Gannett Announces First Quarter 2022 Results

44% Digital-Only Paid Subscriber Growth Year-Over-Year to over 1.75 million Paid Subscribers

Digital Marketing Solutions Core Platform Revenues rose 14% Year-Over-Year to $107.3 million

Total Digital Revenues of $251.1 million, or 34% of Total Revenues grew 9% Year-Over-Year

Gannett Co., Inc. (“Gannett”, “we”, “us”, “our”, or the “Company”) (NYSE: GCI) today reported its financial results for the first quarter ended March 31, 2022.

“The first quarter performance was slightly ahead of our expectations and we believe we have positioned ourselves to carry this momentum throughout 2022. We have created solid building blocks for future growth at Gannett and, as such, we are reiterating our full year guidance for 2022. We continue to experience strong growth in digital-only circulation with five consecutive quarters of at least 40% subscriber growth and surpassing 1.75 million digital-only paid subscribers. In lockstep with the increase in our digital-only subscribers, our digital marketing solutions business has experienced year-over-year core revenue and core client growth of 14% and 13%, respectively, as well as four consecutive quarters of double-digit Adjusted EBITDA margins,” said Michael Reed, Gannett Chairman and Chief Executive Officer.

“The success in these key operating pillars has allowed the company to continue its digital transformation journey with digital-only revenues accounting for more than one-third of total revenues and growth of 9% year-over-year. As we continue to evolve the business, we believe we are well positioned to generate significant free cash flow, further improve the balance sheet through debt pay down, and invest in growth opportunities. We remain optimistic for Gannett, not only in the short term, but also for anticipated long-term shareholder value creation.”

First Quarter 2022 Financial Highlights:

Total revenues of $748.1 million decreased 3.7% compared to the first quarter of 2021
- Same store revenues⁽¹⁾decreased 2.5% compared to the first quarter of 2021
Total digital revenues were $251.1 million or 34% of total revenues, up 9.7% over the same period in the prior year on a same store⁽¹⁾ basis
Net loss attributable to Gannett of $3.0 million and margin loss of 0.4%
Adjusted net income attributable to Gannett⁽¹⁾ of $4.5 million
Adjusted EBITDA⁽¹⁾ totaled $64.2 million, a decrease of 36.1% compared to the first quarter of 2021
- Adjusted EBITDA margin⁽¹⁾ of 8.6%
Cash provided by operating activities of $32.4 million
Free cash flow⁽¹⁾ of $21.7 million

Additional Business Highlights:

Digital-only paid subscribers increased 44% compared to the first quarter of 2021 and surpassed 1.75 million at the end of the first quarter of 2022
- Digital-only circulation revenues of $30.1 million grew 30.0% year-over-year
191 million average monthly unique visitors in the first quarter of 2022 with 145 million average monthly unique visitors coming from our USA TODAY NETWORK (based on March 2022 Comscore Media Metrix®) and 46 million average monthly unique visitors resulting from our U.K. digital properties
Digital Marketing Solutions segment revenues were $109.7 million, and on a same store basis⁽¹⁾ increased 8.2% in the first quarter of 2022 compared to the same period in the prior year
- Total core platform revenues⁽²⁾ were $107.3 million in the first quarter of 2022, up 14.2% compared to the same quarter in the prior year
- Total core platform customers were 15,400 in the first quarter of 2022, up 13.2% compared to the first quarter of 2021
- Net income attributable to Gannett margin within the segment was 4.8% in the first quarter of 2022 versus 1.1% in the same quarter of the prior year
- Adjusted EBITDA margin⁽¹⁾ within the segment increased to 10.2% in the first quarter of 2022 versus 9.0% in the same quarter of the prior year, representing the fourth consecutive quarter of double-digit margins
Revenues from USA TODAY NETWORK Ventures, our events portfolio, were $11.7 million and increased 83.3% year-over-year driven by increased attendance at in-person events and endurance races
- The Company hosted 115,000 attendees across 25 events versus 60,000 attendees and 12 events in the same quarter of the prior year
In March 2022, the Company launched its Digital Saturday initiative in 136 markets, which allows subscribers to receive access to the full portfolio of e-Editions across the USA TODAY network
- The recent launch has resulted in an increase to the Company’s Saturday digital e-Edition usage by 55% with 351,000 average Saturday digital users
The Company released its second annual Inclusion Report documenting its progress and accomplishments in 2021, including in-depth workplace diversity metrics and reflections from employees across the organization
In March 2022, the Company published its inaugural Environmental, Social and Governance Report detailing the alignment of the Company’s efforts across its corporate social responsibility pillars which are people, planet, and communities, with the U.N. Sustainable Development Goals
Total principal amount of debt outstanding as of March 31, 2022 was $1.371 billion and comprised of $882.1 million in first lien debt, which resulted in a First Lien Net Leverage⁽³⁾ of 1.84x
- During the first quarter of 2022, the Company repaid approximately $48.0 million in principal under its five-year senior secured term loan facility (the “New Senior Secured Term Loan”) using the proceeds from real estate and other asset sales totaling $17.2 million and year-end excess cash of $30.8 million
- In January 2022, in connection with the Company’s announced $100 million share repurchase program, the Company obtained an incremental term loan in an aggregate principal amount not to exceed $50 million to its New Senior Secured Term Loan and transitioned the interest rate base from LIBOR to Adjusted Term SOFR due to regulatory requirements
- In March 2022, the Company executed a privately negotiated agreement to repurchase $22.5 million of the 2026 Senior Notes, without any additional fees or premiums, for an additional $22.5 million of borrowing under the New Senior Secured Term Loan
As of March 31, 2022, the Company had cash and cash equivalents of $152.2 million

⁽¹⁾		See “Use of Non-GAAP Information” below for information about this non-GAAP measure.
⁽²⁾		Core platform revenue is defined as revenue derived from customers utilizing our proprietary digital marketing services platform that are sold by either our direct or local market teams.
⁽³⁾		As of March 31, 2022, the First Lien Net Leverage ratio was calculated by subtracting cash on the balance sheet from the sum of both our New Senior Secured Term Loan and 6% first lien notes due November 1, 2026 (the “2026 Senior Notes”) and dividing that by Q1 2022 LTM Adjusted EBITDA. Our 6% Senior Secured Convertible Notes due 2027 are second lien as of the completion of the New Senior Secured Term Loan refinancing in October 2021.

Financial Highlights

in thousands	First Quarter 2022
Revenues	$	748,077
Net loss attributable to Gannett		(2,967	)
Adjusted EBITDA⁽⁴⁾ (non-GAAP)		64,171
Adjusted Net income attributable to Gannett⁽⁴⁾ (non-GAAP)		4,494
Cash provided by operating activities		32,429
Free cash flow⁽⁴⁾(non-GAAP)		21,665

⁽⁴⁾

Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA, Adjusted Net income attributable to Gannett, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure.

Business Outlook

Full year 2022 outlook has been updated to include the impact of acquisitions and dispositions that took place in the first quarter of 2022. The Company is maintaining its outlook for 2022, while adjusting its revenue outlook to reflect the impact of recent acquisitions. The Company’s estimates do not factor in the impact of any future acquisitions or dispositions.

	Q2’22 Outlook	FY 2022 Outlook
Revenues	$780M to $790M	$3.1B to $3.2B
Same-store total revenues⁽⁵⁾⁽⁶⁾ Year-Over-Year	(3)% to (1)%	(2)% to +1%
Net income (loss) attributable to Gannett	~$0M	$50M to $70M
Cash provided by operating activities	~$5M	$205M to $225M
Free cash flow^(5)(6)(7)(non-GAAP)	($10M) to ($5M)	$160M to $180M
Adjusted EBITDA⁽⁵⁾⁽⁶⁾ (non-GAAP)	$80M to $85M	$380M to $400M
Ending Digital-only subscribers	1.85M+	2.0M to 2.2M

⁽⁵⁾		Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA, Adjusted Net income attributable to Gannett, Same-store total revenues, and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure.
⁽⁶⁾		Refer to “Business Outlook” on Tables 11, 12 and 13 below for a reconciliation of non-GAAP outlook measures to corresponding GAAP measures.
⁽⁷⁾		Capital expenditures are assumed at $40 million to $45 million for full year 2022. Figure does not include asset disposition proceeds which we estimate will be approximately $60 million to $70 million in 2022.