MCLEAN, Va.--(BUSINESS WIRE)--Gannett Co., Inc. (NYSE: GCI) today reported its financial results for the second quarter ended June 30, 2020. 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.

“While the second quarter was significantly impacted by the COVID-19 pandemic, our revenue was in line with the guidance we shared on our last earnings call and our EBITDA performance benefited from our expense reduction efforts," said Michael Reed, Gannett Chairman and Chief Executive Officer. "We saw sequential improvement to revenue each month during the quarter and successfully realized over $125 million of incremental expense savings during the quarter. In addition, we continued to execute on our operating and integration plans from the Acquisition, with over $160 million of cumulative annualized synergies implemented by the end of the quarter. Combining our incremental expense savings, our synergy implementation, and the normal course expense savings that rolled forward from the first quarter, our operating expenses included in Adjusted EBITDA were down 26%."

"At no time in our history has the value of high-quality journalism been as clear as it is right now at this intersection of a global pandemic and a nation in turmoil over systemic racism and inequality. Our journalists have worked tirelessly and doggedly to help keep our communities safe and informed, while exercising the crucial role of holding officials accountable. As digital, social platforms are overtaken by the spread of misinformation, our readers trust us to clear through the noise with credible, fact-based, fair reporting. And that is evidenced by audiences turning to us in record numbers since the beginning of the pandemic and very strong digital subscription growth. Our employees have been phenomenal, performing during these challenging times at the highest level, which is a testament to their commitment to our mission and our communities. We do not have certainty around how the pandemic will continue to affect our country and the economy, but we remain highly confident in our ability to continue to execute upon our operational and integration plans."

Financial Highlights

(1) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA and Free Cash Flow, and reconciliations to the most comparable GAAP measures.

Second Quarter 2020 Consolidated Results

• Second quarter revenues of $767.0 million rose 89.7% as compared to the prior year, reflecting the Acquisition.
  • Same store pro forma revenues (as defined and reconciled below) decreased 28.0%, due to unfavorable impacts resulting from the COVID-19 pandemic and general trends adversely impacting the publishing industry.
• Digital advertising and marketing services revenues were $168.8 million in the second quarter, or 22.0% of total revenues.
• Over $160 million in annualized synergy measures were implemented by the end of the second quarter, with approximately $41.2 million in savings recognized in the quarter.
• On a pro forma basis, operating expenses included in Adjusted EBITDA were down 26.3% to the prior year quarter due to the implementations of synergies, incremental cost measures in response to the COVID-19 pandemic, and normal course expense savings that rolled forward from the first quarter.
• Non-cash goodwill and intangible impairment of $393.4 million was recognized in the second quarter of 2020 in connection with the Company’s annual impairment testing. The non-cash charge was driven by the COVID-19 pandemic and the uncertainty the crisis has created.
• GAAP net loss attributable to Gannett of $436.9 million in the second quarter reflects $393.4 million of non-cash goodwill and intangible impairment and $66.3 million of depreciation and amortization.
• Adjusted EBITDA totaled $78.0 million. Margins in the quarter were 10.2%, despite the pressures from the COVID-19 pandemic.

Balance Sheet & Cash Flow

• As of the end of the second quarter, the Company had cash and cash equivalents of $158.6 million.
• During the quarter, the Company repaid $6.3 million in principal under its credit facility.
• Sold $7.5 million of real estate in the second quarter and used the net proceeds to pay down debt.
  • Over $15.0 million in real estate sales under contract expected to close during the third quarter; and on track to sell an additional $100 - $125 million of real estate by the end of 2021, which we expect will enable us to accelerate debt repayment.
• Capital expenditures were $8.4 million, primarily for product development, technology investments, and maintenance projects. We expect capital expenditures to be between $9 - $10 million in both the third and fourth quarters.
• Cash flow used by operations in the second quarter of 2020 was $35.8 million compared to cash flow provided of $25.9 million for the prior year quarter primarily driven by interest paid and integration costs related to the Gannett acquisition.

COVID-19 Response

• Strengthened balance sheet and continue to preserve liquidity:
  • Reduced expenses for the second quarter by over $125 million through implementation of furloughs, significant pay reductions, reductions in force, and cancellation of non-essential travel and spending.
    • Expect to maintain expenses, other than variable costs of goods sold, in line with the second quarter for the remainder of 2020.
  • Reduced planned capital expenditures for 2020 by approximately 20%.
  • Suspended quarterly dividend until conditions improve.
  • Implemented NOL Rights Plan to protect approximately $435 million in tax assets.
  • Deferred over $50 million of payments, under the CARES Act, using provisions relating to ERISA pension contribution deferral and employer FICA tax deferral.
  • Restructured required additional pension contributions, that were originally due in 2020 and 2021, into quarterly installments beginning in the fourth quarter of this year through the third quarter of 2022.
• Adapted our workplaces and continue to promote the health and safety of our employees:
  • Transitioned 95% of our non-production and delivery employees to work from home by late March.
    • Thoughtfully exploring how to prepare our offices as safe work environments for those employees who wish to return.
  • Implemented social distancing measures and hygiene best practices in line with CDC and WHO guidelines for all facilities and employees in product and delivery roles.
  • Maintained consistent operations across all properties, with no significant disruptions.
• Supported our communities by providing high quality journalism and by creating innovative solutions to support small businesses:
  • Created new tailored content for readers and their communities, which has received more than 885 million views since mid-February, nearly all of which is available for free:
    • Nation’s Health daily COVID-19 specific section runs in USA TODAY in print and digital and is available in all local e-editions; real-time updates online.
    • The USA TODAY and 35 local markets publish coronavirus newsletters for our readers.
  • Support Local platform has had over 1.6 million page views which provided communities with an easy way to discover opportunities to help their favorite local businesses.
    • Free business listings providing special services, such as enabling gift cards and delivery services.

Publishing Segment

• Publishing segment revenues totaled $695.9 million in the second quarter.
• Circulation revenues totaled $342.6 million in the second quarter.
  • Same store pro forma circulation revenues decreased 13.6% in the second quarter, partially stemming from a reduction in volume of our single copy and home delivery sales, reflecting the impact of COVID-19 pandemic on businesses that sell single copies of our publications as well as general industry trends.
• Print advertising revenues totaled $187.9 million in the second quarter.
  • Same store pro forma print advertising revenues decreased 45.0% compared to the prior year reflecting the negative impact from the COVID-19 pandemic.
• Digital advertising and marketing services revenues were $104.4 million in the second quarter.
  • Same store pro forma digital advertising and marketing services revenues decreased 26.7% versus the prior year period, reflecting the impacts from the COVID-19 pandemic beginning in the latter part of the first quarter which negatively affected digital revenues across each category.
• Commercial printing and other revenues contributed $61.0 million in the second quarter.
• Paid digital-only subscribers now total approximately 927,000, up 31.3% year-over-year on a pro forma basis.
• Publishing segment Adjusted EBITDA was $92.0 million, representing a margin of 13.2% for the quarter.

Marketing Solutions Segment

• Marketing Solutions segment revenues were $94.6 million in the second quarter.
  • Same store pro forma Marketing Solutions segment revenues decreased by 24.0% to the prior year driven by the impacts of the COVID-19 pandemic which began in the latter part of the first quarter of 2020.
• Marketing Solutions segment Adjusted EBITDA was $2.8 million, representing a margin of 2.9% for the quarter.

Integration Update

• Implemented cumulative measures by the end of the second quarter that will result in over $160 million in annualized savings.
  • Realized $41.2 million in savings in the second quarter.
• Expect to have implemented measures that will result in over $200 million in annualized savings by the end of the third quarter.
  • Expect to realize $50 - $55 million in savings during the third quarter.
• 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.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to 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 millions 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 46 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., Gannett Ventures, formerly 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.