Ladies and gentlemen, thank you for standing by, and welcome to the Gannett Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ashley Higgins from Investor Relations. Please go ahead.

Thank you, Marcella. Good morning, everyone, and thank you for joining our call today to discuss Gannett’s third quarter 2020 results. Presenting on today’s call will be Mike Reed, Chairman and Chief Executive Officer; and Doug Horne, Chief Financial Officer. During this call, we will discuss Gannett’s financial results for the quarter. If you navigate to the Gannett website, you will find that we have posted an earnings 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 differ materially 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 Gannett’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 earnings supplement. The pro forma information presents Legacy New Media and Legacy Gannett 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 audiocast, a copyrighted material of Gannett and may not be duplicated, reproduced or re-broadcasted without our consent. With that, I’d like to turn the call over to Mike Reed, Gannett’s Chairman and CEO.

Thanks, Ashley. Good morning, everyone. Happy Election Day. We have some very positive updates to share with you this morning as it relates to financial performance, the balance sheet, debt paid down, and our general operating performance, especially as it relates to our near-term and long-term growth categories. So we're excited to talk to you about all this, this morning. Let's start with the third quarter financial performance, which we were pleased to see showed a strong rebound from the second quarter, for both revenue and EBITDA, both from an absolute dollar perspective and a trend perspective. In the third quarter revenues were down 19.6% on the same-store basis to the prior year, pro forma for our acquisition of Legacy Gannett. This is a significant improvement from the second quarter which was down 28%. The improvement was driven predominantly by a resurgence in advertising revenue, with especially strong performance on the digital side. Our national sales team had a great quarter with 8% growth over the prior year, driven by strong digital display sales at the USA TODAY, and continued interest from national advertisers in reaching local customers across our network. At USA TODAY, our advertising revenue is now over 90% digital and has grown annually for the past three years. Additionally, we're very pleased to see our reach local core sales team return to year-over-year growth in revenue within the third quarter. One of the metrics we have been watching closely throughout the pandemic at the local level is the percentage of digital marketing campaigns, coming from our small business customers that have been paused. Pre-COVID this level was 3% to 4% of total campaign, so pretty small. At the high level lockdowns in the spring, we saw this percentage spike to as high as 23%. At the end…

Thank you, Mike, and good morning, everyone. For Q3, total operating revenues were $814.5 million, up 116.3% as compared with the prior year quarter, as a result of the acquisition of Legacy Gannett in Q4 of 2019. On a same-store pro forma basis operating revenues were down 19.6%, as compared with the prior year quarter, due to the continued secular decline in print advertising and home delivery, as well as the economic slowdown brought on by the pandemic. Adjusted EBITDA totaled $88 million in the quarter. This reflects the impact of lower revenues, which was partially offset by cost reductions and synergy savings. Important to note that during the quarter adjusted EBITDA was burdened by approximately $2 million of a negative impact associated with a true up with a company's shrink reserves, related to a single copy distribution channel. The adjusted EBITDA margin in the quarter was 10.8%, which was slightly improved from Q2. And in the third quarter expenses were reduced by approximately 19% on a pro forma basis, reflecting ongoing expense measures taken in response to the pandemic, as well as continued synergies from integration initiatives, as well as regular rate of cost reductions. Notably, as Mike mentioned, we saw strong improvement in both revenue and adjusted EBITDA sequentially compared with the second quarter. Now moving on to our segments. The publishing segment revenue in the second quarter was $732.2 million, within that total, print advertising revenue decreased 30.9% compared to the prior year on a same-store pro forma basis, reflecting the continued secular pressures, as well as the disruption from the pandemic. However, we were very pleased to see approximately 14 points of year-over-year improvement from the second quarter to the third quarter. Digital advertising and marketing services revenue decreased 13.5% on the same-store pro forma basis,…

[Operator instructions] Your first question comes from the line of Jason Bazinet from Citi. Your line is open.

Good morning, guys.

Hey, Jason.

I just had a quick question. I got the commentary on the debt reduction target by the end of the year, by the end of '21 down to that, and I think you said $1.4 billion to $1.5 billion. What do you think happened there?

By the end of this year. Yes.

And then you talked about this $100 million and $125 million of potential asset sales and real estate sales in '21? Should we just assume that the debt reduction just continues and you just keep chipping away at the debt balance? Or do you think something else is [multiple speakers]

Yes. Jason, great question. So we think we're going to be closer to $1.4 billion, as we said, $1.4 billion to $1.5 billion net debt by the end of this year. We have an additional $100 million to $125 million in real estate sales that will pay down debt next year. But we'll also have cash flow debt pay downs, as well. So our plan for the year ago to refinance the current term loan B in 2021 remains our plan. The asset sales have been ahead of pace for us, which is great. And with the combination of excess cash flow and liquidity sweeps, we still feel confident in our ability to refinance, which as we lower our leverage we’ll also lower our cost of interest expense as well. So, it should be a big boost for 2021 as we get to a refinancing, and we have a lower debt absolute dollar number as well as the lower cost to that debt.

Yes. And can I just ask one follow-up. In terms of the circulation trends, and we all understand what's going on with the ad market? But can you just provide maybe a little bit of color in terms of the same store circulation trends? It seems like those didn't improve as much as ads did sort of sequentially. Can you just provide a little bit of color in terms of what you think is reasonable as we move into next year?

Yes. So on the digital side, digital paid grew about 30%, 31%, and our revenue, as Doug mentioned, grew closer to 50%. We expect those trends to accelerate in 2021 on the digital side, that's where our primary investment goes. But, we're also focused on retention and customer service on the print side to moderate those trends. What had the biggest impact from a negative standpoint, Jason, on print trends is single copy. So the traffic it out picking up single copy has been down, especially with the USA TODAY, which is a big reliance on airports and on the hotels. So, I think you'll see our circulation trends, I think we said on the print side, we were down 13% in the third quarter. I actually do think you'll see those trends come in and get better in 2021, as we cycle the downturn we've seen in single copy, primarily from the USA TODAY. And we'd like to try to get those trends inside of down 10% in 2021.

Right. Super helpful. Thank you.

There are no further questions at this time. I'll turn the call back over to the presenters.

Yes, thank you. So in closing, we're pleased with our third quarter results and the rebound we saw in revenue EBITDA and our improved EBITDA margins. We ended the quarter as just mentioned in a good liquidity position with $189 million of cash on the balance sheet. And also, as just mentioned, we've made very good progress with debt repayment especially early in the fourth quarter. We see a clear path to reducing our net debt to approximately $1.4 billion to $1.5 billion by yearend. This is a significant reduction since New Media acquired Gannett only one year ago. We see enormous potential to continue to grow our digital subscriptions and digital marketing service businesses, accelerating growth trends and vastly increasing our current paid digital subscriber base, which is mentioned earlier, is a significant contributor to next year's growth. And as mentioned earlier, we see growth opportunities for our events business in the future, based on retaining a virtual realm, while also returning to live events. We look forward to sharing more with you about our vision and strategy for 2021 and beyond. But just to kind of recap, huge growth drivers for us, subscription and digital, digital subscriptions, our digital marketing services business, our national digital advertising business and our events business, they are all starting to grow nicely now and we see significant upside in 2021 and beyond. So, I just want to take a second to thank all my colleagues at Gannett for their continued commitment to our communities, and their resilience during this incredibly difficult year. So thanks for joining us today. I wish everybody on the call a safe and healthy holiday season and happy Election Day, and look forward updating you as we close the year and get into the first quarter of next year. Thanks everyone for joining.

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