MCLEAN, Va.--(BUSINESS WIRE)--Gannett Co., Inc. (NYSE: GCI) today reported its financial results for the fourth quarter and full year ended December 31, 2019. Prior to November 19, 2019, our corporate name was New Media Investment Group Inc., and Gannett Co., Inc. was a separate publicly traded company. On November 19, 2019, New Media acquired Legacy Gannett. In connection with the Acquisition, Legacy Gannett became a wholly owned subsidiary of New Media, and New Media changed its name to Gannett Co., Inc.

The discussion below presents “consolidated results” for the Company as a whole and “segment results” for our primary reporting segments: Publishing and Marketing Solutions. Within each of these categories, we provide (i) our actual GAAP results, which reflect a full quarter or year (as applicable) of Legacy New Media operations and six weeks of Legacy Gannett operations, (ii) same store revenue trends for Legacy Gannett and Legacy New Media, each on a stand-alone basis for the entire period, (iii) pro forma results, which reflect the consolidated operations, adjusted as if New Media had owned Legacy Gannett for the entire period presented, and (iv) Adjusted EBITDA, which is our non-GAAP measure of operating results, calculated based on actual results (with six weeks of Legacy Gannett results) and on a pro forma basis (assuming Legacy Gannett was owned for the entire period).

Financial Highlights

(1) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA and the reconciliation to the most comparable GAAP measure included herein.

(2) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Free cash flow and the reconciliation to the most comparable GAAP measure included herein. Free cash flow for the fourth quarter was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments. Free cash flow for the full year was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $45.4 million of integration and reorganization costs, $38.4 million of acquisition costs, and $11.3 million of other one-time adjustments.

Fourth Quarter 2019 Consolidated Results

• Fourth quarter GAAP revenues of $699.3 million rose 68.1% as compared to the prior year quarter reflecting the Acquisition.
  • Legacy Gannett fourth quarter same store revenues decreased 10.1% year-over-year.
  • Legacy New Media fourth quarter same store revenues decreased 9.6% year-over-year.

• Pro forma digital advertising and marketing services revenues reached $231.8 million in the fourth quarter, or 22.0% of total pro forma revenues.
• GAAP net loss attributable to Gannett of $95.1 million in the fourth quarter reflects a one-time non-cash write-down of $100.7 million related to the revaluation of intangibles and $145.6 million one-time cash charges related to restructuring and transaction related costs.
• Adjusted EBITDA totaled $98.8 million and represented a 14.1% margin. On a pro forma basis, Adjusted EBITDA totaled $141.2 million and represented a 13.4% margin.

Full Year 2019 Consolidated Results

• 2019 GAAP revenues of $1.9 billion rose 22.4% as compared to the prior year reflecting the Acquisition.
  • Legacy Gannett 2019 same store revenues decreased 9.4% year-over-year.
  • Legacy New Media 2019 same store revenues decreased 8.0% year-over-year.

• Pro forma digital advertising and marketing services revenues reached $912.5 million in 2019, or 21.8% of total pro forma revenues.
• GAAP net loss attributable to Gannett of $119.8 million in 2019 reflects a one-time $100.7 million non-cash write-down related to the revaluation of intangibles and $182.9 million one-time cash charges related to restructuring and transaction related costs.
• Adjusted EBITDA totaled $223.9 million and represented a 12.0% margin. On a pro forma basis, Adjusted EBITDA reached $485.5 million and represented a 11.6% margin.

"We are pleased to announce our first earnings report since completing our acquisition of Legacy Gannett in November," said Michael Reed, Gannett Chairman and Chief Executive Officer. "Although we acquired Legacy Gannett only six weeks before the end of the quarter, we immediately began implementing our integration plan. By the end of the first quarter of 2020, we expect to have implemented measures that will result in over $60 million in annualized savings. As a result of these measures, we expect to realize $10 - $15 million of savings in the first quarter, and we expect the savings in subsequent quarters to increase as we continue to implement synergies throughout the year. We remain highly confident that we will complete the implementation of measures in 2020 corresponding to more than half of our $300 million synergy target related to the acquisition of Legacy Gannett."

"We are also happy to report that we are ahead of schedule in paying down debt. As announced earlier in January, we paid down $35.8 million in principal on our credit facility during the fourth quarter. Subsequent to the quarter, we have paid down an additional $9.4 million. Real estate sales have driven $8.9 million of the repayments, and we anticipate an additional $100 - $125 million in real estate sales by the end of 2021."

"As expected, same store trends weakened in the fourth quarter, in large part reflecting the runoff of more aggressive subscriber pricing initiatives that Legacy Gannett implemented in the fourth quarter of 2018. Beyond circulation revenue, same store advertising trends were a bit weaker than expected primarily due to disruption from the Acquisition. We have already seen trends improve in the first quarter and are confident in our ability to sustain these positive trends. In the fourth quarter, we saw strong gains in digital marketing services revenues at Legacy Gannett in our local markets, and the Legacy New Media events business nearly doubled its revenues compared to the prior year period. We were pleased with the strong momentum we saw in our key growth areas, which positioned us for a solid start to 2020."

"Our Adjusted EBITDA in the quarter was negatively impacted by both the revenue softness and higher than anticipated healthcare claims, while our Free cash flow reflects a significant amount of one-time costs related to the Acquisition. Adjusting for these one-time items, Free cash flow would have been $65.9 million. With integration efforts ongoing, we remain very optimistic about our ability to deliver on our synergy targets, pay down debt, and return capital to shareholders, while continuing to serve as a trusted source of high quality news to the communities we serve."

Fourth Quarter 2019 Publishing Segment

• Publishing segment revenues totaled $653.9 million in the fourth quarter; on a pro forma basis, Publishing segment revenues were $964.7 million.
• Print advertising revenues totaled $240.9 million in the fourth quarter; on a pro forma basis, print advertising revenues were $334.1 million, reflecting continued secular pressures.
  • Same store Legacy Gannett print advertising revenues decreased 20.1% as compared to the prior year quarter.
  • Same store Legacy New Media print advertising revenue decreased 16.3%, as compared to the prior year quarter.
• Digital advertising and marketing services revenues were $90.1 million in the fourth quarter; on a pro forma basis, digital advertising and marketing services revenues were $150.3 million.
  • Legacy Gannett same store digital advertising and marketing services revenues decreased 1.6% as compared to the prior year quarter, an improvement from the third quarter trend, reflecting improved digital marketing services results.
  • Legacy New Media same store digital advertising and marketing services revenues decreased 0.4% year-over-year.
• Circulation revenues totaled $255.6 million in the fourth quarter; on a pro forma basis, circulation revenues were $384.4 million.
  • Legacy Gannett same store circulation revenues decreased 10.3% year-over-year, as expected, reflecting the cycling of last year's more aggressive pricing initiatives.
  • Legacy New Media same store circulation revenues decreased 7.2% from the prior year.
• Commercial printing and other revenues contributed $67.3 million to Publishing segment revenues in the fourth quarter.
• Paid digital-only subscriber volumes now total approximately 812,000, up 25.3% year-over-year on a pro forma basis.
• Publishing segment Adjusted EBITDA was $113.3 million, representing a margin of 17.3% for the quarter.

Fourth Quarter 2019 Marketing Solutions Segment

• Marketing Solutions segment revenues were $69.3 million in the fourth quarter; on a pro forma basis, Marketing Solutions segment revenues were $122.7 million.
  • Legacy Gannett same store digital marketing services revenues increased 1.8% as compared to the prior year, similar to the 2.5% gain in the third quarter. Revenues across the Legacy Gannett local markets achieved another quarter of robust growth, driven by an increase in the number of clients.
• Marketing Solutions segment Adjusted EBITDA was $4.0 million, representing a margin of 5.8% for the quarter.

Fourth Quarter 2019 Cash Flow

• Cash flow from operations was negative $73.0 million compared to positive $37.6 million for the prior year quarter, as net cash used in operating activities from Legacy Gannett of $72.4 million included additional pension and postretirement contributions of $92.4 million, most of which were related to an $87.8 million pay-out of pension benefits upon change-in-control. Additionally, cash flow from operations was reduced by $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments.
• Capital expenditures were $6.7 million, primarily for product development, technology investments, and maintenance projects.
• The Company repaid $35.8 million in principal under its credit facility.
• As of the end of the fourth quarter, the Company had a cash balance of $156.0 million.

2020 Dividend

We expect to resume paying a quarterly dividend with respect to the first quarter of 2020. Consistent with our past practice, any dividend declared with respect to the first quarter is expected to be announced and paid in May. We expect the amount of this dividend to be $0.19 per share.

Under the terms of the credit facility that we entered into on November 19, 2019 in connection with the Acquisition, we are prohibited from paying cash dividends until after April 2020 and thereafter will be permitted to pay cash dividends only in accordance with the limitations set forth in our credit facility. Accordingly, our Board of Directors did not declare a dividend with respect to the fourth quarter of 2019. In addition, our Board has not yet declared any dividend with respect to the first quarter of 2020 or any future quarter, and there can be no guarantee as to the amount and timing of any future dividend.

Integration Update

By the end of the first quarter of 2020, the Company expects to have implemented measures that will result in over $60 million in annualized savings. As a result of these measures, the Company expects to realize $10 - $15 million in savings in the first quarter and further savings in each subsequent quarter, as it continues to implement synergies throughout the year. Management remains highly confident in its ability to implement measures by the end of 2021 that are expected to result in $300 million in synergies, with more than half of such measures expected to be completed in 2020.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to fostering the communities in our network and helping them build relationships with their local businesses. With an unmatched reach at the national and local level, Gannett touches the lives of nearly 150 million people monthly with our Pulitzer-Prize winning content, consumer experiences and benefits, and advertiser products and services. Our portfolio includes the USA TODAY, local media organizations in 47 states in the U.S. and Guam, and Newsquest, a wholly owned subsidiary with over 140 local media brands operating in the United Kingdom. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc. and runs the largest media-owned events business in the U.S., GateHouse Live. Effective November 20, 2019, following the completion of its merger with Gannett, New Media Investment Group Inc. trades on the New York Stock Exchange under Gannett Co., Inc. and its ticker symbol has changed to “GCI”. To connect with us, visit www.gannett.com.