Gannett Co., Inc.
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Gannett Fourth Quarter and Full Year 2020 Earnings Conference Call. I would like to hand the conference over to your speaker today, Ashley Higgins of Investor Relations. Please go ahead.

[Ashley Higgins:]

Thank you, Mary. Good morning, everyone and thank you for joining our call today to discuss Gannett’s fourth quarter 2020 results. Presenting on today’s call will be Mike Reed, Chairman and Chief Executive Officer and Doug Horne, Chief Financial Officer. During this call, we will discuss Gannett’s financial results for the quarter. If you navigate to the Gannett website, you will find that we have posted an earnings supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter’s performance.

[Mike Reed:]

Thanks, Ashley. Good morning, everyone. Thanks for joining our call this morning. We are pleased to share with you today the details of our strong fourth quarter performance, our improved capital structure, including a significantly lower cost of debt, and importantly, how we expect to build upon our momentum in 2021 and beyond. We are exiting 2020 having achieved meaningful progress across all aspects of our business. We are seeing improving trends and we are pivoting from a primary focus on integration in debt reduction toward our long-term subscription led digital growth strategy. Looking at the results of our fourth quarter, our revenue trends improved 330 basis points sequentially from the third quarter driven by the continued rebound of our advertising and marketing service products, both digital and print. On the circulation side, single-copy sales remain challenged. However, our subscription revenue trends remained consistent with the third quarter. As we have discussed on prior calls, we are highly focused on continuing to grow our digital-only paid subscriptions, which are now totaling over 1.1 million. Our continued strong execution on capital – on capturing the synergies as well as additional cost reduction efforts in response to the pandemic led to expenses decreasing 20.4% to prior year during the fourth quarter. As a result, we achieved adjusted EBITDA of $148.8 million in the fourth quarter, which represents year-over-year same-store growth of 5.4% on a combined company basis.

[Doug Horne:]

Thank you, Mike and good morning everyone. As Mike mentioned in his opening remarks during the fourth quarter, we saw significant trend improvements across our businesses. We are exiting the year with strong momentum and entering 2021 with a strong balance sheet, a materially lower cost structure and more opportunity to drive financial performance and shareholder value over time. For Q4, total operating revenues were $875.4 million, up 25.2% as compared to the prior year quarter as a result of the acquisition of Legacy Gannett in Q4 of 2019. On a same-store pro forma basis, operating revenues were down 16.3% as compared with the prior quarter due to the unfavorable impacts from the pandemic and continued secular trends. However, this trend compares favorably to the down 19.6% we experienced in Q3 of 2020. Adjusted EBITDA totaled $148.8 million in the quarter, which is up $7.6 million or 5.4% year-over-year. This performance reflects the impact of improved revenue trends as well as cost reductions and synergy savings. The adjusted EBITDA margin in the quarter was 17%, a significant increase over our third quarter margin of 10.8%. In the fourth quarter, our expenses were lower by 20.4% on a pro forma basis, reflecting ongoing expense measures taken in response to the pandemic as well as continued synergies from integration initiatives as well as regular way cost reductions. Now, moving on to our segments, the Publishing segment revenue in the fourth quarter was $794.2 million. Within that total, print advertising revenue decreased 26.9% compared to the prior year on a same-store pro forma basis, reflecting continued secular pressures as well as the disruption from the pandemic. However, we were very pleased to see that we have 400 basis points of trend improvement from the third quarter to the fourth quarter. Digital advertising and marketing services revenues decreased 2% on a same-store pro forma basis driven by the disruption from the pandemic. This is over 11 points of improvement compared to the third quarter trends, reflecting improved demand for digital display advertising and digital marketing services products. Digital advertising and marketing services returned to year-over-year growth in December and improvement in the quarter was largely as a result of national digital growing 29% year-over-year on a pro forma basis. Circulation revenues decreased 13.6% compared to the prior year on a same-store pro forma basis, which reflects the ongoing pressure of the pandemic on single-copy sales during the quarter, which remain negatively impacted as a result of lower travel and consumer activity. Home delivery circulation trends remain consistent with Q3 trends. And similar to prior quarters, we did not see a negative impact on home delivery as a result of the pandemic. Cade digital-only subscribers grew 29% year-over-year to 1.1 million subscriptions. Digital-only circulation revenue grew 46% on a pro forma basis as compared with the prior year. Adjusted EBITDA for the publishing segment totaled $147.4 million, representing a margin of 18.6% in the fourth quarter, which compares favorably to the 14.9% margin we saw in Q3.

[Operator:]