Gannett Co., Inc.

Greetings. Welcome to the Gannett 1Q earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Tricia Gosser. Ms. Gosser, you may begin.

Thank you, Alex. Good morning, everyone, and thank you for joining our call today to discuss Gannett's first quarter 2021 results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer, and Doug Horn, 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. Before we begin, please let me remind you that this call is being recorded. In addition, statements made during this call with respect to future results and events are forward-looking statements that are based upon current expectations. Actual results and events could differ materially from those discussed today. We encourage you to read the forward-looking statements disclaimer in the presentation as well as the risk factors described in Gannett's filing made with the SEC. In addition, we will be discussing some non-GAAP financial information during the call today. You can find reconciliations of our non-GAAP measures to the most comparable GAAP measures in the earnings supplement. Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in Gannett. The website and audio cast are copyrighted material of Gannett. They may not be duplicated, reproduced, or rebroadcasted without our consent. With that, I would like to turn the call over to Mike Reed, Gannett's chairman and CEO.

Thanks, Tricia. Good morning, everyone. Thanks for joining us this morning on our earnings call. I'm very pleased to report that our first quarter earnings highlights results and operations witness or show significant progress against our stated strategy in almost all respects. First quarter financial results were ahead of internal expectations, showing continued year-over-year growth in adjusted EBITDA. And after normalizing for some structural changes in our year-over-year comparisons, We also produced sequential improvement from Q4 to Q1 in same-store revenue and adjusted EBITDA trends. We're pleased to see that. March was our best month of the quarter, and we anticipate continued sequential trend improvement in Q2 as we start to cycle the largest impacts of the COVID-19 pandemic in 2020. We expect to post year-over-year total revenue growth of low to mid-single digits in the second quarter, along with more than 30% adjusted EBITDA growth in the second quarter. And that is expected to lead to significant adjusted EBITDA growth for full year 2021 as compared to 2020. And we've mentioned that on our last couple calls, and we're a little bit ahead of pace so far on our internal targets. Within the quarter, we also continue to improve the capital structure of the company, And we significantly lowered the cost of debt in the first quarter. For those that have been following the company for a while now, you know we refinanced our 11.5% term loan B with a LIBOR plus 700 term loan B during the quarter. And we also got shareholder approval for our converts issuance, which we did in the Q4 time period, and that was approved at the end of February 2020. In the first quarter, and the converts have a rate of 6%. So we have lowered our overall cost of capital from 11.5% to about 7.17%. Last point I'll make on our financial statements, and then Doug, of course, will go through them in much more detail. We're showing a loss of $142.3 million on our income statement, and you need to put that in perspective given the financing moves that we made in the first quarter, which significantly lower our cash outflows. That's part of the converts deal before shareholders approve it. Accounting rules require changes in the value of converts to be marked to market and run through the income statement because our share price went up significantly from the beginning of the year to the shareholder approval date. we had to take a non-cash charge of $126.6 million on the income statement. Now that shareholders have approved that deal, we won't have mark-to-market changes running through the income statement any longer. Also, in order to get the refinancing done, we incurred $19.4 million of non-cash charges related to the extinguishment of debt. And in order to get all those deals done, we incurred $10.2 million in non-cash associated with those transactions. If you take those three charges into account, your net loss actually goes from 142.3 million to a net gain before taxes of 13.9 million, so a net gain of 13.9 million. Thought that was worth noting for shareholders since that net loss is such a big headline number. Now, turning to operations, Our digital subscribers surpassed 1.2 million in the quarter. That was fantastic. And then, again, it outperformed our internal expectations. We grew over 37% versus the prior year, and we had our single largest quarter for new paid digital subscribers, adding over 120,000. Further, our digital-only circulation revenue grew by more than 45% year over year. Overall, in Q1, our digital revenues accounted for approximately 30% of total revenue, and print advertising was less than 25% of total revenue, making real progress towards our goal of being a digital technology company combined with having revenue streams primarily made up of subscription revenues. We are pleased with our execution on synergies as well, going back to the acquisition of Gannett in November of 2019. We've implemented a cumulative $300 million of annualized synergies now as of the end of the first quarter of this year, well ahead of our original goal of $300 million by the end of 2021. And we are confident in our ability to implement additional synergies by the end of 2021, resulting in a total of approximately $325 million or more of annualized synergies. When we spoke last on our Q4 earnings call in February, we outlined our commitment to a subscription-led digital business strategy that drives audience growth and engagement by delivering deeper content experiences to our consumers and while offering the products and marketing expertise our advertisers desire. We delineated five key pillars to our strategy, and I'd like to spend a few minutes updating you on the progress of each of those during the first quarter. Our first pillar is accelerating digital subscriber growth. As I mentioned, digital-only subscriptions surpassed 1.2 million in the quarter, up 37% year-over-year, And importantly, we delivered our largest quarter-over-quarter growth as a combined company with 120,000 net new subscribers. Our markets responded well to new and more consistent subscription offers and enhanced high-performing and localized creative, as well as the marketing of highly valued and unique content. We anticipate that new subscription and product launches in the coming months will accelerate this growth on our path to reach a target of 10 million paid digital-only subscriptions in the next five years. The second pillar is driving digital marketing services growth by engaging more clients in a recurring revenue relationship and aggressively expanding our digital marketing services business into our local markets, both domestically and internationally. We continue to see progress with our local IQ digital marketing platform. The platform enables subscription-like opportunities through our core product set, which we expect to drive higher recurring revenue, more stable billing cycles, improved client retention, and stronger marketing performance for our clients. Our core sales team continued with year-over-year growth in revenue, returning to double-digit growth in the quarter and achieving the highest productivity metrics since 2016. The significant growth and record productivity that our team drove in Q1 is a prime example of the superior results we believe we can drive for all local businesses worldwide. The third pillar is optimizing our traditional businesses across print subscriptions and print advertising. We continue to drive the profitability of our traditional print operations through economies of scale, process improvements, and optimizations. This includes maximizing the lifetime value of our print subscribers through newly implemented retention and loyalty programs and expanding on the content we know our subscribers value most. Our print subscriber base has been quite stable over the past year, and while we do not expect print subscriptions to grow over time, we are highly focused on retaining our current subscriber base. The fourth pillar is prioritizing investments into growth businesses that have significant potential and support for our vision. By leveraging our unique footprint, trusted brands, and media reach, we identify, test, and invest in opportunities for growth. We've highlighted a couple examples in the last quarter, and we have a couple new great examples to talk about this quarter. But going back to last quarter, we highlighted our USA Today Network Ventures, which is our events and promotions business. We've built this and continue to invest in it. We're slowly returning to live events. We had a few in the first quarter. And while our events and ventures revenue and activity was lighter than typical during the first quarter, it reflects an intentional delay of several events until later in the year when in-person events are anticipated to be more widely allowed and widely accepted. But I mentioned we have a couple new areas to talk about that we're particularly excited about. They could represent very significant opportunities for us. The first is in the sports gaming sector, and we're exploring a sports gaming partnership that we actually expect to announce in this second quarter, so very soon. Online gaming is a sector that is poised to grow substantially in the U.S. over the next five to ten years. as it continues to legalize across the country at the state level. We believe we are well positioned to grow our business in tandem with this sector by leveraging our unparalleled ability to reach consumers at both the local and national level in the U.S. with deep community reach, content, and brands. Our sports readers are some of the most engaged audiences And with our large network of dedicated and well-known sports journalists, we believe we offer access in local perspectives that many of our national counterparts cannot. And we plan to capitalize on that through a unique partnership. The second area we are exploring is leveraging our massive media archive to create non-fungible tokens or NFTs. One of our most important assets is our content. We are excited about the NFT market because we believe it creates several new opportunities for Gannett. First, it presents a new way for consumers to enjoy and experience Gannett's award-winning coverage of historical events, monumental moments, and areas of passion or special interests such as sports, current events, the arts, and pop culture. Second, it presents a new business opportunity for Gannett as we see how this space continues to develop and how our incredible archives could be monetized in new marketplaces. We are excited about this opportunity and we'll be launching our first NFT in the upcoming weeks. Finally, pillar number five, we are committed to building upon our inclusive and diverse culture to center around meaningful purpose, individual growth, and customer focus. Inclusion, diversity, and equity are core pillars of our organization. We have previously shared our inclusion goals for 2025, and we just published our first workforce diversity report in March, outlining the steps we're taking to reach those goals. During the quarter, we were also recognized for two awards that we are proud of. First, for the fourth year in a row, we received a score of 100 on the Human Rights Campaign Foundation's Corporate Equality Index. And for the second year in a row, Gannett has been recognized as one of America's best employers for diversity by Forbes. Gannett is highly intent and focused on becoming a more inclusive, diverse, and equitable workplace And while we still have work to do, we are very proud to be recognized for the steps we are taking to get there. With that, I'll turn it over to Doug for a more detailed discussion on our financial performance for the first quarter. Doug?