Gannett Announces Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

Gannett Co. reported its Q4 and full-year 2020 financial results, revealing a net loss of $122.2 million for Q4 and $670.5 million for the year. Despite a 25.2% revenue increase in Q4 to $875.4 million, driven by the acquisition of Legacy Gannett, same-store pro forma revenues fell 16.3%. Digital revenues accounted for 25.5% of total revenues. The company emphasized progress in digital transformation and subscription growth, surpassing 1 million digital subscribers. Gannett plans to implement a subscription-led growth strategy aimed at increasing stockholder value and reducing debt.

Positive

• Achieved 25.2% revenue growth in Q4 2020 to $875.4 million due to Legacy Gannett acquisition.
• Digital subscriber base surpassed 1 million, illustrating strong growth in digital transformation.
• Adjusted EBITDA increased by 50.6% in Q4 2020, reaching $148.8 million with a margin of 17.0%.
• Reported $177 million in integration savings from the Legacy Gannett acquisition, resulting in over $245 million in annualized savings.

Negative

• Net loss of $670.5 million in 2020 reflects significant write-downs and losses associated with convertible debt.
• Same store pro forma revenues dropped 16.3% in Q4 due to COVID-19 impacts and publishing industry trends.
• Print advertising revenues decreased by 26.9% in Q4, highlighting ongoing challenges in traditional media.

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

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

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

Financial Highlights

in thousands	Fourth Quarter 2020				Full Year 2020
Revenues	$	875,447			$	3,405,670
Net loss attributable to Gannett	(122,174)				(670,479)
Adjusted EBITDA(1) (non-GAAP)	148,829				413,895
Net cash flow provided by operating activities	(16,510)				57,770
Free cash flow(1) (non-GAAP)	(24,541)				20,795

(1)

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

Fourth Quarter 2020 Consolidated Results

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

• Fourth quarter revenues of $875.4 million rose 25.2% as compared to the prior year quarter reflecting the acquisition of Legacy Gannett.
  • Same store pro forma revenues (as defined and reconciled on Table No. 5 below) decreased 16.3%, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry. This is an improvement of 330 basis points over the third quarter 2020 trend.
• Digital advertising and marketing services revenues reached $223.3 million in the fourth quarter, or 25.5% of total revenues.
• Net loss attributable to Gannett of $122.2 million in the fourth quarter reflects a $74.3 million non-cash loss on the derivative associated with our convertible notes and a $42.1 million loss associated with the early extinguishment of debt.
• Adjusted EBITDA totaled $148.8 million, an increase of 50.6% compared to the prior year and represented a 17.0% margin.
  • Adjusted EBITDA grew $7.4 million, or 5.4%, year-over-year on a pro forma basis.

Full Year 2020 Consolidated Results

• Full year 2020 revenues of $3.406 billion rose 82.3% as compared to the prior year reflecting the acquisition of Legacy Gannett.
  • Same store pro forma revenues decreased 18.5%, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry.
• Digital advertising and marketing services revenues reached $808.4 million in 2020, or 23.7% of total revenues.
• Net loss attributable to Gannett of $670.5 million in 2020 reflects a second quarter non-cash write-down related to the second quarter 2020 impairment of goodwill and intangible assets of $393.4 million, as well as a $74.3 million non-cash loss on the derivative associated with our convertible debt and a $43.8 million loss associated with the early extinguishment of debt, offset by non-operating pension income of $72.1 million.
• Adjusted EBITDA totaled $413.9 million and represented a 12.2% margin.

Balance Sheet & Cash Flow

• As of December 31, 2020, the Company had cash and cash equivalents of $170.7 million.
• During the fourth quarter of 2020, the Company repaid $653.4 million in principle under its $1.075 billion 11.5% term loan (the "Acquisition Term Loan") using the proceeds from the issuance of the $497.1 million 6% senior secured convertible notes due 2027 (the "2027 Convertible Notes"), along with real estate and other asset sales and cash on hand.
• Total debt outstanding as of December 31, 2020 was $1.575 billion, comprised of:
  • $1.075 billion Acquisition Term Loan;
  • $497.1 million of 2027 Convertible Notes; and
  • $3.3 million of 4.75% senior secured convertible notes (the "2024 Convertible Notes").
• Cash flow provided by operations was $57.8 million for the year ended December 31, 2020 compared to $25.5 million for the prior year primarily due to a decrease in pension and postretirement payments of $44.2 million and an increase in tax refunds of $5.2 million, offset by an increase in interest paid of $177.9 million and an increase in severance payments of $73.1 million. The remainder of the change was due to the acquisition of Legacy Gannett, as well as overall timing of receipts and payments.
• Capital expenditures were $8.0 million in the fourth quarter of 2020 and $37.0 million for the year ended December 31, 2020, primarily for product development, technology investments, and operating infrastructure.
• Subsequent to December 31, 2020, the Company further amended its debt structure by:
  • Reducing its Acquisition Term Loan debt by an additional $32.6 million utilizing net proceeds from real estate sales; and
  • Refinancing the remaining Acquisition Term Loan with a five-year, senior secured term loan facility in an aggregate principal amount of $1.045 billion (the "5-Year Term Loan"), at LIBOR+700 with a 0.75% LIBOR floor.
  • Total debt outstanding at February 25, 2021, after giving effect to those changes is $1.545 billion, which includes the $1.045 billion 5-Year Term Loan, $497.1 million of 2027 Convertible Notes, and $3.3 million of 2024 Convertible Notes.
  • Cash interest during 2021 is expected to be $90.0 million less than 2020 due to the interest rate savings from the 5-Year Term Loan and 2027 Convertible Notes, and the approximately $250.0 million in debt reduction made since the acquisition of Legacy Gannett.
  • The Company also expects to sell an additional $100 million to $125 million in non-core assets during 2021 that are anticipated to accelerate debt pay down and further reduce cash interest costs.
  • Targeting first lien net leverage of 1.0x by the end of 2022.

Fourth Quarter 2020 Publishing Segment

• Publishing segment revenues totaled $794.2 million in the fourth quarter.
• Circulation revenues totaled $338.5 million in the fourth quarter.
  • Same store pro forma circulation revenues decreased 13.6% in the fourth quarter, primarily driven by single copy sales, reflecting the impact of the COVID-19 pandemic on businesses that buy and sell copies of our publications, and the overall secular declines in the volume of home delivery due to subscriber declines.
• Print advertising revenues totaled $237.6 million in the fourth quarter, reflecting continued secular pressures.
  • Same store pro forma print advertising revenues decreased 26.9% compared to the prior year fourth quarter, a 400 basis point improvement over the third quarter of 2020, reflecting secular industry trends and the negative impact of the COVID-19 pandemic on all categories.
• Digital advertising and marketing services revenues were $146.5 million in the fourth quarter.
  • Same store pro forma digital advertising and marketing services revenues decreased 2.0% versus the same period in the prior year, an improvement from the 13.5% year-over-year decline we experienced in the third quarter of 2020.
• Other revenues contributed $71.6 million in the fourth quarter.
• Digital-only subscriptions totaled approximately 1.1 million at the end of the fourth quarter, up 29% year-over-year.
• Publishing segment Net income attributable to Gannett was $104.9 million and Adjusted EBITDA was $147.4 million, representing an Adjusted EBITDA margin of 18.6% for the fourth quarter.

Fourth Quarter 2020 Digital Marketing Solutions Segment

• Digital Marketing Solutions segment revenues were $107.3 million in the fourth quarter.
  • Same store pro forma Digital Marketing Solutions segment revenues decreased by 10.3% compared to the prior year fourth quarter, versus the 17.4% decline that we experienced in the third quarter of 2020. Fourth quarter 2020 trend improvement was driven by overall growth in our core ReachLocal business, offset by continued impacts from the COVID-19 pandemic.
• Digital Marketing Solutions segment Net income attributable to Gannett was $0.6 million and Adjusted EBITDA was $9.5 million, representing an Adjusted EBITDA margin of 8.9% for the quarter.

Integration of Legacy Gannett Update

• Realized $61 million in savings in the fourth quarter, bringing our total 2020 integration savings to approximately $177 million.
  • On an annualized basis, that will result in over $245 million of ongoing savings.
• Management remains confident in its ability to implement additional measures by the end of 2021 that are expected to result in over $300 million in aggregate annualized synergies.

Earnings Conference Call

Management will host a conference call on Thursday, February 25, 2021 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. The conference call may be accessed by dialing 1-855-319-1124 (from within the U.S.) or 1-703-563-6359 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Gannett Fourth Quarter and Full Year 2020 Earnings Call” or access code “6922159”. A simultaneous webcast of the conference call will be available to the public on a listen-only basis at investors.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, April 8, 2021 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “6922159”.

About Gannett

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

Same Store Pro Forma Revenues

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

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding measures expected to result in over $90 million in annualized cash interest savings, our ability to achieve our operating priorities and increase stockholder value, our digital revenue performance, shifts in our revenue mix and the timing of realizing such shifts, the potential sales of non-core assets, including the anticipated use of any proceeds from such sales, integration of our acquisitions, our ability to achieve $300 million of synergies through measures expected to be implemented by the end of 2021, our expectations, in terms of both amount and timing, with respect to debt repayment, real estate sales and debt refinancing, growth of our digital-only subscriptions, digital marketing services, and events and promotions businesses, the impact from and our response to the COVID-19 pandemic, our strategy, and future revenue trends and our ability to influence trends. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

CONSOLIDATED BALANCE SHEETS Gannett Co., Inc. In thousands (except per share amounts)
Table No. 1
Assets	December 31, 2020				December 31, 2019
Current assets:
Cash and cash equivalents	$	170,725			$	156,042
Accounts receivable, net of allowance for doubtful accounts of $20,843 and $19,923, respectively	314,305				438,523
Inventories	35,075				55,090
Prepaid expenses and other current assets	116,581				129,460
Total current assets	636,686				779,115
Property, plant, and equipment, net	590,272				815,807
Operating lease assets	289,504				309,112
Goodwill	534,088				914,331
Intangible assets, net	824,650				1,012,564
Deferred tax assets	90,240				76,297
Other assets	143,474				112,876
Total assets	$	3,108,914			$	4,020,102
Liabilities and equity
Current liabilities:
Accounts payable and accrued expenses	$	378,246			$	453,628
Deferred revenue	186,007				218,823
Current portion of long-term debt	128,445				3,300
Other current liabilities	48,602				42,702
Total current liabilities	741,300				718,453
Long-term debt	890,323				1,636,335
Convertible debt	581,405				3,300
Deferred tax liabilities	6,855				9,052
Pension and other postretirement benefit obligations	99,765				235,906
Long-term operating lease liabilities	274,460				297,662
Other long-term liabilities	151,847				136,188
Total noncurrent liabilities	2,004,655				2,318,443
Total liabilities	2,745,955				3,036,896
Redeemable noncontrolling interests	(1,150)				1,850
Commitments and contingent liabilities
Equity
Preferred stock, $0.01 par value, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were outstanding at December 31, 2020 and December 31, 2019	—				—
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 139,494,741 shares issued and 138,102,993 shares outstanding at December 31, 2020; 129,386,258 shares issued and 128,991,544 shares outstanding at December 31, 2019	1,395				1,294
Treasury stock, at cost, 1,391,748 and 394,714 shares at December 31, 2020 and December 31, 2019, respectively	(4,903)				(2,876)
Additional paid-in capital	1,103,881				1,090,694
Accumulated deficit	(786,437)				(115,958)
Accumulated other comprehensive loss (income)	50,173				8,202
Total equity	364,109				981,356
Total liabilities and equity	$	3,108,914			$	4,020,102

CONSOLIDATED STATEMENTS OF OPERATIONS Gannett Co., Inc. In thousands (except per share amounts)
Table No. 2	Three months ended								Year ended
	December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
	(Unaudited)
Operating revenues:
Advertising and marketing services	$	461,088			$	370,324			$	1,710,244			$	952,644
Circulation	338,468				255,574				1,391,996				704,842
Other	75,891				73,376				303,430				210,423
Total operating revenues	875,447				699,274				3,405,670				1,867,909
Operating costs	498,733				398,322

FAQ

What were Gannett's financial results for Q4 2020?

Gannett reported Q4 2020 revenues of $875.4 million, with a net loss of $122.2 million.

How did Gannett's revenues change in 2020?

For the full year 2020, Gannett's revenues rose 82.3% to $3.406 billion, primarily due to the acquisition of Legacy Gannett.

What is Gannett's strategy for 2021?

Gannett aims to implement a subscription-led growth strategy to drive audience engagement and increase stockholder value.

How many digital subscribers does Gannett have as of Q4 2020?

Gannett surpassed 1 million digital subscribers by the end of Q4 2020.

What are Gannett's expected savings from integration with Legacy Gannett?

Gannett reported $177 million in integration savings for 2020, projecting over $245 million in ongoing annualized savings.