Gannett Co., Inc.

Greetings and welcome to Kinet 4Q Earnings Conference 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, Investor Relations. 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 2023 financial results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer, Doug Horn, Chief Financial Officer, Kristen Roberts, Chief Content Officer, and Chris Cho, President of Digital Marketing Solutions. If you navigate to the Gannett website, you will find that we have posted an earning 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 risk 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 forward-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 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 webcast and audiocast are copywriting material of Gannett and may not be duplicated, reproduced, or rebroadcast it without prior written consent. With that, I would like to turn the call over to Mike Reed, Gannett's Chairman and CEO.

Thanks, Matt. Good morning, everybody, and thanks for joining our call this morning. I'm pleased to share with you details on our solid fourth quarter and very solid 2023 full-year performance and how we are building on this momentum already in 2024. 2023 was a year marked by innovation, resilience, and collaborative efforts at Gannett. We rallied around new ideas, new approaches, and new avenues, and implemented substantive change in our organization, which drove meaningful improvement in our key metrics. As a result, we achieved four consecutive quarters of sequential improvement in same-store revenues. We grew adjusted EBITDA and free cash flow for the full year. We significantly increased our net income We developed new partnership revenue streams, and we improved our capital structure. In 2023, adjusted EBITDA grew 4% over the prior year. We repaid approximately $142 million of debt, which combined with the growth in adjusted EBITDA significantly reduced our first lien net leverage from 2.7 times to 2.0 times. We also significantly improved free cash flow in 2023, and we maintain a strong liquidity position with just over $100 million of cash on the balance sheet. We are very excited to carry this momentum into the year ahead. As you'll hear from Doug later, among progress in several other areas in 2024, we expect another year of adjusted EBITDA and free cash flow growth, another $110 million in debt repayment, and further reduction to our first lien net leverage. In 2023, digital revenues were approximately $1.1 billion and represented 39% of total revenues, growing over the prior year. Over the past year, the investment and successful execution of our content strategy allowed us to grow our digital audience and engagement, as well as improve the overall monetization of our audience. Our expectation for 2024 is that total digital revenues will make up over 45% of total revenues by the end of the year. And we expect digital revenues to grow approximately 10% versus 2023. And importantly, begin to outpace the declines we see in our legacy revenue streams. As a result, we are expecting total revenue growth near the end of 2024. We've talked about the inflection point in the past being the end of 24. The inflection point is when revenue flips from declining to growing, and as I just said, we're expecting that towards the end of 24 as we enter 25. There were numerous accomplishments in 2023, and they underscore the strength of our strategy at a time when the media industry faces many challenges. I'm sure many of you have read in the press over the last couple months that many of our peers have recently announced sizable layoffs Nonprofits have been forced to close, and some media outlets have ceased to exist. Although we face similar headwinds, we believe our scale and our strategy are differentiators, and that our results are continued proof that we are on the right path. Remember, we grew profitability in 2023, and our outlook this morning forecasts continued growth over the next three years. Later today, you'll hear from Kristen Roberts on how we are reinvesting in our newsrooms, particularly in our small communities. And as we enter 2024, we are energized to have laid the necessary groundwork for sustainable growth here at Gannett. Important to our success in 2023 and the success in 2024 is the growth of total digital revenues. We have seen solid progress across several of our digital revenue streams And in the fourth quarter, total digital revenues continued to grow over the prior year. Our digital revenue strategy and the foundation for anticipated future growth is to expand our audience and improve engagement and improve the platform monetization at each point in the customer journey with us. We believe the greatest revenue opportunity lies in a comprehensive monetization strategy that maximizes revenue across the entire spectrum of our 187 million average monthly unique visitors, which by the way grew 4% year over year. An important component of the monetization of our audience has been digital-only subscription revenue. In Q4, digital-only subscription revenue and digital-only ARPU experienced new highs, reflecting a more strategic acquisition and pricing model. We believe we have continued upside in both areas as we maintain our focus on smart customer acquisition, in-depth local content, and effective pricing strategies. While digital-only subscription revenue growth remains a key element given its highly recurring nature, we are balancing it with a focus on our digital advertising business. In the fourth quarter, our initiatives around audience expansion and increased engagement led to the best quarterly performance for digital advertising in all of 2023. First party data is crucial to unlocking further value in our digital advertising, lengthening the time on site and creating personalized smart customer journeys that allow for the full implementation of multi-point monetization. By leveraging our data science capabilities, we launched first party data led campaigns across 50 demographic segments and 800 interest segments in 2023. The deprecation of the third-party cookie is expected to result in a substantial shift in the advertising industry. While its full impact remains to be seen, we believe we are well positioned in 2024 to capture increased premium revenue as we expand our already robust first-party data capabilities. Another channel to increase our overall monetization is through partnerships. We made great strides with partnerships in 2023 as we align with brands that share our values and are expected to expand our audience. Within the quarter, we announced two more partnerships with Jack Pocket and Home Solutions. Our five announced partnerships in 2023 create a new digital revenue stream with significant potential and importantly, at a very high margin, and that have become immediately accretive to our total revenue and to our total free cash flow. For 2024, we expect to generate approximately $20 million in this very high margin partnership revenue, more than doubling 2023 levels, virtually all of which is accretive to adjusted EBITDA and free cash flow. Over the next five years, we believe this partnership revenue can grow more meaningfully. And while we expect to launch new partnerships in 2024, the more substantial revenue growth is expected to come from scaling our existing portfolio of partnerships, further embedding the content across our platform and driving increased engagement. Now central to our strategy is our commitment to expanding our audience. and their engagement through our renewed content strategy focused on creating joyful experiences. Since joining us as our Chief Content Officer, Kristen has made a remarkable impact on the domestic Gannett Media segment. Kristen and her team are executing on our strategy to rapidly expand our audience and content, amplify our journalism, and drive diversified revenue streams. Over the past two quarters, the team has driven a significant increase in audience growth, page views, and readership per story, while also leveraging the power of data to deliver the right outcomes for each consumer. I'll now hand it over to Kristin to recap her team's accomplishments in 2023 and hear what we can expect in 2024. Kristin? Thank you, Mike.