Good morning ladies and gentlemen, thank you for standing by. Welcome to Gannett's Fourth Quarter 2019 Earnings Conference Call. My name is Marcella, and I will be your conference operator today. At this time, all participants are in listen-only mode. After the prepared remarks, the management from Gannett will conduct a question-and-answer session. The conference participants will be given instructions at that time. As a reminder, this conference is being recorded. I would now like to turn the call over to Ms. Ashley Higgins of Investor Relations.

Thank you, Marcella. Good morning, everyone. And thank you for joining us today to discuss Gannett's fourth quarter and fiscal year 2019 results. Presenting on today's call will be Mike Reed, Chairman and CEO of the Public Company, Allie Engel, CFO; and Paul Bascobert, CEO of the Operating Company. During this call, we will discuss Gannett's financial results for the quarter. If you navigate to the Gannett's Web site, you will find that we have posted and earning supplement in addition to our earlier press release. We will be referencing it today on the call as it provides you with additional detail on this quarter's performance. Before we begin, please let me remind you that this call is being recorded. In addition, statements made during this call with respect to future results and events are forward-looking statements that are based upon current expectations. Actual results and events could be achieved materially differ from those discussed today. We encourage you to read the forward-looking statements disclaimer in the presentation, as well as the risk factors described in Gennett's filings made with the SEC. In addition, we will be discussing some non-GAAP and pro-forma financial information during the call today. You can find reconciliations of our non-GAAP measures to the most comparable GAAP measures in the earning supplements. The pro-forma information presents New Media and Legacy Gennett on a consolidated basis. Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in Gannett. The webcast and audio cast is copyrighted material of Gannett, and may not be duplicated, reproduced or rebroadcasted without our consent. With that, I would like to turn the call over to Mike Reed, Gannett's Chairman and CEO.

Thanks Ashley. Good morning, everyone. Thanks for joining our fourth quarter and full year 2019 earnings call. This is our first earnings call since the transformative acquisition we completed in November of last year. It is a pivotal moment for our company as we report results on a consolidated basis for the first time, and as we set goals for 2020 as a much bigger and stronger enterprise. Our stock price performance, which has certainly been disappointing, should not obscure the fact that the combination of New Media and Legacy Gennett creates a tremendous opportunity to significantly reduce costs, accelerate the path to revenue growth and create significant value for shareholders. I would like to take a minute to thank all of our employees who've been working tirelessly on our integration efforts, while also improving our business in the first quarter. I know it has been an enormous amount of work, but the transaction better positions us for a faster path to revenue and profit growth. Nearly three months post-closing we are making great progress on integration and synergies. We previously guided to the high end of the cost synergy target of $275 million to $300 million, and we remain confident that we will implement the measures required to realize these savings by the end of 2021. We are already reaping the benefits of careful integration planning that begin prior to closing. By the end of this quarter, we expect to have implemented measures that will result in over $60 million in annualized savings. We expect these savings to ramp up each quarter until we achieve our $300 million target. At the same time, we are laser focused on improving our revenue performance, driven by growth within the digital marketing services and events categories. We're also ahead of schedule with…

Thanks, Mike. As mentioned in our release this morning, integration kicked-off shortly after closing and this continued into the first quarter. By the end of the first quarter, we implemented synergy savings totaling over $60 million on an annualized basis with the first quarter benefiting from approximately $10 million to $15 million in savings. We'll continue to execute on our synergy plans and are confident in our stated goal of implementing at least half of the $300 million in synergies during 2020. We discussed our synergies in four categories; newspaper operations, corporate and procurement, other operations and systems. What we've implemented thus far has predominantly come from newspaper operations and corporate and procurement categories. We've announced the consolidation of 14 printing facilities across the country and reduced headcount within the executive leadership and corporate support teams. Across all categories, the teams are implementing thoughtful strategic plans to most effectively bring these two businesses together. But more than just eliminating costs, we are working towards centralizing and integrating all parts of our business onto common platforms for things like content, billings, circulation, web and mobile. As a result, some of those actions will take a longer lead time to implement but will give us the cost efficiencies of our scale and the ability to quickly launch digital businesses across our network. In addition to integration, the rest of the business continues to operate well. As Mike mentioned, we're beginning to see some momentum in our sales organization. Kevin Gentzel, our Chief Revenue Officer, has moves quickly to close -- after close to integrate our sales organizations and announce leadership roles for our sales teams could start the year focused on delivering our 2020 targets. Kevin and his team has done a nice job bringing everyone together under new Gannett and reenergizing…

Thanks Paul. So in the fourth quarter, we paid down $35.8 million in debt, which was earlier than originally expected. That brought our outstanding debt to approximately $1.7 6 billion when we ended the quarter and 3.6 turns of leverage. So far during the first quarter, we have paid down an additional $9.4 million with the proceeds from real estate sales. As I mentioned before, we have identified an additional $100 million to $125 million in real estate sales that we plan to sell throughout 2020 and 2021, and we'll use the proceeds to accelerate debt pay down. Our expectation is for leverage to be approximately 2.75 times by the end of this year 2020, and we still expect to refinance this credit facility when we reduce the leverage to approximately 2 times, which we expect will occur by the end of 2021. So we remain on track with our original plan. Looking ahead to the first quarter, we expect to announce our first post acquisition dividend when will report Q1 2020 earnings in early May, which is consistent with the timing of New Media’s past dividends with respect to the first quarter. This is also in line with our credit agreement, which allows for dividend payments to begin after our first full fiscal quarter as a consolidated company. We expect the amount of the first quarter dividend to be $0.19 consistent with what we've told shareholders from going back to last summer, subject to approval by our Board of Directors of course at the first quarter Board meeting. Now, I'd like to turn it over to Allie to give us a much more detailed review of our financial performance in the quarter.

Thank you, Mike, and good morning everyone. GAAP operating revenues in the first quarter were $699.3 million, up 68.1% to the prior year quarter due to the acquisition. On a pro-forma basis, operating revenues were $1.05 billion, which were down 9.7% to the prior year quarter. On a same store basis, revenues were down 9.9%, which reflects continued weakness in both print advertising and circulation revenues, partially due to disruption from the transaction. As we had mentioned last quarter, part of the weakness in the circulation revenue trend was due to the cycling of more aggressive pricing initiatives that Legacy Gannett implemented in the fourth quarter of 2018. GAAP adjusted EBITDA totaled $98.8 million in the quarter and on a pro-forma basis, totaled $141.2 million or down 19.4% versus the prior year quarter, reflecting lower revenues and higher than anticipated healthcare claims. The adjusted EBITDA margin in the quarter was 13.3% on a pro-forma basis. In the fourth quarter, pro-forma expenses fell approximately 8%, reflecting payroll savings from various cost-reduction initiatives each company already had underway on a standalone basis, significant newsprint savings from both lower volumes and prices and continued production and distribution efficiencies. Turning to our segments, GAAP publishing segment revenue in the fourth quarter was $653.9 million or $964.7 million on a pro-forma basis. Print advertising revenues were down 20.1% on a same-store basis for Legacy Gannett and down 16.3% at legacy New Media, reflecting continued secular pressures. Digital advertising and marketing services revenues decreased 1.6% on a same-store basis at Legacy Gannett and 0.4% on a same-store basis at legacy New Media. Strong gains in digital marketing services revenues, especially at Legacy Gannett, were offset by more muted results within digital media and continued weakness in digital classified revenues as expected. Circulation revenues decreased 10.3% on…

[Operator Instructions] Your first question comes from the line of Kyle Evans from Stephens. Your line is open.

Mike, the two legacy companies have pretty different dividend strategies, I know you got to wait for board approval for the 1Q '19, so it's not official. But maybe you could talk at a high level about how this new entity is going to think about returning capital versus the leverage, the expensive debt you have? And then more specifically kind of what the right brackets are around the percent of free cash flow payout you would expect going forward?

So we set the dividend at $0.76 a year targeting in the first year about 30% payout ratio. And Kyle, in an ideal world, we'd like to continue with 30% payout ratio. So you would grow the dividend as you grow free cash flow over the years to come. However, you bring up good points from a capital allocation standpoint. We have expensive debt and we have a very low stock price. And so with our stock price as low as it is now and with the yield as high as it is now for the capital allocation standpoint, both buying back shares and paying down debt, 11.5% debt, is more beneficial to the company and its shareholders than just raising the dividend. So we have full intention to pay our current dividend as announced. But as we go forward in the years to come, we do have several levers to look at. And so part of it will depend on where our share price is and do we trade at better on fundamentals, because we're not trading on fundamentals today.

You mentioned the expectation for improving revenue trends, and I think on Page 5 it says significant same-store revenue trend improvement in 2020. Can you bracket kind of what you expect pro-forma revenue to look like, and the cadence of that going across the full quarters of 2020? And then behind that, what are the biggest moving parts that make you confident enough to put that in the deck?

About 150 basis points.

Of total pro-forma revenue improvement in '20 versus '19?

Yes.

And how are we going to get there?

Improvement in the DMS revenues, improvement in the events revenues, stabilized print while down not a worsening print trend and then some slight improvement in circulation revenue towards the back half of the year, national is a good category for us as well and that will help us in 2020.

Your circulation comment is a good segue into the thing that you guys are sick of me asking, I'm sure but you know I'm obsessed with the circulation economics. You talked a little bit about, well not a little bit, three times about the rolling off of the aggressive pricing strategy at Legacy Gannett and you're kind of aiming at those negative 10% number to explain that. But I also see Legacy New Media kind of going from 5.5% to 6% in the first three quarters to 7% dip. And just kind of wondering if you could talk a little bit about that 7% dip at New Media and then kind of talking about what you think pricing, the interplay between pricing and unit volume, will look like in 2020?

Yes while not as bulky, Kyle, it’s not as significant. We at New Media had done some price increases in Q4 2018 too that cycled off in Q4 of 2019. And we also had done more premiums in the second half of '18, premium additions than we did in 2019. So that's all part of the pricing strategy. And as we go forward, our strategy is much more around volumes through retention, better retention efforts, better customer service, better marketing and better content not pricing.

And when those 5.5 to 6 declines turned into 7 and 10 at New Media and Gannett, did you see better -- do you see unit volume improvements on a year-over-year basis?

Yes, we did.

And I guess to be specific and put a final point on this line of questions. Do you expect to be doing any aggressive rate hikes in 2020 for either side of the business?

We do not.

Lastly and then I'll quit hogging the microphone here. $300 million in cost synergies that you plan to get, you've talked about consolidating 14 print facilities. Are there more print facility consolidations coming? And can you talk about the cost to achieve -- cash costs to achieve synergies in 2020? Thank you.

Well, the back half of that question, costs to achieve, have been running about 20% of our synergies, we're about halfway done with the print consolidation project. So there's a lot more to do there. And of course there's a lot of long lead time items that help us get to $300 million in synergies that roll into 2021, that's why it's a two year project. But don't forget also, Kyle, both companies had been doing regular way cost reductions before the merger and even after the merger. So those regular way costs reductions will roll into 2020 as well. So our costs will be down a lot more than just the synergies.

And maybe just sneak one more in here, a lot of discussion around digital only and the growth you're seeing there, solid growth but still quite small as a percent of total. I'm sitting here in Little Rock, it's smaller market than most of the legacy Gannett's at DMA 57, but it's a lot bigger than a lot of the legacy New Media. Our local paper here is printed only on Sundays and its digital the other six days a week. How much in your mind would print advertising have to decline from where it is today before you start to consider something fairly radical on the distribution side of the business model? Thanks.

A lot. We still make a lot of money off the print edition. We really do -- print circulation and print advertising. So print subscribers are highly profitable and we'd have to decline a lot from where it is today. We don't have any plans in the near future to do anything like that.

But basically what I hear you saying is, you'll be refinancing your 11.5% debt at the end of next year before you're thinking about doing something radical?

As we sit here today, I would say yes that's correct.

Your next question comes from the line of Ryan Vaughn from Needham. Your line is open.

Just a couple here, one encouraging to hear that you're seeing some improvement in January and February. Would you say that's just more kind of the industry advertising backdrop is improving or some of the merger initiatives that you guys have been highlighting that are starting to play out? And then I have one follow up.

This is Paul. A couple of things, one, I think we pulled together the team now across both companies, they've got some really strong momentum. We've done some sales rallies around the country. The team has a lot of energy and we've gotten the restructuring done early. And so I think we're often running. So operationally, I think we're just seeing a lift from that. We also have a benefit now of a much broader base in which we can sell national programs. And so we've got a lot more properties that we can digest large buys from national advertisers, which we're starting to see some nice lift from that. So the combination of those two plus just some overall strength in the advertising market here as we look towards political advertising and just I think a nice comeback in the ad spend.

And then just on the comment about expect meaningful EBITDA growth. In the press release, appreciate all the pro forma. I think that there was $485 million pro forma. Is that a good starting point for us to use when you say expect meaningful EBITDA growth for 2020?

Yes, it is.

And I'll take one more. Mike, I always appreciate your thoughts on the capital allocation, we've talked about this in the past. But to your point with where the stock is today and obviously, your full intention you're committed to the dividend. Can you just remind me or clarify the comment that you made before that it's probably a better use of capital to be buying back shares at plus or minus $5 level versus paying a dividend. Can you just extrapolate on that comment that you made?

Well part of our overall strategy is to return capital to shareholders that's why we have $0.19 a quarter dividend. My point on capital allocation was do you increase that as you improve financial performance or do you buy back shares or pay down debt. With where our share price is today, the yield on the dividend is so high, we're not really getting credit for it. So it's going to make more sense in the near term to take capital and pay down debt and buyback shares. So that's what I meant by that. And also just to clarify on the second question, the significant EBITDA growth will come primarily as we continue to realize synergies. In every single quarter, those synergies will continue to ramp up. So you don't expect to see the same percentage every quarter throughout 2020 that would indicate that all of the synergies were already in place. So everything will continue to ramp up as the year goes on.

Your next question comes from the line of Lee Cooperman from Omega Family Office. Your line is open.

I think I know the answers to all these questions, but you've been very transparent and you've been very consistent, but I got it. I just don't believe where the stock is trading. So I got to ask the question again. In January, early January this year, you had an interview in Las Vegas, I think with Jason Bassinet. He asked you some interesting questions. One was you bought a lot of stock, what are you thinking about valuation. And I think the response was as you looked at a few years, you see company's going to have a valuation somewhere between 4 billion to 5 billion, I see a debt pay down to approximately 1 billion. So I see a market cap of 3 billion to 4 billion, which gives me $25 to $30 stock, which is I guess 6 times where we are trading currently. There was one time made, the second time you made was on the dividend at that time, it was 12% yield is now 15.5% yield. And I add a third observation and that is when you put out the S4 in connection with the merger, you had a lot of projections out to 2022. Are the projections in the S4, your comment to Jason in early January, still operative in your view?

Well, my comments to Jason are still operative, that's still the way I feel. You’re right, I do own a lot of shares. I see significant value over the next three years as we grow EBITDA substantially and pay down debt. I think we're not changing our mindset at all in terms of what we put in the S4. The Board has discussed at length whether we give specific guidance for 2020, and the decision was no specific guidance for 2020. But I am saying that our revenues are going to improve and we're going to have significant EBITDA growth. And all of the things I told Jason Bassinet in January still stand today.

If the dividend was set at roughly 30% of free cash flow, the implicit, you take $0.76 divide that by 0.3, you're talking about 2,500 share free cash flow your stock is trading less than 2 times free cash flow. So 250 of free cash flow is what you're thinking for this year.

Yes, so I’m not. Actually I said, the stock is not trading on fundamentals today. And I think what's happening is there's a ton shorts in the stock and there's a wait and see approach for a couple quarters to see how Q1 and Q2 actually do, can we grow EBIDTA and can we improve revenue trends. And if we deliver on both of those in Q1 and Q2, I think we'll start to squeeze the shorts out and I think we will start to trade on fundamentals.

You’ve made some comments about the dividend, I just want to make sure -- your comments were, maybe this is my interpretation, so just tell me if I’m on the wrong track. $0.76 dividend is secure. What you're saying is we may not grow the dividend as cash flow grows, if that stocks trades down here that maybe a better use of the capital to pay down debt or buyback stock, but you're not talking about the vulnerability of the existing dividend, you’re just talking about the growth of the dividend. Is that correct?

I'm talking about the growth of the dividend.

Yeah. Okay, so I figured so. Well, good luck. I mean, I've never seen such a disconnection from fundamentals, but hopefully that’s the opportunity. But thank you and good luck.

Thanks Lee.

I will now turn the call over to Mike Reed for closing remarks.

Thank you. In closing, I'd like to highlight that in the short time since the closing of our acquisition, as mentioned earlier, we have made substantial progress on the integration. We have begun implementing measures that will result in significant cost savings, both the first quarter and beyond. We remain very confident in our ability to implement over $300 million of synergies and we target that by the end of next year 2021. We have already prepaid over $45 million of our term loan, and we remain highly focused on de-leveraging. We have identified $100 million to $125 million of real estate that we expect to sell by the end of 2021, which will also accelerate our de-leveraging plan. Our revenue trends so far in the first quarter are looking stronger than the fourth quarter, and we are optimistic about our ability to continue to improve same-store revenue trends this year. We are also very optimistic about our ability to grow EBITDA in 2020. I want to say thank you again to our employees. We appreciate your hard work to-date, your dedication, your motivation and commitment to a successful 2020. And I also want to thank our shareholders for your support of the acquisition and your trust as we work to achieve our goals that we've laid out today. Look forward to speaking to you again in just a couple of months with Q1 earnings. Thank you.

This concludes today's conference call. You may now disconnect.