Gannett Announces First Quarter 2021 Results

Rhea-AI Summary

Gannett reported its Q1 2021 financial results, achieving a record of over 1.2 million digital-only subscriptions, marking a 37% increase year-over-year. Revenue totaled $777.1 million, an 18.1% decline from Q1 2020, influenced by COVID-19 impacts and industry trends. Adjusted EBITDA increased by 1.4% to $100.5 million, with a margin expansion of 250 basis points. The company fully refinanced its 11.5% term loan, achieving $300 million in annualized synergies ahead of schedule. Despite a net loss of $142.3 million, digital revenues showed growth, particularly in digital marketing solutions.

Positive

• Record of over 1.2 million digital-only subscriptions, up 37% YoY.
• Achieved $300 million in annualized synergies ahead of schedule.
• Adjusted EBITDA increased by 1.4% to $100.5 million.

Negative

• Revenue decreased by 18.1% from Q1 2020, totaling $777.1 million.
• Net loss of $142.3 million includes significant non-cash losses.

Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the first quarter ended March 31, 2021.

“The first quarter of 2021 was our best quarter to date for new digital-only subscriptions subsequent to the acquisition of Legacy Gannett, surpassing 1.2 million, and a very encouraging start to the year as a whole. Our core digital marketing solutions teams also had a fantastic quarter, setting new records in productivity. Adjusted EBITDA grew from the first quarter of 2020 and reflected Adjusted EBITDA margin expansion of 250 basis points to the prior year period,” said Michael Reed, Gannett Chairman and Chief Executive Officer. “We are pleased to have fully refinanced our 11.5% term loan during the quarter as well as achieving our target of $300 million of annualized synergies, well ahead of our year end 2021 goal.”

“With the refinancing behind us, we are focused on a long-term, subscription-led, digital growth strategy. With the first quarter momentum in both digital-only subscriptions and in our Digital Marketing Solutions segment, we believe we are well positioned to not only meaningfully grow Adjusted EBITDA year over year, but also continue our evolution to a digitally focused content platform.”

Financial Highlights

in thousands		First Quarter 2021
Revenues		$	777,084
Net loss attributable to Gannett		(142,316		)
Adjusted EBITDA(1) (non-GAAP)		100,465
Net cash flow provided by operating activities		61,316
Free cash flow(1) (non-GAAP)		53,709

(1)

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

First Quarter 2021 Consolidated Results

• First quarter revenues of $777.1 million decreased 18.1% as compared to the prior year quarter.
  • Same store revenues (as defined and reconciled on Table No. 5 below) decreased 16.5% compared to the first quarter of 2020, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry.
  • First quarter same store revenue trends were impacted by the cessation of industry wide digital marketing services incentives at the end of 2020. The incentives, earned through our Digital Marketing Solutions segment, totaled $13.0 million during 2020, with $9.2 million in the first quarter of 2020, accounting for a decrease of 0.9% on the first quarter same store trend. On a comparable basis, first quarter same store trends improved slightly from fourth quarter 2020 levels.
• Digital advertising and marketing services revenues reached $195.2 million in the first quarter, or 25.1% of total revenues.
• Digital-only circulation revenues of $23.2 million grew 46.7% in the first quarter of 2021 compared to the same period in the prior year attributable to a 37% increase compared to the same period in the prior year in digital-only subscriptions. Digital-only subscriptions totaled approximately 1.2 million at the end of the first quarter of 2021, adding 120,000 net new subscriptions in the first quarter.
• Total digital revenues were $229.2 million or 29.5% of total revenues, which includes Digital advertising and marketing services revenues, Digital-only circulation revenues and Digital syndication and affiliate revenues.
• Net loss attributable to Gannett of $142.3 million in the first quarter reflects a $126.6 million non-cash loss on the derivative associated with the 6% senior secured convertible notes due 2027 (the "2027 Convertible Notes"), a $19.4 million loss associated with the early extinguishment of debt and an additional $10.2 million related to costs incurred in connection with our debt refinancing activities during the quarter.
• Adjusted EBITDA totaled $100.5 million, an increase of $1.4 million or 1.4% compared to the first quarter of 2020 and represented a 12.9% margin.

Balance Sheet & Cash Flow

• As of March 31, 2021, the Company had cash and cash equivalents of $163.5 million.
• During the first quarter of 2021, the Company refinanced its five-year, senior-secured 11.5% term loan facility with Apollo Capital Management, L.P. (the "Acquisition Term Loan") with a five-year, senior secured term loan facility in an aggregate principal amount of $1.045 billion (the "5-Year Term Loan"), at LIBOR+700 with a 0.75% LIBOR floor. Additionally, during the three months ended March 31, 2021, the Company repaid approximately $9 million in principal under its 5-Year Term Loan using the proceeds from real estate and other asset sales.
• Total debt outstanding as of March 31, 2021 was $1.537 billion, comprised of the (i) $1,036.4 million of 5-Year Term Loan, (ii) $497.1 million of 2027 Convertible Notes, and (iii) $3.3 million of remaining convertible notes from Legacy Gannett.
• Cash flow provided by operations was $61.3 million for the three months ended March 31, 2021 compared to $60.5 million for the same period in the prior year. The increase in cash flow provided by operating activities was primarily due to an increase in working capital of $15.1 million due to the overall timing of payments and receipts and a decrease in severance payments of $9.9 million, partially offset by an increase in interest paid on the Acquisition Term Loan of $13.0 million, an increase in contributions to our pension and other postretirement benefit plans of $12.4 million and a decrease in tax refunds of $1.0 million.
• Capital expenditures were $7.6 million for the quarter ended March 31, 2021, primarily related to product development, technology investments, and operating infrastructure.
• The Company expects to sell an additional $90 million to $115 million in non-core assets during the remainder of 2021 that are anticipated to accelerate debt pay down and further reduce cash interest costs.

First Quarter 2021 Publishing Segment

• Publishing segment revenues were $699.6 million in the first quarter of 2021.
• Circulation revenues were $325.4 million in the first quarter of 2021.
  • Same store circulation revenues decreased 12.9% in the first quarter of 2021 compared to the same period in the prior year, primarily driven by a reduction in the volume of home delivery subscribers and a decline in single copy sales reflecting the overall secular trends impacting the industry as well as the impact of the COVID-19 pandemic on businesses that buy and sell copies of our publications.
  • Digital-only circulation revenues grew 46.7% in the first quarter of 2021 compared to the same period in the prior year.
  • Digital-only subscriptions totaled approximately 1.2 million at the end of the first quarter of 2021, up 37% compared to the same period in the prior year.
• Print advertising revenues were $193.2 million in the first quarter of 2021.
  • Same store print advertising revenues decreased 24.9% in the first quarter of 2021 compared to the same period in the prior year, a 200 basis point improvement over the fourth quarter of 2020, reflecting secular industry trends impacting all categories and impacts from the COVID-19 pandemic.
• Digital advertising and marketing services revenues were $121.1 million in the first quarter of 2021.
  • Same store digital advertising and marketing services revenues decreased 10.4% in the first quarter of 2021 compared to the same period in the prior year reflecting lower local digital media spend and lower page views compared to the prior year which reflected coverage of the COVID-19 pandemic and lower digital classified revenue.
• Other revenues were $59.8 million in the first quarter of 2021.
  • Same store other revenues decreased 23.2% due to declines in the commercial print and delivery business, driven by overall secular trends impacting the industry and a decline in event revenues due to the absence of in-person events in the first quarter of 2021 compared to the same period in the prior year.
• Publishing segment Net income attributable to Gannett was $66.2 million and Adjusted EBITDA was $102.2 million, representing an Adjusted EBITDA margin of 14.6% for the first quarter of 2021 compared to 12.9% for the same period in the prior year.

First Quarter 2021 Digital Marketing Solutions Segment

• Digital Marketing Solutions segment revenues were $102.3 million in the first quarter of 2021.
  • Same store Digital Marketing Solutions segment revenues decreased 12.7% in the first quarter of 2021 compared to the same period in the prior year, impacted by the cessation of industry wide incentives at the end of 2020. The incentives totaled $13.0 million during 2020, with $9.2 million in the first quarter 2020, accounting for a decrease of 7.6% on the first quarter same store trend. On a comparable basis, first quarter same store trends improved slightly from fourth quarter 2020 levels.
• Digital Marketing Solutions segment Net income attributable to Gannett was $1.1 million and Adjusted EBITDA was $9.2 million, representing an Adjusted EBITDA margin of 9.0% for the first quarter of 2021 compared to 6.5% for the same period in the prior year.

Integration of Legacy Gannett Update

On November 19, 2019, we acquired Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referred to as “Legacy Gannett”) and we changed our name to Gannett Co., Inc.

• We realized $11.0 million in savings associated with the acquisition in the first quarter of 2021.
• We have achieved $300 million in annualized synergies, achieving our original target well ahead of expectations.
• Management remains confident in its ability to implement additional measures by the end of 2021 that are expected to result in the Company outperforming original synergy targets, resulting in a total of $325 million of annualized synergies.

Earnings Conference Call

Management will host a conference call on Friday, May 7, 2021 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. The conference call may be accessed by dialing 1-877-451-6152 (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 First Quarter Earnings Call” or access code “13718389”. 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 Friday, May 21, 2021 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 “13718389”.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is a subscription-led and digitally focused media and marketing solutions company committed to empowering communities to thrive. With an unmatched reach at the national and local level, Gannett touches the lives of millions with our Pulitzer Prize-winning content, consumer experiences and benefits, and advertiser products and services. Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S., and Newsquest, a wholly owned subsidiary operating in the United Kingdom with more than 120 local news media brands. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc., which are marketed under the LOCALiQ brand, and runs the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures. To connect with us, visit www.gannett.com.

Same Store Revenues

Same store revenues are based on GAAP revenues for Gannett for the current period, excluding (i) exited operations, (ii) currency impacts, and (iii) deferred revenue impacts related to the acquisition of Legacy Gannett.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our ability to grow Adjusted EBITDA, measures expected to result in annualized cash interest savings, our ability to achieve our operating priorities, our digital revenue performance, shifts in our revenue mix and the timing of realizing such shifts, the potential sales of non-core assets, including the anticipated use of any proceeds from such sales, integration of our acquisitions, our ability, in terms of both amount and timing, to surpass $300 million of annualized synergies, our expectations, in terms of both amount and timing, with respect to debt repayment, real estate sales and debt refinancing, growth of and demand for our digital-only subscriptions and digital marketing and advertising services, our strategy, and future revenue trends and our ability to influence trends. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s 2020 Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

GANNETT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Table No. 1
In thousands, except share data		March 31, 2021				December 31, 2020
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$	163,505			$	170,725
Accounts receivable, net of allowance for doubtful accounts of $17,124 and $20,843, as of March 31, 2021 and December 31, 2020, respectively		275,933				314,305
Inventories		32,457				35,075
Prepaid expenses and other current assets		118,082				116,581
Total current assets		589,977				636,686
Property, plant, and equipment, net		552,462				590,272
Operating lease assets		286,368				289,504
Goodwill		534,211				534,088
Intangible assets, net		797,862				824,650
Deferred tax assets		103,269				90,240
Other assets		190,302				143,474
Total assets		$	3,054,451			$	3,108,914
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses		$	377,370			$	378,246
Deferred revenue		190,699				186,007
Current portion of long-term debt		81,057				128,445
Other current liabilities		48,396				48,602
Total current liabilities		697,522				741,300
Long-term debt		888,086				890,323
Convertible debt		394,146				581,405
Deferred tax liabilities		16,280				6,855
Pension and other postretirement benefit obligations		95,542				99,765
Long-term operating lease liabilities		271,496				274,460
Other long-term liabilities		151,388				151,847
Total noncurrent liabilities		1,816,938				2,004,655
Total liabilities		2,514,460				2,745,955
Redeemable noncontrolling interes

FAQ

What were Gannett's Q1 2021 revenues and how do they compare to Q1 2020?

Gannett's Q1 2021 revenues were $777.1 million, down 18.1% from Q1 2020.

How many digital-only subscriptions did Gannett achieve by the end of Q1 2021?

Gannett achieved over 1.2 million digital-only subscriptions, a 37% increase year-over-year.

What was Gannett's net loss in Q1 2021?

Gannett reported a net loss of $142.3 million in Q1 2021.

What is Gannett's adjusted EBITDA for Q1 2021?

Gannett's adjusted EBITDA for Q1 2021 was $100.5 million, representing a 1.4% increase from the previous year.

What significant financial action did Gannett complete in Q1 2021?

Gannett fully refinanced its 11.5% term loan during Q1 2021.