Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to the Gannett First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Matthew Esposito, Investor Relations.

You may begin sir.

Matthew Esposito

Thank you. thank first 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

addition, this differ may expectations. In current forward-looking call or actual cause from may events respect certain materially those to and events today. discussed those that upon including based These be results and to statements are and statements made are results future involve during be risks to statements, with uncertainties deemed and

statement to required of obligation Gannett's statements well update any the the risk cautionary We factors supplement or made this to the forward-looking encourage Except call. the the with as in regarding undertake during you correct no earnings law, made we SEC. as forward-looking described publicly read statements in by filings as

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

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

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

Gannett's CEO. turn like over the would to Mike I Chairman Reed, call that, to and With

Michael Reed

for Matt. call first joining this morning. Thanks, earnings everyone quarter Thanks our

us. entering quarter the QX, great comparisons down And EBITDA most our fourth quarter XX% in to start. We challenging is the to down to year in X% first that to XXXX was compared of year Adjusted the behind after prior only report prior a we off XXXX. believe are are pleased being

currency, to of was year. the flat EBITDA adjusted Excluding actually impact prior foreign the

revenue Our expect and improved continue this quarter. in first quarter same-store the into trends the trend we also second to sequentially

the $XX.X by That Net income $XX.X compares in from to the million. quarter year loss of million to first a grew million the year. of quarter prior net in $X last first

cost expect As EBITDA more year-over-year we revenue growth cycle our capture earnings XXXX see and improving we call, to as our forecasted adjusted in management last trends, in the benefits achieve initiatives, comparisons. favorable from

our gives of quarter the trajectory that we flow. cash the it with in confidence the us net income our full are we the concisely, inflection to put To XXXX year point adjusted this performance And respect in solid free increase of an and outlook first to EBITDA, at believe year company.

as this this of hear morning most throughout to You'll right regard call nicely moving we our measures. are in with the the direction financial

actions to in our believe We the of company success. long-term better first the the results for in position half demonstrate later the put of we in effectiveness XXXX quarter place the

efforts, And these in growth anticipated savings least in highly resulting structure million in $XXX our digital our from of We efficiently businesses. recurring XXXX. for continued anticipated established are have operating more foundation solid changes annualized a organizational at

as reduced repayment improve structure. capital to the our the to debt We also first quarter of strategy the million in remain well in our committed aggressive continues leverage and repayment evidenced which by $XX debt quarter, our

XXXX. we and able generate streams revenue cost will growth digital significant believe EBITDA pressures year-over-year adjusted cash comes to be our we structure ease, our free inflationary grow, As flow to in continue down and

digital-only approach quarter. major in the balanced quarter and between last February, we a I'd earnings highlights like When growing of spoke first outlined that, call fourth more subscriptions. the we on paid increasing With discuss profitability to our

continue to growth. paid subscriptions pursue will We digital

However, increased an ARPU. focus we on profitability more our become and with targeted in strategy acquisition subscription have

the was reflects expectations the volume balance year-over-year as digital-only as ads unchanged refocusing paid from in product we first volume and of quarter improving our focus in This digital-only in increased this remained subscription the with anticipated quarter. net efficiency line pricing the versus and we quarter refined lower and marketing relatively subscriptions fourth our XX% Our on first first profitability. strategies. quarter, In

We in quarter. the anticipate second continue to this

as QX and do with our we QX we an a growth year-over-year our same-store and throughout year. in XX% expect this this increase we revenues in expect to However, had volumes into of strong shift focus, the in year. subscription the to of Even growth continue digital-only on basis circulation see acquisition move quarter our first

medium the significant given long-term, opportunity over our base digital-only to organic a audience. have grow that believe We and large our we subscriber

attack the in For investments context, first digital to had current to and improve platform. market making are believe our a XXX expand our market this audiences offerings addressable million visitors. the We monthly to to that very visit our during our and penetration for us quarter, further we we average unique significant further of infrastructure continue have sizable

content creation, have and and importantly, set marketing we and of Investments collection and in our enhancement, analysis. market, pricing subscribers. this this newsletter and registered product area data an and improvements, product Within most the engaged include regard strategy, addressable to product driver consumers across active users content, significant with Data growth strategy, content our for our our strategies. significant remains

and alone, of we year-over-year. the XX% had registered the X.X first U.S. users, quarter, the million at end that grew In

X.X were registered We had of growing subscribers, also of those yet XX% year-over-year, million users. newsletter million which not X.X

subscribers XX basis. yet user to regular expect we nearly numbers to continue we a million grow. And on are with these not are that interacting registered that's who engaged So consumers

convert users build into highly is to relationships, activate goal Our of this of on those users and those engaged subscribers. pool a portion

Now gears switching bit. a

big audience beyond in of subscriptions large content advertising. our is this of further One opportunities beyond monetization growth this platform and

order growth leverage in of key focus ours this announced, partnerships to opportunity. previously As are a

financial partnerships to plans we have gambling partnerships to establish the previously sectors, covering education. services addition home services additional as sectors the such In announced big and sports in and

us will the content of expand to overall more area much allow We'll these in anticipate over and addressable in well We platform. have our increase total pipeline to much as partnerships the of monetization come business our and announce more this few the our others market to as next quarters.

of Kristin architected fuel creating journalism. and recently engineered to changes are needed our and create previous most investment growth excited joining categories business Kristin her Chief roles, has content, We the to Gannett strategic audience Chief X quality Officer. and McClatchy. for high tactical over new also brings the Content as In about to Roberts decades experience Kristin role, of as Officer Content sustain

consumers, a strategy agile USA leveraging a data with has newsrooms record that NETWORK. her and TODAY TODAY for both help the and local growth our strategy our focus digital our USA that Kristin transformation ensuring science be creating and across expertise track will digital at our proven Gannett's deliver drives will on audience interactions energized we our Her journalism and content content levels. national to drive model and monetizing dynamic refine content breadth of are

of audience. expand further efforts opportunities to to significant additional All to lead are our monetize and these expected

contributions the are to we We towards on forward and thrilled Kristin team to driving her really our transformation. have look

X% core grew revenues ARPU increasing business. and EBITDA We Digital year-over-year, $XXX.X maintaining Solutions retention the achieved both quarter well. year-over-year of margins. in adjusted million turning of while first budget Now, to platform approximately as Marketing strong our XXXX,

to surpassing our our experience, continue through We users quarter. offerings expand DMS to freemium which in the DMS our first product contributed registered XXX,XXX

addition at by users doubling the end Our as fourth registered from our XX,XXX to the core growth user registered are freemium XX,XXX demonstrated count in continues platform nearly to quarter. nearly These show customers impressive of customers. registered

customer expect or online monetize to segment provides introduce this start freemium and we as move interested and of engaged to Our to more businesses ARPU an business products we low do-it-yourself forward. buy base meaningfully

business continue We optimistic the DMS about growth remain its very and to potential.

many has it a in similarities to and high First, model generates this that subscription retention. SaaS or client revenue business

historically digital are of million strategy the their product. are of generate that revenue businesses over businesses have own There and leads. business, and grow to retained small SaaS and those We importantly, manage increasingly XX subscription dependent XX% to U.S. customer to in on a or a comparable

our presence. an optimize complex optimizing with while and across businesses increasingly optimizing digital that platform establish our digital spend partners these their assist marketing ecosystem their digital with business serve online them their We We lead helps process. management

in the Finally, knowledge communities of given have which we our business lower operate, CAC. believe and a with small a the reaching that we we sized successfully segment involvement longstanding and advantage overall at medium true

can for second, early to tremendous globally AI innovatively of and is Gannett topic our very a help content of our and industry. AI a a in that about in talk the risks being while AI, potential hot shows course, effectively development, in-depth while using has still well. our leader business, produce. terms maintaining generative Generative and but, only journalists improve committed stages us unparalleled Let's in to unique in as

We continue the AI, but possibilities and have Gannett. implemented cases at to use here seen explore already of

where weather can to on allowing listings. we quality, as content is generative services. effectively to while content and we journalists event utilizing our non-commoditize at one such creating more basic most, can that Looking content, area high focus stands commoditized benefit our value-added AI, out By and provide audience

balance areas vast, that experience improve of further in decisions pages. improve national such The and We technology, provide and experiences. such are And is efficiencies customer leverage AI recommendations content experience personalized of product local journalists to and Gannett AI more allow we known page curated premium content by can to pricing rich and applications leveraging business all help on for. strategies the improve can and create the as as can content content, in or our the the areas responsibly AI our quicken that

to our reiterate key to solid It had our and us the financial few was across guidance our several quarter turning confidence before categories. enables with raise important over business. trends noticeable to a I Doug, broad spectrum We a in Now encouraging improvement very of in points. call very first want a

revenue we the remain this greater for execute digital the year. We on meaningfully and transformation lower year And free cost our grow With ability declining EBITDA debt leverage, to positioned reach over we inflection our the coming in positioned year. prior we confident company, improving and enhancement portion a significant and while our revenue to flow towards same-store value from well adjusted to well the our in of trends are significantly are of end delever cash shareholders. structure, we believe resulting with point next lower

detail to call XXXX XXXX on our increase first additional our to to as well guidance. now full year to color around Doug Doug? as details the over the the like I'd provide turn and quarter

Douglas Horne

and morning, Thank you, Mike, good everybody.

revenue, around progress are the year-over-year the stable impacts comparisons mentioned, currency, relatively excited Mike more Last remained beginning EBITDA year's Adjusted the negative in we we trends of second significant despite quarter. in by the challenging XXXX. first quarter inflationary made As facing the most and became all year. of

points execution also adjusted the EBITDA in adjusted in stabilization our improved the sustained EBITDA cost well our our We of management XX margin initiatives year-over-year. as strategy. of by basis as execution reflects The successful QX

throughout optimistic in about ongoing continue trends, to QX. the and anticipate will we which We most QX year, are notably improve the

puts EBITDA a We growth us for to XXXX. believe adjusted in year-over-year position achieve this favorable

of QX, XXX-basis same-store decrease of XXXX. trend from or as XX.X% expect basis. for fourth total And we the a For in year. revenue represents of same-store year improvement balance quarter point operating and This to the quarter, prior to on year-over-year the continue million, compared X.X% this the revenues decreases $XXX.X a were improvement the XX.X%

quarter. was down in million captured in $XX.X savings of the from year-over-year. almost X.X% slight X% quarter million of XX% impact XXXX EBITDA driven management with the prior to decrease year-over-year margin totaled to foreign related was cost to by compared initiatives EBITDA $X.X from margin first these rates. The initiatives adjusted the adjusted The expenses exclusively a the improvement EBITDA X.X% to or of our Adjusted approximately in exchange

This of the inflationary impacts pressures. lingering is despite

While on XXXX. still we through in peaked believe first was of costs XXXX these a the impact the quarter flow year-over-year meaningful late in basis

net with bottom income. attributable million $X.X line, net to million Gannett in first of quarter we adjusted ended and On the the income $XX.X

gain income $XX.X tax a the assets real other on represents [Audio a and estate and net sale Our Gap] of benefit. million

We $XX by being continue in the remain expected to provision to line a of tax with offset with in tax benefit second to the in the first XXXX. our expect expected half original of the X tax an of full million year provision half year guidance

XXXX basis. and basis year-over-year. started same-store in XXXX a revenues quarter, million which digital decreased Digital of continued were QX in In X.X% a for Total QX revenues digital softness $XXX.X advertising XX% was our in down mid in same-store QX accounted of on total our of first the revenues. down due digital year-over-year total on to revenues XX.X%

primarily was as advertising The digital the decrease in year prior compared driven to monetization period. lower rates by revenue

We This and through our to midway than us digital XX% projection XXXX begin to impact will our more of this expect return of revenues help reach digital second of to total the cycle quarter long-term accounting revenue growth. total revenue. for

in growth. our revenues digital-only provide circulation basis, increased On Solutions Digital to year is prior the future continue The our over performance million expected circulation Marketing to XX% for digital-only nearly the of foundation same-store businesses $XX.X a and period.

continued and the ahead, expect year trends declines. we more focus year prior revenue reflecting in rise advertising As through of secular profitable our compared look as subscribers. the on the gradually acquisition Print to to customer same-store a a we despite efforts stabilization decreased we to continue basis, improvement the ARPU rest on XX.X%

advertising There basis to in has points an We of over basis obituaries sequential some on XXXX. with includes improvement trends print QX been which market, compared did softness and a the in XXX classifieds a listings. increase employment experience of significant

the have stages, we verticals, both increase those led average the we the base. has across self-service volume order that to as size to in implemented expanded initial as and in However, order self-service well are an an and order both of pleased customer report functionality capabilities

circulation print [Technical in Results Difficulty]

Operator

Hold moment please. me one please. a moment for Excuse

Michael Reed

we the I here. also the XXXX improve Doug am pick in seen QX subscriber to a compared sequential as going a improvement up to experience. to print Results have result actions of of circulation implemented for

the our helped a routes from addressing that's XXXX, open in to the of results seen X% decrease the of and lot. distribution first and the investments see to challenges, situation successfully route started percentage have open we've us quarter in We of delivery XX%

a to to our balance flow, of course, digital This us remains a important -- of has stress it. to cash it source repaying us allows enables long which believe improve still our strong invest in tail It's that cash and traditional sheet we by opportunities. flow print to debt, the growth business

print possible we We efforts as and effectively and -- focusing churn are are print our reduce with tail to subscribers. our the managing have increased as

markets for local is in a our XXXX. us Revitalizing objective key

our serve her viewers to are remain will working every Chief readers, Kristin the teams Gannett investing independent communities put new sustainable and that Content model brands forefront is journalism. to team Officer, at are and business Our decision. listeners we part and recognize Kristin a ensure maintaining success, This for We our content of vital to and team. our the local in our customers, we thrilled we to as vital local have the while of that

In our basis. million, was decreased segment was a a first approximately quarter increase business, of on X.X%. the EBITDA margin XX.X% year-over-year quarter. of $XXX.X first Average Solutions Adjusted same-store the million, in total Digital X.X% the for $XX.X count revenue customer in representing Marketing monthly an by

the versus almost prior grew year. X% ARPU However,

due of to our customer In in QX QX count in XX,XXX terms inherent from of the customers quarter-over-quarter base. results, XX,XXX decreased customer to slightly seasonality

along the seasonality freemium the products at with development and additional believe our continued we on the business. mitigate of especially However, market with increase effect will model, and execution, of features the in least addressable part, DMS our

it I'll to Doug over sheet. Doug? the to turn balance cover now back

Douglas Horne

Thank apologies the you, Mike issues. for technical

first the the billion. of translating end at we in included cost balance severance debt associated of our management and flow usage restructuring approximately $X.XX largely had a million cash million net quarter, In the quarter, million, $X.X So to program. with and was first $XX.X costs, cash $XX.X of free

of anticipate anticipate pension expenses related costs. million XXXX, our the we we now improvement we as such $XX our highlighted flow, in significant year year-over-year and are to of flow than and more free in free $XXX reorganization for results, a of cash of In our cash targeting QX of XXXX cash we full a $XX to QX reduction In light obligations million million that XXXX.

We approximately ended $X.XX with the first billion debt. of total quarter

million of to decreased quarter. reflecting X.XXx, the debt net in lien paydown leverage first $XX.X Our first total

we for approximately senior million. of During $X.X quarter, repurchased our million XXXX the notes first $X

million sales repaid $XX.X term payment our loan totaling million. $XX.X and of $XX.X million quarterly asset other through We also estate and real of our amortization

X In totaling asset QX, we sales $XX.X estate other and completed real million.

project $XX year we asset to the full including XXXX, of million in sales, estate to million the first $XX and in For other those we completed real continue quarter.

a debt maintain sales paydown contribute real million, to approximately our pipeline flow estate to expected continue sizable million of We $XX free to aggressive combined cash with our will meaningfully $XX strategy. which improvement

guidance and we in net release leverage. our total guidance, reiterating today's same-store earnings as are prior with described lien revenues to to respect first now revenues, Moving

cash as adjusted full first flow both are million by of EBITDA free our for quarter the We increasing and results. outlook XXXX result year a $X

now year more between expected to to XX%. of year-over-year adjusted growth million, million our -- over We be most declines EBITDA of cost which revenue QX the is the to $XXX significant significant management QX expect the $XXX and This of in translates ramping due full of cycling growth initiatives. to expected and XXXX

now to is of Free in million million. the be to cash expected $XX flow range $XXX

We year attributable income Gannett $X and cash net also operating by full raised activities provided million. outlook XXXX both for our to by

For of million net income we of be to net of is operating $XX to $XXX expected range activities expect from while attributable by cash to million million, a net in $XXX full provided the $XX loss to the income range million. Gannett to year,

progress pleased day-to-day base Just overall our to our recap, well our of with strategic I our as our to reduce QX ability cost performance, initiatives, execution. am the extremely effectively as

free our I EBITDA as the for XXXX. believe in second as well and half flow QX we positioned As a adjusted in result, well of growth are cash very

to for thoughts. operator questions, and for the back it hand can to then go closing now some I'll Mike over we

Operator

from Barclays. Bahlman with Courtney Our Instructions] question [Operator comes first

Courtney Bahlman

but on color miss color any and to of that give of cadence ties about could results. kind asset would a guys how bit sales I debt think hopefully little how the the on Congrats great? I you the we should this, remaining assets, didn't paydown of be

Michael Reed

Thanks. this Courtney, Mike. Yes, is

So to million remaining normal quarter. $XX.X bit of in paydown, have the with will straightforward, $XX amortization regard sales debt more, obviously million $XX quarterly the we be And then little lumpy. that's our a million asset to

there. sized a couple decent in there's, ones of So

for real of but I transactions, repayment sizable of the quarter, and XX.XX. So, of the into on factored lumpy, that most couple to year, because our regular amor for fourth $XXX-plus now so really complete would between quarterly straightforward forecast debt overall hope little we that, million and we a say estate the a of

Operator

comes question from next Our with Doug Research. Arthur Huber

Douglas Arthur

be here, because -- -- to I -- slowing on I to know goal digital with got mind. to your going jump call. from like brief sort of about more approach you balance I'm the the But the a it looks growth of down What talked actually subscription of in in like subscribers fourth another is digital it expectation That of quarter subscribers. year? profitable of for dropped the the number volume sequentially, in terms number for sort -- maximize looks

Michael Reed

Doug, actually it a much so of not was X,XXX drop.

the think in of XXXX XXXX. was first quarter it end at the I we're

are paying, with We better better as I focused on subscribers, higher profitability retention, said, and higher our ARPU therefore, retention. on

in the on them, we're having right the getting and and right in then pricing So, right right place. strategies the front the marketing focused personalization curation, of content

and So and more much playing QX things a QX with expect see in QX. in few growth and we're significant to here QX

to guidance volume a that -- be over more We haven't the next about feel on subscriber success we'd -- few guiding little number. And yet. to comfortable better that we I'd any see with like a the to provided months say

from grow well. undertaking return of But confident in the growth to seeing increase that and paid something a to we're subscriber efforts XX%, to of in able as ARPU we to the be growth digital current to perspective we're per feel very revenue to subscribers return that profitability higher

on So I that, more quarters much think there's to over come definitely next the couple Doug.

Douglas Arthur

the -- mean subscribers, I theory, among probably hopefully, better seeing, existing because... you're in so Okay. stickiness

Michael Reed

We are.

Douglas Arthur

ferreting of ones. churn You're the high out sort

Michael Reed

Yes, that's accurate.

Operator

go like are comments. There turn Reed, for to I Please ahead. sir, would Mike to questions this the closing back over no at time. further CEO floor

Michael Reed

pleased thank made progress this the we I'd to first morning like how we quarter. Yes, significant are close the by with you. reiterating in

First a quarter we results to had and were that. than were glad bit better little see anticipated, we

over income with previous a prior revenue net to in decline the in the improving adjusted growth quarters. and significant compared along prior over the trends flat reversing year, trends saw essentially X year, EBITDA We same-store seen

in We we in and decline progress reducing net saw continued also good debt, the our leverage quarter. made

goes We expect on. to of all of these that see things a year more lot as the

We and are guidance increasing our able are guidance adjusted to net year year full cash very flow. pleased for revenue income, with our along we EBITDA full reiterate that

we XXXX about as We see flow revenue as our improvement trends EBITDA versus expect the XXXX. revenue in inflection see achieving million growth to prior significant towards progresses, focused adjusted XXXX we of Further, free well end continued remain this growth in and point as $XXX to the on cash year. in expect year

EBITDA adjusted continued our as Xx in we growth combined aggressive our firstly end net with With debt below be expect to leverage we this repayment, year.

content year, very only org our half changes but better the leveraging focus org that audience well. and with the platform our our this are around our back trends, With digital in about will improvement on our of growth, structure and revenue, audience we improving digital in combined as and significant optimistic XXXX revenue to strategy and grow our partnerships the continued not our to revenue subscriber on strategic monetize in

our So revenue same-store as leverage, to with and a structure significant cost good we trends, move to lower shareholders are well we value low liquidity, return forward. improving positioned very

for at on forward Thank the you. to of the and updating us Thanks again end second joining the we today, look call you quarter.

Operator

teleconference. today's concludes This

disconnect Thank this your at for time. lines your you may participation. You

Gannett (GCI) 4 May 232023 Q1 Earnings call transcript