Greetings, and welcome to the Gannett Fourth Quarter Earnings Call. [Operator Instructions]. It is now my pleasure to introduce your host, Matthew Esposito. Thank you, Mr. Esposito, you may begin.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss Gannett's fourth 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, adjusted EBITDA margin 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 like to 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 taking the time this morning to join us on our call. We are entering 2023 with a lot of optimism, and you'll hear that throughout the call today. Adjusted EBITDA in the fourth quarter increased substantially over the third quarter, and we believe sets us up for adjusted EBITDA growth in 2023 of approximately 10% to 15% year-over-year. We'll walk through the details later, but we expect significant free cash flow growth in 2023 as well. We're seeing improving revenue trends early in Q1 and we've announced a few exciting new partnerships that drive immediate revenue opportunities that are also very high-margin deals. We've paid down significant debt in 2022, and we expect to repay at least another $120 million of debt in 2023. And we expect at the end of 2023, our first lien net debt will be less than 2x EBITDA. And our digital businesses are showing consistent growth. Of course, we're happy to turn the page on 2022, it was a tough year, but we are excited about the momentum that we are carrying into 2023. 2022 was a year of unanticipated volatility and of course, high inflation. Despite these challenges, we made great strides with the business. We focused on what we could control, providing unique and relevant content to our readers, helping local businesses find, convert and keep customers as well as taking the necessary actions to significantly lower our cost structure. As a result, fourth quarter adjusted EBITDA grew nearly $40 million over the third quarter. Digital-only subscription revenue grew nearly 30% year-over-year and we saw new highs across several key metrics in our digital marketing solutions business. We are focused on the investments needed to support the growth areas of our business and still believe we…

Thank you, Mike, and good morning, everybody. As Mike mentioned a moment ago, in Q4, we drove significant sequential improvement to our adjusted EBITDA from Q3. As a result of our robust cost management program, we improved our adjusted EBITDA margin in the fourth quarter by over 500 basis points sequentially. And importantly, we expect to see continued improvement during 2023. For Q4, total operating revenues were $730.7 million, a decrease of 11.6% as compared to the prior year quarter and a decline of 10.3% on a same-store basis. This is down slightly from the 9% year-over-year same-store revenue decline in the third quarter as a result of the pressures in our print and digital advertising revenues. Also, given the strength of the U.S. dollar relative to the U.K. pound, currency translation negatively impacted our reported revenue by $9.4 million or about 114 basis points as compared to the prior year period. Adjusted EBITDA totaled $90.4 million in the fourth quarter, a decrease of 21.7% year-over-year. Adjusted EBITDA margin was 12.4% compared to 14% in the prior year quarter. In the fourth quarter, we continue to be impacted by inflationary pressures, which we estimate negatively impacted Q4 by approximately $25 million as compared to the prior year period. However, we have seen the largest cost pressures, namely newsprint and distribution costs peak and stabilize, and we believe that the worst is behind us in terms of inflation. We expect labor and newsprint costs in 2023 to remain relatively stable to the pricing at year-end 2022. Factoring in the Q4 impact, we estimate that inflationary pressures on distribution, newsprint, fuel and utilities negatively impacted our full-year 2022 results by approximately $100 million. As we have seen costs stabilize, we expect that we will largely cycle the year-over-year impacts of these increases…

[Operator Instructions]. Our first question comes from Jason Bazinet with Citi.

I just had 2 revenue questions, one about sort of this year '23 and then one sort of about getting back to growth by '24. So for '23, it feels like the buy sides have been thinking about a recession for a year now, and there's been some areas that were weak sort of in '22, maybe some of your businesses, maybe mobile advertising also. But now the markets like are going into a recession. And so I would just love to know sort of what sort of macro, you guys talked about things getting better. But is that assuming that the macro doesn't deteriorate materially? Is it just sort of steady Eddie and the improvement is just on the comps, but just any sort of macro color for this year? And then on the longer term, getting back to growth, should we think about the improvement being sort of balanced across print advertising and CERC and digital ads and DMS and commercial print and other? Or is there one area in particular that you think will be most important to get you back to growth mode?

Yes. So on your first question, we are not seeing trends in our business here in the first quarter that would indicate that the country is moving into a recession or moving in that direction. In fact, our trends are improving here in the first 2 months relative to Q4. So we're -- we've looked out for the full year. Our teams have done bottoms up across all of our revenue categories. And based on what we see today, based on how our customers are interacting with us across all of our revenue channels, we just don't see a worst-case kind of hard landing. And especially on the local side, our local businesses continue to engage with us, and we see some slightly improving trends there in the first quarter. So our forecast is built on a soft economy, certainly not a hard landing. We don't see that in our numbers today. We don't anticipate that. We'd have to pivot if that occurred with our cost structure. But we feel really good about what we're seeing in the markets today, what our customers are telling us. And so we see a soft landing as a worst-case scenario, but potentially no recession at all. And with regard to the -- to your second question, the most important is our digital growth, obviously. As Doug said, 37% of total revenue in the fourth quarter is digital only. That will continue to move towards 50%. The growth in that across all the spectrum, whether it's our new partnership opportunities, our digital advertising business, obviously, the subscription business and our digital marketing solutions business, all important that those continue to churn and grow as we expect them to. But we are also working on stabilizing to some degree or not stabilizing, but slowing the rate of decline of our print business and that's also an important component of reaching the inflection point in 2024. We've undertaken a lot of actions over the last 12 months to -- on both of those fronts, but certainly, on lowering the declines on print. It's something we've been focused on and we're actually seeing those results in our first quarter numbers. So we're encouraged by that. So right now, based on what we see, Jason, we soft landing to no recession this year and a combination of our strong digital growth, combined with improving trend performance in print is what leads us to have confidence in our inflection point being reached back half of 2024.

Okay. And if you hit that inflection, is the right mix, like if you get to 50% of your revenues are digital, that's sort of the right --

Yes, that's about the rate [indiscernible].

[Operator Instructions]. Our next question comes from Lee Cooperman with Omega Family Office.

Just a few observations and I have 2 questions. Ever since I invested in the company, which is at least 5 years ago, you felt the stock was significantly undervalued. And this -- when did -- nothing would go down, but I have to say you backed up your view by consistently buying substantial amount of stock for your own account. I think it's fair to say you couldn't understand the impact of COVID and the recession of the company. Having said that, I think it's a fair to say we have been too slow in reducing cost. Now for my ideas and questions, okay, one, I think we should consider selling off a few of our trophy properties at valuation levels substantially above the public market valuation of our equity to accelerate our debt repayment and surface some hidden value and I'd like to get your thoughts on that. And secondly, when do you think you'll be in a position to buy back cheap equity? So I think we announced that original authorization before the economy deteriorated when the stock was 7.5 and went down to below 2. It's now about 2.5, 2.60, whatever. So your thoughts on those 2 questions.

Yes. So first question, Lee, selling off trophy properties. Obviously, the answer is, yes. We would entertain bids on any of our markets, any of our products that are at or above fair market value. So that's something we've done in the past, we'll do in the future. Those things can be lumpy. It depends on vanity type buyers in those particular markets. But I would say, Lee, the answer is yes, we will do that. We're hopeful that we'll have an opportunity or 2 this year to do that. But it's not anything that's in our plans is it's hard to count on it for -- with certainty. But -- so overall, yes, the answer is yes, we'll do that if and when we get the opportunity to do so. As far as buying back cheap equity, we'd love to be in a position to continue our stock buyback program. We feel right now, Lee, that the best continued use of capital beyond investing in the growth business, growth parts of our business is to reduce debt. As Doug mentioned, our first lien net debt is still 2.68, so closer to 3. I'd love to see that under 2, closer to 1.5 as we go into next year. And then I think when the -- when nobody is worried about debt, which we're not worried about debt at all, some other people are. But as we get into a much better position from a leverage standpoint, then I think the capital allocation opportunities widen for us as we materially lower that first lien net leverage.

There are no further questions at this time. I would like to turn the floor back over to Mike Reed for closing comments. Please go ahead.

Yes. Okay. As you could hear from the call, we're entering 2023 with a great deal of optimism. Let me just highlight a couple of the things you heard today that give us that optimism. I'll start with by saying we have a very strong team here at Gannett, and I think we have the right organizational structure in place with the right players here. Further, we reduced our cost structure, as you heard today by over $220 million as we enter into 2023. Inflation seems to have peaked and we could see some moderation there in 2023. Revenue trends are improving during the first 2 months of 2023. We're encouraged by what we're seeing and hearing from our customers. We see 10% to 15% EBITDA growth in 2023. We see nearly $100 million of free cash flow growth in 2023. We see first lien net leverage below 2x by the end of 2023. Our digital growth businesses remain robust from a growth standpoint. We see that continuing in 2023. And we continue to see our inflection point for long-term sustainable growth hitting towards the end of 2024. So a lot to be optimistic about, we feel good about our opportunities and the plans we have in place for 2023. We look forward to updating you on our progress on each of our quarterly earnings calls this year. Thanks to all of you for your support as we continue to navigate this journey. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.