Gannett Announces 2023 Results and Business Outlook

Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the fourth quarter ended December 31, 2023.

"In 2023, we made excellent progress executing on our strategy to drive our digital transformation, resulting in total digital revenues exceeding 41% of total revenues in the fourth quarter, and amounting to nearly $1.1 billion for the year. Over the past year, we’ve expanded our digital audience, improved engagement, grown the monetization of our audience, and driven significantly improved financial results over the prior year. Our digital-only subscription revenues surpassed $150 million in 2023, with total digital-only average revenue per user reaching a new high. Also, our partnership strategy increased our overall digital monetization, and importantly, we expect to generate $20 million in high margin revenue from our partnerships in 2024," said Michael Reed, Gannett Chairman, and Chief Executive Officer.

"In 2023, we achieved full year growth in both Adjusted EBITDA and free cash flow, representing an important change in trajectory compared to last year's declines. We also remained focused on improving our capital structure and, with over $140 million in debt repayments in 2023, we were able to significantly reduce our leverage during the year. As these results show, we are building momentum toward a sustainable digital growth business, with a strong balance sheet."

"As we look forward to 2024 and the next several years, we expect to capitalize on this progress and build to inflection in our revenue as we end 2024. Our business outlook reflects our investments in strategy and our prioritization of revenue and free cash flow growth while also maintaining ongoing profit improvements and further deleveraging. We believe 2024 is an important milestone in the foundation for creating sustainable growth for Gannett."

Fourth Quarter 2023 Digital Highlights:

• Total digital revenues of $277.1 million, or 41.4% of total revenues, up 2.9% versus the prior year
• Digital-only subscription revenues of $41.9 million grew 18.1% year-over-year
• Digital-only average revenue per user(1) of $7.05 increased 19.5% year-over-year
• Total digital-only paid subscriptions(1) were approximately 2.0 million, sequential growth of 1.6%
• 187 million(2) global average monthly unique visitors in the fourth quarter of 2023, up 4.3% year-over-year
• Digital Media revenues of $78.8 million grew 3.9% year-over-year
• Digital Marketing Solutions core platform revenues(1) of $119.4 million decreased 0.3% year-over year
  • Record high core platform average revenue per user(1) of $2,663, up 2.1% year-over-year
  • Customer budget retention(3) was 95.4%, an increase of 50 basis points compared to the fourth quarter of 2022

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Fourth Quarter 2023 Capital Structure Highlights:

• As of December 31, 2023, the Company had cash and cash equivalents of $100.2 million
• Total principal amount of debt outstanding as of December 31, 2023 was $1,130.6 million, including $642.0 million in first lien debt, which resulted in a First Lien Net Leverage(4) of 2.0x, a decrease of 24.6% compared to 2.7x as of the end of fiscal 2022
• During the fourth quarter of 2023, the Company repaid $23.9 million of debt. For the full year 2023, the Company repaid $141.6 million of debt

Full Year 2024 and Mid-Term 2025-2026 Business Outlook(5)

The Company presents its full year 2024 outlook and its mid-term outlook over the course of 2025 and 2026 below.

• Full Year 2024 Business Outlook(5)
  • Total digital revenues are expected to grow approximately 10%
  • Total revenues are expected to be down in the low to mid-single digits on a reported and same store basis(6)
  • Net income attributable to Gannett is expected to improve, after excluding an impairment charge of approximately $45 million related to the exit of our McLean, Virginia office during the first quarter of 2024
  • Adjusted EBITDA(6) is expected to grow versus the prior year
  • Cash provided by operating activities is expected to grow versus the prior year
  • Free cash flow(6) is expected to grow in excess(7) of the expected growth in Adjusted EBITDA(6)
  • Real estate and non-strategic asset sales are expected to be in the range of $45 million and $50 million
• Full Year 2025 and Full Year 2026 Business Outlook(5)
  • Total digital revenues are expected to accelerate with growth exceeding 10% year-over-year
    • Total digital revenues are expected to make up 50% of total revenues in 2025 and exceed 55% of total revenues in 2026
  • Total revenues are expected to grow in the low single digits on a reported basis and same store basis(6)
  • Net income attributable to Gannett is expected to improve to positive
  • Adjusted EBITDA(6) is expected to exhibit ongoing growth
  • Cash provided by operating activities is expected to grow with an estimated CAGR(8) of 30%
  • Free cash flow(6) is expected to grow at an accelerated rate with an estimated CAGR(6)(8) of 40%

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Additional Fourth Quarter 2023 Highlights:

• Total revenues of $669.4 million decreased 8.4% compared to the fourth quarter of 2022
  • Same store revenues(6) decreased 8.0% compared to the fourth quarter of 2022, reflecting a sequential improvement of 40 basis points compared to the third quarter of 2023
• Net loss attributable to Gannett of $22.9 million as compared with net income attributable to Gannett of $32.8 million in the fourth quarter of 2022 and a Net loss attributable to Gannett margin of 3.4% versus a net loss attributable to Gannett margin of 0.4% in the third quarter of 2023
• Adjusted EBITDA(6) totaled $74.1 million, a decrease of 18.0% compared to the fourth quarter of 2022
  • Sequential improvement of 24.5% compared to the third quarter of 2023
  • Adjusted EBITDA margin(6) of 11.1%, representing sequential improvement of 200 basis points compared to the third quarter of 2023
  • The prior year results included approximately $9.0 million related to employee furloughs which did not recur
• Cash provided by operating activities of $21.2 million, an increase of $13.4 million year-over-year
• Free cash flow(6) of $12.7 million, an improvement of $14.4 million year-over-year

Financial Highlights

Earnings Conference Call

Management will host a conference call on Thursday, February 22, 2024 at 8:30 A.M. Eastern Time to review the financial and operating results for the period. A copy of the earnings release will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. The conference call may be accessed by dialing 1-877-451-6152 (from within the U.S.) or 1-201-389-0879 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference "Gannett Fourth Quarter Earnings Call" or access code "13742832". We use our website as a channel of distribution for important Company information and we use the investors.gannett.com website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. A simultaneous webcast of the conference call will be available to the public on a listen-only basis at investors.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, March 7, 2024 by dialing 1-844-512-2921 (from within the U.S.) or 1-412-317-6671 (from outside of the U.S.); please reference access code "13742832". A transcript of our earnings call held today also will be posted to the investors.gannett.com website.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is a diversified media company with expansive reach at the national and local level dedicated to empowering and enriching communities. We seek to inspire, inform, and connect audiences as a sustainable, growth focused media and digital marketing solutions company. We endeavor to deliver essential content, marketing solutions, and experiences for curated audiences, advertisers, consumers, and stakeholders by leveraging our diverse teams and suite of products to enrich the local communities and businesses we serve. Our current portfolio of trusted media brands includes the USA TODAY NETWORK, comprised of the national publication, USA TODAY, and local media organizations in the United States, and Newsquest, a wholly-owned subsidiary operating in the United Kingdom. Our digital marketing solutions brand, LocaliQ, uses innovation and software to enable small and medium-sized businesses to grow, and USA TODAY NETWORK Ventures, our events division, creates impactful consumer engagements, promotions, and races.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, our full year 2024 business outlook, our mid-term business outlook, statements regarding our business outlook, digital revenue performance and growth, growth in our Digital Marketing Solutions segment, growth of and demand for our digital-only subscriptions and audience, digital marketing and advertising services, digital revenues, monetization of our audience, print advertising trends and revenues, expected results of our targeting and pricing models, expectations regarding our cash from operating activities, free cash flows, compound annual growth rates ("CAGR"), revenues, net income (loss) attributable to Gannett, Adjusted EBITDA, same-store revenues and cash flows, expectations regarding our long-term growth, sustainable growth, and inflection in our revenue, our ability to create long-term stockholder value, our expectations, in terms of both amount and timing, with respect to debt repayment, our expected capital expenditures, expectations regarding real estate and non-strategic asset sales, the impact from changes at our McLean, Virginia property, our strategy, our partnerships, our ability to generate affiliate revenues, our ability to achieve our operating priorities, our long-term opportunities, economic impacts, our ability to navigate volatility, achieve our financial goals, optimize our capital structure and achieve optimal financial performance, our cost structure and future revenue and expense trends and our ability to influence trends. Words such as "expect(s)", believe(s)", "will", "outlook", "guidance", "estimate(s)", "project(s)", "focus", "building", and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s most recent Annual Report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Except to the extent required by law, the Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

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USE OF NON-GAAP INFORMATION

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

The Company defines its non-GAAP measures as follows:

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

• Adjusted EBITDA margin is a non-GAAP performance measure the Company believes offers a useful view of the overall and segment operations of our business. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total Operating revenues.

• Adjusted Net income (loss) attributable to Gannett is a non-GAAP performance measure the Company believes offers a useful view of the overall operations of our business and is useful to analysts and investors in evaluating the results of operations and operational trends. The Company defines Adjusted Net income (loss) attributable to Gannett before (1) Gains or losses on the early extinguishment of debt, (2) Loss on convertible notes derivative, (3) Integration and reorganization costs, (4) Other operating expenses, including third-party debt expenses and acquisition costs, (5) Asset impairments, (6) Goodwill and intangibles impairments, (7) Gains or losses on the sale or disposal of assets, (8) certain other non-recurring charges, and (9) the tax impact of the above items.

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

• Same store revenues is a non-GAAP performance measure based on GAAP revenues for Gannett for the current period, excluding (1) acquired revenues (2) currency impact, and (3) exited operations.

Management’s Use of Non-GAAP Measures

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

We use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues as measures of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results.

Limitations of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues

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

Management believes these items are important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues are not alternatives to net income, margin, income from operations, cash flows provided by (used for) operations or revenues as calculated and presented in accordance with U.S. GAAP. As such, they should not be considered or relied upon as substitutes or alternatives for any such U.S. GAAP financial measure. We strongly urge you to review the reconciliations of Net income (loss) attributable to Gannett to Adjusted EBITDA, Adjusted EBITDA margin, Net income (loss) attributable to Gannett to Adjusted Net income (loss) attributable to Gannett, Cash provided by (used for) operations to Free cash flow and Revenues to Same Store revenues along with our Consolidated financial statements included elsewhere in this report. We also strongly urge you not to rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, the Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income (loss) attributable to Gannett, Free cash flow and Same store revenues measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.

Non-GAAP Outlook

Our 2024 business outlook and our mid-term outlook included in this release include certain non-GAAP measures, including Same store revenues, Adjusted EBITDA, Free cash flow, and Free cash flow CAGR. CAGR is a compound annual growth rate over the time period noted for Free cash flow. We believe providing expected Free cash flow CAGR as part of our outlook is meaningful to share with investors and an indication of what management believes is an important measure of growth. The outlook for each of these non-GAAP items does not factor in the impact of any further acquisitions or dispositions. We have provided these non-GAAP measures for future guidance for the same reasons that were outlined above for historical non-GAAP measures. We have not reconciled non-GAAP forward-looking Same store revenues, Adjusted EBITDA, Free cash flow, and Free cash flow CAGR to their most directly comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliations would require unreasonable efforts to estimate and quantify various necessary GAAP components largely because forecasting or predicting our future operating results is subject to many factors or future events out of our control, is unavailable, or is not readily predictable, and could significantly impact, either individually or in the aggregate, our comparable GAAP measures. Accordingly, we are unable to provide a full reconciliation of the non-GAAP measures used in our outlook without unreasonable efforts.

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SAME STORE REVENUES - TOTAL DIGITAL REVENUES, TOTAL DIGITAL MEDIA REVENUES and DIGITAL-ONLY SUBSCRIPTION REVENUES
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