Greetings, and welcome to the Gannett 3Q Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Esposito of Investor Relations. Thank you. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss Gannett's third quarter 2022 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, 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 non-GAAP financial information during the call, including same-store revenues, free cash flow, adjusted EBITDA and adjusted net income attributable to Gannett. You can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement. Lastly, I would remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in Gannett. The webcast and audio cast are copyrighted material of Gannett and may not be duplicated, reproduced or rebroadcasted without prior written consent. With that, I would like to turn the call over to Mike Reed, Gannett's Chairman and CEO.

Thanks, Matt. Good morning, everyone. Thanks for joining our call this morning. As I know you are all aware, the macro environment has remained challenging. However, we are encouraged by the stabilization and trends in the third quarter compared to the end of the second quarter. As you may recall, the operating environment declined quickly from Q1 to Q2, but we maintained much more consistent trends during the third quarter. We also continued to make great progress in our digital transformation, with solid growth in our digital only subscription business and our digital marketing solutions business. During the third quarter, we also implemented several cost control initiatives that made immediate impacts on our cost base. We are already seeing the benefits from these cost actions with sequential improvements to adjusted EBITDA and adjusted EBITDA margin in the third quarter. But we expect these benefits to ramp substantially in the fourth quarter and in 2023. We also continued to meaningfully repay debt and remain on track with our debt reduction plan. While the operating environment remains challenging, we are confident we have the right plans in place to navigate the backdrop successfully. Our financial results for the third quarter reflect continued progress on our strategy, as well as early progress on our new costs initiatives implemented to combat the current inflationary environment. Overall revenue trends in the third quarter were consistent with how we ended Q2, but adjusted EBITDA and adjusted EBITDA margin as I just mentioned, improved slightly. However, while we haven't seen conditions improve at this juncture in the macro environment, we are seeing stabilization. This leads us to believe our Q4 adjusted EBITDA and adjusted EBITDA margin will improve significantly as our recent cost actions take full effect. Further, we are taking additional measures in Q4 that will…

Thank you, Mike, and good morning, everyone. If you will recall, we saw significant deterioration in trends from Q1 to Q2. And some good news for Q3 is that total operating revenues performed similar to what we experienced at the end of the second quarter and while we have not seen revenue trends improve yet, we are encouraged that we did not see revenue trends deteriorate from where we ended the second quarter. We are also encouraged that our recent cost actions will result in improvements going forward in adjusted EBITDA and free cash flow. Our third quarter results did continue to see pressure on digital advertising spend and home delivery circulation from our print subscribers. For Q3, total operating revenues were $717.9 million, a decrease of 10.3% as compared to the prior year quarter. On a same-store basis, operating revenues decreased 9% year-over-year as compared to the down 6.3% year-over-year in the second quarter, but importantly, in line with June's year-over-year decline of 8.5%. Given the strength in the U.S. dollar relative to the UK pound, currency translation negatively impacted our reported revenue by $10.7 million or about 133 basis points as compared to the prior year period. Adjusted EBITDA totaled $51.9 million in the third quarter, down $50.2 million, or 49.1% year-over-year. Adjusted EBITDA margin was 7.2% versus 12.8% in the prior quarter. The decline in adjusted EBITDA year-over-year was caused by the inflationary pressures we experienced this year, along with the ongoing challenges in digital advertising and print circulation, which continue to be impacted by secular pressures, the overall macro environment and distribution labor shortages. We estimate the ongoing inflationary pressures in the third quarter resulted in a $29 million year-over-year increase in costs largely in the media segment. Those costs were tied to distribution, newsprint, fuel,…

[Operator Instructions]. Our first question is from Doug Arthur of Huber Research.

I think I was on mute. And then I thought I hung up. In terms of the inflationary cost pressures, have you seen any mitigation? I mean, I know earlier in the year, you talked about fuel costs. I assume those have eased a little bit. I'm not quite sure, I didn't haven't seen the queue yet, in terms of what's going on with newsprint. Any positives going on there, at least going into the fourth quarter?

Doug, this is Doug. So in terms of inflationary impacts, I would say that we've seen stabilization and maybe a slight improvement in fuel, but stabilization in terms of paper, quarter on quarter, I think we are still seeing some increases in terms of distribution as we make investments to improve our route coverage and delivery to our consumers. So that is still I think, a variable that's going up. But other than that, I think the good news is we've seen stabilization across most other categories.

And in terms of these big cost reduction efforts, in addition to headcount, I mean, this is all about outsourcing at this point?

I mean, I think there's a large portion in terms of outsourcing, but as part of outsourcing, really looking at how we do business internally, and also in engage with our customers externally. So we're looking for really kind of process improvement and process efficiency. And in some cases, I think we're evaluating kind of the overall kind of go-to-market strategy in different markets to just to make sure that we have the right strategy, which is aligned with our Northstar priorities that allows us to unlock the maximum amount of cost savings as we move forward.

Okay. And then final question. You gave out a specific digital net add number, did you say 165? I missed that.

Is 116.

I'm sorry. 116. Okay.

Our Next question is from Jason Bazinet of Citi.

A top line question. Can you guys remind us when you guys are sort of aiming to sort of hit crossover in terms of getting back to flattish organic growth?

Yes, Jason, we're targeting 2024 as our inflection point that that remains the target. It's been our target for a considerable amount of time now, hasn't changed. We haven't given a specific quarter within 2024. But within calendar year 2024, we expect to see revenue stabilization first and then revenue growth.

And then can I also just something on Doug’s questions on inflation the 29 million that you called out as inflationary impact. Is that, should we think about that on a year-over-year basis, or that's like a sequential impact?

That's a year-over-year impact. So it's looking at kind of the year-over-year change.

And then how are you guys thinking more broadly about inflation other than those specific newsprint and distribution items that you call out, in that 29 million just for the for the broader expense space? I ask if it's a little bit challenging, that we read these CPI numbers at 8% or 9% inflation, but a lot of it does seem to be rent related and food related and things that aren't going to impact you. So I would you just sort of characterize the overall inflation pressures outside the 29 million in those specific areas you called out?

I mean, from my perspective, I think, it's hard looking too far in the future, these days, given kind of there's a lot of uncertainty. And I think there's a lot of different views as to what the broader economic environment will do next year. But as we sit here today, I would say that I think we've seen other than in delivery, where we're still having to make investments to close open routes, I would say we've seen stabilization across most other categories, and we're not expecting any significant further increases. But again, I think that can change depending upon kind of what happens with the economy next year. But as we sit here now, we feel pretty good about where we're at.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Mike Reed for any closing comments. Please go ahead, sir.

Thank you. So let me just close with a few comments. It's not lost on us that this remains a challenging environment. But as you heard today, on the call, we are encouraged by a number of key wins in the third quarter and some of the stabilization we've seen. We continue to see solid growth in our digital only subscription business and our digital marketing solutions business, and we have accomplished major milestones in both of those businesses during the third quarter. Further, our cost action plans had an immediate impact on Q3 adjusted EBITDA, but as you heard today, we really expect to see the ramp from that in Q4, and also for full year 2023. So we expect pretty meaningful increases in both adjusted EBITDA and margin as we go forward. We also continue to make substantial progress on debt repayment, which you heard today. And we've done that consistently throughout this year and really silver the last three years since the acquisition of Gannett. So while we continue to operate in a challenging environment, we feel like we have all the necessary components in place for short-term and long-term success going forward from today. So thank you all for joining us today. We look forward to updating you on our fourth quarter when we get out into February of next year. And again, thanks for joining us today.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.