Greetings. Welcome to the Gannett third quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, please press star, zero from your telephone keypad. Please note this conference is being recorded. At this time, I’ll turn the conference over to Trisha Gosser with Investor Relations. Trisha, you may now begin.

Thank you Rob. Good morning everyone and thank you for joining our call today to discuss Gannett’s third quarter 2021 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 our earlier press release. We will be referencing it today on the call as it provides you with additional details on this quarter’s performance. Before we begin, please let me remind you that this call is being recorded. In addition, certain statements made during this call are or may be deemed to be forward-looking statements, including those with respect to future results and events, and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement, as well as the risk factors described in Gannett’s filings made with the SEC. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call. In addition, we will be discussing some non-GAAP financial information during the call today. You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement. 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 are copyrighted material of Gannett and may not be duplicated, reproduced or rebroadcasted with our consent. With that, I would like to turn the call over to Mike Reed, Gannett’s Chairman and CEO.

Thanks Trisha. Good morning everyone. Thanks for joining us this morning on our third quarter earnings call. We are pleased to report this morning that the third quarter was another strong quarter for Gannett, especially in the areas of our business plan that are the most important for the evolution of our business and our long term growth. Our results in the quarter evidence continued strong growth in our digital-only subscriber counts and in our digital marketing solutions segment. These represent stable and recurring revenue streams that are growing very rapidly with big, addressable markets that we are penetrating. The increases in these digital categories in Q3 led to year-over-year same store revenue growth and for the fourth consecutive quarter year-over-year adjusted EBITDA growth. Also, importantly our results are in line with previous guidance we had given at the end of the second quarter and again when we did our most recent refinancing about a month ago. Q3 adjusted EBITDA was $102.1 million with a margin of 12.8% for the quarter, and that brings our last 12 months adjusted EBITDA to $467 million, up meaningfully from 2020. We achieved positive net income in the quarter of $14.7 million and adjusted net income was a very strong $26.5 million in the quarter. Further, I am excited to report that our last 12 months digital revenues have now exceeded $1 billion and our overall digital revenues are growing at 15% to 20%. During the third quarter, we were able to meaningfully pay down principal on our five-year term loan, reducing debt by $91 million in the third quarter. Our aggressive debt repayment this year combined with strong financial performance has allowed us to opportunistically refinance our term loan B. This refinancing was completed in October, just last month. In fact, this was…

Thank you Mike, and good morning everyone. For Q3, total operating revenues were $800.2 million, a decrease of 1.8% as compared to the prior year quarter. On a same store basis, operating revenues increased 0.9% year-over-year. Total digital revenues were $265 million, increasing 17.8% on a same store basis year-over-year. Adjusted EBITDA totaled $102.1 million in the quarter, up $14.1 million or 16% year-over-year. This strong performance was against a prior year adjusted EBITDA number that included $4.8 million of adjusted EBITDA associated with a print business that we disposed of in the fourth quarter of 2020. The adjusted EBITDA margin was 12.8%, in line with our outlook and up 200 basis points from the 10.8% recorded in the prior year quarter. Adjusted EBITDA expenses of $713.2 million declined 1.8% year-over-year and benefited from $15.1 million of PPP loan forgiveness in the quarter. On the bottom line, we achieved $14.7 million of net income and $26.5 million of adjusted net income attributable to Gannett in the third quarter. Our net income compares favorably to the prior year, where we incurred a loss of $31.3 million. We are benefiting in part year-over-year as a result of 40% lower interest expense as compared with the prior year. Moving now to our segments, the publishing segment revenue in the second quarter was $715.8 million, down 2.2% as compared to the prior year quarter and flat year-over-year on a same store basis. Print advertising revenue decreased 4.3% compared to the prior year on a same store basis as a result of the continued secular decline in the print advertising category. Digital advertising and marketing services revenues increased 16.1% on a same store basis, reflecting strong operational execution from our national and local sales teams. Despite reduced page view volumes as compared to last year’s…

[Operator instructions] Our first question is coming from the line of Doug Arthur with Huber Research. Please proceed with your questions.

Yes, good morning. Just a question on ARPU and digital. Obviously you’re growing your subs nicely. The revenue number is still to be harvested, I would say. You talked about stable ARPU in 2022. I guess the question is, at what kind of level of subs would you start to press the price level lever a little more aggressively?

Thank you for the questions. This is Doug, and certainly Mike can jump in if he has some additional things to add. I think what we’re talking about in terms of ARPU for 2022 is kind of the natural progression of the subscriber base, so I think we are going to remain really focused on maximizing the volume of our digital subscribers, but naturally as those subscribers age, we’re going to be able to increase, or they will naturally increase off their introductory pricing plans to more of the full priced monthly rate. As we get more and more of those subscribers in the ecosystem, I think we’ll naturally see ARPU stabilize and then begin to increase, so we’re not looking at next year as necessarily attacking a price level, but really more of the maturation of the base itself.

Yes Doug, we have such a long ways to go with penetration. With 179 million monthly uniques, the volume growth that we see over the next five years far outpaces needing to do price increases or any kind of work like that. But you’ll see as our core customers come on, increasing ARPU and increasing revenue growth rates that start to mirror the growth rates of our actual subscriber counts as this business segment for us matures a little bit.

Do you have enough data on churn at this point, or is it just too early in the process to really draw any major conclusions in terms of price sensitivity, etc.?

Well, we are using the data to drive all of that work, and we do have good data so far. I would say it’s still early, but our data right now suggests that we’re keeping 70% to 75% of our consumers that come on, so the data is good, it’s strong, and we’re moving folks after the introductory offer up to more normalized pricing and retention is good. Once a customer stays with us for more than a year, that retention on an ongoing basis improves to above 80%, so it is still early but the data so far suggests strong retention.

Okay, great. Two other questions. There’s a lot going on with your USA Today franchise - you know, sports betting, this venture thing. Mike, is there a way to sort of frame the overall revenue size of the USA platform, and I know single copy sales is obviously a source of weakness, you mentioned business travel, but--or is it just sort of ubiquitous through the system because you’re inserting a lot of sections into local papers, so it’s really hard to box?

Well, to that question, Doug, the USA Today news business itself represents a little bit less than 15% of Gannett’s total revenue; however, the sports gaming partnership we’ve undertaken, we’ve undertaken as part of Gannett and our USA Today network, so all of our local properties as well as USA Today are part of the gaming partnership. The standalone news business for USA Today, which has both digital print circulation and digital and print advertising, is a little bit less than 15% of the overall Gannett. The growth that we see in the future coming from these new product launches, like Sports Plus app, crosswords, the gaming partnership are really distributed across the entire network, not tied specifically to the USA Today news product.

Okay, that’s really helpful. Then finally, any color on trends at Newsquest?

The Newsquest business has actually performed very well since the pandemic hit. It’s been--it’s actually been one of our best performing assets during really 2020 and ’21, so we can’t say enough about the great job the team’s done over there and their ability to maintain revenue and profitability during the pandemic. There’s not anything more strategic going on than that, we’re just very pleased with the performance and they’re a nice contributor to our overall business. I will say they represent less than 10% of Gannett’s overall revenue and profitability, but it’s still a nice contributor.

And has their digital strategy--I mean, I know they were sort of early movers, I believe, if I can remember correctly. Has their digital strategy been a success, in your view?

I think their digital strategy is actually more early stage than here in the U.S. Right now in the U.S., about 20, 21% of consumers are willing to pay for digital news online, and in the U.K. it’s a little bit less than 10%, so I think that the upside for the U.K. on the digital side, both the digital marketing solutions segment as well as digital subscriber growth, there’s more upside there. They’re not as far along as what we see here in the U.S.

Interesting, okay. All right, great. Thank you very much.

Thank you. As a reminder, it is star, one to ask a question at this time. Our next question is from the line of Lawrence Fuller of Fuller Asset Management. Please proceed with your question.

Hi, good morning. Thanks for taking my questions, and congratulations on a great quarter. I have two questions for you. First question is regarding the poison pill that’s outstanding, are there any plans, discussions on lifting the cap of 5% for institutional shareholders?

Not in the near term, Lawrence, and thank you for the question and the comment here. We have a three-year window for tax purposes to protect that NOL post the merger we did with Gannett, so about a year from now that three-year window expires, and certainly our intention as a company will be to move that threshold up from the current 4.9%. But right now, it’s really in the best interests of all shareholders that we protect that NOL.

Okay, understood, then one more. I wanted to ask you about the Local Journalism Sustainability Act, which is--in the latest version of the budget that came out this week, assuming we actually have a budget that passes, if it does pass, have you all quantified the impact that will have on your business in 2022?

Yes, you know, on a gross basis we think if it passes as it stands today, it could be $30 million to $35 million of employment tax credits for Gannett.

Okay, and then with respect--I guess that’s with respect to the credits for digital subscribers, print subscribers, as well as the credits for small business ad spending, I guess that’s something more difficult to quantify, if you can at the moment?

Well Lawrence, the most recent version of the bill this week, obviously it’s been moving by the hour, it seems like, the most recent version--

Right, [indiscernible].

It did not, it only included the employment tax credit for employing journalists.

Okay, that’s what I thought. I didn’t manage to read the entire 2,200 pages, so thanks for explaining that to me.

Yes, it’s a lot to read.

Okay, I appreciate it. Thanks very much. Great job.

Thank you.

Thank you. There are no additional questions at this time. I’d like to turn the floor back to Mike Reed for additional comments.

Okay, great. Thank you everybody. I just wanted to mention something - Doug mentioned at the end of his commentary about the enhanced restricted payment baskets and opportunity we have as a company with our latest credit facility. It’s really important because it really opens up all levers for us now to create value for shareholders, and as we think about capital allocation, we now have additional levers. We can continue to invest in the business, which we’ll do. We’re going to continue to de-lever and pay down debt. We also have more optionality now to repurchase common shares of stock in the market, as well as repurchase convertible notes, so even more levers available to us to allocate capital and create value for shareholders. In summary, very solid execution by our business, and we’re squarely on track to deliver an outstanding 2021. We continue to execute against the strategic priorities we laid out for everybody at the beginning of the year and we continue to discuss on all of our quarterly updates. The top priority for our company continues to be driving recurring digital revenue growth through our digital-only subscription business and the increased penetration of our digital marketing solutions business, and debt repayment remains a very high priority in terms of how we think about capital allocation. De-levering that balance sheet is still a high priority. As our results year-to-date demonstrate, our focused execution on the five pillars of our growth strategy is working well, and we’re excited about the significant opportunities which lie ahead and look forward to keeping you apprised of our progress as we drive momentum in 2022 and as we continue to create value for our shareholders. Thanks for joining us today. Appreciate the time and the support. Thank you.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.