Gannett Co., Inc.

Greetings and welcome to the Gannett Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Esposito. Thank you, Mr. Esposito. You may begin.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss Gannett's fourth quarter 2022 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, certain statements made during this call are or may be deemed to be forward-looking statements. including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement, as well as the risk factors described in Gannett's filings made with the SEC. Except as required by law, We undertake no obligation to publicly update or correct any of the following looking statements made during this call. In addition, we will be discussing non-GAAP financial information during the call, including same store revenues, free cash flow, adjusted EBITDA, adjusted EBITDA margin, and adjusted net income attributable to Gannett. You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earning 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 webcast and audiocast are copyrighted material of Gannett and may not be duplicated, reproduced, or rebroadcasted without prior written consent. With that, I would like to turn the call over to Mike Reed and that's Chairman and CEO.

Thanks, Matt. Good morning, everyone. Thanks for taking the time this morning to join us on our call. We are entering 2023 with a lot of optimism, and you'll hear that throughout the call today. Adjusted EBITDA in the fourth quarter increased substantially over the third quarter, and we believe sets us up for adjusted EBITDA growth in 2023 of approximately 10% to 15%. year over year. We'll walk through the details later, but we expect significant free cash flow growth in 2023 as well. We're seeing improving revenue trends early in Q1, and we've announced a few exciting new partnerships that drive immediate revenue opportunities that are also very high margin deals. We've paid down significant debt in 2022, And we expect to repay at least another $120 million of debt in 2023. And we expect at the end of 2023, our first lien net debt will be less than two times EBITDA. And our digital businesses are showing consistent growth. Of course, we're happy to turn the page on 2022. It was a tough year. But we are excited about the momentum that we are carrying into 2023. 2022 was a year of unanticipated volatility and, of course, high inflation. Despite these challenges, we made great strides with the business. We focused on what we could control, providing unique and relevant content to our readers, helping local businesses find, convert, and keep customers, as well as taking the necessary actions to significantly lower our cost structure. As a result, fourth quarter adjusted EBITDA grew nearly 40 million over the third quarter. Digital-only subscription revenue grew nearly 30% year over year, and we saw new highs across several key metrics in our digital marketing solutions business. We are focused on the investments needed to support the growth areas of our business and still believe we will reach the revenue inflection point in 2024 and create long-term sustainable growth from there. We also continued to repay debt. As I mentioned, we repaid $147 million of debt in 2022, and we've already paid another $22 million of debt so far in 2023. Since the acquisition of Gannett back in November of 2019, we have repaid over one-third of that debt while also significantly lowering our cost of capital. For the full year, we generated $2.9 billion in total operating revenues, and approximately 35% of that revenue came from digital sources, and that grew 1.8% year over year on the same store basis. We are very proud to have grown digital revenues despite the continued slowdown in the digital advertising marketplace, and many of our PeerPlay digital peers have actually witnessed revenue declines. This really speaks to the importance of revenue diversification in the digital ecosystem, particularly in recurring revenue streams, such as our digital-only subscription revenue and our digital marketing solutions business. Turning to 2023, we believe we are well positioned to grow adjusted EBITDA and free cash flow, as well as improve our revenue trends. We created a lower and more variable cost base in the second half of 2022, which we expect will translate into annual savings of at least $220 million in 2023. Our cash obligations tied to items such as pension and reorganization costs are expected to decrease by over $60 million year over year and should provide a substantial uplift to our free cash flow. Our digital businesses are expected to continue to perform well and represent valuable recurring revenue streams. In addition, we are creating incremental revenue streams through partnerships with top-tier organizations. We are optimizing our local content, and we believe we are positioned to better monetize our sports verticals. All of these things are building blocks for growth, for the growth we expect in 2023. As you may remember, the macro pressures that we experienced for much of 2022 did not begin until the second quarter, which will mean the first quarter of 23 will have tougher revenue comparisons to the prior year. However, starting in the second quarter of this year, we expect to benefit from more favorable year-over-year comparisons, which combined with the anticipated growth of our digital businesses and the flow through of our cost management program is expected to result in full year 2023 Adjusted EBITDA growth, I mentioned, of about 10% to 15%, and pre-cash flow growth approaching nearly $100 million. Doug will go into more detail later on the call on our full year 2023 guidance and how we believe the foundation we built in 22 is expected to set us up for success this year. We are excited to build on the momentum of our execution, fourth quarter performance, and improved capital structure. We have a clear vision and strategy and I'd like to spend a few minutes outlining it for you. We made tremendous progress on our strategic priorities last year. Digital-only subscriptions grew to 2.03 million during the fourth quarter, and since the second quarter of 2022, paid digital-only subscriptions have outnumbered our full-access print subscriptions And in the back half of 2022, we have grown our overall total number of subscriptions on a combined basis. The growth of our overall paid consumer base across print and digital marks a meaningful inflection point in our consumer business. And we believe this will be a key component in driving total revenue growth by the end of 2024. In Q4, traditionally our lowest quarter for net new digital only paid subscribers, we added 47,000 new subscribers. And we added approximately 400,000 net new digital subscribers for the full year of 2022. During the fourth quarter, we continued to grow our total registered users and newsletter subscribers as well. We ended the quarter with 5.9 million registered users, and 8.5 million newsletter subscribers, which represents meaningful growth of 60% and 25%, respectively, year over year. Both continue to be important customer acquisition and subscriber engagement channels for us with low costs of acquisition. While growing digital-only subscriptions remains one of our top priorities, we have adopted a more balanced approach between increasing profitability and growing subscribers. We will continue to pursue subscriptions growth, but we will be more targeted in our acquisition strategy. During 2022, we experimented with several offer strategies and rate structures. As a result, we are learning which offers perform well in both the near term and which are expected to perform well in the long term. Based on all of the learnings of the various tests, we intend to focus our subscription acquisition efforts on acquiring highly engaged long-term, and more profitable subscribers. During the first half of 2023, we will be focusing our efforts on consumer acquisition and retention improvement. We will be modulating back our paid acquisition strategy during this time as well and expect to lower our marketing spend while our product enhancements begin to take effect. Having said that, We still expect to see significant growth in digital-only subscriptions and revenue during 2023. We have learned an incredible amount from our first year of USA Today as a subscription product. At the start of its launch, we prioritized subscriber volume growth over advertising monetization. Given our learnings, we have refined our strategy to be more balanced, which we believe will lead to improved overall USA Today monetization and profitability versus purely subscriber growth. The new balanced approach will bring a larger audience into our ecosystem, and we will be able to monetize these visitors not only through digital advertising but also through strategic partnerships. As a result, we expect lower subscription acquisition at USA Today but an overall increase in revenue and profitability. Local markets are expected to continue to drive most of our subscription growth and already account for over 90% of our current subscribers. And we believe we still have significant opportunity in these local communities since the local subscribers we have today only represent approximately 3% of our digital local audience as of the end of 2022. Turning back to the USA Today for a minute, we plan to balance monetization across the platforms. With USA Today's clear, concise, and credible approach to journalism, we believe USA Today has the potential to be the top digital news and content destination in the United States. Given its large organic audience, delivering over half of the 133 million unique visitors to our digital platform on average each month in the U.S., we will use USA Today more extensively to guide people into our ecosystem help create bundles, serve as product extensions for games and sports, and create a subscription-based value proposition for our local offerings. In addition to the success of our digital subscription efforts, our digital marketing solutions business again drove impressive results in Q4. We achieved core platform revenues of $119.7 million in the fourth quarter of 2022. increasing 8.7% year-over-year, and we continue to maintain double-digit adjusted EBITDA margins. Customer count, ARPU, and budget retention all grew year-over-year. The majority of our revenue in the DMS segment continues to be recurring and structured on evergreen contracts. With monthly customer budget retention rates of 95%, We continue to expand our DMS product offerings through our freemium channel to help SMBs have greater control over how they interact with their customers, including our recently launched scheduling tools, which makes booking appointments simple and enables businesses to accept online appointments 24-7. Since we launched our freemium channel in 2021, we have seen significant growth in the number of registered users thanks to these and other initiatives. As many of you are aware, we launched the channel in 21, and as we ended 2021, we had less than 1,000 registered users. We're ending 2022 with 55,000 registered users, and that number more than tripled from Q3 to Q4. So you can see the growth trajectory in our freemium channel. Our freemium customer business is an important lever for future growth, as these are businesses that have registered with us and are engaged with our platform and our products, and are a growth channel outside our traditional lead gen channels. Moving forward, we expect the premium capabilities throughout 2023 in connection with do-it-yourself and buy online products that will deliver a quality marketing solution for lower tier marketing budgets and a lower cost of sale and service. We do expect to continue to expand these capabilities in 23. Our 2022 financial results reflect an important year for our DMS business as it represented the most profitable year to date in the segment's history. So despite advertising budgets being tightened across the country, we believe these results demonstrate that our efficient, data-driven solutions with in-depth analytics and attributions yielded tangible results for our customers. We are proud of the progress we made in 2022 and believe our dedication to helping local businesses unlock their potential makes our LocalIQ digital marketing platform an indispensable partner to thousands of SMBs. I'm incredibly grateful to Chris Barton, the president of LocalIQ, for his leadership driving this platform and developing an extremely talented team of leaders. While Chris will be leaving Gannett next month to pursue his passion of becoming a CEO, we expect his positive impact will continue to fuel the team and business. Under Chris's guidance, we have achieved significant milestones, and he has helped further position Local IQ as a competitive leader in the industry. We have begun an executive search for Chris's replacement, but his leadership team, including our Chief Revenue Officer and Chief Customer Officer, have well over 30 years of combined experience in the marketing solutions business. We remain well positioned with a talented and experienced leadership team in place, and we remain confident in our ability to execute on our strategic plans in 2023 and beyond. We've been on an incredible journey to evolve Local IQ's brand identity and positioning to showcase the commitment to helping customers transform their businesses through the power of digital marketing. Last year, we shared the beginning of the brand evolution with our first brand advertising campaign, highlighting businesses who benefited from the Local IQ platform. And earlier this month, we launched a new website which unifies the Local IQ brand promise and highlights the digital solutions that help businesses seize their full potential using LocalIQ's advanced digital platform. On our new LocalIQ website, you can find rebuilt product pages that more clearly explain the features and benefits of each of our solutions and how they work to help businesses reach their specific marketing goals, along with more information about how the LocalIQ platform uses proprietary marketing technology, data, and expertise to help its customers. We have also been laser focused on increasing the overall monetization of our content platform. And a key piece of this strategy is growth through new partnerships that bring in both new audience and revenue streams. The strength of the USA Today brand and audience creates a unique opportunity to work with top tier organizations across subscriptions, affiliate, and content partnerships. We are very excited about the two new partnerships we have recently launched in 2023 with Gambling.com and Forbes Marketplace Platforms. Both of these will allow us to provide additional sports and consumer financial services content to our readers while also allowing us to immediately monetize our large organic audience of 133 million uniques. These affiliate partnerships such as these provide great content to our audience and are expected to be immediately accretive to our total revenue and free cash flow. We intend to roll out additional partnerships in the future where we can leverage our platform to create additional growth in audience and revenue, and you'll hear more on these in the quarters to come. Finally, as we enter 2023, we are renewing our commitment to our local operations and our local communities. Gannett serves over 200 local communities, and our commitment is to build community connections by helping advertisers and readers stay informed, connected, and engaged. We believe by leaning further into our local connections, we will not only better serve our audiences, but we will also drive better operating performance. We are confident in our belief that we have entered 2023 with great plans in place. We believe our digital-only subscription revenue and digital marketing solution revenue are poised for significant growth. Our focus on creating a lower and more variable cost base going forward combined with sustainable growth in our core digital revenue streams positions us well for our anticipated adjusted EBITDA growth and free cash flow growth. With anticipated improving free cash flow and a strong balance sheet, We believe we are well positioned to navigate any near-term headwinds that may persist and continue our evolution to a customer-first, subscription-led business powered by data and content. I'm now going to turn the call over to Doug to provide additional detail and color around 2022 fourth quarter and our full year 2023 guidance. Doug?

Thank you, Mike, and good morning, everybody. As Mike mentioned a moment ago, in Q4, we drove significant sequential improvement to our adjusted EBITDA from Q3. As a result of our robust cost management program, we improved our adjusted EBITDA margin in the fourth quarter by over 500 basis points sequentially. And importantly, we expect to see continued improvement during 2023. For Q4, total operating revenues were $730.7 million, a decrease of 11.6% as compared to the prior year quarter, and a decline of 10.3% on a same-store basis. This is down slightly from the 9% year-over-year same-store revenue decline in the third quarter as a result of the pressures in our print and digital advertising revenues. Also, given the strength of the US dollar relative to the UK pound, currency translation negatively impacted our reported revenue by $9.4 million, or about 114 basis points as compared to the prior year period. Adjusted EBITDA totaled $90.4 million in the fourth quarter, a decrease of 21.7% year over year. Adjusted EBITDA margin was 12.4% compared to 14% in the prior year quarter. In the fourth quarter, we continued to be impacted by inflationary pressures which we estimate negatively impacted Q4 by approximately $25 million as compared to the prior year period. However, we have seen the largest cost pressures, namely newsprint and distribution costs, peak and stabilize, and we believe that the worst is behind us in terms of inflation. We expect labor and newsprint costs in 2023 to remain relatively stable to the pricing at year-end 2022. Factoring in the Q4 impact, we estimate that inflationary pressures on distribution, newsprint, fuel, and utilities negatively impacted our full year 2022 results by approximately $100 million. As we have seen costs stabilize, we expect that we will largely cycle the year-over-year impacts of these increases early in 2023. On a sequential basis, adjusted EBITDA increased $38.4 million, representing substantial growth over Q3, well beyond the traditional seasonality. The strong improvement in adjusted EBITDA and adjusted EBITDA margin from Q3 to Q4 reflects both the seasonally stronger revenue and the momentum of our cost management initiatives. We took significant actions in Q3 and Q4 to operate more efficiently. Through these steps, which had an impact on both our headcount and our non-payroll expenses, we were able to create a more flexible cost structure and effectively adjust our expenses in response to the revenue trends. As a result of our cost management initiatives, we recognized $16 million in benefits in the third quarter, $49 million in the fourth quarter, and anticipate at least $220 million in savings during 2023. The focus of our cost management program was to drive a more variable, efficient cost structure to support our revenue base. We are relying more substantially on third party variable services for our technology teams, third parties for accounting and other finance functions, self-service across the B2B organization, and AI to create efficiencies. Our quality journalism and unique content is the foundation of what we do. However, we have made recent investments in AI and machine learning tools that allow us to simplify routine tasks, such as selecting and cropping images quickly, recommendation engines to personalize content, or gathering simple data sets to inform readers on things such as where to watch various sporting events. These AI-enabled efficiencies allows our journalists to focus on what differentiates us, quality content that drives deeper engagement. On the bottom line, we ended the fourth quarter with a net income attributable to Gannett of $32.8 million and $53.2 million in adjusted net income attributable to Gannett. Our net income represents a $55.2 million year-over-year increase driven by lower depreciation and amortization costs and the absence of the impact in the prior year from the early extinguishment of debt. Total digital revenues in Q4 were $269.2 million, down 0.4% year-over-year on a same store basis, but up sequentially by 190 basis points from Q3. In the fourth quarter, our total digital revenues accounted for approximately 37% of total revenues. Our decline in total digital revenues was influenced by digital advertising, which fell 20.5% on a same store basis year-over-year. The decrease in digital advertising revenue reflects a softer market where we continue to see lower monetization rates as compared to the prior year. The performance in our digital-only circulation and digital marketing solutions businesses is expected to continue to provide the foundation for future growth. Our digital-only circulation revenue of $35.5 million grew 29.5% compared to the prior year on a same-store basis. while ARPU grew approximately 2% year-over-year. As we head into 2023, we expect our growth to continue as we optimize the subscriber funnel, improve our customer interactions, and leverage our data and insights to improve retention and minimize churn. We expect to drive further revenue growth as a result of these improvements and lessen our reliance on introductory offers, as well as acquire and retain more engaged consumers. While revenue performance on a year-over-year basis was fairly stable from Q3 into Q4, we did see some deterioration in print advertising revenue late in the fourth quarter. This includes softness in classifieds, including obituaries and employment. We have begun to implement self-service order functionality across these verticals and are pleased that in the early stages, self-service has increased both the number of orders and the average order size. We are also highly focused on improving print circulation revenue and volume. While our volume trends improved approximately 106 basis points quarter over quarter, from a revenue trend perspective, we are beginning to cycle some of the more aggressive price actions that we rolled out late in 2021. We continue to believe that we have some additional pricing power for new subscribers, but our focus is to stabilize our print subscriber base and maximize the lifetime value of our customers. For new subscribers, we've rolled out an all-in-one pricing model, which has been shown to improve subscriber retention. We have continued to reduce the number of unstaffed delivery routes, which peaked in the second quarter of 2022, and we will continue to take advantage of mail delivery in certain locations. In our digital marketing solutions business, total revenue in the fourth quarter reached a record high of $121.1 million, an increase of 7.8% year-over-year on a same-store basis. Adjusted EBITDA for the segment was $16.4 million, representing a strong double-digit margin of 13.5% in the fourth quarter. Average monthly customer count increased by approximately 1%, while ARPU reached a new high of over $2,600 per month, and that grew 7.7% versus the prior year period. These positive trends reflect the impact of national clients and a focused product portfolio, which we believe drives more effective results for clients and higher ARPU and margins within the segment. In terms of quarter over quarter results, there was a slight decline from 15,800 customers in Q3 to 15,300 customers in Q4 due to the seasonality of small, multi-location customers that are still inherent in our business. However, ARPU and revenue both grew in the fourth quarter over what is traditionally a stronger third quarter. We believe our continued execution, along with the development of additional products and features, will increase our addressable market and reduce the effect of seasonality on the DMS segment. Let's now shift to the balance sheet. At the end of the fourth quarter, we had a cash balance of $94.3 million, translating into net debt of approximately $1.18 billion. In the fourth quarter, free cash flow usage was $1.6 million, which included our final FICA deferral payment of $20.8 million. We had a slight use of cash flow for the full year of $4.5 million, which included $23 million of cash pension contributions, the $20.8 million in the deferred FICA payment, and $64.8 million in cash related to integration, reorganization, and severance. We anticipate all of these items to decrease materially in 2023, with no funding of our main pension plan anticipated and our final deferred FICA payment behind us. We ended the fourth quarter with approximately $1.3 billion of total debt. Our first lien net leverage was 2.68 times. And for the full year of 2022, we repaid $146.6 million of total debt. And in 2023, we've already reduced our first lien debt by $22.2 million. We expect to repay a minimum of $120 million in 2023 through our scheduled quarterly amortization payments, as well as further real estate and other asset sales. In Q4, we completed 13 real estate and other asset sales totaling $12.2 million, bringing our total 2022 real estate and other asset sales to $67.9 million. For the full year of 2023, we project $65 to $75 million in real estate and other asset sales, including those completed in January. We continue to maintain a sizable real estate sales pipeline of approximately $50 to $60 million, which combined with our expected free cash flow improvement should contribute to our aggressive debt pay down strategy. So looking ahead to 2023, We begin to cycle the decline of digital media mid Q2 and benefit immediately from the ramp of the cost management program we put in place. As a result, we expect adjusted EBITDA in the range of $280 to $300 million for 2023, which translates to expected year-over-year growth of 10 to 15 percent. Q1 adjusted EBITDA trends will be more in line with what we experienced in Q4 of 2022 as a result of a difficult year-over-year comparison, as well as certain non-recurring items we benefited from in the prior year, which contributed about $6 million in the previous year. While Q1 adjusted EBITDA is expected to decline on a year-over-year basis, we anticipate year-over-year growth in each of the remaining quarters of 2023. This growth will be most significant in Q2 and Q3 due to the cycling of the more significant revenue declines and ramping of cost initiatives in 2022. 2023 net income attributable to Gannett is expected to range from a net loss of $20 million to a net income of $10 million. For the full year, 2023, we expect total revenues between $2.75 to $2.8 billion, representing a same-store decline of 3 to 5 percent year over year. For the first half of the year, revenue is expected to perform similar to the end of 2022, improving slightly as we cycle the digital advertising declines mid Q2. In the second half of 2023, revenue is expected to return to low single-digit declines on a same-store basis. With an increased focus on growing quality subscriptions, which is expected to result in higher profitability and retention in 2023, digital-only circulation revenue is expected to grow at rates slightly below 2022. Digital-only subscription volume growth will reflect the balance of volume versus profitability, and as such is expected to be more moderated as compared to digital-only revenue growth Net ads are expected to be lower in the first two quarters as we ramp product efficiencies and scale back marketing spend, but we expect acquisition volume to accelerate in the back half of the year. With expected debt pay down of $120 million in 2023 and expected adjusted EBITDA of $280 million to $300 million, we anticipate, firstly, net leverage to fall below two times at the end of 2023. Finally, as a result of the improving net income performance and significantly lower cash obligations, we expect cash provided by operating activities to be in the range of $120 million to $140 million and substantial improvement in free cash flow. Free cash flow is expected to be in the range of $80 to $100 million for the year, representing a conversion rate of approximately 25 to 35%. We are pleased to have made considerable progress on our strategic pillars and to be entering 2023 with a strong balance sheet and liquidity position. We have shown that even in a challenging environment, the compounding growth in our digital revenue businesses and our ability to strategically moderate our cost structure allows us to positively impact adjusted EBITDA and free cash flow. We are excited about our operational and financial plans for 2023. as well as the opportunity to create meaningful value for both our shareholders, as well as the communities that we serve. I will now hand it back to the operator for questions, and then we will go back to Mike for some closing thoughts. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Start Q if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Start keys. One moment, please, while we poll for questions. Our first question comes from Jason Basiet with C. Please go ahead.

Thanks. I just had two revenue questions, one about sort of this year, 23, and then one sort of about getting back to growth by 24. So for 23, it feels like the buy side has been thinking about a recession for a year now. And there have been some areas that were weak sort of in 22, you know, maybe some of your businesses, maybe mobile advertising also. But now the market's like less convinced we're going into a recession. And so I would just love to know sort of what sort of macro, you guys talked about things getting better, but is that assuming that the macro doesn't deteriorate materially? Is it just sort of steady eddy and the improvement is just on the comps, but just any sort of macro color for this year? And then on the longer term, getting back to growth, should we think about the improvement being sort of balanced across print advertising and CERC and digital ads and DMS and commercial print and other, or is there one area in particular that you think will be most important to get you back to growth mode? Thanks.

Yeah, thanks, Jason. So on your first question, you know, we are not seeing trends in our business here in the first quarter that would indicate that the country's moving into a recession or moving in that direction. In fact, our trends are improving here in the first two months relative to Q4. We've looked out for the full year. Our teams have done bottoms up across all of our revenue categories. Based on what we see today, based on how our customers are interacting with us across all of our revenue channels, we just don't see a a worst-case kind of hard landing. And especially on the local side, our local businesses continue to engage with us, and we see some slightly improving trends there in the first quarter. So our forecast is built on a soft economy, certainly not a hard landing. We don't see that in our numbers today. We don't anticipate that. We'd have to pivot if that occurred with our cost structure. But we feel really good about what we're seeing in the markets today, what our customers are telling us. And so we see a soft landing as a worst-case scenario, but potentially no recession at all. And with regard to your second question, the most important is our digital growth, obviously. As Doug said, 37% of total revenue in the fourth quarter is digital only. That will continue to move towards 50%. The growth in that across all the spectrum, whether it's our new partnership opportunities, our digital advertising business, obviously the subscription business, and our digital marketing solutions business, all important that those continue to churn and grow as we expect them to. But we are also working on stabilizing to some degree, or not stabilizing, but slowing the rate of decline of our print business And that's also an important component of reaching the inflection point in 2024. We've undertaken a lot of actions over the last 12 months on both of those fronts. But certainly on lowering the declines on print is something we've been focused on. And we're actually seeing those results in our first quarter numbers. So we're encouraged by that. So right now, based on what we see, Jason, soft landing to no recession this year and And, you know, a combination of our strong digital growth combined with improving trend performance in print is what leads us to have confidence in our inflection point being reached back half of 2024. Okay.

And if you hit that inflection, is the right mix? Like if you get to 50% of your revenues are digital, that's sort of the right? Yeah, that's about the right crossover.

Okay. Thank you.

Again, if you have a question, please press star 1 on your telephone keypad. Our next question comes from Lee Cooperman with Omega Assembly Office. Please go ahead.

Thank you very much. Just a few observations, and I have two questions. Ever since I invested in the company, which is at least five years ago, you felt the stock was significantly undervalued. And this went, did nothing but go down, but I have to say you backed up your view by consistently buying substantial amounts of stock for your own account. I think it's fair to say you couldn't understand the impact of COVID and the recession on the company. Having said that, I think it's a fair criticism to say we have been too slow in reducing costs. Now for my ideas and questions. Okay. One, I think we should consider selling off a few of our trophy properties at valuation levels. substantially above the public market valuation of our equity to accelerate our debt repayment and surface some hidden value. And I'd like to get your thoughts on that. Excuse me. And secondly, when do you think you'll be in a position to buy back cheap equity? So I think we announced that original authorization before the economy deteriorated when the stock was seven and a half and went down to below two. It's now about two and a half, two 60, whatever. So your thoughts on those two questions.

Yeah. So, um, First question leads to selling off trophy properties. Obviously the answer is yes. We would entertain bids on any of our markets, any of our products that are at or above fair market value. That's something we've done in the past, we'll do in the future. Those things can be lumpy. It depends on vanity type buyers in those particular markets, but know i would say lee the answer is yes we will do that um we're we're hopeful that we'll have an opportunity or two uh this year to do that but but it's not anything that's in our plans is it's hard to to count on it for with certainty but so overall yes the the answer is yes we'll do that if if and when we get the opportunity to do so you know as far as buying back cheap equity uh um you know, we'd love to be in a position to continue our stock buyback program. We feel right now, Lee, that the best continued use of capital beyond investing in the growth business, growth parts of our business, is to reduce debt. You know, as Doug mentioned, our first lien net debt is still 2.68, so closer to three. I'd love to see that, you know, under two, closer to one and a half as we go into next year. And then I think when the when nobody is worried about debt, which we're not worried about debt at all. Some other people are, but as we get into a much better position from a leverage standpoint, then I think the capital allocation opportunities widen for us as we materially lower that first lien net leverage.

Thank you very much, and congratulations on hopefully turning the corner.

Thanks, Lee.

There are no further questions at this time. I would like to turn the floor back over to my grade for closing comments. Please go ahead.

Yeah, okay, thank you. As you could hear from the call, we're entering 2023 with a great deal of optimism. Let me just highlight a couple of things you heard today that give us that optimism. I'll start by saying we have a very strong team here at Gannett, and I think we have the right organizational structure in place with the right players here. Further, we reduced our cost structure, as you heard today, by over $220 million as we enter into 2023. Inflation seems to have peaked, and we could see some moderation there in 2023. Revenue trends are improving during the first two months of 2023. We're encouraged by what we're seeing and hearing from our customers. We see 10% to 15% EBITDA growth in 2023. We see nearly $100 million of free cash flow growth. in 2023. We see firstly net leverage below two times by the end of 2023. Our digital growth businesses remain robust from a growth standpoint. We see that continuing in 2023. And we continue to see our inflection point for long-term sustainable growth hitting towards the end of 2024. So a lot to be optimistic about. We feel good about our opportunities and the plans we have in place for 2023. We look forward to updating you on our progress on each of our quarterly earnings calls this year. Thanks to all of you for your support as we continue to navigate this journey. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.