MCLEAN, Va.--(BUSINESS WIRE)--Gannett Co., Inc. (NYSE: GCI) today reported first quarter 2018 financial results for the period ended March 31, 2018. Our first quarter 2018 comprised 90 days, one less day (Sunday) than our first quarter 2017.

"We are pleased with the momentum we saw this quarter in digital advertising revenues, which reached 43.6% of total advertising revenues in the quarter," said Robert J. Dickey, president and chief executive officer. "Overall, first quarter results were ahead of our expectations driven by solid growth in digital advertising revenues, especially within the digital marketing services category."

"We also experienced lower than expected costs in the quarter primarily driven by favorable savings in compensation and benefits," said Ali Engel, senior vice president and chief financial officer. "This quarter's strong results are a testament to our continued focus on efficiencies to drive steady cash flow, while also investing for our future. Finally, we were pleased to complete a $200 million convertible debt financing in early April that provides us continued flexibility to execute on our strategic transformation."

First Quarter 2018 Consolidated Results

• Operating revenues were $723.0 million, compared to $773.5 million in the first quarter of 2017.
• Favorable changes in foreign currency exchange rates benefited revenues by $7.5 million.
• Same store, day adjusted (1) operating revenues declined 7.2%, an improvement compared to the 8.8% decline in the fourth quarter of 2017. The improvement was due to stronger digital advertising revenue and our strategic subscriber pricing initiatives.
• Total digital revenues increased 9% to $255.5 million, or approximately 35% of total revenue.
• GAAP net losses were $0.4 million, including $14.4 million of after-tax restructuring, asset impairment charges and other costs.
• Adjusted EBITDA (2) totaled $55.1 million compared to $69.7 million in the first quarter of 2017.

First Quarter 2018 Publishing Segment

• Publishing segment operating revenues were $638.7 million compared to $694.9 million in the first quarter of 2017. On a same store, day adjusted basis, segment revenues declined 8.6%.
• Same store, day adjusted print advertising revenues declined 17.2% year-over-year, an improvement from the 18.5% decline in the fourth quarter of 2017. The improvement reflects the benefit from an earlier Easter and a revenue lift associated with the redesign of our obituary sections.
• Digital advertising revenues increased 7.3% to $101.5 million compared to the prior year quarter. On a same store, day adjusted basis, digital advertising revenues increased 5.5%, a strong improvement from the 0.7% gain in the fourth quarter.
  • Digital marketing services advertising revenues of $17.1 million rose 44.3%, on a same store, day adjusted basis, driven by higher client counts and higher average revenue per client.
  • Digital media advertising revenues of $64.4 million rose 6.2%, on a same store, day adjusted basis, due to strong growth in both on- and off-platform revenues.
  • Digital classified advertising revenues of $20.0 million fell 16.2%, on a same store, day adjusted basis, largely reflecting expected declines in the challenged employment category.

• Same store, day adjusted circulation revenues fell 5.1% from the prior year quarter, an improvement from the 6.7% decline in the fourth quarter of 2017 reflecting our full access subscriber pricing initiatives, offset by expected declines in single copy.
• Digital-only subscriber volumes grew 51.0% year-over-year and now total approximately 382,000.
• Publishing segment Adjusted EBITDA was $77.8 million compared to $91.7 million in the prior year quarter.

First Quarter 2018 ReachLocal Segment

• Operating revenues were $96.5 million, up 24.4% year-over-year.
  • The increase was attributable to the migration of Gannett clients onto the ReachLocal platform, the addition of SweetIQ, and organic growth in North America and Latin America.
• Adjusted EBITDA was $6.2 million, nearly doubling from the year ago level and representing a 6.4% margin as compared to 4.1% in the first quarter of 2017.
  • Improved profitability in the quarter was driven by solid growth in average revenue per client due to more successful cross-selling and the migration of Gannett clients onto the ReachLocal platform.

First Quarter 2018 Cash Flow

• Net cash flow from operating activities was approximately $65.2 million compared to $31.4 million in the prior year quarter.
• Capital expenditures were approximately $13.5 million, primarily for product development, technology investments, and maintenance projects.
• The company paid dividends of $18.1 million; there were no share repurchases.
• As of the end of the first quarter, the company had a cash balance of $145.9 million and $305.0 million drawn on its revolver, or net debt of $159.1 million.
  • At the beginning of May, the company's revolver balance had been reduced to $40.0 million with proceeds from its $201.3 million convertible note offering and cash on hand.

Outlook

For 2018, the company reiterates the following:

• Consolidated revenues of $2.93-3.03 billion.
• Consolidated Adjusted EBITDA outlook of $330-340 million.
• Capital expenditures of $65-75 million.
• Depreciation and amortization of $140-150 million, excluding accelerated depreciation related to facility consolidations.
• The non-operating cost associated with our pension plans, recorded in other non-operating items, is currently estimated to be a credit of $5-10 million as compared to an expense of $21 million in 2017.
• An effective tax rate of 25-27%.

Non-GAAP Financial Measures

This press release also contains a discussion of certain non-GAAP financial measures that the company presents to allow investors and analysts to measure, analyze and compare its financial condition and results of operations in a meaningful and consistent manner. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying this press release.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to strengthening communities across our network. With an unmatched local-to-national reach, Gannett touches the lives of more than 110 million people monthly with our Pulitzer-Prize winning content, consumer experiences and benefits, and advertiser products and services. Gannett brands include USA TODAY NETWORK with the iconic USA TODAY and more than 100 local media brands, digital marketing services companies ReachLocal and SweetIQ, and U.K. media company Newsquest. To connect with us, visit www.gannett.com.