Greetings, and welcome to the Gannett First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Esposito, Investor Relations. You may begin sir.

Thank you. Good morning, everyone, and thank you for joining our call today to discuss Gannett's first quarter 2023 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. Thanks everyone for joining our first quarter earnings call this morning. We are pleased to report that 2023 is off to a great start. Adjusted EBITDA was down only 2% in the first quarter compared to the prior year after being down 22% in the fourth quarter of 2022. And entering Q2, we believe our most challenging comparisons to prior year are behind us. Excluding the impact of foreign currency, adjusted EBITDA was actually flat to the prior year. Our same-store revenue trends also improved sequentially in the first quarter and we expect this trend to continue into the second quarter. Net income in the first quarter grew by $13.3 million from the prior year to $10.3 million. That compares to a net loss of $3 million in the first quarter of last year. As forecasted in our last earnings call, we expect to achieve year-over-year adjusted EBITDA growth in 2023 as we capture the benefits from our cost management initiatives, see improving revenue trends, and cycle more favorable comparisons. And the solid performance in the first quarter of this year gives us the confidence to increase our 2023 full year outlook with respect to adjusted EBITDA, net income and free cash flow. To put it concisely, we believe that we are at an inflection point in the trajectory of our company. You'll hear this throughout the call this morning as we are moving nicely in the right direction with regard to most of our financial measures. We believe our results in the first quarter demonstrate the effectiveness of the actions we put in place in the later half of 2022 to better position the company for long-term success. We are operating more efficiently from these efforts, resulting in anticipated annualized savings of at least $220 million in…

Thank you, Mike, and good morning, everybody. As Mike mentioned, we are excited by the progress we made in the first quarter. Adjusted EBITDA remained relatively stable year-over-year despite facing the most challenging comparisons of the year. Last year's negative trends around revenue, inflationary impacts and currency, all became more significant beginning in the second quarter of 2022. We also improved our adjusted EBITDA margin in Q1 by 80 basis points year-over-year. The stabilization in adjusted EBITDA reflects the successful execution of our cost management initiatives as well as the sustained execution of our strategy. We are optimistic about the ongoing trends, which we anticipate will continue to improve throughout the year, most notably in Q2 and Q3. We believe this puts us in a favorable position to achieve year-over-year adjusted EBITDA growth for 2023. For Q1, total operating revenues were $668.9 million, a decrease of 10.6% as compared to the prior year quarter, or 9.3% on a same-store basis. This represents 100-basis point improvement from the 10.3% year-over-year same-store revenue decreases in the fourth quarter of 2022. And we expect this trend and improvement to continue for the balance of the year. Adjusted EBITDA totaled of $62.9 million in the first quarter of 2023 a slight decrease of 2% or $1.3 million year-over-year to almost exclusively to the impact from foreign exchange rates. The adjusted EBITDA margin was 9.4% compared to 8.6% in the prior quarter. The improvement in adjusted EBITDA margin was driven by the savings captured from our cost management initiatives with expenses related to these initiatives down approximately 12% year-over-year. This is despite the lingering impacts of inflationary pressures. While we believe these costs peaked in late 2022 the flow through impact was still meaningful on a year-over-year basis in the first quarter of 2023. On…

Excuse me one moment please. Hold for a moment please.

I am going to pick up for Doug here. Results in print circulation have also seen a sequential improvement compared to Q4 of 2022 as a result of the actions we implemented to improve the subscriber experience. We have started to see the results of our investments in addressing the open route situation and distribution challenges, and we've successfully seen the percentage of open delivery routes decrease from 14% to 9% in the first quarter of 2023, that's helped us a lot. It's important to stress that we believe our traditional print business remains a strong source of cash flow, which still has a long tail to it. This cash flow enables us to improve the balance sheet by repaying debt, and of course, it allows us to -- invest in our digital growth opportunities. We are focusing -- we are managing the tail and print as effectively as possible and have increased our efforts to reduce churn with our print subscribers. Revitalizing our local markets is a key objective for us in 2023. Our new Chief Content Officer, Kristin and her team are working to put our customers, readers, viewers and listeners at the forefront of every content decision. This will ensure that we remain vital to the communities we serve while maintaining a sustainable business model for independent journalism. We recognize that investing in our local teams and our local brands is vital to our success, and we are thrilled to have Kristin as part of the Gannett team. In our Digital Marketing Solutions business, total revenue in the first quarter was $112.8 million, an increase of 3.4% year-over-year on a same-store basis. Adjusted EBITDA for the segment was $11.7 million, representing a margin of 10.4% in the first quarter. Average monthly customer count decreased by approximately 4.5%. However, ARPU grew almost 9% versus the prior year. In terms of quarter-over-quarter results, customer count decreased slightly from 15,300 customers in Q4 to 14,700 in Q1 due to the inherent seasonality of our customer base. However, we believe our continued execution, especially with the freemium model, along with the development of additional products and features will increase our addressable market and mitigate at least in part, the effect of seasonality on the DMS business. I'll turn it back over to Doug now to cover the balance sheet. Doug?

Thank you, Mike apologies for the technical issues. So at the end of the first quarter, we had a cash balance of $83.1 million, translating to net debt of approximately $1.15 billion. In the first quarter, free cash flow usage was $2.1 million and included $18.2 million in severance and restructuring costs, largely associated with our cost management program. In Q4 of 2022, we highlighted that we anticipate a year-over-year reduction of more than $60 million in our 2023 cash obligations related to expenses such as pension and reorganization costs. In light of our Q1 results, we anticipate a significant improvement in our free cash flow, and we are now targeting free cash flow of $85 million to $105 million for the full year of 2023. We ended the first quarter with approximately $1.23 billion of total debt. Our first lien net leverage decreased to 2.59x, reflecting $37.3 million of total debt paydown in the first quarter. During the first quarter, we repurchased $6.1 million of our 2026 senior notes for approximately $5 million. We also repaid $31.3 million of our term loan through real estate and other asset sales totaling $16.2 million and our quarterly amortization payment of $15.1 million. In Q1, we completed 8 real estate and other asset sales totaling $29.3 million. For the full year of 2023, we continue to project $65 million to $75 million in real estate and other asset sales, including those we completed in the first quarter. We continue to maintain a sizable real estate sales pipeline of approximately $50 million to $60 million, which combined with our expected free cash flow improvement will contribute meaningfully to our aggressive debt paydown strategy. Moving now to guidance, we are reiterating our prior guidance as described in today's earnings release with respect to revenues,…

[Operator Instructions] Our first question comes from Courtney Bahlman with Barclays.

Congrats on the results. I hopefully I didn't miss this, but could you guys give a little bit of color on how we should think about the cadence of assets, the remaining asset sales and kind of how debt paydown ties to that any color would be great?

Yes, Courtney, this is Mike. Thanks. So with regard to debt paydown, we have our normal quarterly amortization that's obviously straightforward, $15.1 million in the quarter. And then the remaining $50 million to $60 million of asset sales will be a little bit more, lumpy. So there's, a couple of decent sized ones in there. So, I would say between now and the fourth quarter, we hope to complete most of that, and we factored that into our overall forecast for debt repayment of $120-plus million for the year, so real estate a little lumpy, because of a couple of sizable transactions, but really straightforward on the regular quarterly amor 32.43.

Our next question comes from Doug Arthur with Huber Research.

I got to be brief here, because I'm going to jump on another call. But the digital -- I know you talked about slowing digital subscription subscribers down to maximize -- sort of approach -- with a more profitable goal in mind. That looks like sequentially, it looks like it actually dropped from the fourth quarter in terms of number of subscribers. What sort of -- is your expectation for growth in the volume number for the balance of the year?

Doug, it was actually 6,000 so not much of a drop. I think we're at 2028 in the end of the first quarter it was 2022. We are focused on higher retention, higher paying, therefore, better ARPU and profitability on our subscribers, as I said, with better retention. So, we're focused on getting the right content in front of them, the right curation, the right personalization and then having the right marketing and pricing strategies in place. So we're playing with a few things here in Q1 and Q2 and expect to see much more significant growth in Q3 and Q4. We haven't provided any guidance on that yet. And I'd say that -- we'd like to be a little more comfortable with the success we see over the next few months to feel better about guiding to a -- subscriber volume number. But we feel very confident in the efforts we're undertaking to grow profitability in ARPU per subscriber to return to growth of paid subscribers from a digital perspective and to be able to increase the current revenue growth that we're seeing of 20%, return that to something higher as well. So I think there's definitely much more to come over the next couple quarters on that, Doug.

Okay. I mean -- so in theory, you're probably seeing, hopefully, better stickiness among the existing subscribers, because...

We are.

You're sort of ferreting out the high churn ones.

Yes, that's accurate.

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

Yes, thank you. I'd like to close this morning by reiterating how pleased we are with the significant progress we made in the first quarter. First quarter results were a little bit better than we had anticipated, and we were glad to see that. We saw significant growth in net income over the prior year, along with improving same-store revenue trends and essentially flat adjusted EBITDA compared to the prior year, reversing a decline in trends seen over the previous 5 quarters. We also made continued good progress in reducing debt, and we saw our net leverage decline in the quarter. We expect to see a lot more of that all of these things as the year goes on. We are very pleased that we are able to reiterate our full year revenue guidance along with increasing our full year guidance for net income, adjusted EBITDA and cash flow. We expect to see continued improvement in revenue trends as 2023 progresses, and we remain focused on achieving our revenue inflection point towards the end of 2024. Further, we expect to see significant adjusted EBITDA growth in 2023 versus the prior year as well as about $100 million in free cash flow growth this year. With our growth in adjusted EBITDA combined with our continued aggressive debt repayment, we expect firstly net leverage to be below 2x as we end this year. With the changes in our org structure and our strategic focus on leveraging our content org to grow audience and revenue, combined with our partnerships that will better monetize our significant audience on the platform and our improving strategy around digital subscriber and digital revenue growth, we are very optimistic about our continued improvement to revenue trends, not only in the back half of this year, but in 2024 as well. So with low leverage, good liquidity, a lower cost structure and improving same-store revenue trends, we are very well positioned to return significant value to our shareholders as we move forward. Thanks for joining us on the call today, and we look forward to updating you again at the end of the second quarter. Thank you.

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