[Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2021, the company's total assets and liabilities decreased, while total stockholders' equity increased, primarily due to a reduction in current portion of long-term debt and a significant decrease in convertible debt Key Balance Sheet Data (in thousands of US dollars) | Indicator | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :------------- | | Total Assets | $3,054,451 | $3,108,914 | | Total Liabilities | $2,514,460 | $2,745,955 | | Total Stockholders' Equity | $541,652 | $364,109 | | Current Liabilities | $697,522 | $741,300 | | Current Portion of Long-Term Debt | $81,057 | $128,445 | | Convertible Debt | $394,146 | $581,405 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) For the three months ended March 31, 2021, total operating revenues decreased by 18% year-over-year, but operating income turned profitable, while net loss significantly increased by 77% due to a substantial loss on convertible note derivatives Key Operating and Comprehensive Income (Loss) Data (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Year-over-Year Change (thousands of US dollars) | Year-over-Year Change (%) | | :--------------------------------- | :-------------------- | :-------------------- | :----------------- | :------------ | | Total Operating Revenues | $777,084 | $948,682 | $(171,598) | (18.1)% | | Operating Income (Loss) | $7,941 | $(29,822) | $37,763 | >100% | | Interest Expense | $39,503 | $57,899 | $(18,396) | (31.8)% | | Loss on Early Extinguishment of Debt | $19,401 | $805 | $18,596 | >100% | | Loss on Convertible Note Derivatives | $126,600 | — | $126,600 | — | | Net Loss | $(142,701) | $(80,606) | $(62,095) | 77.0% | | Net Loss Attributable to Gannett | $(142,316) | $(80,152) | $(62,164) | 77.6% | | Net Loss Per Share Attributable to Gannett - Basic and Diluted | $(1.06) | $(0.61) | $(0.45) | 73.8% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the three months ended March 31, 2021, cash flow from operating activities slightly increased, and investing activities shifted from cash usage to inflow; however, cash used in financing activities significantly rose due to increased debt repayments and issuance costs, leading to a decrease in total cash, cash equivalents, and restricted cash at period-end Key Cash Flow Data (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Year-over-Year Change (thousands of US dollars) | | :--------------------------------- | :-------------------- | :-------------------- | :----------------- | | Net Cash Provided by Operating Activities | $61,316 | $60,489 | $827 | | Net Cash Provided by (Used in) Investing Activities | $2,516 | $(3,419) | $5,935 | | Net Cash Used in Financing Activities | $(74,699) | $(14,679) | $(60,020) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $196,173 | $232,609 | $(36,436) | [Condensed Consolidated Statements of Equity](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) As of March 31, 2021, the company's total stockholders' equity significantly increased, primarily due to the reclassification of convertible note equity features to additional paid-in capital, despite an expanded net loss during the same period Key Stockholders' Equity Data (in thousands of US dollars) | Indicator | March 31, 2021 | December 30, 2020 | | :--------------------------------- | :------------- | :------------- | | Additional Paid-in Capital | $1,421,977 | $1,103,881 | | Accumulated Deficit | $(928,753) | $(786,437) | | Accumulated Other Comprehensive Income | $53,596 | $50,173 | | Total Equity | $541,652 | $364,109 | - The equity component of convertible notes was reclassified on March 31, 2021, increasing **additional paid-in capital by $316,252 thousand**[16](index=16&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations of the company's business, accounting policies, financial data breakdowns, and significant transactions and events, including COVID-19 impacts, debt restructuring, convertible note accounting, pension plans, taxes, and contingencies [NOTE 1 — Description of Business and Basis of Presentation](index=9&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 dedicated to fostering communities, with a strategic focus on driving audience growth and engagement, and providing products and marketing expertise to advertisers[18](index=18&type=chunk) - The company's operations are organized into two reportable segments: Publishing and Digital Marketing Solutions (DMS)[20](index=20&type=chunk) - The ongoing COVID-19 pandemic has led to decreased demand for advertising and digital marketing services, commercial printing and distribution services, and reduced in-person events and single-copy newspaper sales, which is expected to continue negatively impacting business and operating results in the short term[21](index=21&type=chunk) - The company has implemented and continues to pursue cost reduction and cash flow preservation measures, including applying for government relief programs, suspending quarterly dividends, debt refinancing, and reducing discretionary spending[22](index=22&type=chunk) - The company adopted new guidance simplifying income tax accounting, allowing for the recognition of a tax benefit in the first quarter of 2021 as the annual projected loss no longer limits quarterly losses[27](index=27&type=chunk) [NOTE 2 — Revenues](index=10&type=section&id=NOTE%202%20%E2%80%94%20Revenues) Revenues by Source (in thousands of US dollars) | Revenue Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Year-over-Year Change (thousands of US dollars) | Year-over-Year Change (%) | | :------------------------- | :-------------------- | :-------------------- | :----------------- | :------------ | | Advertising and Marketing Services | $388,357 | $487,010 | $(98,653) | (20.3)% | | Circulation | $325,437 | $374,723 | $(49,286) | (13.2)% | | Other | $63,290 | $86,949 | $(23,659) | (27.2)% | | **Total Revenues** | **$777,084** | **$948,682** | **$(171,598)** | **(18.1)%** | - Approximately **7.5% of revenues** for the three months ended March 31, 2021, were derived from international operations[30](index=30&type=chunk) - Deferred revenue primarily consists of prepaid circulation subscriptions, expected to be recognized within the next **1 to 12 months**[31](index=31&type=chunk) [NOTE 3 — Leases](index=11&type=section&id=NOTE%203%20%E2%80%94%20Leases) Lease-Related Data (in thousands of US dollars) | Indicator | March 31, 2021 | March 31, 2020 | | :--------------------------------- | :------------- | :------------- | | Operating Lease Right-of-Use Assets | $286,368 | $289,504 | | Current Operating Lease Liabilities | $42,600 | — | | Long-Term Operating Lease Liabilities | $271,496 | $274,460 | | Net Lease Cost (Three Months) | $23,897 | $27,026 | - As of March 31, 2021, the weighted-average remaining lease term was **7.6 years**, with a weighted-average discount rate of **12.90%**[38](index=38&type=chunk) [NOTE 4 — Accounts Receivable, Net](index=12&type=section&id=NOTE%204%20%E2%80%94%20Accounts%20receivable,%20net) Changes in Allowance for Doubtful Accounts (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------- | :-------------------- | | Beginning Balance | $20,843 | $19,923 | | Provision for the Period | $(2,171) | $5,143 | | Write-offs | $(2,805) | $(5,347) | | Recoveries | $1,206 | $918 | | Ending Balance | $17,124 | $20,486 | - Bad debt expense decreased by **$2.2 million** in the first quarter of 2021, primarily due to a seasonal decline in accounts receivable volume, increased recoveries, and fewer write-offs[41](index=41&type=chunk) [NOTE 5 — Goodwill and Intangible Assets](index=13&type=section&id=NOTE%205%20%E2%80%94%20Goodwill%20and%20intangible%20assets) Goodwill and Intangible Assets, Net (in thousands of US dollars) | Indicator | March 31, 2021 | December 31, 2020 | | :--------------------------------- | :------------- | :------------- | | Finite-Lived Intangible Assets | $626,575 | $653,242 | | Indefinite-Lived Intangible Assets (Mastheads) | $171,287 | $171,408 | | **Total Intangible Assets** | **$797,862** | **$824,650** | | **Goodwill** | **$534,211** | **$534,088** | - As of March 31, 2021, the company's financial performance exceeded the 2020 annual impairment assessment projections, with no indicators of impairment identified[43](index=43&type=chunk) [NOTE 6 — Integration and Reorganization Costs and Asset Impairments](index=13&type=section&id=NOTE%206%20%E2%80%94%20Integration%20and%20reorganization%20costs%20and%20asset%20impairments) Integration and Reorganization Costs (in thousands of US dollars) | Cost Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------- | :-------------------- | :-------------------- | | Severance-Related Costs | $7,097 | $21,174 | | Facility Integration and Other Reorganization-Related Costs | $6,307 | $1,090 | | **Total** | **$13,404** | **$28,264** | - Asset impairment charges of **$0.8 million** were recorded in the first quarter of 2021, primarily related to real estate sales[48](index=48&type=chunk) - Accelerated depreciation expense decreased from **$24.7 million** in the first quarter of 2020 to **$9.2 million** in the first quarter of 2021, due to shortened asset useful lives[49](index=49&type=chunk) [NOTE 7 — Debt](index=14&type=section&id=NOTE%207%20%E2%80%94%20Debt) - On February 9, 2021, the company entered into a **$1.045 billion** 5-Year Term Loan, a senior secured term loan, to repay the **$1.043 billion** Acquisition Term Loan and cover related fees[50](index=50&type=chunk)[51](index=51&type=chunk) - In the first quarter of 2021, the company recognized a **$19.4 million loss on early extinguishment of debt**, primarily due to the early repayment of the Acquisition Term Loan[55](index=55&type=chunk) - As of March 31, 2021, the 5-Year Term Loan had an aggregate outstanding principal balance of **$1.0364 billion** and an effective interest rate of **9.4%**[55](index=55&type=chunk) - On February 26, 2021, stockholders approved the stock settlement of the 6.0% Senior Secured Convertible Notes due 2027 (2027 Notes), resulting in a **$126.6 million increase in the fair value of the derivative liability** and its reclassification to equity[67](index=67&type=chunk)[68](index=68&type=chunk) - As of March 31, 2021, the effective interest rate for the liability component of the 2027 Notes was **10.5%**[69](index=69&type=chunk) [NOTE 8 — Pensions and Other Postretirement Benefit Plans](index=17&type=section&id=NOTE%208%20%E2%80%94%20Pensions%20and%20other%20postretirement%20benefit%20plans) Retirement Plan Costs (in thousands of US dollars) | Cost Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------- | :-------------------- | :-------------------- | | Pension Benefit Service Cost | $511 | $681 | | Postretirement Benefit Service Cost | $31 | $3 | | Pension Non-Operating (Income) Expense | $(24,364) | $(19,069) | | Postretirement Benefit Non-Operating (Income) Expense | $486 | $58 | | **Total Retirement Plan Expense (Income)** | **$(23,853)** | **$(18,388)** | - In the first quarter of 2021, the company contributed **$22.7 million** to pension plans and **$2.5 million** to other postretirement benefit plans[76](index=76&type=chunk) - The Gannett Retirement Plan (GR Plan) has deferred certain contractual contributions and negotiated a payment schedule of **$5 million per quarter** from December 31, 2020, through September 30, 2022[76](index=76&type=chunk) [NOTE 9 — Income Taxes](index=18&type=section&id=NOTE%209%20%E2%80%94%20Income%20taxes) Key Income Tax Data (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------- | :-------------------- | :-------------------- | | Loss Before Income Taxes | $(151,810) | $(71,627) | | Provision (Benefit) for Income Taxes | $(9,109) | $8,979 | | Effective Tax Rate | 6.0% | * | - The income tax benefit in the first quarter of 2021 was primarily driven by the net loss before income taxes but was below the **21% statutory federal rate** due to the non-deductible impact of derivative revaluation, partially offset by valuation allowances for non-deductible interest expense carryforwards and state and foreign income tax expense[79](index=79&type=chunk) - As of March 31, 2021, the total unrecognized tax benefits amounted to approximately **$39.7 million**[81](index=81&type=chunk) [NOTE 10 — Supplemental Equity Information](index=19&type=section&id=NOTE%2010%20%E2%80%94%20Supplemental%20equity%20information) Loss Per Share (in thousands of US dollars, except per share amounts) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------- | :-------------------- | :-------------------- | | Net Loss Attributable to Gannett | $(142,316) | $(80,152) | | Basic Weighted-Average Shares Outstanding | 134,075 | 130,561 | | Diluted Weighted-Average Shares Outstanding | 134,075 | 130,561 | | Net Loss Per Share Attributable to Gannett - Basic and Diluted | $(1.06) | $(0.61) | - In the first quarter of 2021, the company recognized **$3.4 million in equity-based compensation expense**, down from **$11.6 million** in the same period of 2020[84](index=84&type=chunk) - **3.9 million restricted stock units** were granted in the first quarter of 2021, typically vesting in installments over three years[85](index=85&type=chunk) - The company adopted a Stockholder Rights Plan on April 6, 2020, to protect its net operating loss carryforwards (NOLs) and other tax assets[86](index=86&type=chunk) [NOTE 11 — Fair Value Measurement](index=20&type=section&id=NOTE%2011%20%E2%80%94%20Fair%20value%20measurement) - Fair value measurements utilize a three-level fair value hierarchy, primarily encompassing pension plan assets[92](index=92&type=chunk)[93](index=93&type=chunk) - The 5-Year Term Loan is recorded at its carrying value, which approximates fair value, and is categorized as Level 2[94](index=94&type=chunk) - As of March 31, 2021, assets held for sale totaled **$14.1 million** and are classified as Level 3[95](index=95&type=chunk) [NOTE 12 — Commitments, Contingencies and Other Matters](index=21&type=section&id=NOTE%2012%20%E2%80%94%20Commitments,%20contingencies%20and%20other%20matters) - The company is periodically involved in legal proceedings in the ordinary course of business, including claims for defamation, invasion of privacy, intellectual property infringement, and wrongful termination, but management does not expect these to have a material adverse effect on the company's financial condition or results of operations[96](index=96&type=chunk)[98](index=98&type=chunk) - The company has assumed certain environmental contingencies related to the acquisition of Legacy Gannett, including investigation and remediation of groundwater contamination in Montgomery, Alabama, with the ultimate costs yet to be determined[97](index=97&type=chunk) [NOTE 13 — Segment Reporting](index=22&type=section&id=NOTE%2013%20%E2%80%94%20Segment%20reporting) - The company segments its operations into two reportable segments, Publishing and Digital Marketing Solutions, and a Corporate and Other category, based on how the Chief Operating Decision Maker (CODM) manages operations[100](index=100&type=chunk) - The CODM uses Adjusted EBITDA and Adjusted EBITDA Margin to assess segment performance and allocate resources[102](index=102&type=chunk) Key Adjusted EBITDA (Non-GAAP) Data (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Year-over-Year Change (thousands of US dollars) | Year-over-Year Change (%) | | :--------------------------------- | :-------------------- | :-------------------- | :----------------- | :------------ | | Net Loss Attributable to Gannett | $(142,316) | $(80,152) | $(62,164) | 77.6% | | Adjusted EBITDA (Non-GAAP) | $100,465 | $99,069 | $1,396 | 1.4% | | Adjusted EBITDA Margin (Non-GAAP) | 12.9% | 10.4% | 2.5 pp | — | [NOTE 14 — Other Supplemental Information](index=23&type=section&id=NOTE%2014%20%E2%80%94%20Other%20supplemental%20information) Reconciliation of Cash, Cash Equivalents, and Restricted Cash (in thousands of US dollars) | Indicator | March 31, 2021 | March 31, 2020 | | :--------------------------------- | :------------- | :------------- | | Cash and Cash Equivalents | $163,505 | $199,651 | | Restricted Cash in Other Current Assets | $8,999 | $11,028 | | Restricted Cash in Investments and Other Assets | $23,669 | $21,930 | | **Total Cash, Cash Equivalents, and Restricted Cash** | **$196,173** | **$232,609** | - Interest paid in the first quarter of 2021 was **$13.5 million**, significantly higher than **$0.551 million** in the same period of 2020[108](index=108&type=chunk) Accounts Payable and Accrued Liabilities Detail (in thousands of US dollars) | Indicator | March 31, 2021 | December 31, 2020 | | :------------------------- | :------------- | :------------- | | Accounts Payable | $137,571 | $131,797 | | Compensation | $109,173 | $115,061 | | Taxes | $28,786 | $30,834 | | Benefits | $22,120 | $22,821 | | Interest | $22,327 | $3,676 | | Other | $57,393 | $74,057 | | **Total Accounts Payable and Accrued Liabilities** | **$377,370** | **$378,246** | [NOTE 15 — Subsequent Events](index=24&type=section&id=NOTE%2015%20%E2%80%94%20Subsequent%20events) - Subsequent to March 31, 2021, the company received approval for approximately **$16.2 million** in Paycheck Protection Program (PPP) funds and plans to apply for forgiveness in accordance with applicable guidelines[110](index=110&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) [Overview](index=25&type=section&id=OVERVIEW) Gannett is a subscription-led, digitally focused media and marketing solutions company committed to driving audience growth and engagement by deepening content experiences, expanding digital marketing services, optimizing traditional print operations, and actively exploring growth businesses like online gaming - The company's strategic focus is to drive audience growth and engagement, transitioning from traditional print media to a digital content platform by offering deeper content experiences and marketing expertise for advertisers[112](index=112&type=chunk) - The company has identified several business trends, including the continued decline in print advertising, an increasingly complex digital marketing landscape for small and medium-sized businesses (SMBs), and consumer demand for experiential connections[115](index=115&type=chunk) [Certain Matters Affecting Comparability](index=25&type=section&id=Certain%20matters%20affecting%20comparability) This section discusses several factors impacting period-end comparability, including the reclassification of 2020 digital circulation revenue, a **$126.6 million non-cash loss** from the 2027 convertible notes equity classification, and significant changes in integration and reorganization costs - In the fourth quarter of 2020, circulation revenue in the Publishing segment was reclassified, resulting in a **$3.9 million increase in print circulation revenue** and a **$3.9 million decrease in digital circulation revenue** for the first quarter of 2020, with no impact on total circulation revenue[115](index=115&type=chunk) - On February 26, 2021, stockholders approved the stock settlement of the 2027 convertible notes, leading to the reclassification of the conversion option to equity and a **$126.6 million non-cash loss** due to an increase in the company's stock price[116](index=116&type=chunk) Integration and Reorganization Costs (in thousands of US dollars) | Cost Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------- | :-------------------- | :-------------------- | | Integration and Reorganization Costs | $13,404 | $28,300 | | Accelerated Depreciation | $9,200 | $24,700 | - International operations of the UK Publishing business and the ReachLocal subsidiary are subject to foreign currency fluctuations[121](index=121&type=chunk) [Outlook for 2021](index=26&type=section&id=Outlook%20for%202021) The company's 2021 strategic focus is to accelerate digital subscriber growth, targeting **10 million users within five years**; drive digital marketing services growth; optimize traditional print operations; and prioritize investments in high-growth businesses like USA TODAY NETWORK Ventures and online gaming, while the COVID-19 pandemic is expected to continue having a negative short-term impact - The company plans to grow its paid digital subscriber base to **10 million within the next five years** through existing product expansion and new digital subscription offerings[122](index=122&type=chunk) - The company will leverage its integrated sales structure and data insights to actively expand domestic and international digital marketing services and develop new dynamic advertising products[123](index=123&type=chunk) - The company will continue to enhance the profitability of its traditional print business through economies of scale, process improvements, and optimization[124](index=124&type=chunk) - The company will prioritize investments in growth businesses such as USA TODAY NETWORK Ventures and explore advertising, marketing, promotion, event, and service investments in the online gaming sector[125](index=125&type=chunk) - The COVID-19 pandemic is expected to continue negatively impacting the company's business and operating results in the short term, and the company will continue to implement cost reduction and cash flow preservation measures[126](index=126&type=chunk) - The company's revenues are subject to seasonality, primarily due to fluctuations in advertising volume, with the fourth quarter typically being the highest and the first quarter the lowest[127](index=127&type=chunk) [Results of Operations](index=27&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's operating results for the first quarter of 2021, including changes in total revenues, operating expenses, non-operating income and expenses, income taxes, and net loss, with segment reporting for Publishing, Digital Marketing Solutions, and Corporate and Other categories [Consolidated Summary](index=28&type=section&id=Consolidated%20Summary) Consolidated Summary of Operations (in thousands of US dollars, except per share amounts) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (thousands of US dollars) | Change (%) | | :--------------------------------- | :-------------------- | :-------------------- | :------------- | :-------- | | Total Operating Revenues | $777,084 | $948,682 | $(171,598) | (18)% | | Total Operating Expenses | $769,143 | $978,504 | $(209,361) | (21)% | | Operating Income (Loss) | $7,941 | $(29,822) | $37,763 | >100% | | Non-Operating Expenses | $159,751 | $41,805 | $117,946 | >100% | | Net Loss Attributable to Gannett | $(142,316) | $(80,152) | $(62,164) | 78% | | Net Loss Per Share Attributable to Gannett - Basic and Diluted | $(1.06) | $(0.61) | $(0.45) | 74% | - Intersegment eliminations represent revenues and expenses for digital advertising and marketing services sold by local U.S. Publishing sales teams but fulfilled by the DMS segment[130](index=130&type=chunk) [Operating Revenues](index=28&type=section&id=Operating%20revenues) - Total operating revenues for the first quarter of 2021 were **$777.1 million**, a year-over-year decrease of **$171.6 million**[131](index=131&type=chunk) - Publishing segment operating revenues decreased by **$158.6 million** year-over-year, primarily due to declines in print and digital advertising, circulation, and other revenues[132](index=132&type=chunk) - DMS segment operating revenues decreased by **$19.0 million** year-over-year, primarily due to declines in advertising and marketing services and other revenues[133](index=133&type=chunk) [Operating Expenses](index=29&type=section&id=Operating%20expenses) - Total operating expenses for the first quarter of 2021 were **$769.1 million**, a year-over-year decrease of **$209.4 million**[135](index=135&type=chunk) - Publishing segment operating expenses decreased by **$173.3 million** year-over-year, primarily due to reductions in operating costs, selling, general and administrative expenses, depreciation and amortization, and integration and reorganization costs[135](index=135&type=chunk) - DMS segment operating expenses decreased by **$21.6 million** year-over-year, primarily due to reductions in selling, general and administrative expenses, operating costs, and integration and reorganization costs[136](index=136&type=chunk) - Corporate and Other category operating expenses decreased by **$20.3 million** year-over-year, primarily due to reductions in selling, general and administrative expenses and integration and reorganization costs[137](index=137&type=chunk) - Operating expenses primarily include personnel, newsprint, distribution, third-party online media purchasing costs, selling, general and administrative expenses, depreciation and amortization, integration and reorganization costs, other operating expenses, and gains or losses on asset disposals and impairment charges[142](index=142&type=chunk) [Non-Operating (Income) Expense](index=29&type=section&id=Non-operating%20(income)%20expense) - Interest expense for the first quarter of 2021 was **$39.5 million**, down from **$57.9 million** in the same period of 2020, primarily due to debt refinancing and a lower effective interest rate from reduced debt balances[139](index=139&type=chunk) - Loss on early extinguishment of debt for the first quarter of 2021 was **$19.4 million**, up from **$0.8 million** in the same period of 2020, primarily due to the repayment of the Acquisition Term Loan[140](index=140&type=chunk) - Non-operating pension income for the first quarter of 2021 was **$23.9 million**, up from **$18.5 million** in the same period of 2020, primarily due to increased expected returns on plan assets and lower interest cost on benefit obligations[141](index=141&type=chunk) - Loss on convertible note derivatives for the first quarter of 2021 was **$126.6 million**, primarily due to an increase in the fair value of the derivative liability driven by the company's stock price appreciation[142](index=142&type=chunk) [Provision (Benefit) for Income Taxes](index=30&type=section&id=Provision%20(benefit)%20for%20income%20taxes) Loss Before Income Taxes and Income Taxes (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------- | :-------------------- | :-------------------- | | Loss Before Income Taxes | $(151,810) | $(71,627) | | Provision (Benefit) for Income Taxes | $(9,109) | $8,979 | | Effective Tax Rate | 6.0% | * | - The income tax benefit in the first quarter of 2021 was primarily influenced by the net loss before income taxes, with an effective tax rate of **6.0%**, lower than the **21% statutory federal rate** due to the non-deductible impact of derivative revaluation, partially offset by valuation allowances[145](index=145&type=chunk) [Net Loss Attributable to Gannett and Diluted Loss Per Share Attributable to Gannett](index=30&type=section&id=Net%20loss%20attributable%20to%20Gannett%20and%20diluted%20loss%20per%20share%20attributable%20to%20Gannett) Net Loss Attributable to Gannett and Diluted Loss Per Share Attributable to Gannett (in thousands of US dollars, except per share amounts) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------- | :-------------------- | | Net Loss Attributable to Gannett | $(142,316) | $(80,152) | | Diluted Loss Per Share Attributable to Gannett | $(1.06) | $(0.61) | [Publishing Segment](index=30&type=section&id=Publishing%20segment) Publishing Segment Operating Revenues (in thousands of US dollars) | Revenue Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (thousands of US dollars) | Change (%) | | :------------------------- | :-------------------- | :-------------------- | :------------- | :-------- | | Advertising and Marketing Services | $314,310 | $403,636 | $(89,326) | (22)% | | Circulation | $325,436 | $374,720 | $(49,284) | (13)% | | Other | $59,839 | $79,794 | $(19,955) | (25)% | | **Total Operating Revenues** | **$699,585** | **$858,150** | **$(158,565)** | **(18)%** | - Print advertising revenue decreased by **28%**, and digital advertising and marketing services revenue decreased by **11%**, primarily impacted by industry trends and the COVID-19 pandemic[149](index=149&type=chunk)[150](index=150&type=chunk) - Digital circulation revenue grew by **47% to $23.2 million**, primarily driven by a **37% increase in digital subscribers to approximately 1.2 million**[151](index=151&type=chunk) - Operating costs decreased by **$87.1 million** year-over-year, primarily due to reductions in newsprint and ink costs, distribution costs, compensation and benefits, and external service costs[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - Selling, general and administrative expenses decreased by **$64.6 million** year-over-year, primarily due to reductions in compensation and benefits, external service costs, and other costs[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - Publishing segment Adjusted EBITDA was **$102.2 million**, a year-over-year decrease of **8%**[164](index=164&type=chunk)[165](index=165&type=chunk) [Digital Marketing Solutions Segment](index=34&type=section&id=Digital%20Marketing%20Solutions%20segment) Digital Marketing Solutions Segment Operating Revenues (in thousands of US dollars) | Revenue Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (thousands of US dollars) | Change (%) | | :------------------------- | :-------------------- | :-------------------- | :------------- | :-------- | | Advertising and Marketing Services | $101,376 | $116,283 | $(14,907) | (13)% | | Other | $905 | $4,998 | $(4,093) | (82)% | | **Total Operating Revenues** | **$102,281** | **$121,281** | **$(19,000)** | **(16)%** | - The decline in advertising and marketing services revenue was primarily due to a **$9.2 million revenue shortfall** from changes in media rebate programs and a decrease in international operations[168](index=168&type=chunk) - Operating costs decreased by **$4.0 million** year-over-year, primarily due to a **$5.5 million reduction in compensation and benefits**, partially offset by a **$3.7 million increase in third-party media costs**[170](index=170&type=chunk)[171](index=171&type=chunk) - Selling, general and administrative expenses decreased by **$16.9 million** year-over-year, primarily due to a **$17.7 million reduction in compensation and benefits**, benefiting from cost control measures and headcount reductions[172](index=172&type=chunk)[173](index=173&type=chunk) - Digital Marketing Solutions segment Adjusted EBITDA was **$9.2 million**, a year-over-year increase of **16%**[175](index=175&type=chunk)[176](index=176&type=chunk) [Corporate and Other Category](index=35&type=section&id=Corporate%20and%20other%20category) - Corporate and Other category operating revenues were **$3.1 million** in the first quarter of 2021, remaining relatively flat compared to the same period in 2020[177](index=177&type=chunk) Corporate and Other Category Operating Expenses (in thousands of US dollars) | Expense Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (thousands of US dollars) | Change (%) | | :------------------------- | :-------------------- | :-------------------- | :------------- | :-------- | | Operating Costs | $3,956 | $5,749 | $(1,793) | (31)% | | Selling, General and Administrative Expenses | $14,269 | $29,949 | $(15,680) | (52)% | | Integration and Reorganization Costs | $5,912 | $13,557 | $(7,645) | (56)% | | Other Operating Expenses | $10,576 | $5,969 | $4,607 | 77% | | **Total Operating Expenses** | **$38,665** | **$59,002** | **$(20,337)** | **(34)%** | - Other operating expenses increased by **$4.6 million**, primarily including **$10.2 million in third-party fees** incurred in the first quarter of 2021 for the 5-Year Term Loan, compared to **$6.0 million in acquisition costs** in the same period of 2020[180](index=180&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company expects to meet operating, debt, and capital expenditure needs through cash flow from operations; despite stable operating cash flow, cash used in financing activities significantly increased due to higher debt repayments and issuance costs, leading to a decrease in total cash. The company has refinanced debt with a new 5-Year Term Loan and implemented cash flow management measures, but the COVID-19 pandemic and debt leverage still present uncertainties Summary of Cash Flows (in thousands of US dollars) | Indicator | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------- | :-------------------- | | Net Cash Provided by Operating Activities | $61,316 | $60,489 | | Net Cash Provided by (Used in) Investing Activities | $2,516 | $(3,419) | | Net Cash Used in Financing Activities | $(74,699) | $(14,679) | | (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(10,553) | $43,945 | - The increase in cash used in financing activities was primarily due to a **$26.1 million increase in net term loan repayments** and a **$33.9 million increase in debt issuance cost payments**[185](index=185&type=chunk) - On February 9, 2021, the company entered into a **$1.045 billion** 5-Year Senior Secured Term Loan to repay the Acquisition Term Loan, with an outstanding principal balance of **$1.036 billion** as of March 31, 2021[186](index=186&type=chunk)[187](index=187&type=chunk)[190](index=190&type=chunk) - The 2027 Convertible Notes totaled **$497.1 million**, are convertible into common stock, and are subject to various covenant terms[191](index=191&type=chunk)[193](index=193&type=chunk) - Under the CARES Act, the company deferred **$41.6 million** in employer FICA taxes in 2020, with **50% due by December 31, 2021**, and the remaining **50% due by December 31, 2022**[206](index=206&type=chunk) - Remaining capital expenditures for 2021 are estimated at approximately **$37.5 million**, primarily for digital product development, print and technology system maintenance, and system upgrades[208](index=208&type=chunk) - The company's leverage may adversely affect its business and financial performance and limit its operating flexibility, with the ultimate impact of the COVID-19 pandemic remaining uncertain[209](index=209&type=chunk)[210](index=210&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The company uses Adjusted EBITDA and Adjusted EBITDA Margin as non-GAAP financial measures to assess overall operational and day-to-day business performance, excluding non-operating or non-cash items like depreciation, amortization, taxes, and interest. These metrics aid management in identifying trends and making decisions but should not be viewed in isolation or as substitutes for GAAP measures - Adjusted EBITDA is defined as net income (loss) attributable to Gannett, excluding income taxes, interest expense, gain or loss on early extinguishment of debt, non-operating pension income or expense, loss on convertible note derivatives, other non-operating items, depreciation and amortization, integration and reorganization costs, asset impairments, goodwill and intangible asset impairments, gain or loss on sale or disposal of assets, equity-based compensation expense, other operating expenses, and gain or loss on sale of investments[212](index=212&type=chunk) - Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total operating revenues[212](index=212&type=chunk) - Management believes these non-GAAP measures are useful for identifying day-to-day performance trends, evaluating controllable expenses, and supporting decisions to achieve financial goals and optimize financial performance[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) - Adjusted EBITDA and Adjusted EBITDA Margin are not measures of financial performance under GAAP and should not be considered in isolation or as substitutes for operating income, net income (loss), or any other GAAP measure of performance or liquidity[216](index=216&type=chunk)[218](index=218&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) [No Material Changes](index=41&type=section&id=No%20Material%20Changes) There have been no material changes to the quantitative and qualitative disclosures about market risk previously reported by the company in its Form 10-K for the fiscal year ended 2020 - No material changes to market risk disclosures have occurred since the Form 10-K for the fiscal year ended December 31, 2020[221](index=221&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) [Disclosure Controls and Procedures](index=41&type=section&id=Disclosure%20Controls%20and%20Procedures) The company's disclosure controls and procedures were deemed ineffective due to previously reported material weaknesses in internal control over financial reporting; the company is actively implementing remediation plans, including organizational and design enhancements, training, and technology integration, while the remote work environment due to COVID-19 has not materially impacted internal controls - The company's disclosure controls and procedures were ineffective due to previously reported material weaknesses in internal control over financial reporting[222](index=222&type=chunk) - The company is implementing remediation plans, including organizational enhancements, design enhancements, training, leveraging external resources, and integrating relevant supporting technologies[223](index=223&type=chunk) - The remote work environment resulting from the COVID-19 pandemic has not materially impacted internal controls[225](index=225&type=chunk) [Legal Proceedings](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) [No Material Developments](index=42&type=section&id=No%20Material%20Developments) There have been no material developments regarding the potential liabilities for legal and environmental matters reported by the company in its Form 10-K for 2020, other than those disclosed in Note 12, Commitments, Contingencies and Other Matters - No material developments in legal and environmental matters beyond those disclosed in Note 12[227](index=227&type=chunk) [Risk Factors](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) [No Material Changes](index=42&type=section&id=No%20Material%20Changes) There have been no material changes to the risk factors disclosed by the company in its Form 10-K for 2020 - No material changes to risk factors have occurred since the 2020 Form 10-K[228](index=228&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) [Not Applicable](index=42&type=section&id=Not%20Applicable) This item is not applicable for the current reporting period - This item is not applicable[229](index=229&type=chunk) [Defaults Upon Senior Securities](index=42&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) [Not Applicable](index=42&type=section&id=Not%20Applicable) This item is not applicable for the current reporting period - This item is not applicable[230](index=230&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) [Not Applicable](index=42&type=section&id=Not%20Applicable) This item is not applicable for the current reporting period - This item is not applicable[231](index=231&type=chunk) [Other Information](index=42&type=section&id=ITEM%205.%20OTHER%20INFORMATION) [Not Applicable](index=42&type=section&id=Not%20Applicable) This item is not applicable for the current reporting period - This item is not applicable[232](index=232&type=chunk) [Exhibits](index=42&type=section&id=ITEM%206.%20EXHIBITS) [List of Exhibits](index=42&type=section&id=List%20of%20Exhibits) This section lists the exhibits filed with Form 10-Q, including supplemental indentures, credit agreements, restricted stock unit award agreements, the annual bonus plan, and certifications from the Chief Executive Officer and Chief Financial Officer - Exhibits include the Second Supplemental Indenture, Credit Agreement, Amended and Restated Performance Restricted Stock Unit Award Agreement, Employee Performance Restricted Stock Unit Award Agreement, and the 2021 Annual Bonus Plan[233](index=233&type=chunk) - Also included are certifications under Rule 13a-14(a) and Section 1350 from the Chief Executive Officer and Chief Financial Officer[233](index=233&type=chunk) [Signatures](index=44&type=section&id=SIGNATURES) [Report Signature](index=44&type=section&id=Report%20Signature) This report was formally signed by Douglas E. Horne, Chief Financial Officer and Chief Accounting Officer of Gannett Co., Inc., on May 7, 2021 - The report was signed by Douglas E. Horne, Chief Financial Officer and Chief Accounting Officer, on behalf of Gannett Co., Inc[240](index=240&type=chunk) - The signing date was May 7, 2021[240](index=240&type=chunk)

| --- | --- | --- | |---------------------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Q4 and Full Year 2020 Earnings | | | | February 25, 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." Prior to November 19, 2019, our corpor ...

Table of Contents 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, 2020 ☐ 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 Juris ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ FORM 10-Q _______________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-36097 ___________________________ GANNETT CO., INC. (Exact name of registrant as specified in its charter) _________________ ...

Gannett Co., Inc. (NYSE:GCI) Q3 2020 Earnings Conference Call November 3, 2020 8:30 AM ET Company Participants Ashley Higgins - IR Mike Reed - CEO Doug Horne - CFO Conference Call Participants Jason Bazinet - Citi Operator Ladies and gentlemen, thank you for standing by, and welcome to the Gannett Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] I would now l ...

GANNETT Q3 2020 Earnings November 3, 2020 Disclaimers 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." Prior to November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media" or "Legacy New Media"), and Gannett Co., Inc. ("Legacy Gannett") was a separate publicly traded company. On November ...

Financial Data and Key Metrics Changes - Revenues for the quarter were down 28% year-over-year on a same-store basis and pro forma for the acquisition of Legacy Gannett, with sequential improvement noted throughout the quarter [10][48] - Adjusted EBITDA totaled $78 million, exceeding expectations, with an adjusted EBITDA margin of 10.2% [19][49] - The company reported a GAAP net loss of $436.9 million, primarily due to a non-cash goodwill and intangible impairment charge of $693.1 million [54] Business Line Data and Key Metrics Changes - In the publishing segment, revenue was $695 million, with print advertising down 4% year-over-year on a same-store pro forma basis [50] - Digital advertising and marketing services revenues decreased 26.7% on a same-store pro forma basis, but trends improved each month during the quarter [51] - Paid digital-only subscriber revenue grew 31.3% year-over-year, reaching approximately 927,000 subscriptions [52] Market Data and Key Metrics Changes - Digital properties averaged over 147 million unique visitors per month, indicating strong demand for credible news during the pandemic [24] - The events division saw revenue down about 37% year-over-year, but managed to pivot to virtual events, launching 91 during the quarter [32][33] Company Strategy and Development Direction - The company is focused on improving financial performance through subscription income growth, digital marketing services, and expanding community events [42][43] - Plans to sell $100 million to $125 million in real estate and $40 million to $50 million of non-strategic assets by the end of 2021 to reduce leverage [44][45] - The integration of Legacy Media and Legacy Gannett is a priority, with a target of $300 million in annualized synergy savings [46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future revenue performance, expecting Q3 results to be similar to or slightly better than June's performance [39] - The company remains confident in its ability to meet obligations under its term loan and is focused on debt repayment [60][66] - Management acknowledged significant uncertainty for the second half of the year but noted continuous improvement in revenue trends [38][65] Other Important Information - The company implemented over $125 million in expense savings during Q2, contributing to a 26% reduction in costs compared to the prior year [15][17] - The company plans to establish an at-the-market equity offering program for up to $50 million of common stock for added flexibility [61] Q&A Session Summary - There were no questions during the Q&A session, and the call concluded with management reiterating their confidence in the company's future and ongoing strategies [62][68]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=Part%20I.%20Financial%20Information) This section presents Gannett Co., Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Gannett's unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flow statements, along with detailed notes on accounting policies, revenues, leases, and other financial disclosures [Condensed Consolidated Balance Sheets](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's financial position, detailing assets, liabilities, and equity as of June 30, 2020, and December 31, 2019 Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Total assets | $3,337,917 | $4,020,102 | | Total liabilities | $2,885,374 | $3,036,896 | | Total equity | $452,085 | $981,356 | - Total assets decreased by **$682.185 million** (**16.97%**) from December 31, 2019, to June 30, 2020, primarily due to a significant reduction in goodwill and intangible assets[13](index=13&type=chunk) - Total equity decreased by **$529.271 million** (**53.93%**) over the six-month period, largely influenced by accumulated deficit and other comprehensive loss[13](index=13&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%28LOSS%29) This section details Gannett's revenues, expenses, and net income or loss for the three and six months ended June 30, 2020 and 2019 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $767,000 | $404,387 | $1,715,683 | $791,987 | | Total operating expenses | $1,204,624 | $392,214 | $2,183,131 | $781,249 | | Operating income (loss) | $(437,624) | $12,173 | $(467,448) | $10,738 | | Net income (loss) attributable to Gannett | $(436,893) | $2,815 | $(517,045) | $(6,291) | | Diluted EPS | $(3.32) | $0.05 | $(3.95) | $(0.10) | | Dividends declared per share | $0.00 | $0.38 | $0.00 | $0.76 | - Total operating revenues for the three months ended June 30, 2020, increased by **89.6%** year-over-year, primarily due to the Legacy Gannett acquisition[15](index=15&type=chunk) - The company reported a significant net loss of **$(436.893) million** for the three months ended June 30, 2020, compared to a net income of **$2.815 million** in the prior year, largely driven by goodwill and intangible impairment charges of **$393.446 million**[15](index=15&type=chunk) - Dividends declared per share were suspended in Q2 2020 (**$0.00**) compared to **$0.38** in Q2 2019, as a measure to preserve liquidity due to the COVID-19 pandemic[15](index=15&type=chunk) [Condensed Consolidated Statements of Equity](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) This section outlines changes in Gannett's total equity, accumulated deficit, and comprehensive income (loss) for the periods presented Condensed Consolidated Statements of Equity (in thousands) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Total Equity | $452,085 | $981,356 | | Accumulated Deficit | $(633,003) | $(115,958) | | Accumulated other comprehensive income (loss) | $(13,362) | $8,202 | - Total equity decreased significantly from **$981.356 million** at December 31, 2019, to **$452.085 million** at June 30, 2020, primarily due to a substantial increase in accumulated deficit from **$(115.958) million** to **$(633.003) million**[17](index=17&type=chunk)[19](index=19&type=chunk) - The accumulated other comprehensive income (loss) shifted from a gain of **$8.202 million** to a loss of **$(13.362) million**, mainly due to foreign currency translation adjustments and pension benefit items[17](index=17&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section presents Gannett's cash flows from operating, investing, and financing activities for the six months ended June 30, 2020 and 2019 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $24,640 | $57,653 | | Net cash used for investing activities | $(3,026) | $(37,180) | | Net cash used for financing activities | $(20,331) | $(50,062) | | Increase (decrease) in cash and cash equivalents and restricted cash | $503 | $(29,586) | - Net cash provided by operating activities decreased by **$33.013 million** (**57.26%**) for the six months ended June 30, 2020, compared to the same period in 2019, primarily due to higher interest payments and severance payments, partially offset by working capital increases from the Legacy Gannett merger[20](index=20&type=chunk)[216](index=216&type=chunk) - Net cash used for investing activities significantly decreased from **$(37.180) million** in 2019 to **$(3.026) million** in 2020, mainly due to lower acquisition payments and higher proceeds from asset sales[20](index=20&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Net cash used for financing activities decreased from **$(50.062) million** in 2019 to **$(20.331) million** in 2020, largely due to the suspension of dividend payments in 2020[20](index=20&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [NOTE 1 — Basis of presentation and summary of significant accounting policies](index=12&type=section&id=NOTE%201%20%E2%80%94%20Basis%20of%20presentation%20and%20summary%20of%20significant%20accounting%20policies) This note describes the company's formation, business segments, and the significant impact of the COVID-19 pandemic on its operations and financial results - Gannett Co., Inc. is a digitally focused media and marketing solutions company, formed by the acquisition of Legacy Gannett by New Media Investment Group Inc. on November 19, 2019[21](index=21&type=chunk) - The company operates in two segments: Publishing (including USA TODAY, local media, and Newsquest in the U.K.) and Marketing Solutions (including ReachLocal, UpCurve, and WordStream)[22](index=22&type=chunk)[23](index=23&type=chunk) - The COVID-19 pandemic significantly negatively impacted Q2 2020 results, leading to decreased demand for advertising, digital marketing, commercial print, and distribution services. The company implemented cost reduction measures including dividend suspension, furloughs, and deferred pension contributions[24](index=24&type=chunk) [NOTE 2 — Revenues](index=14&type=section&id=NOTE%202%20%E2%80%94%20Revenues) This note details the breakdown of Gannett's total operating revenues by type, including print advertising, digital advertising, and circulation Revenue by Type (in thousands) | Revenue Type (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Print advertising | $188,158 | $158,205 | $456,000 | $309,105 | | Digital advertising and marketing services | $168,760 | $46,492 | $387,929 | $89,137 | | Circulation | $342,646 | $150,850 | $717,369 | $303,015 | | Other | $67,436 | $48,840 | $154,385 | $90,730 | | Total revenues | $767,000 | $404,387 | $1,715,683 | $791,987 | - Digital advertising and marketing services revenue saw a substantial increase of **263%** for the three months ended June 30, 2020, compared to the prior year, largely due to the Legacy Gannett acquisition[38](index=38&type=chunk) - Circulation revenue more than doubled for both the three and six months ended June 30, 2020, compared to 2019, also primarily driven by the acquisition[38](index=38&type=chunk) [NOTE 3 — Leases](index=15&type=section&id=NOTE%203%20%E2%80%94%20Leases) This note provides information on Gannett's operating lease right-to-use assets, liabilities, and associated lease costs Lease Metrics (in thousands) | Lease Metric (in thousands) | June 30, 2020 | | :-------------------------- | :------------ | | Operating lease right-to-use assets | $296,100 | | Short-term operating lease liabilities | $44,700 | | Long-term operating lease liabilities | $282,900 | Lease Expense (in thousands) | Lease Expense (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $24,437 | $7,864 | $48,321 | $15,969 | | Short-term lease cost | $1,345 | $866 | $4,487 | $1,632 | | Net lease cost | $25,782 | $8,730 | $52,808 | $17,601 | - The weighted-average remaining lease term as of June 30, 2020, was **7.9 years**, with a weighted-average discount rate of **12.78%**[47](index=47&type=chunk) [NOTE 4 — Accounts receivable, net](index=16&type=section&id=NOTE%204%20%E2%80%94%20Accounts%20receivable%2C%20net) This note details the allowance for doubtful accounts and the impact of COVID-19 on estimated future credit losses for trade receivables Allowance for Doubtful Accounts (in thousands) | Allowance for Doubtful Accounts (in thousands) | Six months ended June 30, 2020 | | :--------------------------------------------- | :----------------------------- | | Beginning balance | $19,923 | | Current period provision | $17,345 | | Write-offs charged against the allowance | $(12,019) | | Recoveries of amounts previously written-off | $1,467 | | Foreign currency | $(156) | | Ending balance | $26,560 | - The allowance for doubtful accounts increased to **$26.560 million** as of June 30, 2020, from **$19.923 million** at the beginning of the period, reflecting a current period provision of **$17.345 million**[49](index=49&type=chunk) - The Company estimated **$7.7 million** in future credit losses for trade receivables due to the potential impacts of the COVID-19 pandemic, based on analysis of higher-risk accounts[50](index=50&type=chunk) - Bad debt expense for the six months ended June 30, 2020, was **$17.3 million**, a significant increase from **$4.0 million** in the same period of 2019[51](index=51&type=chunk) [NOTE 5 — Acquisitions](index=17&type=section&id=NOTE%205%20%E2%80%94%20Acquisitions) This note describes the acquisition of Legacy Gannett and other publications, including purchase price and measurement period adjustments - On November 19, 2019, New Media Investment Group Inc. completed the acquisition of Legacy Gannett for an aggregate purchase price of **$1.3 billion**, financed by a term loan and common stock issuance[52](index=52&type=chunk) - Measurement period adjustments for the Legacy Gannett acquisition during the six months ended June 30, 2020, primarily related to intangible assets and multi-employer pension liabilities, offset against Goodwill[55](index=55&type=chunk) - In 2019, the Company also acquired other publications and businesses for **$53.4 million**, including 11 daily newspapers and digital platforms, with **$7.0 million** of consideration payable as of June 30, 2020[56](index=56&type=chunk) [NOTE 6 — Goodwill & Intangible Assets](index=19&type=section&id=NOTE%206%20%E2%80%94%20Goodwill%20%26%20Intangible%20Assets) This note details changes in goodwill and intangible assets, including significant impairment charges recognized due to market conditions Goodwill & Intangible Assets (in thousands) | Asset Type (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------ | :------------ | :---------------- | | Goodwill | $559,623 | $914,331 | | Mastheads | $176,217 | $178,559 | | Amortized intangible assets, net | $744,308 | $834,005 | - Goodwill decreased by **$354.708 million** during the six months ended June 30, 2020, primarily due to impairment charges of **$362.350 million** across Publishing and Marketing Solutions segments[63](index=63&type=chunk) - The company recorded goodwill impairment charges of **$256.5 million** for Domestic Publishing, **$65.4 million** for Newsquest, and **$40.5 million** for Marketing Solutions in Q2 2020, driven by the COVID-19 pandemic's impact on operations[68](index=68&type=chunk) - Masthead impairment of **$4.0 million** was recorded in both Domestic Publishing and Newsquest reporting units[66](index=66&type=chunk) [NOTE 7 — Integration and reorganization costs and impairments of property, plant and equipment](index=21&type=section&id=NOTE%207%20%E2%80%94%20Integration%20and%20reorganization%20costs%20and%20impairments%20of%20property%2C%20plant%20and%20equipment) This note outlines expenses related to severance, facility consolidation, and impairment charges for property, plant, and equipment Integration and Reorganization Costs and Impairments (in thousands) | Expense Type (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Severance-related expenses | $25,742 | $2,880 | $47,521 | $6,293 | | Facility consolidation and other restructuring-related expenses | $6,564 | $1,398 | $13,039 | $3,784 | | Impairment of property, plant and equipment | $6,859 | $1,262 | $6,859 | $2,469 | | Accelerated depreciation | $11,000 | $2,600 | $35,800 | $2,600 | - Severance-related expenses increased significantly to **$47.521 million** for the six months ended June 30, 2020, from **$6.293 million** in the prior year, reflecting ongoing restructuring programs and acquisition integration[72](index=72&type=chunk) - Property, plant, and equipment impairment charges were **$6.9 million** for the six months ended June 30, 2020, primarily in the Publishing segment, and accelerated depreciation increased to **$35.8 million** due to ceased print operations[73](index=73&type=chunk)[74](index=74&type=chunk) [NOTE 8 — Debt](index=22&type=section&id=NOTE%208%20%E2%80%94%20Debt) This note details the company's debt structure, including the Apollo term loan facility and convertible senior notes, and associated interest expenses - In November 2019, the Company entered into a five-year, **$1.8 billion** senior-secured term loan facility with Apollo Capital Management, L.P., bearing an interest rate of **11.5%** per annum[75](index=75&type=chunk) - As of June 30, 2020, **$1.7 billion** in aggregate principal was outstanding under the term loan facility, with an effective interest rate of **12.9%**[80](index=80&type=chunk) - Interest expense for the six months ended June 30, 2020, was **$115.827 million**, a substantial increase from **$20.346 million** in the prior year, due to the larger debt balance and higher effective interest rate[15](index=15&type=chunk)[80](index=80&type=chunk) - The Company redeemed **$198.0 million** of convertible senior notes in December 2019, with **$3.3 million** principal value remaining outstanding as of June 30, 2020, at an effective interest rate of **6.05%**[82](index=82&type=chunk)[83](index=83&type=chunk) [NOTE 9 — Pensions and other postretirement benefit plans](index=23&type=section&id=NOTE%209%20%E2%80%94%20Pensions%20and%20other%20postretirement%20benefit%20plans) This note provides information on the company's pension plans, including service costs, non-operating expenses, and deferred contributions Retirement Plan Expense (in thousands) | Retirement Plan Expense (in thousands) | Six months ended June 30, 2020 (Pension) | Six months ended June 30, 2019 (Pension) | | :------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Service cost | $1,385 | $317 | | Non-operating expenses (benefit) | $(37,288) | $(480) | | Total expense (benefit) | $(35,903) | $(163) | - The Company reported a total pension benefit of **$(35.903) million** for the six months ended June 30, 2020, compared to a benefit of **$(163) thousand** in the prior year, driven by increased expected return on plan assets[85](index=85&type=chunk) - Pension contributions of **$12 million** for U.K. plans in 2020 were deferred to 2021, and **$11 million** in minimum required contributions for the U.S. GRP for 2019 were deferred until January 1, 2021[85](index=85&type=chunk) [NOTE 10 — Income taxes](index=24&type=section&id=NOTE%2010%20%E2%80%94%20Income%20taxes) This note details the company's income tax expense or benefit, effective tax rate, and the impact of the CARES Act and unrecognized tax benefits Income Tax Metrics (in thousands) | Tax Metric (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Pre-tax net income (loss) | $(472,107) | $2,272 | $(543,734) | $(9,037) | | Benefit for income taxes | $(34,276) | $(343) | $(25,297) | $(2,297) | | Effective tax rate | 7.3% | *** | 4.7% | 25.4% | - The Company recognized a benefit for income taxes of **$(34.276) million** for Q2 2020, primarily due to the pre-tax net loss, but reduced by non-deductible asset impairments and a valuation allowance against deferred tax assets[87](index=87&type=chunk) - The CARES Act, enacted March 27, 2020, allows the Company to defer certain employer payroll tax payments and may provide Employee Retention Tax Credits[88](index=88&type=chunk) - Unrecognized tax benefits totaled **$33.8 million** as of June 30, 2020, with accrued interest and penalties of **$2.3 million**[90](index=90&type=chunk) [NOTE 11 — Supplemental equity information](index=26&type=section&id=NOTE%2011%20%E2%80%94%20Supplemental%20equity%20information) This note provides details on net income (loss) attributable to Gannett, diluted EPS, share repurchase programs, and the Section 382 Rights Agreement EPS Metrics (in thousands, except share data) | EPS Metric (in thousands, except share data) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Gannett | $(436,893) | $2,815 | $(517,045) | $(6,291) | | Basic weighted average shares outstanding | 131,471 | 60,031 | 130,999 | 59,998 | | Diluted weighted average shares outstanding | 131,471 | 60,031 | 130,999 | 59,998 | - Diluted loss per share was **$(3.32)** for Q2 2020 and **$(3.95)** for the six months ended June 30, 2020, compared to income of **$0.05** and loss of **$(0.10)** respectively in the prior year, reflecting the significant net losses[92](index=92&type=chunk) - The Company's share repurchase program expired on May 19, 2020, with **no shares repurchased** during the first six months of 2020[94](index=94&type=chunk) - The Board adopted a Section 382 Rights Agreement on April 6, 2020, to protect the Company's **$435 million** net operating loss carryforwards (NOLs) from ownership changes[102](index=102&type=chunk) [NOTE 12 — Fair value measurement](index=30&type=section&id=NOTE%2012%20%E2%80%94%20Fair%20value%20measurement) This note describes assets and liabilities measured at fair value, primarily pension plan assets and assets held for sale - Assets and liabilities recorded at fair value on a recurring basis primarily consist of pension plan assets[109](index=109&type=chunk) - Assets held for sale, classified as Level 3 assets, totaled **$21.6 million** as of June 30, 2020, down from **$25.5 million** at December 31, 2019[111](index=111&type=chunk) [NOTE 13 — Commitments, contingencies and other matters](index=30&type=section&id=NOTE%2013%20%E2%80%94%20Commitments%2C%20contingencies%20and%20other%20matters) This note addresses the company's involvement in legal proceedings and environmental contingencies, noting no material adverse effects are expected - The Company is involved in various legal proceedings, including environmental contingencies related to groundwater contamination assumed from the Legacy Gannett acquisition, but does not expect them to have a material adverse effect[112](index=112&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) [NOTE 14 — Segment reporting](index=31&type=section&id=NOTE%2014%20%E2%80%94%20Segment%20reporting) This note provides financial information for Gannett's Publishing and Marketing Solutions segments, including Adjusted EBITDA - Gannett reports in two segments: Publishing (local, regional, national, and international newspaper publishers) and Marketing Solutions (digital marketing services like ReachLocal and UpCurve)[120](index=120&type=chunk) - Adjusted EBITDA is the primary metric used by the Chief Operating Decision Maker (CODM) to evaluate segment performance and allocate resources[119](index=119&type=chunk) Segment Adjusted EBITDA (in thousands) | Segment Adjusted EBITDA (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Publishing | $91,991 | $55,493 | $203,014 | $97,188 | | Marketing Solutions | $2,784 | $(2,459) | $10,668 | $(5,689) | | Corporate and other | $(16,757) | $(5,739) | $(36,598) | $(11,354) | | Consolidated Adjusted EBITDA | $78,018 | $47,295 | $177,084 | $80,145 | [NOTE 15 — Related party transactions](index=33&type=section&id=NOTE%2015%20%E2%80%94%20Related%20party%20transactions) This note details transactions with related parties, including the Manager's ownership, management fees, and incentive fee arrangements - The Manager (an affiliate of Fortress Investment Group LLC) and its affiliates owned approximately **4%** of outstanding stock and **40%** of outstanding warrants as of June 30, 2020[123](index=123&type=chunk) - The Amended Management Agreement, effective November 19, 2019, reduced the incentive fee from **25%** to **17.5%** and set a termination date of December 31, 2021, for the Manager's services[126](index=126&type=chunk) Related Party Fees (in thousands) | Fee Type (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fee expense | $4,674 | $2,456 | $8,433 | $4,912 | | Incentive fee expense | $0 | $1,413 | $0 | $1,413 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Gannett's financial condition and results of operations, highlighting the impact of the Legacy Gannett acquisition, COVID-19, strategic outlook, liquidity, and non-GAAP measures [Overview](index=34&type=section&id=Overview) This section provides an overview of Gannett's business as a digitally focused media and marketing solutions company, including its formation and operating segments - Gannett Co., Inc. is an innovative, digitally focused media and marketing solutions company, formed by the acquisition of Legacy Gannett by New Media Investment Group Inc. on November 19, 2019[133](index=133&type=chunk) - The company's portfolio includes USA TODAY, local media in **46 U.S. states** and Guam, Newsquest in the U.K., and digital marketing services companies ReachLocal, UpCurve, and WordStream[135](index=135&type=chunk) - Gannett reports in two operating segments: Publishing and Marketing Solutions, with a corporate and other category for non-segment-specific activities[136](index=136&type=chunk) [Certain matters affecting current and future operating results](index=35&type=section&id=Certain%20matters%20affecting%20current%20and%20future%20operating%20results) This section discusses the financial impact of the Legacy Gannett acquisition, integration costs, goodwill impairments, and newsprint expenses - The Legacy Gannett acquisition in November 2019 for **$1.3 billion** significantly impacted financial results, funded by a new **$1.8 billion** term loan facility[139](index=139&type=chunk) - Integration and reorganization costs for the six months ended June 30, 2020, totaled **$60.6 million**, primarily from severance activities (**$47.5 million**) and facility consolidation[139](index=139&type=chunk) - Goodwill and intangible impairment charges of **$393.4 million** were recognized in Q2 2020, mainly due to the current and expected impact of the COVID-19 pandemic[143](index=143&type=chunk) - Newsprint expense increased by **$22.0 million** for the six months ended June 30, 2020, due to acquired expenses from Legacy Gannett, partially offset by volume declines and efficiency efforts[142](index=142&type=chunk) [Outlook for the remainder of 2020](index=36&type=section&id=Outlook%20for%20the%20remainder%20of%202020) This section outlines Gannett's strategic priorities for 2020, including integration, deleveraging, revenue growth, and the anticipated impact of the COVID-19 pandemic - Key strategic focuses for 2020 include integrating Legacy Gannett, deleveraging the balance sheet through cash flow and real estate monetization, and driving revenue growth in digital marketing services, digital subscriptions, and events[143](index=143&type=chunk)[144](index=144&type=chunk) - The COVID-19 pandemic is expected to continue negatively impacting business and results of operations in the near term, with long-term impacts dependent on the pandemic's severity and duration[146](index=146&type=chunk) - Cost reduction measures include suspending quarterly dividends, employee furloughs, compensation decreases, deferred payroll tax remittances (CARES Act), and deferred pension contributions[147](index=147&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of Gannett's consolidated and segment-specific financial performance, including revenues, expenses, and profitability [Consolidated Summary](index=38&type=section&id=Consolidated%20Summary) This section summarizes Gannett's overall operating revenues, expenses, and net income or loss for the reported periods Consolidated Summary (in thousands) | Metric (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $767,000 | $404,387 | $1,715,683 | $791,987 | | Total operating expenses | $1,204,624 | $392,214 | $2,183,131 | $781,249 | | Operating income (loss) | $(437,624) | $12,173 | $(467,448) | $10,738 | | Net income (loss) | $(437,831) | $2,615 | $(518,437) | $(6,740) | - Total operating revenues increased by **$362.613 million** (**89.67%**) for Q2 2020 and **$923.696 million** (**116.63%**) for the six months ended June 30, 2020, primarily due to acquisition-related revenues from Legacy Gannett[148](index=148&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - Operating expenses increased significantly due to acquired expenses, goodwill and intangible impairments, and increased integration costs, partially offset by COVID-19 related cost reductions[153](index=153&type=chunk)[159](index=159&type=chunk) [Publishing segment](index=41&type=section&id=Publishing%20segment) This section analyzes the financial performance of the Publishing segment, including revenue trends, digital circulation growth, and operating costs Publishing Segment (in thousands) | Publishing Segment (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $695,893 | $394,435 | $1,554,043 | $772,516 | | Operating income (loss) | $(349,599) | $24,283 | $(321,978) | $42,535 | | Adjusted EBITDA | $91,991 | $55,493 | $203,014 | $97,188 | - Publishing segment revenues increased by **$301.458 million** (**76.43%**) for Q2 2020 and **$781.527 million** (**101.17%**) for the six months ended June 30, 2020, primarily due to acquired revenues from Legacy Gannett[166](index=166&type=chunk)[167](index=167&type=chunk)[173](index=173&type=chunk) - Digital circulation revenues increased by **$15.7 million** (**300%**) in Q2 2020, driven by **$14.7 million** in acquired revenues and a **31.3%** increase in digital-only subscribers[171](index=171&type=chunk) - Operating costs increased by **$203.352 million** (**88.6%**) in Q2 2020, mainly due to acquired costs from Legacy Gannett, partially offset by cost containment initiatives and synergy savings[178](index=178&type=chunk)[179](index=179&type=chunk) [Marketing Solutions segment](index=45&type=section&id=Marketing%20Solutions%20segment) This section reviews the financial performance of the Marketing Solutions segment, focusing on revenue growth and Adjusted EBITDA improvement Marketing Solutions Segment (in thousands) | Marketing Solutions Segment (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating revenues | $94,563 | $27,345 | $215,844 | $53,232 | | Operating loss | $(45,840) | $(3,807) | $(47,291) | $(9,435) | | Adjusted EBITDA | $2,784 | $(2,459) | $10,668 | $(5,689) | - Marketing Solutions revenues increased by **$67.218 million** (**245.8%**) for Q2 2020 and **$162.612 million** (**305.4%**) for the six months ended June 30, 2020, primarily due to acquired revenues from Legacy Gannett[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - The segment's Adjusted EBITDA improved to **$2.784 million** in Q2 2020 from a loss of **$(2.459) million** in Q2 2019, driven by the Legacy Gannett acquisition[201](index=201&type=chunk) - Operating costs increased due to acquired costs from Legacy Gannett and higher costs of online media, partially offset by COVID-19 related cost containment[193](index=193&type=chunk)[196](index=196&type=chunk) [Corporate and other segment](index=47&type=section&id=Corporate%20and%20other%20segment) This section discusses the operating expenses and financial impact of corporate and other non-segment-specific activities - Corporate and other operating expenses increased by **$35.4 million** for Q2 2020 and **$79.7 million** for the six months ended June 30, 2020, primarily due to acquired operating expenses from Legacy Gannett and increased acquisition costs[203](index=203&type=chunk)[204](index=204&type=chunk) [Non-operating expense](index=47&type=section&id=Non-operating%20expense) This section details non-operating expenses, including interest expense from the Apollo term loan and pension income - Interest expense for Q2 2020 was **$57.9 million**, up from **$10.2 million** in Q2 2019, due to a higher effective interest rate and larger debt balance from the Apollo term loan[205](index=205&type=chunk) - Non-operating pension income significantly increased to **$17.6 million** in Q2 2020 from **$0.2 million** in Q2 2019, due to increased expected return on plan assets exceeding interest costs[206](index=206&type=chunk) [Income tax expense (benefit)](index=47&type=section&id=Income%20tax%20expense%20%28benefit%29) This section analyzes the company's income tax expense or benefit, effective tax rate, and the impact of the CARES Act Income Tax Metrics (in thousands) | Tax Metric (in thousands) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Pre-tax net income (loss) | $(472,107) | $2,272 | $(543,734) | $(9,037) | | Benefit for income taxes | $(34,276) | $(343) | $(25,297) | $(2,297) | | Effective tax rate | 7.3% | *** | 4.7% | 25.4% | - The benefit for income taxes in Q2 2020 was primarily due to the pre-tax net loss, but the effective tax rate was reduced by non-deductible asset impairments and a valuation allowance against deferred tax assets[209](index=209&type=chunk) - The CARES Act allows for a refund of tax benefits from earlier years and deferral of certain employer payroll tax payments[210](index=210&type=chunk) [Net income (loss) attributable to Gannett and diluted income (loss) per share attributable to Gannett](index=48&type=section&id=Net%20income%20%28loss%29%20attributable%20to%20Gannett%20and%20diluted%20income%20%28loss%29%20per%20share%20attributable%20to%20Gannett) This section presents the net income or loss attributable to Gannett and the corresponding diluted earnings per share Net Income (Loss) and Diluted EPS (in thousands, except share data) | Metric (in thousands, except share data) | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Gannett | $(436,893) | $2,815 | $(517,045) | $(6,291) | | Diluted income (loss) per share | $(3.32) | $0.05 | $(3.95) | $(0.10) | - The company reported a net loss attributable to Gannett of **$(436.9) million** and diluted loss per share of **$(3.32)** for Q2 2020, a significant decline from net income of **$2.8 million** and EPS of **$0.05** in Q2 2019[212](index=212&type=chunk) [Liquidity and capital resources](index=48&type=section&id=Liquidity%20and%20capital%20resources) This section discusses Gannett's cash flows from operating, investing, and financing activities, along with its debt obligations and capital management strategies [Operating cash flows](index=48&type=section&id=Operating%20cash%20flows) This section details the net cash provided by or used in operating activities and the factors influencing these flows - Net cash flow from operating activities decreased by **$33.0 million** to **$24.6 million** for the first six months of 2020, primarily due to higher interest payments on the term loan and severance payments, partially offset by working capital increases from the Legacy Gannett merger[216](index=216&type=chunk) [Investing cash flows](index=48&type=section&id=Investing%20cash%20flows) This section outlines cash flows related to investing activities, including capital expenditures and asset sales - Cash flows used for investing activities totaled **$3.0 million** for the first six months of 2020, mainly consisting of **$22.2 million** in capital expenditures, partially offset by **$17.8 million** from asset sales[217](index=217&type=chunk) [Financing cash flows](index=49&type=section&id=Financing%20cash%20flows) This section describes cash flows from financing activities, primarily debt repayments and dividend suspensions - Cash flows used for financing activities totaled **$20.3 million** for the first six months of 2020, primarily due to **$19.0 million** in repayments under the Apollo term loan and **$1.9 million** for employee taxes withheld from stock awards[219](index=219&type=chunk) [Apollo Term Loan](index=49&type=section&id=Apollo%20Term%20Loan) This section provides details on the $1.8 billion Apollo term loan facility, its interest rate, outstanding balance, and covenants - The **$1.8 billion** Apollo term loan facility, maturing November 19, 2024, bears an interest rate of **11.5%** per annum and requires prepayments from excess cash flow and asset sales[221](index=221&type=chunk)[222](index=222&type=chunk) - As of June 30, 2020, **$1.7 billion** was outstanding under the term loan, with an effective interest rate of **12.9%**. The company was in compliance with all covenants[222](index=222&type=chunk)[225](index=225&type=chunk) [Convertible debt](index=49&type=section&id=Convertible%20debt) This section discusses the redemption of convertible senior notes and the remaining outstanding principal - The Company redeemed **$198.0 million** of **4.75%** convertible senior notes in December 2019, with **$3.3 million** remaining outstanding as of June 30, 2020, at an effective interest rate of **6.05%**[228](index=228&type=chunk)[229](index=229&type=chunk) [Additional information](index=50&type=section&id=Additional%20information) This section covers the suspension of quarterly dividends, cost containment initiatives, and deferred pension contributions - The Company suspended its quarterly dividend to preserve liquidity due to the COVID-19 pandemic and implemented cost containment initiatives including strategic reductions in force, furloughs, and pay reductions[230](index=230&type=chunk)[231](index=231&type=chunk) - Pension contributions for U.K. plans (**$12 million**) and the U.S. Gannett Retirement Plan (**$11 million** for 2019) have been deferred[233](index=233&type=chunk) [Non-GAAP Financial Measures](index=50&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and explains the use and limitations of non-GAAP financial measures, specifically Adjusted EBITDA [Adjusted EBITDA](index=50&type=section&id=Adjusted%20EBITDA) This section provides the detailed definition of Adjusted EBITDA, outlining its components and adjustments - Adjusted EBITDA is defined as net income (loss) from continuing operations before income tax expense (benefit), interest expense, gains/losses on early extinguishment of debt, non-operating items (primarily pension costs), depreciation and amortization, integration and reorganization costs, impairment charges, net loss/gain on asset disposal, equity-based compensation, acquisition costs, and certain other non-recurring charges[236](index=236&type=chunk) [Management's Use of Adjusted EBITDA](index=51&type=section&id=Management%27s%20Use%20of%20Adjusted%20EBITDA) This section explains how management utilizes Adjusted EBITDA to assess performance, control expenses, and achieve financial objectives - Management uses Adjusted EBITDA to identify trends in day-to-day performance, assess controllable expenses, and make decisions to achieve financial goals, as it excludes items not indicative of core operating performance[237](index=237&type=chunk)[238](index=238&type=chunk) [Limitations of Adjusted EBITDA](index=51&type=section&id=Limitations%20of%20Adjusted%20EBITDA) This section highlights the inherent limitations of Adjusted EBITDA as an analytical tool and its non-substitutability for GAAP measures - Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP measures, as it excludes significant items like cash interest/financing expense, income tax, and impairment charges[239](index=239&type=chunk)[241](index=241&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Gannett's exposure to market risks, primarily foreign exchange rate fluctuations from international operations, and provides a sensitivity analysis for the British pound sterling - Gannett is exposed to foreign exchange rate risk from operations in the U.K. (British pound sterling) and other regions (Australian dollar, Canadian dollar, Indian rupee, New Zealand dollar)[245](index=245&type=chunk) - A **10%** fluctuation in the British pound sterling against the U.S. dollar would have increased or decreased operating income by approximately **$10.8 million** for the first six months of 2020[248](index=248&type=chunk) - Cumulative foreign currency translation adjustment reported as part of equity totaled **$9.3 million** at June 30, 2020[246](index=246&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of Gannett's disclosure controls and procedures, acknowledging a material weakness in internal control over financial reporting and ongoing remediation efforts [Remediation of Material Weakness](index=52&type=section&id=Remediation%20of%20Material%20Weakness) This section details the ongoing remediation efforts to address the material weakness in internal control over financial reporting related to revenue recognition - The principal executive and financial officers concluded that disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting, as reported in the 2019 Form 10-K[249](index=249&type=chunk) - Remediation efforts are ongoing, focusing on dedicated personnel, improved reporting processes, and enhanced supporting technology to address control deficiencies related to revenue recognition[250](index=250&type=chunk) [Changes in Internal Control over Financial Reporting](index=53&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms no material changes in internal control over financial reporting and monitors the impact of the work-from-home environment - No material changes in internal control over financial reporting occurred during the fiscal quarter[252](index=252&type=chunk) - The shift to a primarily work-from-home environment due to COVID-19 has not materially impacted internal control over financial reporting, but the company is continuously monitoring its effects[253](index=253&type=chunk) [PART II. OTHER INFORMATION](index=53&type=section&id=Part%20II.%20Other%20Information) This section provides additional information including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there have been no material developments in legal and environmental matters beyond what was previously reported in the 2019 Form 10-K, as detailed in Note 13 of the financial statements - No material developments in legal and environmental matters have occurred beyond those disclosed in Note 13 and the 2019 Form 10-K[254](index=254&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks, including acquisition integration challenges, intense digital competition, macroeconomic sensitivity, international operation complexities, and potential asset impairments [Risks Related to Our Acquisition and Integration of Legacy Gannett](index=53&type=section&id=Risks%20Related%20to%20Our%20Acquisition%20and%20Integration%20of%20Legacy%20Gannett) This section details risks associated with the Legacy Gannett acquisition, including integration challenges, substantial indebtedness, and potential conflicts of interest with lenders - The Company may not achieve the intended benefits or realize anticipated synergies from the Legacy Gannett acquisition due to integration challenges, including cultural differences, personnel coordination, and retaining key employees[257](index=257&type=chunk)[258](index=258&type=chunk) - The substantial indebtedness incurred for the acquisition (**$1.8 billion** term loan) requires a significant portion of cash flow for interest payments and imposes operating and financial restrictions, including minimum liquidity and dividend limitations[263](index=263&type=chunk)[265](index=265&type=chunk) - Apollo, a lender, has the right to appoint board observers or voting directors, whose interests may conflict with those of stockholders[267](index=267&type=chunk)[268](index=268&type=chunk) [Risks Related to Competition from Digital Media](index=55&type=section&id=Risks%20Related%20to%20Competition%20from%20Digital%20Media) This section highlights risks from declining print revenue, intense competition from digital media providers, and dependence on platforms like Google - Revenue relies heavily on print advertising (**25%** of Q2 2020 total revenue) and paid circulation, both negatively affected by the shift to digital media and commerce, leading to persistent revenue declines[270](index=270&type=chunk)[271](index=271&type=chunk)[275](index=275&type=chunk) - The company may be unsuccessful in stabilizing revenue trends by diversifying into complementary businesses like digital marketing services and events, which face intense competition from major digital providers like Google and Yahoo[277](index=277&type=chunk)[278](index=278&type=chunk) - The ReachLocal and WordStream businesses are highly dependent on media purchases and rebates from Google, making them vulnerable to Google's actions or changes in business practices[279](index=279&type=chunk) [Risks Related to Macroeconomic Factors](index=56&type=section&id=Risks%20Related%20to%20Macroeconomic%20Factors) This section discusses the sensitivity of revenue to economic conditions, the negative impact of COVID-19, and increased risks of bad debts - Revenue generation is highly sensitive to economic conditions and local demographics, with advertising revenues particularly susceptible to downturns and competition from online retailers[281](index=281&type=chunk) - The COVID-19 pandemic is expected to have a material negative impact on business and results of operations in the near term, leading to decreased demand for advertising and distribution services[282](index=282&type=chunk)[283](index=283&type=chunk) - Adverse economic conditions may increase losses from bad debts, as the collectability of accounts receivable could deteriorate beyond current provisions[288](index=288&type=chunk) [Risks Related to International Operations](index=57&type=section&id=Risks%20Related%20to%20International%20Operations) This section outlines challenges in managing international operations, including legal/political uncertainties, foreign exchange variability, and the impact of Brexit - Managing international operations (U.K., Canada, Australia/New Zealand, India) is subject to risks including legal/political uncertainties, difficulties in client network development, differing regulatory requirements, and staffing challenges[290](index=290&type=chunk) - Foreign exchange variability, particularly the British pound sterling against the U.S. dollar, could adversely affect consolidated operating results[292](index=292&type=chunk) - Brexit and the enactment of a Digital Services Tax in the U.K. could negatively impact Newsquest's markets and potentially lead to additional cash taxes for online advertising[293](index=293&type=chunk)[294](index=294&type=chunk) [Additional Risks Related to Our Business](index=58&type=section&id=Additional%20Risks%20Related%20to%20Our%20Business) This section covers seasonal fluctuations, goodwill impairment, internal control weaknesses, environmental liabilities, and tax risks - The business is subject to seasonal fluctuations, with the first fiscal quarter typically weakest and the second and fourth strongest due to holiday advertising[296](index=296&type=chunk) - Goodwill and indefinite-lived assets (mastheads) are subject to annual impairment testing, and significant non-cash charges were recognized in Q2 2020 due to market capitalization decline and COVID-19 impacts[297](index=297&type=chunk)[299](index=299&type=chunk) - Failure to maintain effective internal control over financial reporting, including a material weakness identified in 2019 related to revenue recognition, could lead to financial statement errors and adverse regulatory consequences[302](index=302&type=chunk)[306](index=306&type=chunk) - The company faces environmental and employee safety laws, potential liabilities from personal information breaches, and tax risks related to a worthless stock loss deduction and realization of deferred tax assets[311](index=311&type=chunk)[315](index=315&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) [Risks Related to Pension Obligations and Employees](index=62&type=section&id=Risks%20Related%20to%20Pension%20Obligations%20and%20Employees) This section addresses risks from underfunded pension plans, dependence on key personnel, and potential impacts of unionized labor - The company is required to make significant contributions to its underfunded pension plans (**$116.9 million** underfunded as of December 31, 2019), diverting cash flow from operations, with future amounts difficult to estimate[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk) - Dependence on key personnel and the inability to attract or retain qualified employees could hinder business operations and growth[326](index=326&type=chunk)[327](index=327&type=chunk) - A significant portion of employees are unionized (**13%** as of December 31, 2019), and labor negotiations or strikes could adversely affect efficiency and costs[329](index=329&type=chunk)[330](index=330&type=chunk) [Risks Related to Our Manager](index=63&type=section&id=Risks%20Related%20to%20Our%20Manager) This section highlights reliance on the Manager, potential conflicts of interest, and the Board's limited oversight on investment decisions - The company is reliant on its Manager (an affiliate of Fortress Investment Group LLC) for operations, and the inability to retain key personnel or adverse changes in the Manager's financial health could hinder management[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - Conflicts of interest exist due to the Manager's affiliates investing in similar media assets and the management compensation structure, which may incentivize high-risk investments[337](index=337&type=chunk)[340](index=340&type=chunk) - The Board of Directors does not approve each investment decision, and the investment strategy can change without stockholder vote, potentially leading to riskier or less profitable investments[341](index=341&type=chunk)[342](index=342&type=chunk) [Risks Related to our Common Stock](index=65&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) This section discusses risks related to stock price volatility, potential delisting, dividend suspension, and future stock issuances - The market price of Common Stock may fluctuate widely due to various factors, including COVID-19, operating results, and market volatility, potentially limiting liquidity[347](index=347&type=chunk) - The company's Common Stock may be delisted from the NYSE if it fails to comply with continued listing standards, negatively impacting price, liquidity, and investor confidence[348](index=348&type=chunk) - The quarterly dividend has been suspended, and there is no assurance of reinstatement, which could adversely affect stockholders[350](index=350&type=chunk) - Future sales or issuances of Common Stock, including for capital raises, acquisitions, or equity compensation plans, could dilute existing stockholders' ownership[349](index=349&type=chunk)[354](index=354&type=chunk)[358](index=358&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the reporting period [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) This item is not applicable for the reporting period [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certificates of designation, rights agreements, amendments to credit agreements, and certifications - Exhibits include the Certificate of Designation of Series A Junior Participating Preferred Stock, Section 382 Rights Agreement, Offer Letter Agreement, Amendment No. 2 to the Credit Agreement, CEO/CFO Certifications (Rule 13a-14(a) and Section 1350), and financial information in Inline XBRL format[368](index=368&type=chunk) [Signatures](index=70&type=section&id=Signatures) This section contains the signature of the registrant, Gannett Co., Inc., by its Chief Financial Officer, certifying the filing of the report - The report was signed by Douglas E. Horne, Chief Financial Officer of Gannett Co., Inc., on August 6, 2020[371](index=371&type=chunk)

Che Des Moines Register SUICIDE GANNETT Q2 2020 Earnings August 6, 2020 Tracking outbreaks across the states Disclaimers 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." Prior to November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media" or "Legacy New Media"), and Gannett Co., Inc. ("L ...

GANNE® Needham Technology & Media Conference May 20, 2020 Disclaimers 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." Prior to November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media" or "Legacy New Media"), and Gannett Co., Inc. ("Legacy Gannett") was a separate publicly traded comp ...