recurringly and assets held for sale nonrecurringly - Fair value measurements are disclosed using a three-tiered hierarchy: Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[101](index=101&type=chunk) - Pension plan assets are measured at fair value on a recurring basis, and the 5-Year Term Loan was classified as Level 2[102](index=102&type=chunk)[103](index=103&type=chunk) - Assets held for sale, totaling **$21.7 million** as of September 30, 2021, are measured on a nonrecurring basis and classified as Level 3[104](index=104&type=chunk) [Note 12 — Commitments, Contingencies and Other Matters](index=24&type=section&id=NOTE%2012%20%E2%80%94%20Commitments%2C%20contingencies%20and%20other%20matters) This note addresses the company's legal proceedings and contingent matters, with management believing current proceedings will not materially adversely affect financial position or results - The company is involved in various legal proceedings in the ordinary course of business, including libel, intellectual property, employment, and regulatory matters[105](index=105&type=chunk) - Management does not expect current and threatened legal proceedings to have a material adverse effect on the company's business, financial position, or consolidated results of operations[106](index=106&type=chunk) - Equity purchase arrangements exercisable by counterparties are classified as Redeemable noncontrolling interests[107](index=107&type=chunk) [Note 13 — Segment Reporting](index=25&type=section&id=NOTE%2013%20%E2%80%94%20Segment%20reporting) This note defines the company's Publishing and Digital Marketing Solutions segments, outlining revenue types and the use of non-GAAP measures like Adjusted EBITDA for performance evaluation - Gannett reports in two segments: Publishing (local, regional, national, and international newspaper publishers) and Digital Marketing Solutions (DMS) (digital marketing services through ReachLocal)[23](index=23&type=chunk)[112](index=112&type=chunk) - The Chief Operating Decision Maker (CEO) uses Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett (non-GAAP measures) to evaluate segment performance and allocate resources[110](index=110&type=chunk)[111](index=111&type=chunk) Adjusted EBITDA for Three Months Ended Sep 30 (non-GAAP basis, in thousands) | Segment | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Publishing | $101,001 | $108,752 | $(7,751) | -7.13% | | Digital Marketing Solutions | $15,024 | $4,177 | $10,847 | 259.70% | | Corporate and other | $(13,958) | $(24,949) | $10,991 | -44.05% | | **Consolidated** | **$102,067** | **$87,980** | **$14,087** | **16.01%** | Adjusted EBITDA for Nine Months Ended Sep 30 (non-GAAP basis, in thousands) | Segment | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :---------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Publishing | $317,398 | $311,767 | $5,631 | 1.81% | | Digital Marketing Solutions | $36,725 | $14,847 | $21,878 | 147.35% | | Corporate and other | $(35,822) | $(61,548) | $25,726 | -41.80% | | **Consolidated** | **$318,301** | **$265,066** | **$53,235** | **20.08%** | [Note 14 — Other Supplemental Information](index=28&type=section&id=NOTE%2014%20%E2%80%94%20Other%20supplemental%20information) This note provides additional financial details, including a reconciliation of cash, cash equivalents, and restricted cash, supplemental cash flow information, and a breakout of accounts payable and accrued liabilities Cash, Cash Equivalents and Restricted Cash (in thousands) | Item | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $141,302 | $188,960 | | Restricted cash included in other current assets | $4,845 | $10,796 | | Restricted cash included in investments and other assets | $21,267 | $24,177 | | **Total cash, cash equivalents and restricted cash** | **$167,414** | **$223,933** | Supplemental Cash Flow Information for Nine Months Ended Sep 30 (in thousands) | Item | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Net cash refund for taxes | $(9,031) | $(4,510) | | Cash paid for interest | $80,280 | $176,402 | | Accrued capital expenditures | $2,836 | $758 | Accounts Payable and Accrued Liabilities (in thousands) | Item | Sep 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Accounts payable | $134,805 | $131,797 | | Compensation | $108,444 | $115,061 | | Taxes (primarily property and sales taxes) | $29,104 | $30,834 | | Benefits | $23,031 | $22,821 | | Interest | $10,012 | $3,676 | | Other | $51,928 | $74,057 | | **Total** | **$357,324** | **$378,246** | [Note 15 — Subsequent Events](index=28&type=section&id=NOTE%2015%20%E2%80%94%20Subsequent%20events) This note discloses a major debt refinancing completed on October 15, 2021, where the company secured new loans to repay existing debt, resulting in an estimated loss on early extinguishment - On October 15, 2021, Gannett Holdings completed a debt refinancing, including a **$516 million** New Senior Secured Term Loan and **$400 million** of 6.00% first lien notes due 2026 (2026 Senior Notes)[119](index=119&type=chunk)[120](index=120&type=chunk) - Proceeds from the new debt were used to fully repay the **$899.4 million** 5-Year Term Loan[120](index=120&type=chunk)[124](index=124&type=chunk) - Total debt outstanding after the refinancing was **$1.416 billion**, comprising the New Senior Secured Term Loan, 2026 Senior Notes, 2027 Notes, and 2024 Notes[123](index=123&type=chunk) - The company estimates a loss on early extinguishment of the 5-Year Term Loan and other fees of approximately **$31.2 million** in Q4 2021 due to the refinancing[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Gannett's financial performance, condition, and operational results, covering strategy, trends, COVID-19 impact, and non-GAAP measures [Overview](index=29&type=section&id=OVERVIEW) Gannett is a subscription-led and digitally-focused media and marketing solutions company, aiming to drive audience growth and engagement through content and marketing expertise - Gannett's strategy focuses on driving audience growth and engagement by delivering deeper content experiences and offering marketing expertise to advertisers, transitioning from traditional print to a digitally-focused content platform[126](index=126&type=chunk) - The company's assets include USA TODAY, local media in 46 U.S. states, Newsquest in the U.K., and digital marketing services (ReachLocal, UpCurve, WordStream) marketed under the LOCALiQ brand[127](index=127&type=chunk) [Business Trends](index=30&type=section&id=Business%20Trends) Gannett navigates industry trends including declining print advertising, SMBs' need for digital presence, consumer demand for experience-based connections, and newsprint availability challenges - Print advertising continues to decline, prompting a focus on optimizing print operations and converting digital audiences into digital-only subscribers[131](index=131&type=chunk) - Small and medium-sized businesses (SMBs) require digital presence, which Gannett addresses with its broad suite of Digital Marketing Solutions (DMS) products[131](index=131&type=chunk) - Digital consumer engagement has declined from its peak during the COVID-19 pandemic, as consumers resume pre-pandemic activities and the news cycle slows[131](index=131&type=chunk) - Newsprint availability is constrained, and inflationary pressures are impacting newsprint and delivery costs[131](index=131&type=chunk) [Recent Developments](index=30&type=section&id=Recent%20Developments) Recent developments include a significant debt refinancing on October 15, 2021, and reclassifications in prior period financial statements for consistency - On October 15, 2021, Gannett Holdings completed a debt refinancing, securing a **$516 million** New Senior Secured Term Loan and issuing **$400 million** of 6.00% first lien notes due 2026, used to repay the 5-Year Term Loan[129](index=129&type=chunk) - Certain prior period condensed consolidated financial statements were reclassified to conform to the current year presentation, including a re-alignment of Publishing segment's Circulation revenues related to Digital-only circulation[130](index=130&type=chunk) [Certain Matters Affecting Comparability](index=30&type=section&id=Certain%20matters%20affecting%20comparability) This section highlights factors impacting financial comparisons, including reclassifications, the 2027 Notes' conversion option reclassification, integration costs, accelerated depreciation, and foreign currency fluctuations - Stockholder approval on February 26, 2021, allowed the 2027 Notes' conversion option to be share-settled, leading to its reclassification to equity and a **$126.6 million** non-cash loss due to fair value increase[131](index=131&type=chunk)[132](index=132&type=chunk) Integration and Reorganization Costs (in thousands) | Period | 2021 | 2020 | | :-------------------------- | :----- | :----- | | 3 Months Ended Sep 30 | $13,600 | $13,400 | | 9 Months Ended Sep 30 | $35,500 | $74,000 | - The company ceased operations of **4** and **14** printing facilities for the three and nine months ended September 30, 2021, respectively, resulting in accelerated depreciation of **$1.1 million** and **$11.4 million**[134](index=134&type=chunk) - No goodwill and intangible impairments were incurred for the three and nine months ended September 30, 2021, compared to **$393.4 million** in the nine months ended September 30, 2020, primarily due to COVID-19 impacts[137](index=137&type=chunk) [Outlook for 2021](index=33&type=section&id=Outlook%20for%202021) Gannett's 2021 strategic focus includes accelerating digital subscriber growth, driving digital marketing services growth, optimizing print businesses, and investing in growth areas like USA TODAY NETWORK Ventures - Strategic focus areas for 2021 include accelerating digital subscriber growth to **10 million** over the next five years, driving digital marketing services growth, optimizing traditional print and advertising businesses, and investing in growth businesses like USA TODAY NETWORK Ventures[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - The company entered an exclusive agreement with Tipico USA Technology, Inc. in July 2021 to explore online gaming[143](index=143&type=chunk) [Impacts of the COVID-19 Pandemic](index=33&type=section&id=Impacts%20of%20the%20COVID-19%20pandemic) The COVID-19 pandemic continued to negatively impact Gannett's Advertising and marketing services and single-copy newspaper sales, accelerating secular declines, leading to cost reduction measures - The COVID-19 pandemic continued to negatively impact Advertising and marketing services revenues and single-copy newspaper sales, accelerating secular declines[144](index=144&type=chunk) - Measures to reduce costs and preserve cash flow included applying for governmental relief programs (like PPP), suspending quarterly dividends, and debt refinancing[145](index=145&type=chunk) - The company received **$16.4 million** in PPP funding and had **$15.1 million** of these loans forgiven in Q3 2021, recognized as an offset to operating costs and SG&A expenses[147](index=147&type=chunk) [Seasonality](index=34&type=section&id=Seasonality) Gannett's revenues experience moderate seasonality, with Advertising and marketing services revenues typically highest in the fourth quarter and lowest in the first quarter, influenced by external factors - Revenues are subject to moderate seasonality, with Advertising and marketing services revenues typically highest in Q4 (holiday season) and lowest in Q1[148](index=148&type=chunk) - Advertising sales volumes are influenced by competitors' pricing, advertiser spending decisions, and general economic conditions[148](index=148&type=chunk) [Results of Operations](index=34&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a high-level overview of the company's consolidated financial results, including total operating revenues, expenses, and income (loss) for the three and nine months ended September 30, 2021 Consolidated Operating Results for Three Months Ended Sep 30 (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total operating revenues | $800,185 | $814,539 | $(14,354) | -1.76% | | Total operating expenses | $769,083 | $813,059 | $(43,976) | -5.41% | | Operating income (loss) | $31,102 | $1,480 | $29,622 | 1999.99% | Consolidated Operating Results for Nine Months Ended Sep 30 (in thousands) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total operating revenues | $2,381,544 | $2,530,223 | $(148,679) | -5.88% | | Total operating expenses | $2,297,056 | $2,996,189 | $(699,133) | -23.33% | | Operating income (loss) | $84,488 | $(465,966) | $550,454 | -118.14% | [Consolidated Summary](index=35&type=section&id=Consolidated%20Summary) This section provides a consolidated summary of the company's segment results, including operating revenues, expenses, and income (loss) for the three and nine months ended September 30, 2021 and 2020 Consolidated Summary for Three Months Ended Sep 30 (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Publishing Operating revenues | $715,807 | $732,226 | $(16,419) | -2% | | Digital Marketing Solutions Operating revenues | $116,771 | $105,443 | $11,328 | 11% | | Total operating revenues | $800,185 | $814,539 | $(14,354) | -2% | | Total operating expenses | $769,083 | $813,059 | $(43,976) | -5% | | Operating income (loss) | $31,102 | $1,480 | $29,622 | *** | | Net income (loss) attributable to Gannett | $14,687 | $(31,260) | $45,947 | *** | | Diluted EPS | $0.09 | $(0.24) | $0.33 | *** | Consolidated Summary for Nine Months Ended Sep 30 (in thousands) | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Publishing Operating revenues | $2,139,937 | $2,286,268 | $(146,331) | -6% | | Digital Marketing Solutions Operating revenues | $329,089 | $321,287 | $7,802 | 2% | | Total operating revenues | $2,381,544 | $2,530,223 | $(148,679) | -6% | | Total operating expenses | $2,297,056 | $2,996,189 | $(699,133) | -23% | | Operating income (loss) | $84,488 | $(465,966) | $550,454 | *** | | Net income (loss) attributable to Gannett | $(112,514) | $(548,305) | $435,791 | -79% | | Diluted EPS | $(0.84) | $(4.17) | $3.33 | -80% | [Operating Revenues](index=35&type=section&id=Operating%20revenues) Total operating revenues decreased for both the three and nine months ended September 30, 2021, with Publishing declines offset by DMS growth in digital advertising and marketing services - Total Operating revenues decreased by **$14.4 million (2%)** for the three months and **$148.7 million (6%)** for the nine months ended September 30, 2021[152](index=152&type=chunk) - Publishing segment revenues decreased due to lower Circulation revenues (**$29.5 million** for 3 months, **$111.1 million** for 9 months) and Advertising and marketing services revenues (**$40.8 million** for 9 months), partially offset by higher Other revenues[153](index=153&type=chunk) - DMS segment revenues increased by **$11.3 million (11%)** for the three months and **$7.8 million (2%)** for the nine months, driven by higher Advertising and marketing services revenues[155](index=155&type=chunk) [Operating Expenses](index=36&type=section&id=Operating%20expenses) Total operating expenses decreased for both the three and nine months ended September 30, 2021, with significant reductions in Publishing and Corporate, partially offset by DMS operating cost increases - Total Operating expenses decreased by **$44.0 million (5%)** for the three months and **$699.1 million (23%)** for the nine months ended September 30, 2021[156](index=156&type=chunk) - Publishing segment operating expenses decreased by **$27.2 million (4%)** for the three months and **$591.8 million (23%)** for the nine months, driven by lower operating costs, depreciation, integration costs, and the absence of goodwill impairments seen in 2020[156](index=156&type=chunk) - DMS segment operating expenses increased by **$1.4 million (1%)** for the three months but decreased by **$55.6 million (15%)** for the nine months, reflecting increased operating costs offset by lower SG&A and the absence of 2020 goodwill impairments[157](index=157&type=chunk) - Corporate and other operating expenses decreased by **$9.9 million (22%)** for the three months and **$43.3 million (29%)** for the nine months, primarily due to reduced SG&A and integration costs[158](index=158&type=chunk) [Non-Operating (Income) Expense](index=37&type=section&id=Non-operating%20%28income%29%20expense) This section details changes in non-operating items, including decreased interest expense, increased loss on early debt extinguishment, higher non-operating pension income, and a significant loss on convertible notes derivative - Interest expense decreased for both periods due to a lower effective interest rate from debt refinancing and a reduced debt balance[160](index=160&type=chunk) - Loss on early extinguishment of debt increased significantly, primarily due to early prepayments on the 5-Year Term Loan and the payoff of the Acquisition Term Loan[161](index=161&type=chunk) - Non-operating pension income increased due to higher expected returns on plan assets and lower interest costs on benefit obligations[162](index=162&type=chunk) - A **$126.6 million** loss on convertible notes derivative was recorded for the nine months ended September 30, 2021, driven by an increase in the fair value of the derivative liability due to the company's stock price increase[163](index=163&type=chunk) [Provision (Benefit) for Income Taxes](index=37&type=section&id=Provision%20%28benefit%29%20for%20income%20taxes) The income tax provision for Q3 2021 was influenced by pre-tax income and PPP loan forgiveness, while the nine-month provision was impacted by a pre-tax net loss and the non-deductible derivative revaluation Income Taxes (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Income (loss) before income taxes | $17,529 | $(28,350) | $(101,880) | $(572,085) | | Provision (benefit) for income taxes | $2,984 | $3,098 | $11,567 | $(22,200) | | Effective tax rate | 17.0% | *** | (11.4)% | 3.9% | - The Q3 2021 tax provision was mainly driven by pre-tax income and PPP loan forgiveness, partially offset by valuation allowances on non-deductible interest expense carryforwards[166](index=166&type=chunk) - The nine-month 2021 tax provision was primarily due to a pre-tax net loss in Q1 2021, the non-deductible derivative revaluation, valuation allowances, and state/foreign tax expenses[167](index=167&type=chunk)[168](index=168&type=chunk) - A **$32.5 million** deferred tax asset related to the 2027 Notes' embedded conversion feature was reclassified to Equity in Q1 2021[169](index=169&type=chunk) [Net Income (Loss) Attributable to Gannett and Diluted Income (Loss) Per Share Attributable to Gannett](index=38&type=section&id=Net%20income%20%28loss%29%20attributable%20to%20Gannett%20and%20diluted%20income%20%28loss%29%20per%20share%20attributable%20to%20Gannett) Gannett reported net income of **$14.7 million** and diluted EPS of **$0.09** for Q3 2021, a significant improvement, while the nine-month net loss decreased substantially to **$112.5 million** Net Income (Loss) Attributable to Gannett and Diluted EPS (in thousands, except per share) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to Gannett | $14,687 | $(31,260) | $(112,514) | $(548,305) | | Diluted EPS | $0.09 | $(0.24) | $(0.84) | $(4.17) | - The change in net income (loss) and diluted EPS for both periods reflects the combined impact of improved operating income, reduced interest expense, increased non-operating pension income, and the loss on convertible notes derivative[171](index=171&type=chunk) [Publishing Segment](index=38&type=section&id=Publishing%20segment) The Publishing segment experienced declining total operating revenues due to decreases in print circulation and advertising, but showed growth in digital advertising and marketing services, with significantly reduced operating expenses Publishing Segment Operating Revenues for Three Months Ended Sep 30 (in thousands) | Revenue Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Advertising and marketing services | $328,784 | $329,508 | $(724) | 0% | | Circulation | $306,698 | $336,152 | $(29,454) | -9% | | Other | $80,325 | $66,566 | $13,759 | 21% | | **Total operating revenues** | **$715,807** | **$732,226** | **$(16,419)** | **-2%** | Publishing Segment Operating Revenues for Nine Months Ended Sep 30 (in thousands) | Revenue Type | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Advertising and marketing services | $984,575 | $1,025,396 | $(40,821) | -4% | | Circulation | $942,392 | $1,053,517 | $(111,125) | -11% | | Other | $212,970 | $207,355 | $5,615 | 3% | | **Total operating revenues** | **$2,139,937** | **$2,286,268** | **$(146,331)** | **-6%** | - Print advertising revenues declined due to secular trends and divestitures, while Digital advertising and marketing services revenues increased due to higher digital media spend and marketing services, and improved operating trends post-COVID-19[173](index=173&type=chunk)[174](index=174&type=chunk) - Print circulation revenues decreased due to reduced home delivery and single-copy sales, but Digital-only circulation revenues increased by **27% (Q3)** and **37% (9 months)** driven by a **46%** increase in paid digital-only subscribers to approximately **1.543 million**[175](index=175&type=chunk) - Operating costs decreased due to lower newsprint and ink costs, and reduced compensation and benefits from headcount reductions and PPP loan forgiveness, partially offset by increased distribution costs[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Depreciation and amortization expenses decreased due to fewer print facility shutdowns and strategic real estate dispositions[185](index=185&type=chunk) - Adjusted EBITDA for the Publishing segment decreased by **$7.8 million (7%)** for the three months but increased by **$5.6 million (2%)** for the nine months ended September 30, 2021[192](index=192&type=chunk) [Digital Marketing Solutions Segment](index=43&type=section&id=Digital%20Marketing%20Solutions%20segment) The Digital Marketing Solutions (DMS) segment reported increased operating revenues driven by advertising and marketing services growth, with operating expenses reflecting higher outside services costs offset by reduced compensation Digital Marketing Solutions Segment Operating Revenues for Three Months Ended Sep 30 (in thousands) | Revenue Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Advertising and marketing services | $116,771 | $100,807 | $15,964 | 16% | | Other | — | $4,636 | $(4,636) | -100% | | **Total operating revenues** | **$116,771** | **$105,443** | **$11,328** | **11%** | Digital Marketing Solutions Segment Operating Revenues for Nine Months Ended Sep 30 (in thousands) | Revenue Type | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Advertising and marketing services | $328,184 | $306,899 | $21,285 | 7% | | Other | $905 | $14,388 | $(13,483) | -94% | | **Total operating revenues** | **$329,089** | **$321,287** | **$7,802** | **2%** | - Advertising and marketing services revenues increased due to growth in the core ReachLocal business and improved operating trends post-COVID-19[194](index=194&type=chunk) - Operating costs increased due to higher outside services costs (third-party media fees) driven by increased revenues, while compensation and benefits decreased due to integration efforts and cost containment[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Selling, general and administrative expenses decreased due to reduced compensation and benefits from integration efforts and cost containment initiatives[199](index=199&type=chunk)[200](index=200&type=chunk) - Adjusted EBITDA for the DMS segment increased significantly by **$10.8 million (Q3)** and **$21.9 million (9 months)** compared to the prior year[207](index=207&type=chunk) [Corporate and Other Category](index=45&type=section&id=Corporate%20and%20other%20category) The Corporate and other category experienced decreases in both operating revenues and expenses, with expense reductions driven by cost containment and lower severance, partially offset by systems implementation and debt fees Corporate and Other Operating Expenses for Three Months Ended Sep 30 (in thousands) | Expense Type | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Operating costs | $6,039 | $7,424 | $(1,385) | -19% | | Selling, general and administrative expenses | $15,222 | $26,393 | $(11,171) | -42% | | Depreciation and amortization | $4,260 | $2,106 | $2,154 | *** | | Integration and reorganization costs | $9,176 | $7,060 | $2,116 | 30% | | Other operating expenses | $4 | $1,913 | $(1,909) | -100% | | **Total operating expenses** | **$34,991** | **$44,924** | **$(9,933)** | **-22%** | Corporate and Other Operating Expenses for Nine Months Ended Sep 30 (in thousands) | Expense Type | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Operating costs | $14,534 | $17,864 | $(3,330) | -19% | | Selling, general and administrative expenses | $43,386 | $79,339 | $(35,953) | -45% | | Depreciation and amortization | $12,123 | $11,613 | $510 | 4% | | Integration and reorganization costs | $23,525 | $29,342 | $(5,817) | -20% | | Other operating expenses | $11,354 | $10,261 | $1,093 | 11% | | **Total operating expenses** | **$105,208** | **$148,509** | **$(43,301)** | **-29%** | - The decrease in operating expenses was mainly due to cost containment initiatives in SG&A and lower severance costs, partially offset by increased costs for systems implementation and outsourcing of corporate functions[210](index=210&type=chunk)[212](index=212&type=chunk) - Other operating expenses increased for the nine months due to **$10.9 million** in third-party fees related to the 5-Year Term Loan[213](index=213&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Gannett's primary cash requirements are for working capital, debt, and capital expenditures, funded by operating activities, with net cash provided by operating activities increasing significantly and a major debt refinancing completed in October 2021 - Primary cash requirements are for working capital, debt obligations, and capital expenditures, expected to be funded by operating activities[214](index=214&type=chunk) Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2021 | 2020 | Change ($) | Change (%) | | :-------------------------------------- | :--------- | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $133,347 | $74,280 | $59,067 | 79.52% | | Net cash provided by (used for) investing activities | $39,236 | $(1,979) | $41,215 | -2082.62% | | Net cash used for financing activities | $(212,284) | $(37,471) | $(174,813) | 466.52% | - Increase in operating cash flow was due to decreased interest paid, lower severance payments, PPP funding, and increased tax refunds, partially offset by decreased working capital and increased pension contributions[216](index=216&type=chunk) - Investing activities shifted from cash used to cash provided, primarily due to increased proceeds from asset sales and decreased capital expenditures[217](index=217&type=chunk) - Financing activities used more cash due to increased net repayments under term loans and payments of debt issuance costs[218](index=218&type=chunk) - On October 15, 2021, the company completed a debt refinancing, repaying the 5-Year Term Loan with proceeds from a New Senior Secured Term Loan (**$516 million**) and 2026 Senior Notes (**$400 million**), bringing total debt outstanding to **$1.416 billion**[239](index=239&type=chunk)[242](index=242&type=chunk) - The company does not currently pay a quarterly dividend and has no intention to reinstate it, with debt agreements restricting dividend payments[244](index=244&type=chunk) - Deferred **$41.6 million** in FICA taxes under the CARES Act, with **50%** due by Dec 31, 2021, and the remainder by Dec 31, 2022[245](index=245&type=chunk) - Forecasted capital expenditures for the remainder of 2021 are approximately **$13.9 million**, primarily for digital product development, print/technology systems, and system upgrades[247](index=247&type=chunk) [Critical Accounting Policies and Use of Estimates](index=51&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20USE%20OF%20ESTIMATES) This section refers readers to the company's most recent Annual Report on Form 10-K for a discussion of its critical accounting policies and use of estimates, noting no material changes during the quarter - No material changes to critical accounting policies and use of estimates were reported for the quarter ended September 30, 2021[250](index=250&type=chunk) [Non-GAAP Financial Measures](index=51&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section defines and reconciles non-GAAP financial measures, including Adjusted EBITDA and Adjusted Net income (loss) attributable to Gannett, used by management to evaluate operational performance and trends - Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are non-GAAP measures used to assess overall business operations, identify trends, and evaluate controllable expenses[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) - These non-GAAP measures exclude items like income tax expense (benefit), interest expense, gains/losses on early debt extinguishment, non-operating pension income, loss on convertible notes derivative, depreciation and amortization, integration and reorganization costs, asset impairments, goodwill and intangible impairments, gains/losses on asset sales, share-based compensation, and other non-recurring charges[252](index=252&type=chunk) - These measures have limitations and should not be considered in isolation or as alternatives to U.S. GAAP measures[257](index=257&type=chunk)[259](index=259&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to Gannett | $14,687 | $(31,260) | $(112,514) | $(548,305) | | Total Adjustments | $87,380 | $119,240 | $430,815 | $813,371 | | **Adjusted EBITDA** | **$102,067** | **$87,980**