Ali Engel, Chief Financial Officer - June 2018 - Gannett Investor ...
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June 2018 Ali Engel, Chief Financial Officer
Disclaimers
This presentation may include certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. Forward-looking
statements include all statements that are not historical facts. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and
similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future
performance. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and
expectations of our management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be
achieved or accomplished. Whether or not any such forward-looking statements are in fact achieved will depend on future events, some of which are beyond our control. The matters
discussed in these forward-looking statements are subject to a number of risks, trends, uncertainties and other factors that could cause actual results to differ materially from those
projected, anticipated or implied in the forward-looking statements. These factors include, among other things:
• our ability to achieve our strategic transformation;
• an accelerated decline in general print readership and/or advertiser patterns as a result of competitive alternative media or other factors;
• an inability to adapt to technological changes or grow our digital businesses;
• risks associated with the operation of an increasingly digital business, such as rapid technological changes, frequent new product introductions, declines in web traffic levels,
technical failures and proliferation of ad blocking technologies;
• macroeconomic trends and conditions;
• competitive pressures in the markets in which we operate;
• increases in newsprint costs over the levels anticipated or declines in newsprint supply;
• potential disruption or interruption of our IT systems due to accidents, extraordinary weather events, civil unrest, political events, terrorism or cyber security attacks;
• variability in the exchange rate relative to the U.S. dollar of currencies in foreign jurisdictions in which we operate;
• risks and uncertainties related to strategic acquisitions or investments, including distraction of management attention, incurrence of additional debt, integration challenges, and
failure to realize expected benefits or synergies or to operate businesses effectively following acquisitions;
• our ability to consummate the acquisition of WordStream on a timely basis or at all;
• risks and uncertainties associated with our ReachLocal segment, including its significant reliance on Google for media purchases, its international operations and its ability to develop
and gain market acceptance for new products or services;
• our ability to protect our intellectual property or defend successfully against infringement claims;
• our ability to attract and retain employees;
• labor relations, including, but not limited to, labor disputes which may cause business interruptions, revenue declines or increased labor costs;
• risks associated with our underfunded pension plans;
• adverse outcomes in litigation or proceedings with governmental authorities or administrative agencies, or changes in the regulatory environment, any of which could encumber or
impede our efforts to improve operating results or the value of assets;
• volatility in financial and credit markets which could affect the value of retirement plan assets and our ability to raise funds through debt or equity issuances and otherwise affect
our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms; and
• other uncertainties relating to general economic, political, business, industry, regulatory and market conditions.
A further description of these and other important risks, trends, uncertainties and other factors is provided in the company’s filings with the U.S. Securities and Exchange Commission,
including the company’s annual report on Form 10-K for fiscal year 2017 and quarterly report on Form 10-Q for the first quarter of fiscal 2018. Any forward-looking statements should be
evaluated in light of these important risk factors. The company is not responsible for updating or revising any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
GANNETT 2
Gannett Overview
2017A Financial Summary
$3BN Revenue $1BN Digital Revenue $360MM Adjusted EBITDA $1BN Market Capitalization
BUSINESSES CONSUMERS
• Growing Digital PREMIUM LOCAL NEWS BRANDS • High-Quality Trusted
Revenues Content at Scale
• $2BN+ of 2017A • $1BN+ of 2017A
Advertising and NATIONAL PRESENCE Subscription Revenue
Services Revenue
• 127MM+ Monthly
• $700MM+ in 2017A(1) Unique Visitors (2)
Digital Advertising ROBUST DIGITAL MARKETING SOLUTIONS OFFERINGS
Revenues
GANNETT (1) Includes ReachLocal and corporate eliminations 3
(2) Per Comscore, as of April 2018
Nationwide Digital Marketing Solutions Provider
Managed Service Pending Acquisition (1) of Self Service
BUSINESSES
“Do-it-for-Me” “Do-it-Yourself”
$359MM 19,000 ~2 $55MM 29% 3,400
Average Products
2017 Revenue Active Clients NTM* Revenue EBITDA Margin Active Clients
/ Client
End-to-End Suite of Digital Marketing Solutions for SMBs at Any Stage
DIGITAL MARKETING
DIGITAL ADVERTISING WEB PRESENCE
SOFTWARE
▪ Search ▪ Geotargeting ▪ SEO ▪ Listings ▪ Lead Management
▪ Social Ads ▪ Retargeting ▪ Websites ▪ Reviews ▪ Marketing Automation
▪ Display Ads ▪ Live Chat ▪ Analytics
Note: NTM = next twelve months
GANNETT 4
(1) Subject to regulatory clearance and other customary closing conditions
A Large, Growing Local Digital Advertising Market…
~9MM
SMBs in the U.S.
$76.3B
$70.4B
$63.8B
$57.2B
$50.2B
2017 2018 2019 2020 2021
GANNETT Source: BIA Kelsey: U.S. Local Advertising Forecast 2017; IAB/Borrell. 5
…That is Increasingly Complex for SMBs to Manage
“I don’t have
enough time”
75%
of SMBs “I don’t know how
Advertise Digitally… to do it”
…But Run into
“I don’t have
Numerous Issues
necessary
personnel”
GANNETT Source: IAB/Borrell; ReachLocal Survey Data – 2017; LSA Pulse Survey 6
USA TODAY NETWORK Overview
The USA TODAY NETWORK delivers tremendous nationwide reach through strong, trusted national,
local and passion brands that form the foundation of our local-to-national network strategy
Local USA TODAY
▪ 12MM Local Sunday Local USA TODAY ▪ 3MM USA TODAY Average
Readership Daily Print Readership
▪ 42MM Average Monthly ▪ 97MM Average Monthly
Unique Visitors Passion Unique Visitors
▪ 109 Local Markets ▪ 25MM Mobile App
Downloads
GANNETT Source: comScore (April 2018), MRI, AAM, Scarborough 7
USA TODAY NETWORK Overview
Tangible Value for Advertisers and Consumers
Significant USA TODAY NETWORK Scale Top News Destination for Millennials Leading User Engagement
Avg. Monthly Unique Visitors (millions) Monthly Unique Visitors (millions) Page Views per Visit
127
37 35
117 27 2.8
110 2.3 2.1
2016 2017 YTD 2018
GANNETT Source: comScore (April 2018). 8
Largest Local Media Organization in the United States
Wisconsin
Des Moines (90)
WA Rochester (52)
ND ME
MT MN
Key Highlights OR ID Milwaukee (40)
Detroit (14)
NY VT
NH Westchester
SD MA
▪ #1 or #2 local news WY
WI
CT
RI
website in most CA
MI
NJ
PA
markets
NE IA
NV
UT IL DE
MO IN OH WV
CO MD
▪ 32% millennial audience KS VA Cincinnati (28)
across top markets AZ
KY
NC Indianapolis (35)
NM OK TN
▪ 1,500+ FTE Sales AR
AL Louisville (45)
Organization
MI SC
GA Knoxville (65)
▪ 3,000+ Journalists Guam Phoenix (12)
TX
LA FL
Nashville (37) Fort Myers (79)
Naples (146)
Large Markets / Clusters
38 3 2 4 Large Community
Print Content Design Advertising Creative Circulation
Sites Studios Services Call Centers Small Markets
GANNETT Note: Numbers in parentheses represent MSA rankings based on 2016 US Census estimates. 9
The Future of Gannett: Our Strategy
1 2 3 4
Leverage Accelerate growth Maximize the value Continue to pursue
nationwide scale of our digital of our legacy print opportunistic
and local presence revenue through business and acquisitions
to expand and innovative rationalize our cost
deepen our consumer base
relationships with experiences and
consumers and new marketing
businesses experiences for
businesses
GANNETT 10Strategy: Leverage Nationwide Scale and Local Presence to
Expand and Deepen Relationships
B2B Strategy B2C Strategy
Deliver ROI for advertisers Connect with / monetize targeted audiences
Focus on customer segments with the right Super-serve and retain our most valuable
1 1
product suite and level of service subscribers
Drive deeper penetration of digital Deepen our relationship with younger
2 marketing services and advertising 2 audiences through niche passion brands
products within our broad client base and events
Align storytelling efforts with consumers’
Leverage data and technology to drive
3 3 consumption habits across mobile, video
effectiveness and efficiency
and audio
Pursue acquisitions that expand our
Pursue acquisitions that fill an advertising
4 4 passion brands or fill a gap in our
or marketing service product gap
storytelling product portfolio
GANNETT 11Strategy: Accelerate Expansion of Digital Revenue
B2B Product Innovation
• New Sales Proposal Tool
Sales efficiency
Reduced churn
GANNETT 12Strategy: Accelerate Expansion of Digital Revenue
B2C Product Innovation
Core News New Franchises
GANNETT 13Strategy: Maximize the Value of Legacy Print Business
and Rationalize Cost Base
Track Record in Reducing Continued Opportunity to
Operating Expenses Maximize Profits
($ in millions)
• Distribution & Production
$3,709
$630MM+ • Regionalization / Centralization
In Opex
Reductions
• Standardization / Optimization
$3,079
• Outsourcing
(1)
PF2015 2017
GANNETT (1) Pro forma for acquisition of JMG, NJMG and ReachLocal. Source: Pro forma financials filed with 8-K on 10/21/16. 14Strategy: Pursue Opportunistic Acquisitions
Digital Marketing
Consumer Engagement Local Market Expansion
Software & Services
(August 2016, $163MM) (October 2016, undisclosed)
(April 2016, $261MM)
(April 2017, $32MM) (October 2017, undisclosed) (July 2016, $39MM)
Pending Acquisition of
(June 2018, $130MM)
GANNETT 15Financial Highlights
Recent Financial Highlights
Strong Digital Advertising Improvement and Focus on Digital
1 Transformation
Digital Advertising Revenues Reached 44% of Total Advertising
2 Revenues in Q1 ’18
Pending Acquisition of WordStream, a Digital Marketing Software
3 Company, to Further Enhance ReachLocal’s Digital Marketing Solutions
4 Continued Focus on Efficiencies to Drive Steady Cash Flow
$100MM Stock Repurchase Authorization and 2017 Annual
5 Dividend of $0.64 per share
6 Completed $200MM Convertible Debt Financing in April
GANNETT 17Strong Improvement in Digital Advertising Trends
ReachLocal Operating Revenue &
Q1 ’18 Highlights $120.0 Adjusted EBITDA Margin 9%
$101.4 8%
($ in millions) $93.8 $96.5
$100.0
$85.9 7%
$75.2 $77.6
$80.0 7% 6%
Results Ahead of Expectations Driven by Solid 6%
5%
1 Growth in Digital Advertising Revenues $60.0 5% 6%
4%
$40.0 4% 3%
2%
$20.0
1%
Publishing Segment Digital Advertising 1%
2 Revenues Grew 7% YoY
$- 0%
Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18
Operating Revenue Adjusted EBITDA Margin
ReachLocal Revenues were $96.5 Million, up
3 24%Year-Over-Year Digital Advertising Revenues as a % of Total
Advertising Revenues
41.8% 43.6%
37.9% 38.6% 40.1%
34.9%
Total Digital Revenues Increased 9% to $255.5
4
Million, or ~35% of Total Revenue
Strong Cash Flow and Real Estate Sales Led to
5
Significant Debt Paydown in Q1/early Q2 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18
GANNETT ReachLocal Q2’17 Adjusted EBITDA Margin impacted by one-time transition costs associated with migration of Gannett accounts to the ReachLocal platform 18Financial Summary
Revenue Total Digital Advertising Revenues
($ in millions)
($ in millions)
$3,146 $709.3
$2,885 $3,047
$495.5
$405.2
2015A 2016A 2017A 2015A 2016A 2017A
Adjusted EBITDA and Margin Free Cash Flow(1)
($ in millions) ($ in millions)
$387 $360 $360
$177 $164
13% 12% 11% $106
2015A 2016A 2017A 2015A 2016A 2017A
Adjusted EBITDA Margin
GANNETT (1) Defined as cash flow from operating activities less capital expenditures. 19We Are Gannett. From local to national, we engage the country to tell its stories.
Appendix
Proven and Experienced Management Team
Sharon Rowlands Alison K. Engel
Robert J. Dickey President, USA TODAY NETWORK
President & CEO Senior Vice President,
Marketing Solutions & CEO, ReachLocal Chief Financial Officer & Treasurer
Kris Barton
Chief Product Officer,
Maribel P. Wadsworth Kevin Gentzel
President, USA TODAY NETWORK Chief Revenue Officer
USA TODAY NETWORK
and Publisher of USA TODAY
GANNETT 22Non-GAAP Financial Metrics - Consolidated
($ in millions)
Fiscal Year
2017 2016 2015
Net income (GAAP basis) $7 $53 $146
Provision for income taxes 34 14 48
Interest expense 17 13 5
Other non-operating items 10 10 (34)
Operating income (GAAP basis) $68 $89 $165
Depreciation & Amortization 192 133 108
Asset impairment charges 47 56 29
Restructuring costs 44 46 77
Acquisition-related items 5 33 0
Other items 4 3 8
Adjusted EBITDA (non-GAAP basis) $360 $360 $387
GANNETT 23Non-GAAP Financial Metrics – ReachLocal Segment
($ in millions)
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Operating income (GAAP basis) ($7,498) ($4,772) ($7,889) ($4,207) ($2,071) ($2,926)
Depreciation & Amortization 8,312 7,875 8,783 8,846 8,398 8,513
Restructuring costs 78 323 191 466 539
Acquisition-related items 43
Other items 399 168 83
Adjusted EBITDA (non-GAAP basis) $892 $3,146 $1,217 $5,229 $6,961 $6,209
GANNETT 24You can also read
