Segment reporting | NOTE 13 — Segment reporting We define our reportable segments based on the way the Chief Operating Decision Maker ("CODM"), which is our Chief Executive Officer, manages the operations for purposes of allocating resources and assessing performance. Our reportable segments include the following: • Publishing is comprised of our portfolio of local, regional, national, and international newspaper publishers. The results of this segment include Advertising and marketing services revenues from local, classified, and national advertising across multiple platforms, including print, online, mobile, and tablet as well as niche publications, Circulation revenues from home delivery, digital distribution and single copy sales of our publications, and Other revenues, mainly from commercial printing, distribution arrangements, revenues from our events business, digital content syndication and affiliate revenues, and third-party newsprint sales. The Publishing reportable segment is an aggregation of two operating segments: Domestic Publishing and U.K. Publishing. • Digital Marketing Solutions is comprised of our digital marketing solutions subsidiary, ReachLocal. The results of this segment include Advertising and marketing services revenues through multiple services, including search advertising, display advertising, search optimization, social media, website development, web presence products, customer relationship management, and software-as-a-service solutions. In addition to the above operating segments, we have a Corporate and other category that includes activities not directly attributable to a specific segment. This category primarily consists of broad corporate functions, including legal, human resources, accounting, finance and marketing as well as other general business costs. In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results. The CODM uses Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett to evaluate the performance of the segments and allocate resources. Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are non-GAAP financial performance measures we believe offer a useful view of the overall operation of our businesses and may be different than similarly-titled measures used by other companies. We define 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 (expense), (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, including gains or losses on the sale of investments. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues. We define 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) Gains or losses on the sale of investments, and (9) the tax impact of the above items. Management considers Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett to be the appropriate metrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as it eliminates the effect of items which we do not believe are indicative of each segment's core operating performance. The following tables present our segment information: Three months ended September 30, 2021 In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated Advertising and marketing services - external sales $ 294,742 $ 116,771 $ 507 $ — $ 412,020 Advertising and marketing services - intersegment sales 34,042 — — (34,042) — Circulation 306,698 — 4 — 306,702 Other 80,325 — 1,138 — 81,463 Total operating revenues $ 715,807 $ 116,771 $ 1,649 $ (34,042) $ 800,185 Adjusted EBITDA (non-GAAP basis) $ 101,001 $ 15,024 $ (13,958) $ — $ 102,067 Three months ended September 30, 2020 In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated Advertising and marketing services - external sales $ 303,646 $ 100,807 $ 774 $ — $ 405,227 Advertising and marketing services - intersegment sales 25,862 — — (25,862) — Circulation 336,152 — 6 — 336,158 Other 66,566 4,636 1,952 — 73,154 Total operating revenues $ 732,226 $ 105,443 $ 2,732 $ (25,862) $ 814,539 Adjusted EBITDA (non-GAAP basis) $ 108,752 $ 4,177 $ (24,949) $ — $ 87,980 Nine months ended September 30, 2021 In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated Advertising and marketing services - external sales $ 890,665 $ 328,184 $ 1,638 $ — $ 1,220,487 Advertising and marketing services - intersegment sales 93,910 — — (93,910) — Circulation 942,392 — 6 — 942,398 Other 212,970 905 4,784 — 218,659 Total operating revenues $ 2,139,937 $ 329,089 $ 6,428 $ (93,910) $ 2,381,544 Adjusted EBITDA (non-GAAP basis) $ 317,398 $ 36,725 $ (35,822) $ — $ 318,301 Nine months ended September 30, 2020 In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated Advertising and marketing services - external sales $ 939,923 $ 306,899 $ 2,334 $ — $ 1,249,156 Advertising and marketing services - intersegment sales 85,472 — — (85,472) — Circulation 1,053,518 — 10 — 1,053,528 Other 207,355 14,388 5,796 — 227,539 Total operating revenues $ 2,286,268 $ 321,287 $ 8,140 $ (85,472) $ 2,530,223 Adjusted EBITDA (non-GAAP basis) $ 311,767 $ 14,847 $ (61,548) $ — $ 265,066 The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA and Net income (loss) attributable to Gannett margin to Adjusted EBITDA margin: Three months ended September 30, Nine months ended September 30, In thousands 2021 2020 2021 2020 Net income (loss) attributable to Gannett $ 14,687 $ (31,260) $ (112,514) $ (548,305) Provision (benefit) for income taxes 2,984 3,098 11,567 (22,200) Interest expense 34,603 58,063 109,370 173,890 Loss on early extinguishment of debt 3,761 476 25,996 1,650 Non-operating pension income (23,860) (18,334) (71,644) (54,433) Loss on convertible notes derivative — — 126,600 — Depreciation and amortization 48,107 61,355 154,452 205,706 Integration and reorganization costs 13,619 13,417 35,467 73,978 Other operating expenses 4 1,913 11,354 10,261 Asset impairments 2,301 1,585 3,134 8,444 Goodwill and intangible impairments — — — 393,446 (Gain) loss on sale or disposal of assets, net (833) 795 9,206 1,540 Share-based compensation expense 4,602 3,844 13,804 22,812 Other items 2,092 (6,972) 1,509 (1,723) Adjusted EBITDA (non-GAAP basis) $ 102,067 $ 87,980 $ 318,301 $ 265,066 Net income (loss) attributable to Gannett margin 1.8 % (3.8) % (4.7) % (21.7) % Adjusted EBITDA margin (non-GAAP basis) 12.8 % 10.8 % 13.4 % 10.5 % The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted Net income (loss) attributable to Gannett: Three months ended September 30, Nine months ended September 30, In thousands 2021 2020 2021 2020 Net income (loss) attributable to Gannett $ 14,687 $ (31,260) $ (112,514) $ (548,305) Loss on early extinguishment of debt 3,761 476 25,996 1,650 Loss on convertible notes derivative — — 126,600 — Integration and reorganization costs 13,619 13,417 35,467 73,978 Other operating expenses 4 1,913 11,354 10,261 Asset impairments 2,301 1,585 3,134 8,444 Goodwill and intangible impairments — — — 393,446 (Gain) loss on sale or disposal of assets, net (833) 795 9,206 1,540 Gain on sale of investments — (7,800) — (7,995) Subtotal 33,539 (20,874) 99,243 (66,981) Tax impact of above items (7,033) (25,449) (28,042) (61,364) Adjusted Net income (loss) attributable to $ 26,506 $ (46,323) $ 71,201 $ (128,345) |