GCI - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to the Gannett 2Q Earnings Conference Call. [Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Esposito of Investor Relations. Thank you, and over to you, sir.

Matt Esposito

Thank you. thank second joining quarter and to call everyone, Gannett's discuss XXXX morning, you our for today Good results. Officer. Doug Presenting Mike on Chief and Reed, be Financial Horne, Chairman and today's Chief Executive call will Officer;

the During this call, will discuss quarter. results Gannett's financial we for

If press website, will release. we the find in addition Gannett earnings posted an supplement to to you that navigate you have our earlier

it provides this be referencing today you quarter's additional will call it on We as on with detail performance. the

let you that please is me recorded. call begin, being we Before remind this

statement addition, this differ to required of obligation Gannett's statements may expectations. well update In current forward-looking any the the risk cautionary call We or actual cause from factors supplement or may made this events to the forward-looking respect certain encourage Except call. materially those to and events today. the the with discussed as those in that regarding undertake upon during including based These you correct no earnings be results and to statements law, made are and we statements made SEC. as are results forward-looking future involve described publicly read during be statements risks to statements, in by with filings uncertainties deemed and as

will and net income adjusted information In during Gannett. free EBITDA adjusted the be financial we discussing non-GAAP revenues, attributable addition, flow, call, including cash same-store to

comparable to most measures You non-GAAP U.S. measures can in find of reconciliations earnings the GAAP the supplement. our

to Gannett's consent. to duplicated, interest Gannett. not remind audio or Gannett of to prior rebroadcasted may solicitation Mike call an Chairman and call over would sell turn constitutes like any cast a like and would this in to offer are an CEO. Reed, offer I that I without that, you webcast copyrighted on be nothing reproduced With Lastly, The or the of to purchase material and written

Mike Reed

companies our Like environment rising across a experienced and for resulting this very good pressures many Matt, quarter, consumer. call challenging economic Thanks many we the and morning, difficult everyone. second morning. on joining Thanks, industries, the from

demand in effectively line, On future revenue consumer print pulling the years. losses weakening to subscription top print from larger-than-expected forward revenues, led expected declines

during market the the market addition, keep digitally digital circulation as under advertising hire increased our a of staffed pressure for as transformation. perspective, labor came ability we quarter. affected tight cost From our digital the routes the labor as well savvy talent cost In to

all and expectations both the year transportation back In newsprint, energy full results negatively revised QX and takes addition, into rose of our account our the things also half these and impacting guidance year. for of our the costs for

some quarter However, there meaningful in indicators progress that of our long-term are the accomplishments growth the initiatives. second continued were clear on

and saw new subscribers Our including digital a to increased strong pace, a grow subscription both in at increase revenue, ARPU. paid and slight we continued business

In digital points friction strong early we We near-term strategies. and talent our driving and growth, well. to EBITDA customer in adjusted business. reorganization addition, our marketing driving increased June realized perform announced and also revenue services strong ARPU continued structural is in that achieved The business and we right are challenges of effective business, positive parts aligning growth our more company. internal navigating we both our with for now removing in long-term expertise momentum By the believe

moved we reduction half quickly second near-term that cost XXXX, program. implement in the of Given not the significant do abate to a pressures expect to have we

reductions of variable real and of a long-term on that through past. focus hear to remain course, on and transformative beginning on Further, on and million side digital hindered our nonstrategic And assets that resource providers. attacking will in committed bring on reliance our keep performance we involve growth things highest out also the significant We're $XXX very by we estate target repay identifying structure going have our automation cost of expected additional businesses cost are market, the at steps to are year you'll is we and more believe permanent we the strategy. the and today, our costs as performance, to taking Beyond million forward. continuing to within expected print to the improve to debt the priority we to our close create the business, of to primarily and cost This focused organization, transformation base working year. an XXXX, revenue third-party $XXX debt of repayment increased the

results. to unit the our detail to of summarize turning So, business before quickly

a navigated have in the management have past. very team who waters choppy We seasoned

cost digital We as business is our which structure. are now we strategy term focus near driving the keeping taking pulling aggressive growth. on right, long-term We forward stronger we our pain our manage have more losses, the in us and and variable will steps believe a forward is while lower future with make our to move

and We for balance sheet repayment to market our are sound. assets additional debt bringing is

platform, streams. growth let's second Now quarter marketing platform, which solutions SaaS-like are for driving business. digital and BXB and key our highly by our our to X is transformation with paid categories which a content growth subscriber digital results long-term the turn is recurring business and revenue driving audience

we paid is the these year-over-year. make subscriptions, which We quarter digital of meaningful XX% XXX,XXX progress subscribers. new with continue to X.XX encouraging. million X areas, very paid added digital Quarter-over-quarter, growing net ended in We each

some Crossword in newsroom our include USA platform, segment amplify we gaming We sports our analytics expect which momentum our our fine-tune to this our our continued further of products, and and subscriber and TODAY funnel vertical. our as scale product, efficiency, content engagement optimize subscription utilize premium to see new

and and applying minimize to and data addition, In new churn. partnerships science building retention improve launching subscriber

and that positive they All of underway, these efforts we growth the see are excited are and impact on have. optimistic to

consumer newsletter of XX%, and which year-over-year. the We experienced those in a convert subscribers. and registered be for second channels subscribers, million consumers and Both forward, portion continue those quarter paid during highly to of meaningful moving million us. registered total acquisition this and goal X.X newsletter and of the growth important also We our our be quarter respectively, X.X engagement will users growth users into subscriber relationships, significant engaged subscribers. to represents ended pool with build on users And activate XX%

achieved platform solutions marketing double-digit maintained $XXX and revenues in business XX% we digital record million EBITDA of quarter, core margins. Our second the year-over-year, up adjusted

XX%. Over evergreen with count in customer in our increased core alignment highest segment new customer the of budget of our on and revenue approximately digital retention rates XX% platform is product marketing Our contracts to fourth level since its the XXXX. structured quarter solutions and recurring of

here I our everybody want away. take digital is that really in structured marketing the recurring I segment Over of to from XX% evergreen think point coming that's a contracts. and revenue key solutions

offerings today, the our DMS quarter approximately our July. premium so core through ending X,XXX our through customers. freemium expand addition over with These We XX,XXX X,XXX experience, platform users. basically customers Registered registered as to the over grown continue to month quickly of to users product registered have in of are

will many customers products. Our for with future at as this segment these rate a freemium is than to of our our paid engaged registered some customer are growth of important channels. have and convert believe businesses and platform other channel We marketing higher our that are

and High strong driven by hosted III Network in-person USA same Love attendees we across which the this Colt school endurance which XX% in largest and in featured compared business, return Davis past we Sports brand example School Gannett was experienced is events events This high One events Masters Legends XX in-person which program. our XXXX. appearances a XX,XXX quarter to hosted week, the the to sports and We Ventures. races. events by TODAY year-over-year, recognition party, Awards, quarter, of National TODAY in-person to of our growth USA revenue XX inaugural the Turning Throughout country's XX,XXX Knost. attendees quarter, second

Player sports hosts Rob resulting Stellar Our sport. of athletes recognized, XX each in within Vernon the and announcements Davis. were were Year in Gronkowski

of severely Now revenue the was felt with delivery advertising experienced macroeconomic greater-than-expected most print Both most impact losses print acutely the home our being in legacy print circulation impacted. business. and conditions

accelerated seen more that losses the delivery other XXXX. XX% that we be increasing shortages, year-over-year Our a household when routes, from in-home the And we in things. to by we consumer than have heard at delivery routes of And directly labor increase Couple anticipated. our in subscribers. percentage and have further, with clearly from and XXX% see increase a tightened we challenged continues we have circulation feedback gas budgets print this weakness pump many saw unstaffed to unstaffed compared print distribution loyal and groceries to

those we making changes to the underway, are will subscriber we changes making are and believe declines. over are improve things experience. Those we However, time, moderate the

the despite continue Our experience digital digital solutions growth subscriber businesses to and tightening economy. marketing strong

time, our to consumer operating different our with technology-enabled encountered of will long-term platform on while we believe focused BXB a solutions environments digital business time and in and subscription-like strategy and data economic remain from product digital our driving business. marketing and being be company subscription So

mentioned I team an previous management previously, have As has persevered that experienced we economic downturns. through

operating more and and organizational we believe for to our efficiency DMS U.S. execution us and our goals. the reorganization to which a achieve distinct units, drive our to allows can This and provide greater we platform with structure long-term better our key have and align a around of Gannett was This distinct marketing digital June with solutions. focus recent Our pillars. business internal us restructuring designed and businesses, centralized media X pillars business our our provides operations operating media announced strategic X from us

of and Gannett growth of Maribel News for business the news, leading USA Transformation subscription X,XXX Gannett's content, unit. the who member print was as previously Maribel industry flagship recently of and senior additionally, calling instrumental and and media solutions most Officer. qualified Wadsworth, role experience running USA local been Media the President distribution, Specifically, organizations and management Gannett includes a she TODAY operations is division, Strategy digital TODAY, Publisher serving TODAY on overseeing and USA journalists is XXX than now the business across publication focuses more such Chief news and for Gannett's uniquely business business-to-business Gannett's marketing first we're the her an lens. News this and network, has the than media, Perez as as more through team, and unit, which

marketing second local Chris Chief of overseas marketing support engineering. formerly under product well phase him of digital customer which serves restructuring this marketing digital this solutions, is and platform. the Product retain includes Barton, next business attract, Gannett's and drive to and customers makes unit businesses our equipped Officer, IQ expertise brands business. operations unit the that for services, and created including as solutions, The now Chris's President helps innovation

speed of dozens has Officer team led reorganization Officer, urgency he awards, a Chief long-term Chief is Google I'm Previously, confident since our for Gannett's innovation product business bit. transformation we products. This data the marketing the and I subscription-led and to and the drive operating technology, our consistent development led Product to receiving to Product to team, long-term structure am honors. a a with commitment consumer experience, improved customer-first XXXX, of and the Barton ReachLocal's our are and and evolution Gannett's further for industry management deliver on product our grateful of As powered technology. overcome global facing dedication for strategy. as including Microsoft disruptions and gears overseeing and by Gannett in ability the today Changing

geographies X-year to a still as buyout of Gannett fees July, structured work typical. operate agreement our in other us been slower anticipated, referral with with Tipico Tipico in new deal Tipico, gaming betting us only enables in our equity different sports During than still has to the across expansion while they parties with X warrants we The enables the agreement country states. qualified and -- restructured now providing with purchase newly included to from their

category We gaming revenue other to providers opportunities often expect increased are this exploring moving forward. see with already and sports from

Before personally highlight that me and to journalism. important trusted it's closing, our I impactful

House important X more national given local XX local journalism evident more the many than the has are of report shooting Texas One property in statesmen been public to translation polarization past the ever footage American in investigative the published along Uvalde, TODAY when Spanish very a Our the to the release native It Committee speakers. statements important Austin mass service our USA the was pieces. by is never and the than and community, days as in country. Spanish network with Austin who our released video American of tragic of

Dispatch traveled Columbus the Star the between collaboration the [DOB's] of was story second about Indianapolis The in wake Indiana the from XX-year-old to for decision a victim and Ohio abortion. an the who

a journalist impact. we the case was in horrific transparency drive details was Dispatch the a reinforce we sole its the Columbus of and of These the journalism Bethany importance and Our We drive courtroom, reporter, local fabrication. confirming that accountability, change. drive Bruner, many believed stories importantly,

communities to and the serve are We we the seeking committed and the across reporting truth country.

the Now perspective year. I'd to like on to QX and Doug call the Doug? more hand for full off

Doug Horne

Mike, and morning, you, Thank good everybody.

As the was sensitivity and a digital of in negatively and second foreign quarter a increased unfavorable a Mike print line advertising currency extent, result lesser impacted subscribers mentioned, from our our top slowdown price spend impacts. as in to

and our our were segment but revenue in X.X% the solutions For digital QX, total marketing headwinds compared segment digital in of to year-over-year steady same-store X.X% increasing X.X% compared media the year-over-year, as $XXX.X Same-store media faced print first operating the traditional a quarter. growing in trends decreased businesses. QX, to prior held from basis, year-over-year in X.X% revenues million, down quarter. On as year decrease operating revenues a

to Expenses in currency in million continued points translation QX. XX.X% in account Given impacted and from ongoing approximately acquisitions reported distribution U.K. year. $X.X greater $XXX.X down revenue. the totaled reflecting digital or landscape, the price year-over-year EBITDA the by the year-over-year. the for Total compared Newsquest basis which prior were was along the the of quarter. in in total customer XX.X% secular base. pressures. to to in basis, our shortages in strength in million, macroeconomic quarter, entity QX our X.X% the X.X% EBITDA caused The million pound, to year-over-year the $XX total up inflationary with year decline were made revenue, now environment, relative XX% by Despite print accelerated about EBITDA was as adjusted XX prior and on compared sensitivity Adjusted the digital $XXX.X the grow revenues negatively pressures by the million Adjusted were EBITDA our versus unfavorable and a print included challenging of margin $XX.X adjusted revenue our year-over-year, in million X.X% year same-store dollar recorded increased which prior revenues

of of segment. these negative impact year-over-year newsprint, $XX vast to costs, inflationary the tied resulted an and combined as we fuel, utilities, of the saw in the translates with event majority a a Specifically, which materials, impact QX, estimated in million impact increase distribution, approximately impacted million security media $XX When and year-to-date in it an to the result factors.

$XX.X we second line, of with On net and adjusted the quarter Gannett. million attributable bottom of $XX.X net million a ended loss to the loss

was Our net the as our of loss costs impacted our reorganization was XX% prior In down integration deductibility which provision interest expense. tax includes QX, from headcount $XX.X year. $XX.X million, reductions as limited to million impact the approximately of our depreciation and by is of well tied amortization the expense in negatively and and interest increasing cumulative

same-store second our in media advertising. Moving on basis. Also, year-over-year down The in accelerating year of That media in marketing monetizing growth a from X.X% on year a see million which same-store a sales local we This and Group's and prior Sports as advertising first million and segment the basis. Year-over-year, increased and basis, a digital media a of Digital quarter. decreasing basis. saw which a in primarily quarter. result increased inventory during marketing declines was continue We we XX.X% in to segment the prior X.X% media, prior was advertising experienced X.X% ecosystem, media decreased softness classified, our same-store client year digital XX.X% second in decrease services performance to driven now digital resulted as quarter which the the in and impressive experienced XX.X%, advertising the channel. X.X% marketing respectively, The the segments. on Media the productivity million, $XXX.X on third-party services a quarter. revenue over X.X% declines in services basis. to decreased national compared by print The compared as $XX.X a count of to our said, declined programmatic core advertising, reflects same-store in second the period. in revenue to in softer changes a same-store as X.X% $XX.X revenues result down market, quarter The digital digital advertising digital decline media the broader segment in digital compares policy on affiliate challenges the

copy Moving now to impacts revenues decreased home on the circulation. primarily single caused basis, delivery a Circulation XX.X% and to same-store by to compared prior year sales. our

well several as the increasing we're to by employee This coverage last labor we've an we home the contractor routes and Over months, both challenges struggle to sensitivity our which primarily from subscribers. exacerbated facing basis, maintain as shortages. pricing, delivery appropriate tied delivery seen to is are of third-party delivery of with

basis of While industry-wide XX.X% a under same-store prior compared same-store declined pressure XX.X% print basis. $XX.X which year digital-only on grew our headwinds, year-over-year from a circulation, on revenue remains circulation to the million

in revenue in were with growth second support as data on content, made to is progress solutions higher did Although pillars. the digital prices, of consecutive categories, digital-only a the representing quarter the experiencing quarter. growth. totaled top headwinds pleased our experienced prior as to and labor pressures number EBITDA marketing newsprint margin not the million, are key second segment the in as of quarter. positive well second in quarter the contract which compared which we marketing We Similar second across declines we media approximately see X.X% investments Adjusted cost represents very the margin postage, QX, XX% reflects same X.X%, of rose we including key of sequential second and the our witnessed of a in the year, and that quarter segment, growth ARPU with year-over-year, year-over-year ARPU $XX.X for

quarter digital revenue the of million, solutions segment, $XXX was marketing X.X% in a total For same-store basis. year-over-year on an increase the

year-over-year utilize increase in core XX,XXX with second and prior revenue, there of at an customers does those on versus QX count as the customer customers sales over are customers Average channel. the reflects the to The to revenue quarter in from that's product Compared number increase. solutions services the experience digital platform Looking XX% to our focus seasonality totaled marketing and DMS the ARPU year date. of prior the XX.X% digital customers, from digital quarter, in solutions proprietary $XX.X X.X% X.X% customers EBITDA accounts portfolio as marketing a active growth which platform, XXX sharpened double-digit local increased grew which in segment for second quarter. our stronger segment the well core QX, the platform that some represents the monthly by increased was segment the a margin on the XX.X% year-over-year. of year still media for marketing steady a highest historically million, period. strong to representing Adjusted XX,XXX and

Let's balance now the sheet. turn to

million in Free flow of million secured term scheduled leverage by total was which Capital approximately total debt technology of the approximately products, $XX.X on to the was every during of which first and We in basis. $XX.X payment cash total operating $XX.X lien X of second transformation interest of notes, of cash $XX.X senior loan. our with of million reflected million $XX.X the led senior of interest at related and of on ongoing expenditures was quarter end QX, $XX.X amortization sales of impacted infrastructure. $X.XX first is digital negatively approximately debt a on which included the quarter result quarter million and debt, the million the $X.XX months cash XXXX ended Our as billion investments $XX.X million, an a reflecting net balance payments, was QX, billion. during which use payable asset paydown our net resulting X.XXx,

dispositions completed quarter, During asset we million. million totaling totaling $X.X estate X sales the real completed and $X.X X

sales million for to total million project continue the $XX year. We $XX in asset to

of estate Mike the However, for shares the exploring our year quarter, the under amount of the are the for we say, increase XXX,XXX as program. dispositions of we down in repurchase heard second broader to repurchased real and debt. a In share further pay of remainder effort sale stock you of the to common $X.X asset an portfolio million

the quarter action firmly of the our the healthy is strategy share capital Our level being in operating that in environment. repurchases believe liquidity was by by deployment level overall during a face correct of the with of We maintaining disciplined today's created macroeconomic uncertainty complex governed environment.

have significant real opportunities will down We paying continue meaningful to estate to in which other further debt. and cash have on assist and still make us dispositions, asset hand

of elevated uncertainty As we range prepared in broad we outcomes. are the we mindful forward, a positioned we are economy, look but of for well confident the are and that

Turning guidance. now to

swift we that our with QX, are and earlier, investments pillars Mike and adjust As believe moving our base us of to forward. will results mentioned are our cost actions not allow level satisfied in we in taking we growth

that expect QX. actions weighted of these be naturally We towards but will will second more they benefit the half the year,

into Our benefit the these that XXXX $XXX current EBITDA on Based and trends those cost so range we actions are $XXX million year transformation full beyond. of we actively impacts, in adjusted taking million. from we're to the that will temporary to actions and our mitigate is estimating be and not nature, in anticipate

flat result range that the cash the interest free million also be in This severance are the actions same-store of performance, as be assumption to the outlook positive in year as restructuring operating are on X% with of to trends for Overall, revenue associated flow change reduction primary well now and significantly to the reduced increased of the in as period. expectations drivers X% reflects annual Media cost outlook to continued an for for down our higher the believe Despite enable inflationary legacy forecasting value We $XX our circulation costs. as will a unit this the as expectations of with digital us period digital-only specifically and line driving business cost reduced and on our creation uncertainty focus print these and well as base we our shareholders. and continued our long-term Gannett for navigate and aggressively our digital business XXXX, monetization reducing businesses DMS our that pressures. in media in exit top business specifically will well as growth our

Our supplement back forward-looking of for comparable reconciliations the it measures the at now hand to to our Mike questions, operator additional will and closing information non-GAAP and regarding posted over for quarterly GAAP then guidance measures. earnings go will to provides investors.gannett.com some website comments. Operator? U.S. most our includes we to I

Operator

Ladies turn his Over I'd and gentlemen, sir. the session, we the the to Gannett's to you, remarks. reached of like end back have to call question-and-answer and for CEO, Mike closing Reed to

Mike Reed

tremendous of ahead. to lead Gannett. environment the I It enabled is values strategy to Staying various culture, the we forward will our has environments true navigate complicated past. my know us as navigate us and honor spirit economic successfully propel through collaboration the And to in

to We downturn business they urgency our with we your a making subscription-led us and to call. expect we this that interest in and these strategy progress model, in front headwinds Gannett, capture and to balance challenging, premise will choices represents continue the our the position look and align We all robust but deliver weather in beginning progress our have next forward recognize for team solid you be long-term us. our have experienced be months and value teams you digital believe robust sheet time. already to demonstrates and the coming traction gained appreciate of today. a optimistic and plan difficult of further to value have I of we opportunity Thank solidify the macroeconomic over commitment are on joining will Most our We to updating resources feel puts earnings the our our we demand just on to the shareholders. our We validates act growth our significant we to Gannett achieved our and our the mission and strategy. importantly, on we pass. management

Operator

Ladies sir. gentlemen, and much, conference. this very you concludes Thank today's

Gannett (GCI) 6 Aug 222022 Q2 Earnings call transcript