Gannett Announces First Quarter 2021 Results
Strong first quarter Revenue and Adjusted EBITDA performance
Paid digital-only subscriptions surpass 1.2 million, an increase of 37% from the prior year period
Achieved $300 million of annualized synergies to date, ahead of targeted timeline
MCLEAN, VA — May 7, 2021 — Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") (NYSE: GCI) today reported its financial results for the first quarter ended March 31, 2021.
“The first quarter of 2021 was our best quarter to date for new digital-only subscriptions subsequent to the acquisition of Legacy Gannett, surpassing 1.2 million, and a very encouraging start to the year as a whole. Our core digital marketing solutions teams also had a fantastic quarter, setting new records in productivity. Adjusted EBITDA grew from the first quarter of 2020 and reflected Adjusted EBITDA margin expansion of 250 basis points to the prior year period,” said Michael Reed, Gannett Chairman and Chief Executive Officer. “We are pleased to have fully refinanced our 11.5% term loan during the quarter as well as achieving our target of $300 million of annualized synergies, well ahead of our year end 2021 goal.”
“With the refinancing behind us, we are focused on a long-term, subscription-led, digital growth strategy. With the first quarter momentum in both digital-only subscriptions and in our Digital Marketing Solutions segment, we believe we are well positioned to not only meaningfully grow Adjusted EBITDA year over year, but also continue our evolution to a digitally focused content platform.”
Financial Highlights
| in thousands | First Quarter 2021 | ||||
| Revenues | $ | 777,084 | |||
| Net loss attributable to Gannett | (142,316) | ||||
Adjusted EBITDA(1) (non-GAAP) | 100,465 | ||||
| Net cash flow provided by operating activities | 61,316 | ||||
Free cash flow(1) (non-GAAP) | 53,709 | ||||
(1)Refer to "Use of Non-GAAP Information" below for the Company’s definition of Adjusted EBITDA and Free cash flow, as well as the reconciliation of such measures to the most comparable GAAP measure included herein.
First Quarter 2021 Consolidated Results
•First quarter revenues of $777.1 million decreased 18.1% as compared to the prior year quarter.
◦Same store revenues (as defined and reconciled on Table No. 5 below) decreased 16.5% compared to the first quarter of 2020, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry.
◦First quarter same store revenue trends were impacted by the cessation of industry wide digital marketing services incentives at the end of 2020. The incentives, earned through our Digital Marketing Solutions segment, totaled $13.0 million during 2020, with $9.2 million in the first quarter of 2020, accounting for a decrease of 0.9% on the first quarter same store trend. On a comparable basis, first quarter same store trends improved slightly from fourth quarter 2020 levels.
•Digital advertising and marketing services revenues reached $195.2 million in the first quarter, or 25.1% of total revenues.
•Digital-only circulation revenues of $23.2 million grew 46.7% in the first quarter of 2021 compared to the same period in the prior year attributable to a 37% increase compared to the same period in the prior year in digital-only subscriptions. Digital-only subscriptions totaled approximately 1.2 million at the end of the first quarter of 2021, adding 120,000 net new subscriptions in the first quarter.
•Total digital revenues were $229.2 million or 29.5% of total revenues, which includes Digital advertising and marketing services revenues, Digital-only circulation revenues and Digital syndication and affiliate revenues.
•Net loss attributable to Gannett of $142.3 million in the first quarter reflects a $126.6 million non-cash loss on the derivative associated with the 6% senior secured convertible notes due 2027 (the "2027 Convertible Notes"), a $19.4 million loss associated with the early extinguishment of debt and an additional $10.2 million related to costs incurred in connection with our debt refinancing activities during the quarter.
•Adjusted EBITDA totaled $100.5 million, an increase of $1.4 million or 1.4% compared to the first quarter of 2020 and represented a 12.9% margin.
Balance Sheet & Cash Flow
•As of March 31, 2021, the Company had cash and cash equivalents of $163.5 million.
•During the first quarter of 2021, the Company refinanced its five-year, senior-secured 11.5% term loan facility with Apollo Capital Management, L.P. (the "Acquisition Term Loan") with a five-year, senior secured term loan facility in an aggregate principal amount of $1.045 billion (the "5-Year Term Loan"), at LIBOR+700 with a 0.75% LIBOR floor. Additionally, during the three months ended March 31, 2021, the Company repaid approximately $9 million in principal under its 5-Year Term Loan using the proceeds from real estate and other asset sales.
•Total debt outstanding as of March 31, 2021 was $1.537 billion, comprised of the (i) $1,036.4 million of 5-Year Term Loan, (ii) $497.1 million of 2027 Convertible Notes, and (iii) $3.3 million of remaining convertible notes from Legacy Gannett.
•Cash flow provided by operations was $61.3 million for the three months ended March 31, 2021 compared to $60.5 million for the same period in the prior year. The increase in cash flow provided by operating activities was primarily due to an increase in working capital of $15.1 million due to the overall timing of payments and receipts and a decrease in severance payments of $9.9 million, partially offset by an increase in interest paid on the Acquisition Term Loan of $13.0 million, an increase in contributions to our pension and other postretirement benefit plans of $12.4 million and a decrease in tax refunds of $1.0 million.
•Capital expenditures were $7.6 million for the quarter ended March 31, 2021, primarily related to product development, technology investments, and operating infrastructure.
•The Company expects to sell an additional $90 million to $115 million in non-core assets during the remainder of 2021 that are anticipated to accelerate debt pay down and further reduce cash interest costs.
First Quarter 2021 Publishing Segment
•Publishing segment revenues were $699.6 million in the first quarter of 2021.
•Circulation revenues were $325.4 million in the first quarter of 2021.
◦Same store circulation revenues decreased 12.9% in the first quarter of 2021 compared to the same period in the prior year, primarily driven by a reduction in the volume of home delivery subscribers and a decline in single copy sales reflecting the overall secular trends impacting the industry as well as the impact of the COVID-19 pandemic on businesses that buy and sell copies of our publications.
◦Digital-only circulation revenues grew 46.7% in the first quarter of 2021 compared to the same period in the prior year.
◦Digital-only subscriptions totaled approximately 1.2 million at the end of the first quarter of 2021, up 37% compared to the same period in the prior year.
•Print advertising revenues were $193.2 million in the first quarter of 2021.
◦Same store print advertising revenues decreased 24.9% in the first quarter of 2021 compared to the same period in the prior year, a 200 basis point improvement over the fourth quarter of 2020, reflecting secular industry trends impacting all categories and impacts from the COVID-19 pandemic.
•Digital advertising and marketing services revenues were $121.1 million in the first quarter of 2021.
◦Same store digital advertising and marketing services revenues decreased 10.4% in the first quarter of 2021 compared to the same period in the prior year reflecting lower local digital media spend and lower page views compared to the prior year which reflected coverage of the COVID-19 pandemic and lower digital classified revenue.
•Other revenues were $59.8 million in the first quarter of 2021.
•Same store other revenues decreased 23.2% due to declines in the commercial print and delivery business, driven by overall secular trends impacting the industry and a decline in event revenues due to the absence of in-person events in the first quarter of 2021 compared to the same period in the prior year.
•Publishing segment Net income attributable to Gannett was $66.2 million and Adjusted EBITDA was $102.2 million, representing an Adjusted EBITDA margin of 14.6% for the first quarter of 2021 compared to 12.9% for the same period in the prior year.
First Quarter 2021 Digital Marketing Solutions Segment
•Digital Marketing Solutions segment revenues were $102.3 million in the first quarter of 2021.
◦Same store Digital Marketing Solutions segment revenues decreased 12.7% in the first quarter of 2021 compared to the same period in the prior year, impacted by the cessation of industry wide incentives at the end
of 2020. The incentives totaled $13.0 million during 2020, with $9.2 million in the first quarter 2020, accounting for a decrease of 7.6% on the first quarter same store trend. On a comparable basis, first quarter same store trends improved slightly from fourth quarter 2020 levels.
•Digital Marketing Solutions segment Net income attributable to Gannett was $1.1 million and Adjusted EBITDA was $9.2 million, representing an Adjusted EBITDA margin of 9.0% for the first quarter of 2021 compared to 6.5% for the same period in the prior year.
Integration of Legacy Gannett Update
On November 19, 2019, we acquired Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referred to as “Legacy Gannett”) and we changed our name to Gannett Co., Inc.
•We realized $11.0 million in savings associated with the acquisition in the first quarter of 2021.
•We have achieved $300 million in annualized synergies, achieving our original target well ahead of expectations.
•Management remains confident in its ability to implement additional measures by the end of 2021 that are expected to result in the Company outperforming original synergy targets, resulting in a total of $325 million of annualized synergies.
Earnings Conference Call
Management will host a conference call on Friday, May 7, 2021 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of Gannett’s website, investors.gannett.com. The conference call may be accessed by dialing 1-877-451-6152 (from within the U.S.) or 1-201-389-0879 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Gannett First Quarter Earnings Call” or access code “13718389”. A simultaneous webcast of the conference call will be available to the public on a listen-only basis at investors.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Friday, May 21, 2021 by dialing 1-844-512-2921 (from within the U.S.) or 1-412-317-6671 (from outside of the U.S.); please reference access code “13718389”.
About Gannett
Gannett Co., Inc. (NYSE: GCI) is a subscription-led and digitally focused media and marketing solutions company committed to empowering communities to thrive. With an unmatched reach at the national and local level, Gannett touches the lives of millions with our Pulitzer Prize-winning content, consumer experiences and benefits, and advertiser products and services. Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S., and Newsquest, a wholly owned subsidiary operating in the United Kingdom with more than 120 local news media brands. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc., which are marketed under the LOCALiQ brand, and runs the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures. To connect with us, visit www.gannett.com.
Same Store Revenues
Same store revenues are based on GAAP revenues for Gannett for the current period, excluding (i) exited operations, (ii) currency impacts, and (iii) deferred revenue impacts related to the acquisition of Legacy Gannett.
Cautionary Statement Regarding Forward-Looking Statements
Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our ability to grow Adjusted EBITDA, measures expected to result in annualized cash interest savings, our ability to achieve our operating priorities, our digital revenue performance, shifts in our revenue mix and the timing of realizing such shifts, the potential sales of non-core assets, including the anticipated use of any proceeds from such sales, integration of our acquisitions, our ability, in terms of both amount and timing, to surpass $300 million of annualized synergies, our expectations, in terms of both amount and timing, with respect to debt repayment, real estate sales and debt refinancing, growth of and demand for our digital-only subscriptions and digital marketing and advertising services, our strategy, and future revenue trends and our ability to influence trends. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should
not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s 2020 Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
* * * *
| For investor inquiries, contact: | For media inquiries, contact: | |||||||
| Trisha Gosser | Stephanie Tackach | |||||||
| Investor Relations | Director, Public Relations | |||||||
| 212-479-3160 | 212-715-5490 | |||||||
| investors@gannett.com | stackach@gannett.com | |||||||
# # #
GANNETT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| Table No. 1 | |||||||||||
| In thousands, except share data | March 31, 2021 | December 31, 2020 | |||||||||
| Assets | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 163,505 | $ | 170,725 | |||||||
Accounts receivable, net of allowance for doubtful accounts of $17,124 and $20,843, as of March 31, 2021 and December 31, 2020, respectively | 275,933 | 314,305 | |||||||||
| Inventories | 32,457 | 35,075 | |||||||||
| Prepaid expenses and other current assets | 118,082 | 116,581 | |||||||||
| Total current assets | 589,977 | 636,686 | |||||||||
| Property, plant, and equipment, net | 552,462 | 590,272 | |||||||||
| Operating lease assets | 286,368 | 289,504 | |||||||||
| Goodwill | 534,211 | 534,088 | |||||||||
| Intangible assets, net | 797,862 | 824,650 | |||||||||
| Deferred tax assets | 103,269 | 90,240 | |||||||||
| Other assets | 190,302 | 143,474 | |||||||||
| Total assets | $ | 3,054,451 | $ | 3,108,914 | |||||||
| Liabilities and equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 377,370 | $ | 378,246 | |||||||
| Deferred revenue | 190,699 | 186,007 | |||||||||
| Current portion of long-term debt | 81,057 | 128,445 | |||||||||
| Other current liabilities | 48,396 | 48,602 | |||||||||
| Total current liabilities | 697,522 | 741,300 | |||||||||
| Long-term debt | 888,086 | 890,323 | |||||||||
| Convertible debt | 394,146 | 581,405 | |||||||||
| Deferred tax liabilities | 16,280 | 6,855 | |||||||||
| Pension and other postretirement benefit obligations | 95,542 | 99,765 | |||||||||
| Long-term operating lease liabilities | 271,496 | 274,460 | |||||||||
| Other long-term liabilities | 151,388 | 151,847 | |||||||||
| Total noncurrent liabilities | 1,816,938 | 2,004,655 | |||||||||
| Total liabilities | 2,514,460 | 2,745,955 | |||||||||
| Redeemable noncontrolling interests | (1,661) | (1,150) | |||||||||
| Commitments and contingent liabilities | |||||||||||
| Equity | |||||||||||
Preferred stock, $0.01 par value, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were issued and outstanding at March 31, 2021 and December 31, 2020 | — | — | |||||||||
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 144,443,628 shares issued and 142,541,701 shares outstanding at March 31, 2021; 139,494,741 shares issued and 138,102,993 shares outstanding at December 31, 2020 | 1,444 | 1,395 | |||||||||
Treasury stock, at cost, 1,901,927 shares and 1,391,748 shares at March 31, 2021 and December 31, 2020, respectively | (6,612) | (4,903) | |||||||||
| Additional paid-in capital | 1,421,977 | 1,103,881 | |||||||||
| Accumulated deficit | (928,753) | (786,437) | |||||||||
| Accumulated other comprehensive income | 53,596 | 50,173 | |||||||||
| Total equity | 541,652 | 364,109 | |||||||||
| Total liabilities and equity | $ | 3,054,451 | $ | 3,108,914 | |||||||
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Table No. 2 | Three months ended March 31, | ||||||||||
| In thousands, except per share amounts | 2021 | 2020 | |||||||||
| Advertising and marketing services | $ | 388,357 | $ | 487,010 | |||||||
| Circulation | 325,437 | 374,723 | |||||||||
| Other | 63,290 | 86,949 | |||||||||
| Total operating revenues | 777,084 | 948,682 | |||||||||
| Operating costs | 477,798 | 566,463 | |||||||||
| Selling, general and administrative expenses | 203,684 | 299,137 | |||||||||
| Depreciation and amortization | 58,103 | 78,024 | |||||||||
| Integration and reorganization costs | 13,404 | 28,254 | |||||||||
| Asset impairments | 833 | — | |||||||||
| Net loss on sale or disposal of assets | 4,745 | 657 | |||||||||
| Other operating expenses | 10,576 | 5,969 | |||||||||
| Total operating expenses | 769,143 | 978,504 | |||||||||
| Operating income (loss) | 7,941 | (29,822) | |||||||||
| Interest expense | 39,503 | 57,899 | |||||||||
| Loss on early extinguishment of debt | 19,401 | 805 | |||||||||
| Non-operating pension income | (23,878) | (18,489) | |||||||||
| Loss on Convertible notes derivative | 126,600 | — | |||||||||
| Other (income) expense, net | (1,875) | 1,590 | |||||||||
| Non-operating expense | 159,751 | 41,805 | |||||||||
| Loss before income taxes | (151,810) | (71,627) | |||||||||
| (Benefit) provision for income taxes | (9,109) | 8,979 | |||||||||
| Net loss | $ | (142,701) | $ | (80,606) | |||||||
| Net loss attributable to redeemable noncontrolling interests | (385) | (454) | |||||||||
| Net loss attributable to Gannett | $ | (142,316) | $ | (80,152) | |||||||
| Loss per share attributable to Gannett - basic | $ | (1.06) | $ | (0.61) | |||||||
| Loss per share attributable to Gannett - diluted | $ | (1.06) | $ | (0.61) | |||||||
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Table No. 3 | Three months ended March 31, | ||||||||||
In thousands | 2021 | 2020 | |||||||||
| Operating activities: | |||||||||||
| Net loss | $ | (142,701) | $ | (80,606) | |||||||
| Adjustments to reconcile net loss to operating cash flows: | |||||||||||
| Depreciation and amortization | 58,103 | 78,024 | |||||||||
| Share-based compensation expense | 3,423 | 11,577 | |||||||||
| Non-cash interest expense | 6,118 | 56,160 | |||||||||
| Net loss on sale or disposal of assets | 4,745 | 657 | |||||||||
| Loss on Convertible notes derivative | 126,600 | — | |||||||||
| Loss on early extinguishment of debt | 19,401 | 805 | |||||||||
| Asset impairments | 833 | — | |||||||||
| Pension and other postretirement benefit obligations | (48,538) | (30,545) | |||||||||
| Change in other assets and liabilities, net | 33,332 | 24,417 | |||||||||
| Net cash provided by operating activities | 61,316 | 60,489 | |||||||||
| Investing activities: | |||||||||||
| Purchases of property, plant, and equipment | (7,607) | (13,783) | |||||||||
| Proceeds from sale of real estate and other assets | 10,123 | 10,400 | |||||||||
| Change in other investing activities | — | (36) | |||||||||
| Net cash provided by (used for) investing activities | 2,516 | (3,419) | |||||||||
| Financing activities: | |||||||||||
| Payments of debt issuance costs | (33,921) | — | |||||||||
| Borrowings under term loans | 1,045,000 | — | |||||||||
| Repayments under term loans | (1,083,791) | (12,701) | |||||||||
| Payments for employee taxes withheld from stock awards | (1,707) | (1,615) | |||||||||
| Changes in other financing activities | (280) | (363) | |||||||||
| Net cash used for financing activities | (74,699) | (14,679) | |||||||||
| Effect of currency exchange rate change | 314 | 1,554 | |||||||||
| (Decrease) increase in cash, cash equivalents and restricted cash | (10,553) | 43,945 | |||||||||
| Balance of cash, cash equivalents and restricted cash at beginning of year | 206,726 | 188,664 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 196,173 | $ | 232,609 | |||||||
GANNETT CO., INC.
SEGMENT INFORMATION
(Unaudited)
| Table No. 4 | Three months ended March 31, | ||||||||||
In thousands | 2021 | 2020 | |||||||||
| Operating revenues: | |||||||||||
| Publishing | $ | 699,585 | $ | 858,150 | |||||||
| Digital Marketing Solutions | 102,281 | 121,281 | |||||||||
| Corporate and Other | 3,074 | 3,009 | |||||||||
| Intersegment eliminations | (27,856) | (33,758) | |||||||||
| Total | $ | 777,084 | $ | 948,682 | |||||||
| Adjusted EBITDA: | |||||||||||
| Publishing | $ | 102,208 | $ | 110,928 | |||||||
| Digital Marketing Solutions | 9,172 | 7,887 | |||||||||
| Corporate and Other | (10,915) | (19,746) | |||||||||
| Total | $ | 100,465 | $ | 99,069 | |||||||
| Depreciation and amortization: | |||||||||||
| Publishing | $ | 46,387 | $ | 66,957 | |||||||
| Digital Marketing Solutions | 7,829 | 7,331 | |||||||||
| Corporate and Other | 3,887 | 3,736 | |||||||||
| Total | $ | 58,103 | $ | 78,024 | |||||||
GANNETT CO., INC.
SAME STORE REVENUES
(Unaudited)
| Table No. 5 | Three months ended March 31, | ||||||||||||||||
In thousands | 2021 | 2020 | % Change | ||||||||||||||
| Total revenues | $ | 777,084 | $ | 948,682 | (18.1) | % | |||||||||||
| Currency impact | (4,541) | — | *** | ||||||||||||||
| Exited operations | (25) | (25,565) | (99.9) | % | |||||||||||||
| Deferred revenue adjustment | — | 1,834 | (100.0) | % | |||||||||||||
| Same store total revenues | $ | 772,518 | $ | 924,951 | (16.5) | % | |||||||||||
| Advertising and marketing services revenues | $ | 388,357 | $ | 487,010 | (20.3) | % | |||||||||||
| Currency impact | (2,979) | — | *** | ||||||||||||||
| Exited operations | (25) | (15,713) | (99.8) | % | |||||||||||||
| Deferred revenue adjustment | — | 594 | (100.0) | % | |||||||||||||
| Same store advertising and marketing services revenues | $ | 385,353 | $ | 471,891 | (18.3) | % | |||||||||||
| Circulation revenues | $ | 325,437 | $ | 374,723 | (13.2) | % | |||||||||||
| Currency impact | (1,247) | — | *** | ||||||||||||||
| Exited operations | — | (3,560) | (100.0) | % | |||||||||||||
| Deferred revenue adjustment | — | 1,240 | (100.0) | % | |||||||||||||
| Same store circulation revenues | $ | 324,190 | $ | 372,403 | (12.9) | % | |||||||||||
| Other revenues | $ | 63,290 | $ | 86,949 | (27.2) | % | |||||||||||
| Currency impact | (315) | — | *** | ||||||||||||||
| Exited operations | — | (6,292) | (100.0) | % | |||||||||||||
| Same store other revenues | $ | 62,975 | $ | 80,657 | (21.9) | % | |||||||||||
*** Indicates a percentage change greater than 100.
USE OF NON-GAAP INFORMATION
The Company uses non-GAAP financial performance and liquidity measures to supplement the financial information
presented on a GAAP basis. These non-GAAP financial measures, which may not be comparable to similarly titled measures
reported by other companies, should not be considered in isolation from or as a substitute for the related GAAP measures and
should be read together with financial information presented on a GAAP basis.
The Company defines its non-GAAP measures as follows:
•Adjusted EBITDA is a non-GAAP performance measure the Company believes offers a useful view of the overall operations of our business. The Company defines Adjusted EBITDA as Net income (loss) attributable to Gannett before: (1) Income tax expense (benefit), (2) Interest expense, (3) Gains or losses on the early extinguishment of debt, (4) Non-operating pension income (expense), (5) Loss on Convertible notes derivative, (6) Other non-operating items, including equity income, (7) Depreciation and amortization, (8) Integration and reorganization costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets, (12) Share-based compensation, (13) Other operating expenses, including third-party debt expenses and acquisition costs, (14) Gains or losses on the sale of investments and (15) certain other non-recurring charges. The most directly comparable GAAP measure is Net income (loss) attributable to Gannett.
•Adjusted EBITDA margin is a non-GAAP performance measure the Company believes offers a useful view of the overall operations of our business. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total Operating revenues.
•Free cash flow is a non-GAAP liquidity measure that adjusts our reported GAAP results for items we believe are critical to the ongoing success of our business. The Company defines Free cash flow as Net cash provided by operating activities as reported on the Statement of Cash Flows less capital expenditures, which results in a figure representing Free cash flow available for use in operations, additional investments, debt obligations, and returns to stockholders. The most directly comparable GAAP financial measure is Net cash from operating activities.
Management’s Use of Non-GAAP Measures
Adjusted EBITDA, Adjusted EBITDA margin and Free cash flow are not measurements of financial performance under GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), margin, cash flow from operating activities, or any other measure of performance or liquidity derived in accordance with GAAP. We believe these non-GAAP financial measures as we have defined them are helpful in identifying trends in our day-to-day performance because these items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance.
Adjusted EBITDA and Adjusted EBITDA margin provide us with measures of financial performance, independent of items that are beyond the control of management in the short-term, such as depreciation and amortization, taxation, non-cash impairments, and interest expense associated with our capital structure. These metrics measure our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA and Adjusted EBITDA margin are metrics we use to review the financial performance of our business on a monthly basis.
We use Adjusted EBITDA and Adjusted EBITDA margin as measures of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results.
Limitations of Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow
Each of our non GAAP measures have limitations as an analytical tool. They should not be viewed in isolation or as a substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) include: the cash portion of interest / financing expense, income tax (benefit) provision, and charges related to asset impairments, which may significantly affect our financial results.
Management believes these items are important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.
Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow are not alternatives to net income, income from operations, or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. As such, they should not be considered or relied upon as a substitute or alternative for any such GAAP financial measure. We strongly urge you to review the reconciliations of Net income (loss) attributable to Gannett to Adjusted EBITDA and Cash provided by operations to Free Cash Flow along with our condensed consolidated financial statements included elsewhere in this report. We also strongly urge you to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow are not measures of financial performance under GAAP and are susceptible to varying calculations, the Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.
GANNETT CO., INC.
NON-GAAP FINANCIAL INFORMATION
ADJUSTED EBITDA
(Unaudited)
| Table No. 6 | Three months ended March 31, 2021 | ||||||||||||||||||||||
In thousands | Publishing | Digital Marketing Solutions | Corporate and Other | Consolidated Total | |||||||||||||||||||
| Net income (loss) attributable to Gannett | $ | 66,213 | $ | 1,081 | $ | (209,610) | $ | (142,316) | |||||||||||||||
| Benefit for income taxes | — | — | (9,109) | (9,109) | |||||||||||||||||||
| Interest expense | 11 | — | 39,492 | 39,503 | |||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 19,401 | 19,401 | |||||||||||||||||||
| Non-operating pension income | (23,878) | — | — | (23,878) | |||||||||||||||||||
| Loss on Convertible notes derivative | — | — | 126,600 | 126,600 | |||||||||||||||||||
| Other non-operating expense (income), net | 394 | 96 | (2,365) | (1,875) | |||||||||||||||||||
| Depreciation and amortization | 46,387 | 7,829 | 3,887 | 58,103 | |||||||||||||||||||
| Integration and reorganization costs | 7,326 | 166 | 5,912 | 13,404 | |||||||||||||||||||
| Other operating expenses | — | — | 10,576 | 10,576 | |||||||||||||||||||
| Asset impairments | 833 | — | — | 833 | |||||||||||||||||||
| Net loss on sale or disposal of assets | 4,680 | — | 65 | 4,745 | |||||||||||||||||||
| Share-based compensation expense | — | — | 3,423 | 3,423 | |||||||||||||||||||
| Other items | 242 | — | 813 | 1,055 | |||||||||||||||||||
| Adjusted EBITDA (non-GAAP basis) | $ | 102,208 | $ | 9,172 | $ | (10,915) | $ | 100,465 | |||||||||||||||
| Net income (loss) attributable to Gannett margin | 9.5 | % | 1.1 | % | NM | (18.3) | % | ||||||||||||||||
| Adjusted EBITDA margin (non-GAAP basis) | 14.6 | % | 9.0 | % | NM | 12.9 | % | ||||||||||||||||
| Three months ended March 31, 2020 | |||||||||||||||||||||||
In thousands | Publishing | Digital Marketing Solutions | Corporate and Other | Consolidated Total | |||||||||||||||||||
| Net income (loss) attributable to Gannett | $ | 33,840 | $ | (5,073) | $ | (108,919) | $ | (80,152) | |||||||||||||||
| Provision for income taxes | — | — | 8,979 | 8,979 | |||||||||||||||||||
| Interest expense | 18 | — | 57,881 | 57,899 | |||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 805 | 805 | |||||||||||||||||||
| Non-operating pension income | (5,321) | — | (13,168) | (18,489) | |||||||||||||||||||
| Other non-operating (income) expense, net | (463) | 3,624 | (1,571) | 1,590 | |||||||||||||||||||
| Depreciation and amortization | 66,957 | 7,331 | 3,736 | 78,024 | |||||||||||||||||||
| Integration and reorganization costs | 13,309 | 1,388 | 13,557 | 28,254 | |||||||||||||||||||
| Other operating expenses | — | — | 5,969 | 5,969 | |||||||||||||||||||
| Net loss on sale or disposal of assets | 592 | 23 | 42 | 657 | |||||||||||||||||||
| Share-based compensation expense | — | — | 11,577 | 11,577 | |||||||||||||||||||
| Other items | 1,996 | 594 | 1,366 | 3,956 | |||||||||||||||||||
| Adjusted EBITDA (non-GAAP basis) | $ | 110,928 | $ | 7,887 | $ | (19,746) | $ | 99,069 | |||||||||||||||
| Net income (loss) attributable to Gannett margin | 3.9 | % | (4.2) | % | NM | (8.4) | % | ||||||||||||||||
| Adjusted EBITDA margin (non-GAAP basis) | 12.9 | % | 6.5 | % | NM | 10.4 | % | ||||||||||||||||
NM indicates not meaningful.
GANNETT CO., INC.
NON-GAAP FINANCIAL INFORMATION
FREE CASH FLOW
(Unaudited)
| Table No. 7 | |||||
In thousands | Three months ended March 31, 2021 | ||||
| Net cash flow provided by operating activities (GAAP basis) | $ | 61,316 | |||
| Capital expenditures | (7,607) | ||||
Free cash flow (non-GAAP basis)(a) | $ | 53,709 | |||
(a) Free cash flow for the first quarter of 2021 was negatively impacted by $21.1 million of integration and reorganization costs and $9.7 million of third-party fees related to the 5-Year Term Loan.