# USA TODAY Co., Inc. (TDAY) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from USA TODAY Co., Inc.'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/1579684/000157968424000008/gci-20231231.htm Accession: 0001579684-24-000008 Filing date: 2024-02-22 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/TDAY/ All MD&A years: /company/TDAY/mda/ Previous year: /company/TDAY/mda/fy2022/ (FY 2022) Next year: /company/TDAY/mda/fy2024/ (FY 2024) ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We are a diversified media company with expansive reach at the national and local level dedicated to empowering and enriching communities. We seek to inspire, inform, and connect audiences as a sustainable, growth focused media and digital marketing solutions company. We endeavor to deliver essential content, marketing solutions, and experiences for curated audiences, advertisers, consumers, and stakeholders by leveraging our diverse teams and suite of products to enrich the local communities and businesses we serve. Our current portfolio of trusted media brands includes the USA TODAY NETWORK, comprised of the national publication, USA TODAY, and local media organizations in the United States (the "U.S."), and Newsquest, a wholly-owned subsidiary operating in the United Kingdom (the "U.K."). Our digital marketing solutions brand, LocaliQ, uses innovation and software to enable small and medium-sized businesses ("SMBs") to grow, and USA TODAY NETWORK Ventures, our events division, creates impactful consumer engagements, promotions, and races. Through USA TODAY, our network of local properties, and Newsquest, we deliver high-quality, trusted content with a commitment to balanced, unbiased journalism, where and when consumers want to engage. We have strong relationships with hundreds of thousands of local and national businesses in both our U.S. and U.K. markets due to our large local and national sales forces and a robust advertising and digital marketing solutions product suite. Our strategy prioritizes maximizing the monetization of our audience through the growth of increasingly diverse and highly recurring digital businesses. We expect the execution of this strategy to enable us to continue our evolution to a predominantly digital media company. We deliver value to our customers, advertisers, partners and shareholders with essential content, joyful experiences, and relevant digital solutions. We report in three segments: Domestic Gannett Media, Newsquest and Digital Marketing Solutions ("DMS"). We also have a Corporate and other category that includes activities not directly attributable to a specific reportable segment and includes broad corporate functions, such as legal, human resources, accounting, analytics, finance, marketing and technology, as well as other general business costs. Effective with the fourth quarter of 2023, we are reporting financial information for our Newsquest business in a separate segment. Previously, the financial information for this segment was aggregated with Domestic Gannett Media and, together, formed the Gannett Media reportable segment. As a result, we have revised our historical disclosures to reflect the new Domestic Gannett Media and Newsquest reportable segments for all years presented. A full description of our reportable segments is included in Note 14 — Segment reporting in the notes to the Consolidated financial statements. Business Trends We have considered several industry trends when assessing our business strategy: •Print advertising and circulation revenues continue to decline as our audience increasingly moves to digital platforms. We seek to optimize our print operations to efficiently manage for the declining print audience. We are focused on converting a growing digitally-focused audience into paid digital-only subscribers to our publications. •Inflationary prices across a number of categories such as labor, fuel, delivery costs, newsprint, ink, and printing plates have had and are expected to continue to have a negative impact on our overall cost structure year-over-year. In the short term, we believe the impact of inflationary pressure peaked in 2022. •Our revenues and results of operations have been and can be significantly influenced by general macroeconomic conditions, including, but not limited to, interest rates, inflation, housing demand, employment levels, and consumer confidence. We believe that these factors are contributing to uncertainty in SMBs, which is resulting in lower levels of advertising performance and reduced spending in categories such as home services. •Data privacy standards continue to evolve and implementation of standards may result in incremental costs. Privacy standards, such as third-party cookie deprecation, are anticipated to impact the advertising industry more significantly in 2024. We utilize first-party data to assist our customer's advertising needs but an industry-wide solution to address impacts to programmatic advertising has not yet been developed. 44 Table of Contents Recent Developments Debt repurchase In November 2023, we received a waiver from certain lenders of our five-year senior secured term loan facility in an original aggregate principal amount of $516.0 million (the "Senior Secured Term Loan") that reduced the scheduled quarterly amortization payments payable to those lenders by $12.0 million for the three months ended December 31, 2023, so long as such reduced amount was used to purchase a portion of our 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes") at a discount to par value. In November 2023, we entered into a privately negotiated agreement with certain holders of our $400 million aggregate principal amount of 2026 Senior Notes, and repurchased $14.0 million of principal of our outstanding 2026 Senior Notes at a discount to par value. As a result of this repurchase of our 2026 Senior Notes, we recognized a net gain on the early extinguishment of debt of approximately $1.4 million during the fourth quarter of 2023, which included the write-off of unamortized original issue discount and deferred financing costs. In addition, during the fourth quarter of 2023, we repaid approximately $9.9 million of our Senior Secured Term Loan, including quarterly amortization payments. As a result of the repayment related to our Senior Secured Term Loan, we recognized a net loss on the early extinguishment of debt of approximately $0.1 million during the fourth quarter of 2023, which included the write-off of unamortized original issue discount and deferred financing costs. Corporate office relocation On February 15, 2024, we decided we will relocate our corporate headquarters from McLean, Virginia to our existing leased office space in New York, New York effective March 31, 2024. We will exit, cease use and continue to seek subleases for our leased facility in McLean. As a result of the headquarters relocation, we expect to record impairment charges of approximately $45.0 million during the three months ended March 31, 2024 related to the McLean operating lease right-of-use asset and the associated leasehold improvements. Certain Matters Affecting Comparability The following items affect period-over-period comparisons and will continue to affect period-over-period comparisons for future results: (Gain) loss on sale or disposal of assets, net For the year ended December 31, 2023, we recognized a net gain on the sale of assets of $40.1 million, primarily related to net gains of $38.9 million at the Domestic Gannett Media segment due to the sales of production facilities as part of our plan to monetize non-core assets, and a gain of $1.4 million at our Corporate and other category related to the sale of intellectual property. For the year ended December 31, 2022, we recognized a net gain on the sale of assets of $6.9 million, primarily related to net gains of $6.7 million at the Domestic Gannett Media segment, mainly driven by the sales of production facilities as part of our plan to monetize non-core assets. For the year ended December 31, 2021, we recognized a net loss on the sale of assets of $17.2 million, primarily related to a net loss of $27.4 million at the Domestic Gannett Media segment, partially offset by a net gain of $9.9 million at the Newsquest segment, mainly driven by the sales of production facilities as part of our plan to monetize non-core assets. Integration and reorganization costs For the year ended December 31, 2023, we incurred Integration and reorganization costs of $24.5 million. Of the total costs incurred, $18.5 million were related to severance activities and $6.0 million were related to other costs, including costs for consolidating operations, primarily related to costs associated with systems implementation and the outsourcing of corporate functions, partially offset by the reversal of withdrawal liabilities related to multiemployer pension plans of $6.4 million based on settlement of the withdrawal liabilities. For the year ended December 31, 2022, we incurred Integration and reorganization costs of $88.0 million. Of the total costs incurred, $57.6 million were related to severance activities and $30.4 million were related to other costs, including a withdrawal liability related to multiemployer pension plans of $8.6 million, which was expensed as a result of ceasing contributions, costs 45 Table of Contents for consolidating operations, primarily related to systems implementation and the outsourcing of corporate functions, and facilities consolidation expenses, primarily associated with exiting a lease. For the year ended December 31, 2021, we incurred Integration and reorganization costs of $49.3 million. Of the total costs incurred, $16.5 million were related to severance activities and $32.8 million were related to other costs, including costs for consolidating operations, such as costs associated with systems integrations. Foreign currency Our U.K. media operations are conducted through our Newsquest subsidiary. In addition, we have foreign operations in regions such as Canada, Australia, New Zealand and India. Earnings from operations in foreign regions are translated into U.S. dollars at average exchange rates prevailing during the period, and assets and liabilities are translated at exchange rates in effect at the balance sheet date. Currency translation fluctuations may impact revenue, expense, and operating income results for our international operations. Foreign currency headwinds have increased significantly as the U.S. dollar strengthened in relation to many foreign currencies, including the U.K. pound sterling. Foreign currency exchange rate fluctuations negatively impacted our revenues and profitability during the year ended December 31, 2023, and may continue to negatively impact our financial results in the future. Strategy We are committed to inspiring, informing and connecting audiences as a sustainable, growth-focused media and digital marketing solutions company. We endeavor to deliver essential content, marketing solutions and experiences for curated audiences, advertisers, consumers, and stakeholders by leveraging our diverse teams and suite of products to enrich the local communities and businesses we serve. The execution of this strategy is expected to allow us to continue our evolution from a more traditional print media business to a sustainable, growth-focused media and digital marketing solutions company. We intend to create stockholder value through a variety of methods, including organic growth driven by our consumer and business-to-business strategies, as well as through paying down debt to strengthen our capital structure. Create a stable foundation for growth We continue to optimize and improve our foundation – completing systems consolidations and migrations, improving process workflows, and ensuring we have synergy across the organization to deliver the stabilization required to fuel our plan into the future. We also continue to invest in our people and in the skills needed to support our future aims and to retain our talent by remaining an attractive place to work. Expand our reach Key to our ongoing growth is expanding our base – whether clients in our DMS segment or audience in our Domestic Gannett Media and Newsquest segments – and optimizing our revenue streams across this growing base. For both the Domestic Gannett Media and Newsquest segments, this includes content expansion, establishing a seamless print to digital continuum to introduce clients, readers, viewers, and listeners to a broader range of products we offer. For the DMS segment, expanding our client base and core revenue is anticipated to be supplemented by the development of a complementary software model. Diversify digital revenues We expect to continue to expand the ways that we grow digital revenues through innovative partnerships and developing new products and services that meet the needs of consumers and businesses. Examples of this growth strategy include our intention to continue to expand partnerships that rely on our unique and large audience base and developing new DMS software solutions. Building on our environmental, social and governance focus to foster culture and community both internally and externally We will continue our environmental, social and governance ("ESG") journey that is rooted in our strategic mission to empower our communities to thrive and putting our customers at the center of everything we do. We support that mission with clearly defined values that aim to influence not only what we do, but how we do it, with one of the core pillars focusing on our ongoing commitments to inclusion, diversity, and equity ("ID&E"). From our internal efforts around recruiting, development 46 Table of Contents and retention, to our external efforts to provide high quality products and excellent customer service, we believe our strategic focus will benefit from our continued commitment to building upon our culture and community values. Macroeconomic Environment The U.S. and global economies and markets experienced increased volatility in 2023, and are expected to continue to experience volatility, due to factors, including higher inflation, increased interest rates, banking volatility, and other geopolitical events that are anticipated to continue in 2024. Uncertain economic conditions adversely impacted our advertising revenues, and the occurrence of these factors has resulted in a reduction in demand for our print and digital advertising, reduced the rates for our advertising, and caused marketers to shift, reduce or stop spend. The impact of these uncertain macroeconomic conditions has not changed substantially since the initial volatility that began in the second quarter of 2022. These challenging conditions, especially higher inflation and interest rates, have negatively impacted the consumer and resulted in increased price sensitivity from our print and paid digital-only subscribers. Consumer purchases of discretionary items, including our products and services, generally decline during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. SMBs are facing a more complex marketing environment and need to create digital presence to capture audiences online. Advertisers are increasingly looking for more effective ways to analyze their return on marketing investments and are seeking solutions that offer greater attribution. We believe we offer a broad suite of digital marketing services products that offer a single, unified solution to meet their digital marketing needs. As a result of the macroeconomic volatility, we have experienced rising costs, including costs associated with labor, newsprint, delivery, ink, printing plates, fuel, and utilities. However, we believe that the inflationary pressures peaked in 2022 and we are beginning to realize and expect we may continue to realize lower prices related to newsprint costs. We are also exposed to potential increases in interest rates associated with our Senior Secured Term Loan, which as of December 31, 2023, accounted for approximately 31% of our outstanding debt, as well as fluctuations in foreign currency exchange rates, primarily related to our operations in the U.K. We expect continued uncertainty and volatility in the U.S. and global economies which will continue to impact our business. Recent U.S. and international tax legislation On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the "Inflation Reduction Act"), which includes, among other provisions, changes to the U.S. corporate income tax system, including a 15% minimum tax based on "average adjusted financial statement income" exceeding $1 billion for any three consecutive years preceding the tax year and a 1% excise tax on net repurchases of stock in excess of $1 million after December 31, 2022. During the year ended December 31, 2023, we did not experience a material financial impact from the Inflation Reduction Act. We do not anticipate a material financial impact from the Inflation Reduction Act during 2024. We are subject to income taxes and various other taxes in the U.S. and in many foreign jurisdictions; therefore, changes in both domestic and international tax laws or regulations have affected and may affect our effective tax rate, results of operations, and cash flows. The Organization for Economic Co-operation and Development (the "OECD")/G20 Inclusive Framework on Base Erosion and Profit Shifting has agreed on a two-pillar approach to address tax challenges arising from the digitalization of the global economy by (i) allocating profits to market jurisdictions ("Pillar One") and (ii) ensuring multinational enterprises pay a minimum level of tax regardless of where the headquarters are located or the jurisdictions in which the company operates ("Pillar Two"). Pillar One targets multinational groups with global revenue exceeding €20 billion and a profit-to-revenue ratio of more than 10%. Companies subject to Pillar One will be required to allocate profits and pay taxes to market jurisdictions. Based on the current proposed revenue and profit thresholds, we do not expect to be subject to tax changes associated with Pillar One. Pillar Two focuses on global profit allocation and a global minimum tax rate. In December 2022, the European Union ("EU") Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the OECD Pillar Two Framework that was supported by over 130 countries worldwide. The EU Pillar Two Directive became effective on January 1, 2024. The U.K. has enacted legislation to implement the OECD's Pillar Two rules with the passing of Finance (No.2) Act 2023. The legislation introduces a global minimum effective tax rate of 15% by implementing a domestic top-up tax and a multinational top-up tax for U.K. multinational corporations effective January 1, 2024. Other countries are also actively considering changes to their tax laws to adopt certain parts of the OECD's proposals. We do not expect that Pillar Two will have a material impact on the Consolidated financial statements. 47 Table of Contents Seasonality Our revenues are subject to moderate seasonality, primarily due to fluctuations in advertising volumes. Advertising and marketing services revenues for our Domestic Gannett Media segment are typically highest in the fourth quarter, primarily due to fluctuations in advertising volumes tied to the holidays, regional weather, and levels of activity in our various markets, some of which have a high degree of seasonal residents and tourists. Revenues in our DMS segment experience moderate seasonality in the first quarter due to fluctuations in the seasonal needs of our advertising customers. The volume of advertising sales in any period is also impacted by other external factors such as competitors' pricing, advertisers' decisions to increase or decrease their advertising expenditures in response to anticipated consumer demand, and general economic conditions. Uncertain economic conditions continued to adversely impact our advertising revenues during 2023, and the occurrence of these factors has resulted in a reduction in demand for our print and digital advertising, reduced the rates for our advertising, and caused marketers to shift, reduce or stop spend. Refer to "Macroeconomic Environment" above for further discussion. Environmental, Social and Governance Initiatives As a leading media organization, our longstanding corporate social responsibility position is driven by our deep commitment to our communities. We are dedicated to ensuring that we have mindful and ethical business practices that positively impact our world. In early 2023, we published our 2023 ESG Report detailing the progress we made on our U.N. Sustainable Development Goals ("U.N. SDGs") that include Reduced Inequalities, Climate Action, and Peace, Justice and Strong Institutions. The 2023 ESG Report included noteworthy highlights such as improving our workplace diversity, expanding our systems infrastructure to provide Scope 1 and 2 emissions for our entire global carbon footprint, and reducing the number of manufacturing facilities. We are committed to ensuring our coverage is widely available, actively promoted across our media sites and marketed to our millions of registered users. In January 2024, we published our network-wide 2023 Journalism Impact Report, which highlighted what we believe are the most influential articles we produced in 2023 and covers topics such as coverage on ID&E, as well as climate change. We are committed to the ongoing publishing of an annual network-wide Journalism Impact Report, which surfaces the top stories we produced that led to action. The well-being of our employees is of paramount importance to us and we are committed to maintaining a corporate culture that conducts business in a responsible and ethical manner that includes promoting, protecting and supporting human rights across our operations and throughout our entire organization, which is why we have adopted a company-wide Human Rights Policy. This policy expands upon an existing policy enacted by our U.K. operations. Our Human Rights Policy covers areas such as our commitment to diversity and inclusion, a safe and healthy workplace, our communities and stakeholders, and freedom of association and collective bargaining, which helps ensure our employees' right to form and choose whether to join a labor union without fear of reprisal, intimidation, or harassment. The Human Rights Policy also reflects our commitment to bargaining in good faith with chosen representatives of such groups in accordance with applicable laws. 48 Table of Contents RESULTS OF OPERATIONS Consolidated Summary A summary of our consolidated results is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands, except per share amounts","2023","","2022","","$ Change","","% Change","","2021","","$ Change","","% Change"],["Revenues:"],["Local and national print","$","329,956","","","$","404,298","","","(74,342)","","","(18)","%","","$","502,014","","","$","(97,716)","","","(19)","%"],["Classified print","246,589","","","266,584","","","(19,995)","","","(8)","%","","290,272","","","(23,688)","","","(8)","%"],["Print advertising","576,545","","","670,882","","","(94,337)","","","(14)","%","","792,286","","","(121,404)","","","(15)","%"],["Digital media","280,596","","","299,775","","","(19,179)","","","(6)","%","","363,149","","","(63,374)","","","(17)","%"],["Digital marketing services (a)","476,958","","","467,909","","","9,049","","","2","%","","443,775","","","24,134","","","5","%"],["Digital classified","53,015","","","57,571","","","(4,556)","","","(8)","%","","51,951","","","5,620","","","11","%"],["Digital advertising and marketing services","810,569","","","825,255","","","(14,686)","","","(2)","%","","858,875","","","(33,620)","","","(4)","%"],["Advertising and marketing services","1,387,114","","","1,496,137","","","(109,023)","","","(7)","%","","1,651,161","","","(155,024)","","","(9)","%"],["Print circulation","772,200","","","952,019","","","(179,819)","","","(19)","%","","1,149,186","","","(197,167)","","","(17)","%"],["Digital-only subscription","155,621","","","132,618","","","23,003","","","17","%","","100,488","","","32,130","","","32","%"],["Circulation","927,821","","","1,084,637","","","(156,816)","","","(14)","%","","1,249,674","","","(165,037)","","","(13)","%"],["Other (b)","348,615","","","364,529","","","(15,914)","","","(4)","%","","307,248","","","57,281","","","19","%"],["Total revenues","2,663,550","","","2,945,303","","","(281,753)","","","(10)","%","","3,208,083","","","(262,780)","","","(8)","%"],["Total operating expenses (a)","2,577,279","","","2,978,902","","","(401,623)","","","(13)","%","","3,099,006","","","(120,104)","","","(4)","%"],["Operating income (loss)","86,271","","","(33,599)","","","119,870","","","***","","109,077","","","(142,676)","","","***"],["Non-operating expenses","92,436","","","43,307","","","49,129","","","***","","196,998","","","(153,691)","","","(78)","%"],["Loss before income taxes","(6,165)","","","(76,906)","","","70,741","","","(92)","%","","(87,921)","","","11,015","","","(13)","%"],["Provision for income taxes","21,729","","","1,349","","","20,380","","","***","","48,250","","","(46,901)","","","(97)","%"],["Net loss","(27,894)","","","(78,255)","","","50,361","","","(64)","%","","(136,171)","","","57,916","","","(43)","%"],["Net loss attributable to noncontrolling interests","(103)","","","(253)","","","150","","","(59)","%","","(1,209)","","","956","","","(79)","%"],["Net loss attributable to Gannett","$","(27,791)","","","$","(78,002)","","","$","50,211","","","(64)","%","","$","(134,962)","","","$","56,960","","","(42)","%"],["Loss per share attributable to Gannett - basic","$","(0.20)","","","$","(0.57)","","","$","0.37","","","(65)","%","","$","(1.00)","","","$","0.43","","","(43)","%"],["Loss per share attributable to Gannett - diluted","$","(0.20)","","","$","(0.57)","","","$","0.37","","","(65)","%","","$","(1.00)","","","$","0.43","","","(43)","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. (a)     Amounts are net of intersegment eliminations of $150.5 million, $143.5 million and $129.3 million for the years ended December 31, 2023, 2022 and 2021, respectively, which represent digital advertising marketing services revenues and expenses associated with products sold by sales teams in our Domestic Gannett Media and Newsquest segments but fulfilled by our DMS segment. When discussing segment results, these revenues and expenses are presented gross but are eliminated in consolidation. (b)     Other revenues included Other Digital revenues, including digital syndication, affiliate, production and licensing revenues of $84.2 million, $80.7 million and $68.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Revenues Advertising and marketing services revenues are generated by the Domestic Gannett Media, Newsquest and DMS segments. At both the Domestic Gannett Media and Newsquest segments, Advertising and marketing services revenues are generated by the sale of local, national, and classified print advertising products, digital advertising offerings such as digital classified advertisements, digital media such as display advertisements run on our platforms as well as third-party sites, and 49 Table of Contents digital marketing services delivered by our DMS segment. At the DMS segment, Advertising and marketing services revenues are generated through multiple services, including search advertising, display advertising, search optimization, social media, website development, web presence products, customer relationship management, and software-as-a-service solutions. Circulation revenues are generated by the Domestic Gannett Media and Newsquest segments, and are derived from home delivery, digital distribution and single copy sales of our publications. Other revenues are primarily generated by the Domestic Gannett Media and Newsquest segments. Other revenues generated by the Domestic Gannett Media segment are mainly derived from commercial printing, distribution arrangements, revenues from our events business, digital content syndication and affiliate revenues and third-party newsprint sales. Other revenues generated by the Newsquest segment are mainly derived from digital production revenues and commercial printing. To a lesser extent Other revenues generated at our Corporate and other category are mainly driven by sales of cloud-based products with expert guidance and support. Operating expenses Operating expenses consist primarily of the following: •Operating costs at the Domestic Gannett Media and Newsquest segments include labor, newsprint and delivery costs and at the DMS segment include the cost of online media acquired from third parties and costs to manage and operate our marketing solutions and technology infrastructure; •Selling, general and administrative expenses include labor, payroll, outside services, benefits costs and bad debt expense; •Depreciation and amortization; •Integration and reorganization costs include severance charges and other costs, including those for the purpose of consolidating our operations (i.e., facility consolidation expenses and integration-related costs); •Impairment charges, including costs incurred related to goodwill, intangible assets and property, plant, and equipment; •Gains or losses on the sale or disposal of assets; and •Other operating expenses, including third-party debt expenses as well as acquisition-related costs. Refer to Segment results below for a discussion of the results of operations by segment. Non-operating (income) expense Interest expense: For the year ended December 31, 2023, Interest expense was $111.8 million compared to $108.4 million for the year ended December 31, 2022. The increase in interest expense for the year ended December 31, 2023 compared to 2022 was primarily due to the impact of the increase in interest rates on our Senior Secured Term Loan, partially offset by a lower debt balance, mainly driven by quarterly amortization payments on our Senior Secured Term Loan and repurchases of our 2026 Senior Notes. For the year ended December 31, 2022, Interest expense was $108.4 million compared to $135.7 million for the year ended December 31, 2021. The decrease in interest expense for the year ended December 31, 2022 compared to 2021 was mainly due to a lower debt balance and the impact of lower interest rates on our outstanding fixed-rate debt, partially offset by an increase in interest rates on the Senior Secured Term Loan. Gain on early extinguishment of debt: For the years ended December 31, 2023 and 2022, we recognized gains on the early extinguishment of debt of $4.5 million and $0.4 million, respectively. The increase in the Gain on the early extinguishment of debt for the year ended December 31, 2023 compared to 2022 was mainly due to refinancing activities related to our 2026 Senior Notes and Senior Secured Term Loan. For the year ended December 31, 2021, we incurred a loss on the early extinguishment of debt of $48.7 million. The decrease for the year ended December 31, 2022 compared to 2021 was mainly due to the absence in 2022 of the refinancing activities which occurred in 2021, including the refinancing of our five-year, senior-secured term loan facility in an aggregate principal amount of $1.045 billion (the "5-Year Term Loan") in the fourth quarter of 2021 and the payoff of our five-year, senior-secured 11.5% term loan facility with Apollo Capital Management, L.P., which was made in the first quarter of 2021. Refer to "Recent Developments – Debt repurchase" above for further discussion of our 2026 Senior Notes. Non-operating pension income: For the year ended December 31, 2023, Non-operating pension income was $9.4 million compared to $59.0 million in 2022. The decrease in Non-operating pension income for the year ended December 31, 2023 compared to 2022 was primarily due to a decrease in the expected return on plan assets, mainly driven by a decrease in assets following the annuity contract entered into during 2022, related to the Gannett Retirement Plan (the "GR Plan"). For the year ended December 31, 2022, Non-operating pension income was $59.0 million compared to $95.4 million in 2021. The decrease in Non-operating pension income for the year ended December 31, 2022 compared to 2021 was primarily due to a decrease in 50 Table of Contents the expected return on plan assets held by the GR Plan, mainly driven by a more conservative asset allocation, and to a lesser extent, the reduction to the GR Plan assets as a result of the pension annuity entered into during the third quarter of 2022. Loss on convertible notes derivative: For the years ended December 31, 2023 and 2022, we had no Loss on convertible notes derivative. For the year ended December 31, 2021, Loss on convertible notes derivative was $126.6 million, reflecting the increase in the fair value of the derivative liability as a result of the increase in our stock price. Other non-operating income, net: Other non-operating income, net consisted of certain items that fall outside of our normal business operations. For the year ended December 31, 2023, we recorded Other non-operating income, net of $5.4 million compared to $5.7 million in 2022. For the year ended December 31, 2022, Other non-operating income, net, was $5.7 million compared to $18.7 million in 2021. The decrease in Other non-operating income, net for the year ended December 31, 2022 compared to 2021 was primarily due to the absence in 2022 of the reversal of an accrual related to a legal matter in 2021. Provision for income taxes The following table summarizes our pre-tax loss before income taxes and income tax accounts: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","2021"],["Loss before income taxes","$","(6,165)","","","$","(76,906)","","","$","(87,921)"],["Provision for income taxes","21,729","","","1,349","","","48,250"],["Effective tax rate","NM","","(1.8)","%","","NM"]] [[/GREPCENT_TABLE]] NM indicates not meaningful. Our effective tax rate for the year ended December 31, 2023 was not meaningful. The tax provision for 2023 was primarily impacted by the valuation allowances on non-deductible U.S. interest expense carryforwards, the global intangible low-taxed income inclusion from our U.K. operations, nondeductible compensation, and state and local tax expense, partially offset by the benefit from the pre-tax book loss. Our effective tax rate for the year ended December 31, 2022 was negative 1.8%. The tax provision for 2022 was primarily impacted by the valuation allowances on non-deductible U.S. interest expense carryforwards, the global intangible low-taxed income inclusion, the release of uncertain tax positions in the U.S., and the reduction in the blended state tax rate, which were offset by the tax benefit of the pre-tax book loss. Our effective tax rate for the year ended December 31, 2021 was not meaningful given the income tax provision associated with a loss before income taxes. The tax provision was primarily impacted by the derivative revaluation, which is nondeductible for federal tax purposes, the creation of valuation allowances on non-deductible interest expense carryforwards, and deemed income from global intangible low-taxed income inclusion, offset by the change in the deferred tax rate from 19% to 25% in the U.K. and the income tax impact of Paycheck Protection Program ("PPP") loan forgiveness. Net loss attributable to Gannett and diluted loss per share attributable to Gannett Net loss attributable to Gannett and diluted loss per share attributable to Gannett were $27.8 million and $0.20 for the year ended December 31, 2023, respectively, $78.0 million and $0.57 for the year ended December 31, 2022, respectively, and $135.0 million and $1.00 for the year ended December 31, 2021, respectively. The changes reflect the various items discussed above and below in "Segment Results." 51 Table of Contents Segment Results Domestic Gannett Media segment 2023 compared to 2022 A summary of our Domestic Gannett Media segment comparing the year ended December 31, 2023 to the year ended December 31, 2022 is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Revenues:"],["Advertising and marketing services","$","925,539","","","$","1,034,416","","","$","(108,877)","","","(11","%)"],["Circulation","854,542","","","1,012,525","","","(157,983)","","","(16","%)"],["Other","315,772","","","332,865","","","(17,093)","","","(5","%)"],["Total revenues","2,095,853","","","2,379,806","","","(283,953)","","","(12","%)"],["Operating expenses:"],["Operating costs","1,362,815","","","1,544,708","","","(181,893)","","","(12","%)"],["Selling, general and administrative expenses","540,843","","","631,414","","","(90,571)","","","(14","%)"],["Depreciation and amortization","112,201","","","130,557","","","(18,356)","","","(14","%)"],["Integration and reorganization costs","5,582","","","55,575","","","(49,993)","","","(90","%)"],["Asset impairments","1,370","","","1,056","","","314","","","30","%"],["Gain on sale or disposal of assets, net","(38,937)","","","(6,738)","","","(32,199)","","","***"],["Other operating expenses","139","","","2","","","137","","","***"],["Total operating expenses","1,984,013","","","2,356,574","","","(372,561)","","","(16","%)"],["Operating income","$","111,840","","","$","23,232","","","$","88,608","","","***"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. Revenues The following table provides the breakout of Revenues by category: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Local and national print","$","292,211","","","$","363,772","","","$","(71,561)","","","(20","%)"],["Classified print","209,490","","","230,969","","","(21,479)","","","(9","%)"],["Print advertising","501,701","","","594,741","","","(93,040)","","","(16","%)"],["Digital media","238,706","","","260,417","","","(21,711)","","","(8","%)"],["Digital marketing services","140,589","","","133,219","","","7,370","","","6","%"],["Digital classified","44,543","","","46,039","","","(1,496)","","","(3","%)"],["Digital advertising and marketing services","423,838","","","439,675","","","(15,837)","","","(4","%)"],["Advertising and marketing services","925,539","","","1,034,416","","","(108,877)","","","(11","%)"],["Print circulation","704,158","","","884,854","","","(180,696)","","","(20","%)"],["Digital-only subscription","150,384","","","127,671","","","22,713","","","18","%"],["Circulation","854,542","","","1,012,525","","","(157,983)","","","(16","%)"],["Other(a)","315,772","","","332,865","","","(17,093)","","","(5","%)"],["Total revenues","$","2,095,853","","","$","2,379,806","","","(283,953)","","","(12","%)"]] [[/GREPCENT_TABLE]] (a)     Other revenues included Other Digital revenues, including digital content syndication and affiliate revenues of $67.5 million and $65.8 million for the years ended December 31, 2023 and 2022, respectively. 52 Table of Contents For the year ended December 31, 2023, Local and national print advertising revenues decreased compared to 2022, primarily due to a decrease in advertiser inserts, mainly due to volume declines, and a decrease in local and national print advertisements, mainly due to the ongoing decline associated with secular trends and both a shift and a reduction in spend from customers driven by macroeconomic factors. In addition, the decrease in Local and national print advertising revenues was also due to the absence in 2023 of revenues of $25.7 million associated with both businesses divested and non-core products which were sunset in 2023 and 2022. For the year ended December 31, 2023, Classified print advertising revenues decreased compared to 2022, primarily due to lower spend on classified advertisements, mainly driven by lower spend on obituary notifications and real estate advertisements, partially offset by an increase in spend on employment advertisements. In addition, the decrease in Classified print advertising revenues was also due to the absence in 2023 of revenues of $5.6 million associated with non-core products which were sunset in 2023 and 2022. For the year ended December 31, 2023, Digital media revenues decreased compared to 2022, driven by decreases in both domestic national and local revenue volumes and a reduction in digital advertising demand as a result of a more challenging macroeconomic environment, including declining CPMs (cost per thousand impressions). For the year ended December 31, 2023, Digital marketing services revenues increased compared to 2022, primarily due to an increase in rates, partially offset by a decrease in client counts. For the year ended December 31, 2023, Digital classified revenues decreased compared to 2022, due to lower spend on employment and obituary notifications, partially offset by higher spend on automotive advertisements. For the year ended December 31, 2023, Print circulation revenues decreased compared to 2022, due to a decline in home delivery as a result of a reduction in the volume of subscribers, partially offset by an increase in rates, as well as a decline in single copy due to a reduction in volume. In addition, the decrease in Print circulation revenues was due to the absence in 2023 of revenues of $6.8 million associated with non-core products which were sunset in 2023 and 2022. For the year ended December 31, 2023, Digital-only subscription revenues increased compared to 2022, due to an increase in Digital-only subscription average revenue per user ("Digital-only ARPU") of 7.8%, mainly due to product mix. Refer to "Key Performance Indicators" below for further discussion of Digital-only ARPU. For the year ended December 31, 2023, Other revenues decreased compared to 2022, primarily due to a decline in commercial print volume and a decline in digital syndication, partially offset by an increase in event revenues, mainly driven by an increase in registration fees and higher merchandising revenues, driven by higher attendance, partially offset by slightly fewer events, as well as an increase in digital revenues related to affiliate agreements. Operating expenses For the year ended December 31, 2023, Operating costs decreased $181.9 million compared to 2022. The following table provides the breakout of the decrease in Operating costs: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Newsprint and ink","$","99,760","","","$","129,077","","","$","(29,317)","","","(23","%)"],["Distribution","323,750","","","370,594","","","(46,844)","","","(13","%)"],["Compensation and benefits","393,196","","","487,868","","","(94,672)","","","(19","%)"],["Outside services","326,695","","","333,137","","","(6,442)","","","(2","%)"],["Other","219,414","","","224,032","","","(4,618)","","","(2","%)"],["Total operating costs","$","1,362,815","","","$","1,544,708","","","$","(181,893)","","","(12","%)"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023, Newsprint and ink costs decreased compared to 2022, primarily due to a decline associated with lower revenues, partially offset by an increase of $2.4 million driven by the change in the cost of newsprint. For the year ended December 31, 2023, Distribution costs decreased compared to 2022, primarily due to a decrease of $51.2 million associated with lower home delivery and single copy revenues, partially offset by an increase of $4.4 million, driven by higher postage costs primarily due to conversion to mail delivery in multiple markets. Included in the decline of Distribution costs was the absence in 2023 of expenses of $16.8 million associated with both businesses divested and non-core products which were sunset in 2023 and 2022. For the year ended December 31, 2023, Compensation and benefits costs decreased compared to 2022, primarily due to lower payroll expense of $69.5 million, driven by a decrease in headcount tied to ongoing cost control initiatives, including facility closures and conversion to mail delivery in multiple markets, and to a lesser extent, lower employee benefit costs of 53 Table of Contents $25.1 million, mainly due to a decrease in insurance costs due to a decrease in headcount and a decline in employer 401(k) plan matching contributions, which were suspended in the third quarter of 2022. For the year ended December 31, 2023, Outside services costs, which includes professional services fulfilled by third parties, media fees and other digital costs, and paid search and ad serving services, decreased compared to 2022, primarily due to a decrease of $12.4 million in various expenses, including costs related to news and editorial, professional services, outside printing, and software licensing, partially offset by an increase of $6.0 million in third-party media fees. For the year ended December 31, 2023, Other costs decreased compared to 2022, primarily due to lower facility related expenses associated with real estate sales and lower promotion expenses. For the year ended December 31, 2023, Selling, general and administrative expenses decreased by $90.6 million compared to 2022. The following table provides the breakout of the decrease in Selling, general and administrative expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Compensation and benefits","$","255,491","","","$","289,761","","","$","(34,270)","","","(12","%)"],["Outside services and other","285,352","","","341,653","","","(56,301)","","","(16","%)"],["Total selling, general and administrative expenses","$","540,843","","","$","631,414","","","$","(90,571)","","","(14","%)"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023, Compensation and benefits costs decreased compared to 2022, primarily due to lower payroll expense of $24.0 million, driven by a decrease in headcount tied to ongoing cost control initiatives and lower commissions related to revenue performance, and to a lesser extent, lower employee benefit costs of $10.3 million, including a decrease in employer 401(k) plan matching contributions, which were suspended in the third quarter of 2022. For the year ended December 31, 2023, Outside services and other costs, which include services fulfilled by third parties, decreased compared to 2022, due to a decrease in costs related to technology, promotions, and professional services. For the year ended December 31, 2023, Depreciation and amortization expense decreased compared to 2022, reflecting the impact of fewer print facilities in 2023 compared to 2022. For the year ended December 31, 2023, Integration and reorganization costs decreased compared to 2022, mainly due to a decrease in severance costs of $30.7 million and a decrease in other costs of $19.3 million. The decrease in other costs was primarily due to the reversal of withdrawal liabilities related to multiemployer pension plans of $6.4 million based on settlement of the withdrawal liability, and the absence in 2023 of an accrual of $8.6 million made in 2022 related to a multiemployer pension plan, as well as lower facility and consolidation costs in 2023 compared to 2022. For the years ended December 31, 2023 and 2022, we recognized net gains on the sale of assets of $38.9 million and $6.7 million, respectively, primarily related to sales of production facilities as part of our plan to monetize non-core assets. Domestic Gannett Media segment Adjusted EBITDA [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Net income attributable to Gannett","$","114,254","","","$","63,225","","","$","51,029","","","81","%"],["Non-operating pension income","(705)","","","(35,921)","","","35,216","","","(98","%)"],["Depreciation and amortization","112,201","","","130,557","","","(18,356)","","","(14","%)"],["Integration and reorganization costs","5,582","","","55,575","","","(49,993)","","","(90","%)"],["Other operating expenses","139","","","2","","","137","","","***"],["Asset impairments","1,370","","","1,056","","","314","","","30","%"],["Gain on sale or disposal of assets, net","(38,937)","","","(6,738)","","","(32,199)","","","***"],["Other items","737","","","(108)","","","845","","","***"],["Adjusted EBITDA (non-GAAP basis)(a)","$","194,641","","","$","207,648","","","$","(13,007)","","","(6","%)"],["Net income attributable to Gannett margin","5.5","%","","2.7","%"],["Adjusted EBITDA margin (non-GAAP basis)(a)(b)","9.3","%","","8.7","%"]] [[/GREPCENT_TABLE]] 54 Table of Contents *** Indicates an absolute value percentage change greater than 100. (a) See "Non-GAAP Financial Measures" below for additional information about non-GAAP measures. (b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. For the year ended December 31, 2023, the decrease in Domestic Gannett Media segment Adjusted EBITDA compared to 2022 was primarily attributable to the changes discussed above. In addition, for the year ended December 31, 2023, the decrease in Non-operating pension income compared to 2022 was primarily due to a decrease in the expected return on plan assets mainly driven by a decrease in assets following the annuity contract entered into during 2022 related to the GR Plan. Domestic Gannett Media segment 2022 compared to 2021 A summary of our Domestic Gannett Media segment comparing the year ended December 31, 2022 to the year ended December 31, 2021 is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Operating revenues:"],["Advertising and marketing services","$","1,034,416","","","$","1,219,241","","","$","(184,825)","","","(15","%)"],["Circulation","1,012,525","","","1,179,100","","","(166,575)","","","(14","%)"],["Other","332,865","","","279,776","","","53,089","","","19","%"],["Total operating revenues","2,379,806","","","2,678,117","","","(298,311)","","","(11","%)"],["Operating expenses:"],["Operating costs","1,544,708","","","1,622,214","","","(77,506)","","","(5","%)"],["Selling, general and administrative expenses","631,414","","","676,954","","","(45,540)","","","(7","%)"],["Depreciation and amortization","130,557","","","150,185","","","(19,628)","","","(13","%)"],["Integration and reorganization costs","55,575","","","14,721","","","40,854","","","***"],["Asset impairments","1,056","","","3,881","","","(2,825)","","","(73","%)"],["(Gain) loss on sale or disposal of assets, net","(6,738)","","","27,397","","","(34,135)","","","***"],["Other operating expenses","2","","","\u2014","","","2","","","***"],["Total operating expenses","2,356,574","","","2,495,352","","","(138,778)","","","(6","%)"],["Operating income","$","23,232","","","$","182,765","","","$","(159,533)","","","(87","%)"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. 55 Table of Contents Operating revenues The following table provides the breakout of Operating revenues by category: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Local and national print","$","363,772","","","$","469,211","","","$","(105,439)","","","(22","%)"],["Classified print","230,969","","","259,081","","","(28,112)","","","(11","%)"],["Print advertising","594,741","","","728,292","","","(133,551)","","","(18","%)"],["Digital media","260,417","","","324,843","","","(64,426)","","","(20","%)"],["Digital marketing services","133,219","","","125,861","","","7,358","","","6","%"],["Digital classified","46,039","","","40,245","","","5,794","","","14","%"],["Digital advertising and marketing services","439,675","","","490,949","","","(51,274)","","","(10","%)"],["Advertising and marketing services","1,034,416","","","1,219,241","","","(184,825)","","","(15","%)"],["Print circulation","884,854","","","1,083,760","","","(198,906)","","","(18","%)"],["Digital-only subscription","127,671","","","95,340","","","32,331","","","34","%"],["Circulation","1,012,525","","","1,179,100","","","(166,575)","","","(14","%)"],["Other(a)","332,865","","","279,776","","","53,089","","","19","%"],["Total operating revenues","$","2,379,806","","","$","2,678,117","","","$","(298,311)","","","(11","%)"]] [[/GREPCENT_TABLE]] (a)    Other revenues included Other Digital revenues, including digital content syndication and affiliate revenues of $65.8 million and $57.4 million for the years ended December 31, 2022 and 2021, respectively. The overall decline in Print advertising revenues for the year ended December 31, 2022 compared to 2021 was driven primarily by secular industry trends impacting all categories. In addition, during the year ended December 31, 2022, and specifically beginning in the second quarter of 2022, we saw an acceleration in the rate of decline of our Print advertising revenues as a result of macroeconomic factors. For the year ended December 31, 2022, Local and national print advertising revenues decreased compared to 2021, primarily due to a decrease in advertiser inserts, mainly due to volume declines, as well as the absence of $37.3 million of revenues associated with both businesses divested and non-core products which were sunset in 2022 and 2021. For the year ended December 31, 2022, Classified print advertising revenues decreased compared to 2021 due to lower spend on classified advertisements, primarily related to a decline in obituary notifications, and to a lesser extent declines in real estate and automotive advertisements. In addition, the decrease in Classified print advertising revenues was also due to the absence in 2022 of revenues of $8.0 million associated with non-core products which were sunset in 2022 and 2021. For the year ended December 31, 2022, Digital media revenues decreased compared to 2021, driven by changes in monetization with our sports affiliates as well as lower page views related to increased subscriber-only content, secular trends in news consumption and lower overall digital advertising spend. In addition, during the year ended December 31, 2022, we experienced a reduction in digital advertising demand as a result of a more challenging macroeconomic environment. For the year ended December 31, 2022, Digital marketing services revenues increased compared to 2021, due to an increase in client counts as well as an increase in rates. For the year ended December 31, 2022, Digital classified revenues increased compared to 2021, due to higher client spend, primarily due to increased spend on automotive advertisements, partially offset by lower spend on obituary and employment notifications. For the year ended December 31, 2022, Print circulation revenues decreased compared to 2021, due to a decline in home delivery sales, mainly driven by a reduction in the volume of subscribers, partially offset by an increase in rates, as well as a decline in single copy sales reflecting the overall secular trends impacting the industry and increasing sensitivity from customers related to price increases and product changes. In addition, during the year ended December 31, 2022, and specifically beginning in the second quarter of 2022, the decline in print circulation revenues accelerated as compared to the same period in the prior year as our audience increasingly moved to digital platforms, and as a result of consumer price sensitivity. For the year ended December 31, 2022, Digital-only subscription revenues increased compared to 2021, driven by an increase of 24.6% in paid digital-only subscriptions, including those subscribers on introductory subscription offers, to approximately 2 million as of December 31, 2022, partially offset by a decline in Digital-only ARPU. Refer to "Key 56 Table of Contents Performance Indicators" in Management's Discussion and Analysis of Financial Condition and Results of Operations" below for further discussion of Digital-only ARPU. For the year ended December 31, 2022, Other revenues increased compared to 2021, primarily due to commercial print growth in local markets, an increase in digital content syndication volume and other digital revenues, and an increase in event revenues (though not to pre-pandemic levels) as we hosted more in-person events with higher attendance as compared to the same period in the prior year. Operating expenses For the year ended December 31, 2022, Operating costs decreased $77.5 million compared to 2021. The following table provides the breakout of the decrease in Operating costs: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Newsprint and ink","$","129,077","","","$","96,391","","","$","32,686","","","34","%"],["Distribution","370,594","","","418,402","","","(47,808)","","","(11","%)"],["Compensation and benefits","487,868","","","510,646","","","(22,778)","","","(4","%)"],["Outside services","333,137","","","324,784","","","8,353","","","3","%"],["Other","224,032","","","271,991","","","(47,959)","","","(18","%)"],["Total operating costs","$","1,544,708","","","$","1,622,214","","","$","(77,506)","","","(5","%)"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2022, Newsprint and ink costs increased compared to 2021, primarily due to an increase in newsprint prices of $21.8 million driven by inflationary pressures and supply chain issues impacting the industry, as well as growth in our commercial print business, partially offset by the decline in volume of home delivery and single copy sales as well as reduction of print offerings. For the year ended December 31, 2022, Distribution costs decreased compared to 2021, primarily due to a decrease of $36.1 million associated with lower home delivery and single copy revenues and $11.7 million of lower postage costs associated with lower volumes. Included in the decline in Distribution costs was the absence in 2022 of expenses of $28.0 million associated with both businesses divested and non-core products which were sunset in 2022 and 2021. For the year ended December 31, 2022, Compensation and benefits costs decreased compared to 2021, primarily due to lower payroll expenses of $31.5 million driven by a decrease in headcount tied to ongoing cost control initiatives, partially offset by the absence of $12.1 million of PPP loan forgiveness received in 2021. For the year ended December 31, 2022, Outside services costs, which include outside printing, professional services fulfilled by third parties, paid search and ad serving, feature services, and credit card fees, increased compared to 2021, primarily due to an increase of $4.8 million in third-party media fees and an increase of $3.6 million in various expenses, mainly related to events, driven by the number and mix of live versus virtual events compared to the prior year. For the year ended December 31, 2022, Other costs decreased compared to 2021, due primarily to the absence of expenses associated with both businesses divested and non-core products which were sunset in 2022 and 2021 and cost management initiatives. For the year ended December 31, 2022, Selling, general and administrative expenses decreased by $45.5 million compared to 2021. The following table provides the breakout of the decrease in Selling, general and administrative expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Compensation and benefits","$","289,761","","","$","336,824","","","$","(47,063)","","","(14","%)"],["Outside services and other","341,653","","","340,130","","","1,523","","","\u2014","%"],["Total selling, general and administrative expenses","$","631,414","","","$","676,954","","","$","(45,540)","","","(7","%)"]] [[/GREPCENT_TABLE]] 57 Table of Contents For the year ended December 31, 2022, Compensation and benefits costs decreased compared to 2021, primarily due to lower payroll expense of $34.1 million driven by headcount savings, as well as lower employee benefit costs of $17.2 million, including medical, partially offset by the absence of PPP loan forgiveness of $4.3 million received in 2021. For the year ended December 31, 2022, Outside services and other costs, which include services fulfilled by third parties, increased slightly compared to 2021, due to higher professional services costs and higher marketing and acquisition costs associated with growing subscribers. For the year ended December 31, 2022, Depreciation and amortization expense decreased compared to 2021, reflecting the impact of fewer print facilities compared to 2021. For the year ended December 31, 2022, Integration and reorganization costs increased compared to 2021, mainly due to an increase in severance costs of $27.1 million, primarily driven by our voluntary severance program in the fourth quarter of 2022 related to cost savings initiatives as well as ongoing integration and restructuring activities, and an increase in other costs of $13.8 million, including a withdrawal liability which was expensed as a result of ceasing contributions to a multiemployer pension plan, and an increase in facility consolidation expenses associated with exiting a lease. For the year ended December 31, 2022, we recognized a net gain on the sale of assets of $6.7 million compared to a net loss of $27.4 million for the year ended December 31, 2021 related to the sales of production facilities as part of our plan to monetize non-core assets. Domestic Gannett Media segment Adjusted EBITDA [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Net income attributable to Gannett","$","63,225","","","$","263,524","","","$","(200,299)","","","(76","%)"],["Non-operating pension income","(35,921)","","","(72,216)","","","36,295","","","(50","%)"],["Depreciation and amortization","130,557","","","150,185","","","(19,628)","","","(13","%)"],["Integration and reorganization costs","55,575","","","14,721","","","40,854","","","***"],["Other operating expenses","2","","","\u2014","","","2","","","***"],["Asset impairments","1,056","","","3,881","","","(2,825)","","","(73","%)"],["(Gain) loss on sale or disposal of assets, net","(6,738)","","","27,397","","","(34,135)","","","***"],["Other items","(108)","","","(2,559)","","","2,451","","","(96","%)"],["Adjusted EBITDA (non-GAAP basis)(a)","$","207,648","","","$","384,933","","","$","(177,285)","","","(46","%)"],["Net income attributable to Gannett margin","2.7","%","","9.8","%"],["Adjusted EBITDA margin (non-GAAP basis)(a)(b)","8.7","%","","14.4","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. (a) See "Non-GAAP Financial Measures" below for additional information about non-GAAP measures. (b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. For the year ended December 31, 2022, the decrease in Domestic Gannett Media segment Adjusted EBITDA compared to 2021 was primarily attributable to the changes discussed above. In addition, for the year ended December 31, 2022, the decrease in Non-operating pension income compared to 2021 was primarily due to a decrease in the expected return on plan assets held by the GR Plan, mainly driven by a more conservative asset allocation, and to a lesser extent, the reduction to the GR Plan assets as a result of the pension annuity entered into during the third quarter of 2022. 58 Table of Contents Newsquest segment 2023 compared to 2022 A summary of our Newsquest segment results comparing the year ended December 31, 2023 to the year ended December 31, 2022 is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Revenues:"],["Advertising and marketing services","$","134,126","","","$","136,294","","","$","(2,168)","","","(2","%)"],["Circulation","73,279","","","72,112","","","1,167","","","2","%"],["Other","26,575","","","26,224","","","351","","","1","%"],["Total revenues","233,980","","","234,630","","","(650)","","","\u2014","%"],["Operating expenses:"],["Operating costs","120,264","","","125,405","","","(5,141)","","","(4","%)"],["Selling, general and administrative expenses","63,947","","","69,563","","","(5,616)","","","(8","%)"],["Depreciation and amortization","8,792","","","7,374","","","1,418","","","19","%"],["Integration and reorganization costs","1,763","","","4,425","","","(2,662)","","","(60","%)"],["Gain on sale or disposal of assets, net","(42)","","","(319)","","","277","","","(87","%)"],["Other operating expenses","215","","","725","","","(510)","","","(70","%)"],["Total operating expenses","194,939","","","207,173","","","(12,234)","","","(6","%)"],["Operating income","$","39,041","","","$","27,457","","","$","11,584","","","42","%"]] [[/GREPCENT_TABLE]] Revenues The following table provides the breakout of Revenues by category: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Local and national print","$","37,745","","","$","40,526","","","$","(2,781)","","","(7","%)"],["Classified print","37,099","","","35,615","","","1,484","","","4","%"],["Print advertising","74,844","","","76,141","","","(1,297)","","","(2","%)"],["Digital media","41,890","","","39,358","","","2,532","","","6","%"],["Digital marketing services","8,920","","","9,263","","","(343)","","","(4","%)"],["Digital classified","8,472","","","11,532","","","(3,060)","","","(27","%)"],["Digital advertising and marketing services","59,282","","","60,153","","","(871)","","","(1","%)"],["Advertising and marketing services","134,126","","","136,294","","","(2,168)","","","(2","%)"],["Print circulation","68,042","","","67,165","","","877","","","1","%"],["Digital-only subscription","5,237","","","4,947","","","290","","","6","%"],["Circulation","73,279","","","72,112","","","1,167","","","2","%"],["Other(a)","26,575","","","26,224","","","351","","","1","%"],["Total revenues","$","233,980","","","$","234,630","","","(650)","","","\u2014","%"]] [[/GREPCENT_TABLE]] (a)     Other revenues included Other Digital revenues, including digital production revenues of $10.4 million and $9.5 million for the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, Local and national print advertising revenues decreased compared to 2022, primarily due to a reduction in spend driven by the ongoing decline associated with secular trends reflecting the shift to digital platforms, partially offset by an increase reflecting the impact of an acquisition in the first quarter of 2022. For the year ended December 31, 2023, Classified print advertising revenues increased compared to 2022, primarily due to spend on legal 59 Table of Contents notifications driven by the impact of an acquisition in the first quarter of 2022, partially offset by lower spend on real estate, employment, and automobile classified advertisements. For the year ended December 31, 2023, Digital media revenues increased compared to 2022, driven by the impact of an acquisition in the first quarter of 2022. For the year ended December 31, 2023, Digital classified revenues decreased compared to 2022, due to lower spend on employment notifications. For the year ended December 31, 2023, Print circulation revenues increased compared to 2022, primarily due to the impact of an acquisition in the first quarter of 2022. Operating expenses For the year ended December 31, 2023, Operating costs decreased $5.1 million compared to 2022. The following table provides the breakout of the decrease in Operating costs: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Newsprint and ink","$","13,351","","","$","15,039","","","$","(1,688)","","","(11","%)"],["Distribution","13,325","","","14,697","","","(1,372)","","","(9","%)"],["Compensation and benefits","50,144","","","51,032","","","(888)","","","(2","%)"],["Outside services","16,033","","","16,924","","","(891)","","","(5","%)"],["Other","27,411","","","27,713","","","(302)","","","(1","%)"],["Total operating costs","$","120,264","","","$","125,405","","","$","(5,141)","","","(4","%)"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023, Newsprint and ink costs decreased compared to 2022, primarily due to a decline associated with lower volume due to the decline in revenues and a reduction in the cost of newsprint. For the year ended December 31, 2023, Distribution costs decreased compared to 2022, primarily due to a decline associated with lower revenues. For the year ended December 31, 2023, Compensation and benefits costs decreased compared to 2022, primarily due to lower payroll and employee benefit expenses driven by integration savings due to decreased headcount associated with an acquisition in the first quarter of 2022. For the year ended December 31, 2023, Outside services costs, which includes professional services fulfilled by third parties, media fees and other digital costs, and paid search and ad serving services, decreased compared to 2022 due to lower miscellaneous expenses driven by cost control initiatives. For the year ended December 31, 2023, Selling, general and administrative expenses decreased by $5.6 million compared to 2022. The following table provides the breakout of the decrease in Selling, general and administrative expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Compensation and benefits","$","47,350","","","$","50,708","","","$","(3,358)","","","(7","%)"],["Outside services and other","16,597","","","18,855","","","(2,258)","","","(12","%)"],["Total selling, general and administrative expenses","$","63,947","","","$","69,563","","","$","(5,616)","","","(8","%)"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023, Compensation and benefits costs decreased compared to 2022, primarily due to lower payroll and employee benefit expenses driven by a reduction in headcount tied to integration activities associated with an acquisition in the first quarter of 2022, as well as ongoing cost control initiatives. For the year ended December 31, 2023, Outside services and other costs decreased compared to 2022, primarily due to a reduction in technology spend tied to integration activities associated with an acquisition in the first quarter of 2022. For the year ended December 31, 2023, Depreciation and amortization expense increased compared to 2022, mainly due to higher accelerated depreciation as a result of exiting space and higher amortization of capitalized software. 60 Table of Contents For the year ended December 31, 2023, Integration and reorganization costs decreased compared to 2022, mainly due to a decrease in severance costs of $2.5 million and a decrease in other costs of $0.2 million. Newsquest segment Adjusted EBITDA [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Net income attributable to Gannett","$","49,257","","","$","49,301","","","$","(44)","","","\u2014","%"],["Non-operating pension income","(8,677)","","","(23,032)","","","14,355","","","(62","%)"],["Depreciation and amortization","8,792","","","7,374","","","1,418","","","19","%"],["Integration and reorganization costs","1,763","","","4,425","","","(2,662)","","","(60","%)"],["Other operating expenses","215","","","725","","","(510)","","","(70","%)"],["Gain on sale or disposal of assets, net","(42)","","","(319)","","","277","","","(87","%)"],["Other Items","(1,180)","","","1,553","","","(2,733)","","","***"],["Adjusted EBITDA (non-GAAP basis)(a)","$","50,128","","","$","40,027","","","$","10,101","","","25","%"],["Net income attributable to Gannett margin","21.1","%","","21.0","%"],["Adjusted EBITDA margin (non-GAAP basis)(a)(b)","21.4","%","","17.1","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. (a) See "Non-GAAP Financial Measures" below for additional information about non-GAAP measures. (b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. For the year ended December 31, 2023, the increase in Newsquest segment Adjusted EBITDA compared to 2022 was primarily attributable to the changes discussed above. In addition, for the year ended December 31, 2023, the decrease in Non-operating pension income compared to 2022 was primarily due to an increase in interest rates. 61 Table of Contents Newsquest segment 2022 compared to 2021 A summary of our Newsquest segment comparing the year ended December 31, 2022 to the year ended December 31, 2021 is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Revenues:"],["Advertising and marketing services","$","136,294","","","$","117,962","","","$","18,332","","","16","%"],["Circulation","72,112","","","70,569","","","1,543","","","2","%"],["Other","26,224","","","20,087","","","6,137","","","31","%"],["Total revenues","234,630","","","208,618","","","26,012","","","12","%"],["Operating expenses:"],["Operating costs","125,405","","","100,259","","","25,146","","","25","%"],["Selling, general and administrative expenses","69,563","","","59,812","","","9,751","","","16","%"],["Depreciation and amortization","7,374","","","7,027","","","347","","","5","%"],["Integration and reorganization costs","4,425","","","1,239","","","3,186","","","***"],["Asset impairments","\u2014","","","95","","","(95)","","","(100","%)"],["Gain on sale or disposal of assets, net","(319)","","","(9,929)","","","9,610","","","(97","%)"],["Other operating expenses","725","","","\u2014","","","725","","","***"],["Total operating expenses","207,173","","","158,503","","","48,670","","","31","%"],["Operating income","$","27,457","","","$","50,115","","","$","(22,658)","","","(45","%)"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. Revenues The following table provides the breakout of Revenues by category: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Local and national print","$","40,526","","","$","32,803","","","$","7,723","","","24","%"],["Classified print","35,615","","","31,191","","","4,424","","","14","%"],["Print advertising","76,141","","","63,994","","","12,147","","","19","%"],["Digital media","39,358","","","36,445","","","2,913","","","8","%"],["Digital marketing services","9,263","","","5,872","","","3,391","","","58","%"],["Digital classified","11,532","","","11,651","","","(119)","","","(1","%)"],["Digital advertising and marketing services","60,153","","","53,968","","","6,185","","","11","%"],["Advertising and marketing services","136,294","","","117,962","","","18,332","","","16","%"],["Print circulation","67,165","","","65,421","","","1,744","","","3","%"],["Digital-only subscription","4,947","","","5,148","","","(201)","","","(4","%)"],["Circulation","72,112","","","70,569","","","1,543","","","2","%"],["Other(a)","26,224","","","20,087","","","6,137","","","31","%"],["Total revenues","$","234,630","","","$","208,618","","","26,012","","","12","%"]] [[/GREPCENT_TABLE]] (a)     Other revenues included Other Digital revenues, including digital production revenues of $9.5 million and $7.0 million for the years ended December 31, 2022 and 2021, respectively. For the year ended December 31, 2022, Local and national print advertising revenues increased compared to 2021, primarily due to $12.1 million of revenues associated with an acquisition in the first quarter of 2022, partially offset by a reduction in spend from customers due to macroeconomic factors. For the year ended December 31, 2022, Classified print 62 Table of Contents advertising revenues increased compared to 2021, primarily due to $6.7 million of revenues associated with an acquisition in the first quarter of 2022, partially offset by lower spend on classified advertisements, including real estate and automotive. For the year ended December 31, 2022, Digital media revenues increased compared to 2021, primarily due to $3.1 million of revenues associated with an acquisition in the first quarter of 2022. For the year ended December 31, 2023, Digital marketing services revenues increased compared to 2022, primarily due to $1.7 million of revenues associated with an acquisition in the first quarter of 2022 as well as an increase in client counts. For the year ended December 31, 2022, Print circulation revenues increased compared to 2021, primarily due to $11.7 million of revenues associated with an acquisition in the first quarter of 2022, partially offset by a reduction in volume offset by higher rates. For the year ended December 31, 2022, Other revenues increased compared to 2021, primarily due to $4.0 million of revenues associated with an acquisition in the first quarter of 2022. Operating expenses For the year ended December 31, 2022, Operating costs increased $25.1 million compared to 2021. The following table provides the breakout of the increase in Operating costs: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Newsprint and ink","$","15,039","","","$","9,166","","","$","5,873","","","64","%"],["Distribution","14,697","","","13,010","","","1,687","","","13","%"],["Compensation and benefits","51,032","","","43,161","","","7,871","","","18","%"],["Outside services","16,924","","","13,508","","","3,416","","","25","%"],["Other","27,713","","","21,414","","","6,299","","","29","%"],["Total operating costs","$","125,405","","","$","100,259","","","$","25,146","","","25","%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2022, Newsprint and ink costs increased compared to 2021, primarily associated with higher revenues due to an acquisition in the first quarter of 2022. For the year ended December 31, 2022, Distribution costs increased compared to 2021, primarily due to an acquisition in the first quarter of 2022. For the year ended December 31, 2022, Compensation and benefits costs increased compared to 2021, primarily due to an acquisition in the first quarter of 2022. For the year ended December 31, 2022, Outside services costs, which includes professional services fulfilled by third parties, media fees and other digital costs, and paid search and ad serving services, increased compared to 2021, primarily due to an acquisition in the first quarter of 2022. For the year ended December 31, 2022, Other costs increased compared to 2021, primarily due to an acquisition in the first quarter of 2022. For the year ended December 31, 2022, Selling, general and administrative expenses increased by $9.8 million compared to 2021. The following table provides the breakout of the increase in Selling, general and administrative expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Compensation and benefits","$","50,708","","","$","44,613","","","$","6,095","","","14","%"],["Outside services and other","18,855","","","15,199","","","3,656","","","24","%"],["Total selling, general and administrative expenses","$","69,563","","","$","59,812","","","$","9,751","","","16","%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2022, Compensation and benefits costs increased compared to 2021, primarily due to an acquisition in the first quarter of 2022. 63 Table of Contents For the year ended December 31, 2022, Outside services and other costs increased compared to 2021, primarily due to an acquisition in the first quarter of 2022. For the year ended December 31, 2022, Integration and reorganization costs increased compared to 2021, mainly due to an increase in severance costs of $3.3 million, partially offset by a decrease in other costs of $0.1 million. For the year ended December 31, 2021, we incurred a net gain of $9.9 million on the sale of assets as part of our plan to monetize non-core assets. Newsquest segment Adjusted EBITDA [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Net income attributable to Gannett","$","49,301","","","$","72,575","","","$","(23,274)","","","(32","%)"],["Non-operating pension income","(23,032)","","","(23,141)","","","109","","","\u2014","%"],["Depreciation and amortization","7,374","","","7,027","","","347","","","5","%"],["Integration and reorganization costs","4,425","","","1,239","","","3,186","","","***"],["Other operating expenses","725","","","\u2014","","","725","","","***"],["Asset Impairments","\u2014","","","95","","","(95)","","","(100","%)"],["Gain on sale or disposal of assets, net","(319)","","","(9,929)","","","9,610","","","(97","%)"],["Other Items","1,553","","","1,174","","","379","","","32","%"],["Adjusted EBITDA (non-GAAP basis)(a)","$","40,027","","","$","49,040","","","$","(9,013)","","","(18","%)"],["Net income attributable to Gannett margin","21.0","%","","34.8","%"],["Adjusted EBITDA margin (non-GAAP basis)(a)(b)","17.1","%","","23.5","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. (a) See "Non-GAAP Financial Measures" below for additional information about non-GAAP measures. (b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. For the year ended December 31, 2022, the decrease in Newsquest segment Adjusted EBITDA compared to 2021 was primarily attributable to the changes discussed above. 64 Table of Contents Digital Marketing Solutions segment 2023 compared to 2022 A summary of our DMS segment results is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Revenues:"],["Advertising and marketing services","477,909","","","468,883","","","9,026","","","2","%"],["Total revenues","477,909","","","468,883","","","9,026","","","2","%"],["Operating expenses:"],["Operating costs","336,056","","","323,646","","","12,410","","","4","%"],["Selling, general and administrative expenses","88,630","","","87,657","","","973","","","1","%"],["Depreciation and amortization","23,795","","","26,431","","","(2,636)","","","(10","%)"],["Integration and reorganization costs","784","","","1,108","","","(324)","","","(29","%)"],["Loss on sale or disposal of assets, net","324","","","179","","","145","","","81","%"],["Total operating expenses","449,589","","","439,021","","","10,568","","","2","%"],["Operating income","$","28,320","","","$","29,862","","","$","(1,542)","","","(5","%)"]] [[/GREPCENT_TABLE]] Revenues For the year ended December 31, 2023, Advertising and marketing services revenues increased compared to 2022, primarily due to growth in the core direct business, including growth in revenues associated with both local and multi-location customers, and an increase in core platform average revenue per user ("Core platform ARPU") of 6.5% for the year ended December 31, 2023, partially offset by the impact of the sunset of non-core products. Refer to "Key Performance Indicators" below for further discussion of Core platform ARPU. Operating expenses For the year ended December 31, 2023, Operating costs increased $12.4 million compared to 2022. The following table provides the breakout of the increase in Operating costs: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Outside services","$","294,073","","","$","283,380","","","$","10,693","","","4","%"],["Compensation and benefits","35,604","","","32,633","","","2,971","","","9","%"],["Other","6,379","","","7,633","","","(1,254)","","","(16","%)"],["Total operating costs","$","336,056","","","$","323,646","","","$","12,410","","","4","%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023, Outside services costs, which includes professional services fulfilled by third parties, media fees and other digital costs, and paid search and ad serving services, increased compared to 2022, due to an increase in expenses associated with third-party media fees driven by a corresponding increase in revenues. For the year ended December 31, 2023, Compensation and benefits costs increased compared to 2022, primarily due to an increase in payroll expense driven by higher headcount. For the year ended December 31, 2023, Other costs decreased compared to 2022, primarily due to lower facility related expenses, mainly as a result of exiting space associated with the sunset of non-core products. For the year ended December 31, 2023, Selling, general and administrative expenses increased $1.0 million compared to 2022. The following table provides the breakout of the increase in Selling, general and administrative expenses: 65 Table of Contents [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Compensation and benefits","$","76,190","","","$","74,867","","","$","1,323","","","2","%"],["Outside services and other","12,440","","","12,790","","","(350)","","","(3","%)"],["Total selling, general and administrative expenses","$","88,630","","","$","87,657","","","$","973","","","1","%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023, Compensation and benefits costs increased compared to 2022, primarily due to an increase in payroll expense of $2.9 million, driven by a higher bonus accrual, partially offset by lower employee benefit costs of $1.5 million, mainly due to a decline in employer 401(k) plan matching contributions, which were suspended in the third quarter of 2022. For the year ended December 31, 2023, Outside services and other costs decreased compared to 2022, due to a decrease in various miscellaneous expenses. For the year ended December 31, 2023, Depreciation and amortization expense decreased compared to 2022, primarily due to a decrease in amortization expense, resulting from the impact of intangibles becoming fully amortized in the fourth quarter of 2022, partially offset by an increase in depreciation expense related to capitalized software. DMS segment Adjusted EBITDA [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Net income attributable to Gannett","$","28,841","","","$","26,919","","","$","1,922","","","7","%"],["Depreciation and amortization","23,795","","","26,431","","","(2,636)","","","(10","%)"],["Integration and reorganization costs","784","","","1,108","","","(324)","","","(29","%)"],["Loss on sale or disposal of assets, net","324","","","179","","","145","","","81","%"],["Other items","(521)","","","2,943","","","(3,464)","","","***"],["Adjusted EBITDA (non-GAAP basis)(a)","$","53,223","","","$","57,580","","","$","(4,357)","","","(8","%)"],["Net income attributable to Gannett margin","6.0","%","","5.7","%"],["Adjusted EBITDA margin (non-GAAP basis)(a)(b)","11.1","%","","12.3","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. (a) See "Non-GAAP Financial Measures" below for additional information about non-GAAP measures. (b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. For the year ended December 31, 2023, the decrease in DMS segment Adjusted EBITDA compared to 2022 was primarily attributable to the changes discussed above. In addition, for the year ended December 31, 2023, Other items decreased compared to 2022, mainly due to foreign currency fluctuations. 66 Table of Contents Digital Marketing Solutions segment 2022 compared to 2021 A summary of our DMS segment results is presented below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Operating revenues:"],["Advertising and marketing services","$","468,883","","","$","441,394","","","$","27,489","","","6","%"],["Other","\u2014","","","905","","","(905)","","","(100","%)"],["Total operating revenues","468,883","","","442,299","","","26,584","","","6","%"],["Operating expenses:"],["Operating costs","323,646","","","299,014","","","24,632","","","8","%"],["Selling, general and administrative expenses","87,657","","","92,325","","","(4,668)","","","(5","%)"],["Depreciation and amortization","26,431","","","30,061","","","(3,630)","","","(12","%)"],["Integration and reorganization costs","1,108","","","1,710","","","(602)","","","(35","%)"],["Loss (gain) on sale or disposal of assets, net","179","","","(604)","","","783","","","***"],["Total operating expenses","439,021","","","422,506","","","16,515","","","4","%"],["Operating income","$","29,862","","","$","19,793","","","$","10,069","","","51","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. Operating revenues For the year ended December 31, 2022, Advertising and marketing services revenues increased compared to 2021, primarily due to growth in the core direct business, as well as a growth in revenues associated with local markets, partially offset by the impact of the sunset of non-core products. Operating expenses For the year ended December 31, 2022, Operating costs increased $24.6 million compared to 2021. The following table provides the breakout of the increase in Operating costs: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Outside services","$","283,380","","","$","260,504","","","$","22,876","","","9","%"],["Compensation and benefits","32,633","","","31,136","","","1,497","","","5","%"],["Other","7,633","","","7,374","","","259","","","4","%"],["Total operating costs","$","323,646","","","$","299,014","","","$","24,632","","","8","%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2022, Outside services costs, which include professional services fulfilled by third parties, media fees and other digital costs, paid search and ad serving services, increased compared to 2021 due to an increase in expenses associated with third-party media fees, driven by a corresponding increase in revenues. For the year ended December 31, 2022, Compensation and benefits costs increased compared to 2021, primarily due to an increase in payroll expense driven by higher headcount. For the year ended December 31, 2022, Selling, general and administrative expenses decreased $4.7 million compared to 2021. The following table provides the breakout of the decrease in Selling, general and administrative expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Compensation and benefits","$","74,867","","","$","69,749","","","$","5,118","","","7","%"],["Outside services and other","12,790","","","22,576","","","(9,786)","","","(43","%)"],["Total selling, general and administrative expenses","$","87,657","","","$","92,325","","","$","(4,668)","","","(5","%)"]] [[/GREPCENT_TABLE]] 67 Table of Contents For the year ended December 31, 2022, Compensation and benefits costs increased compared to 2021, primarily due to an increase in payroll expense of $4.6 million driven by higher headcount, including an increase in incentive pay of $0.7 million, driven by a corresponding increase in revenues, and an increase in employee benefit costs of $0.5 million, mainly due to higher employer 401(k) plan matching contributions. For the year ended December 31, 2022, Outside services and other costs decreased compared to 2021, due to a decrease in various miscellaneous expenses, including lower technology and software costs and lower lease expenses, partially offset by higher marketing and promotion costs, mainly driven by lead generation. For the year ended December 31, 2022, Depreciation and amortization expense decreased compared to 2021, primarily due to the impact of capitalized software fully amortized in the third quarter of 2021 related to the sunsetting of a non-core product. DMS segment Adjusted EBITDA [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Net income attributable to Gannett","$","26,919","","","$","18,442","","","$","8,477","","","46","%"],["Depreciation and amortization","26,431","","","30,061","","","(3,630)","","","(12","%)"],["Integration and reorganization costs","1,108","","","1,710","","","(602)","","","(35","%)"],["Loss (gain) on sale or disposal of assets, net","179","","","(604)","","","783","","","***"],["Other items","2,943","","","1,351","","","1,592","","","***"],["Adjusted EBITDA (non-GAAP basis)(a)","$","57,580","","","$","50,960","","","$","6,620","","","13","%"],["Net income attributable to Gannett margin","5.7","%","","4.2","%"],["Adjusted EBITDA margin (non-GAAP basis)(a)(b)","12.3","%","","11.5","%"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. (a) See "Non-GAAP Financial Measures" below for additional information about non-GAAP measures. (b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. For the year ended December 31, 2022, the increase in DMS segment Adjusted EBITDA compared to 2021 was primarily attributable to the changes discussed above. In addition, for the year ended December 31, 2022, Other items increased compared to 2021, mainly due to foreign currency losses. Corporate and other category 2023 compared to 2022 For the year ended December 31, 2023, Corporate and other revenues were $6.3 million compared to $5.4 million for the year ended December 31, 2022. For the year ended December 31, 2023, Corporate and other operating expenses decreased $20.4 million compared to 2022. The following table provides the breakout of the decrease in Corporate and other operating expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","$ Change","","% Change"],["Operating expenses:"],["Operating costs","23,356","","","10,050","","","13,306","","","***"],["Selling, general and administrative expenses","41,919","","","63,854","","","(21,935)","","","(34","%)"],["Depreciation and amortization","17,834","","","17,660","","","174","","","1","%"],["Integration and reorganization costs","16,339","","","26,866","","","(10,527)","","","(39","%)"],["Other operating expenses","1,196","","","1,165","","","31","","","3","%"],["Gain on sale or disposal of assets, net","(1,446)","","","(5)","","","(1,441)","","","***"],["Total operating expenses","$","99,198","","","$","119,590","","","$","(20,392)","","","(17","%)"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. For the year ended December 31, 2023, Corporate and other operating expenses decreased compared to 2022, primarily due to a decrease in Selling, general and administrative expenses, mainly driven by a decrease of $29.3 million in payroll and employee benefit costs, a decrease in Integration and reorganization costs, primarily due to a decrease in severance costs of $6.2 million and a decrease in other costs of $4.3 million, mainly due to a decrease in system integration costs and an increase 68 Table of Contents in the gain on sale of assets driven by a $1.4 million gain on the sale of intellectual property, partially offset by an increase in Operating costs. Corporate and other category 2022 compared to 2021 For the year ended December 31, 2022, Corporate and other operating revenues were $5.4 million compared to $8.4 million for the year ended December 31, 2021. For the year ended December 31, 2022, Corporate and other operating expenses decreased $32.4 million compared to 2021. The following table provides the breakout of the decrease in Corporate and other operating expenses: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2022","","2021","","$ Change","","% Change"],["Operating expenses:"],["Operating costs","10,050","","","8,780","","","1,270","","","14","%"],["Selling, general and administrative expenses","63,854","","","73,592","","","(9,738)","","","(13","%)"],["Depreciation and amortization","17,660","","","16,685","","","975","","","6","%"],["Integration and reorganization costs","26,866","","","31,614","","","(4,748)","","","(15","%)"],["Other operating expenses","1,165","","","20,952","","","(19,787)","","","(94","%)"],["(Gain) loss on sale or disposal of assets, net","(5)","","","344","","","(349)","","","***"],["Total operating expenses","$","119,590","","","$","151,967","","","$","(32,377)","","","(21","%)"]] [[/GREPCENT_TABLE]] *** Indicates an absolute value percentage change greater than 100. For the year ended December 31, 2022, Corporate and other operating expenses decreased compared to 2021, primarily due to a decrease in Other operating expenses driven by the absence in 2022 of third-party fees that were expensed in 2021 related to the 5-Year Term Loan, the 2026 Senior Notes, and to a lesser extent the Senior Secured Term Loan, a decrease in Selling, general and administrative expenses driven primarily by a decrease of $7.9 million in payroll and employee benefits costs and a $3.1 million decrease in other costs, including repairs and maintenance and utilities, partially offset by $1.3 million of higher outside services, including legal fees, and a decrease in Integration and reorganization costs, mainly driven by a $15.4 million decline in costs associated with systems implementation and outsourcing of corporate functions, partially offset by a $10.7 million increase in severance costs. LIQUIDITY AND CAPITAL RESOURCES Our primary cash requirements are for working capital, debt obligations, and capital expenditures. We expect to fund our operations and debt service requirements through cash provided by our operating activities. We expect we will have adequate capital resources and liquidity to meet our ongoing working capital needs, borrowing obligations, and all required capital expenditures for at least the next twelve months. However, a further economic downturn or an increased rate of revenue declines would negatively impact our revenue, cash provided by operating activities and liquidity. We continue to implement cost reduction initiatives to reduce our ongoing level of operating expense. We believe our ability to realize benefits from our cost reduction initiatives will be necessary to offset the continued secular decline in our legacy print business revenue streams. We believe that these measures are important in response to the overall challenging macroeconomic environment that we are facing. Refer to "Overview - Macroeconomic Environment" above for further discussion. Details of our cash flows are included in the table below: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022"],["Cash provided by operating activities","$","94,574","","","$","40,776"],["Cash provided by investing activities","46,979","","","22,124"],["Cash used for financing activities","(135,511)","","","(102,867)"],["Effect of currency exchange rate change on cash","(234)","","","1,152"],["Increase (decrease) in cash, cash equivalents and restricted cash","$","5,808","","","$","(38,815)"]] [[/GREPCENT_TABLE]] Cash flows provided by operating activities: Our largest source of cash provided by operating activities is Advertising revenues, primarily generated from Local and national advertising and marketing services revenues (retail, classified, and 69 Table of Contents online). Additionally, we generate cash through circulation subscribers, commercial printing and delivery services to third parties, and events. Our primary uses of cash from our operating activities include compensation, newsprint, delivery, and outside services. For the year ended December 31, 2023, cash flows provided by operating activities were $94.6 million compared to $40.8 million for the year ended December 31, 2022. The increase in cash flows provided by operating activities was primarily due to an increase in operating income, a decrease in contributions to our pension and other postretirement benefit plans, lower inventory and lower compensation costs, partially offset by lower cash receipts related to deferred revenues, a decrease in accounts payable due to lower cost structure and payment management and an increase in severance payments. Cash flows provided by investing activities: For the year ended December 31, 2023, cash flows provided by investing activities were $47.0 million compared to $22.1 million for the year ended December 31, 2022. The increase in cash flows provided by investing activities was primarily due to lower payments for acquisitions, net of cash acquired, of $15.4 million, a decrease in purchases of property, plant, and equipment of $7.3 million and an increase in proceeds from the sale of real estate and other assets of $1.8 million. Cash flows used for financing activities: For the year ended December 31, 2023, cash flows used for financing activities were $135.5 million compared to $102.9 million for the year ended December 31, 2022. The increase in cash used for financing activities was primarily due to the higher overall repayments of long-term debt, net of borrowings in 2022. Debt As of December 31, 2023, the carrying value of our outstanding debt totaled $1.045 billion, which consisted of $344.1 million related to the Senior Secured Term Loan, $281.2 million related to the 2026 Senior Notes, $416.0 million related to the 2027 Notes (defined below), and $3.3 million related to the remaining 4.75% convertible senior notes due April 15, 2024 (the "2024 Notes"). The Senior Secured Term Loan bears interest at a per annum rate equal to the Adjusted Term SOFR (which shall not be less than 0.50% per annum) plus a margin equal to 5.00% or an alternate base rate (which shall not be less than 1.50% per annum) plus a margin equal to 4.00%. We are required to repay the Senior Secured Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of indebtedness not permitted under the Senior Secured Term Loan, and (iii) the aggregate amount of cash and cash equivalents on hand at the Company and its restricted subsidiaries in excess of $100 million at the end of each fiscal year of the Company. Subsequent to the amendment effective as of April 8, 2022, the Senior Secured Term Loan is amortized at a rate equal to $15.1 million per quarter (or, if the ratio of debt secured on an equal basis with the Senior Secured Term Loan less unrestricted cash of the Company and its restricted subsidiaries to Consolidated EBITDA (as such terms are defined in the Senior Secured Term Loan) (such ratio, the "First Lien Net Leverage Ratio"), for the most recently ended period of four consecutive fiscal quarters is equal to or less than 1.20 to 1.00, $7.6 million per quarter). All obligations under the Senior Secured Term Loan are secured by all or substantially all of the assets of the Company and the wholly-owned domestic subsidiaries of the Company (the "Senior Secured Term Loan Guarantors"). The obligations of Gannett Holdings under the Senior Secured Term Loan are guaranteed on a senior secured basis by the Company and the Senior Secured Term Loan Guarantors. For the year ended December 31, 2023, we made $88.0 million of prepayments, including quarterly amortization payments, on the Senior Secured Term Loan. Interest on the 2026 Senior Notes is payable semi-annually in arrears. The 2026 Senior Notes mature on November 1, 2026, unless redeemed or repurchased earlier pursuant to the 2026 Senior Notes Indenture. During the year ended December 31, 2023, we entered into privately negotiated agreements with certain holders of our 2026 Senior Notes, and repurchased $53.6 million of principal of our outstanding 2026 Senior Notes at a discount to par value. Interest on the 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes") is payable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier repurchased or converted. The 2027 Notes may be converted at any time by the holders into cash, shares of our common stock, par value $0.01 per share (the "Common Stock") or any combination of cash and Common Stock, at our election. The initial conversion rate is 200 shares of Common Stock per $1,000 principal amount of the 2027 Notes, which is equal to a conversion price of $5.00 per share of Common Stock (the "Conversion Price"). For the year ended December 31, 2023, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Our Senior Secured Term Loan, 2024 Notes, 2026 Senior Notes and 2027 Notes all contain usual and customary covenants and events of default. As of December 31, 2023, we were in compliance with all such covenants and obligations. 70 Table of Contents Refer to Note 8 — Debt for additional discussion regarding our debt. Additional information We continue to evaluate our results of operations, liquidity and cash flows, and as part of these measures, we have taken steps to manage cash outflow by rationalizing expenses and implementing various cost management initiatives. We do not presently pay a quarterly dividend and there can be no assurance that we will pay dividends in the future. In addition, the terms of our indebtedness, including the Senior Secured Term Loan, the 2026 Senior Notes Indenture and the 2027 Notes Indenture have terms that restrict our ability to pay dividends. On February 1, 2022, our Board of Directors authorized the repurchase of up to $100 million (the "Stock Repurchase Program") of our Common Stock. Repurchases may be made from time to time through open market purchases or privately negotiated transactions, pursuant to one or more plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or by means of one or more tender offers, in each case, as permitted by securities laws and other legal requirements. The amount and timing of the purchases, if any, will depend on a number of factors, including, but not limited to, the price and availability of our shares, trading volume, capital availability, our performance and general economic and market conditions. The Stock Repurchase Program may be suspended or discontinued at any time. Further, future repurchases under our Stock Repurchase Program may be subject to various conditions under the terms of our various debt instruments and agreements, unless an exception is available or we obtain a waiver or similar relief. During the year ended December 31, 2023, we did not repurchase any shares of Common Stock under the Stock Repurchase Program. As of December 31, 2023, the remaining authorized amount under the Stock Repurchase Program was approximately $96.9 million. The Company does not currently anticipate repurchasing any shares of Common Stock during the first quarter of 2024. Beginning with the quarter ended December 31, 2022, and ending with the quarter ending September 30, 2024, the GR Plan's appointed actuary has and will certify the GR Plan's funded status for each quarter (the "Quarterly Certification") in accordance with U.S. GAAP. If the GR Plan is less than 100% funded, we will make a $1.0 million contribution to the GR Plan no later than 60 days following the receipt of the Quarterly Certification, provided, however, that our obligation to make additional contractual contributions will terminate the earlier of (a) the day following the date that a contractual contribution would be due for the quarter ending September 30, 2024, and (b) the date we have made a total of $5.0 million of contractual contributions subsequent to June 30, 2022. As of December 31, 2023, the GR Plan was more than 100% funded. We expect our capital expenditures during the year ended December 31, 2024 to total approximately $50 million to $60 million. These capital expenditures are anticipated to be primarily comprised of projects related to digital product development, costs associated with our print and technology systems, and system upgrades. Our leverage may adversely affect our business and financial performance and restricts our operating flexibility. The level of our indebtedness and our ongoing cash flow requirements may expose us to a risk that a substantial decrease in operating cash flows due to, among other things, continued or additional adverse economic conditions or adverse developments in our business, could make it difficult for us to meet the financial and operating covenants contained in our Senior Secured Term Loan, the 2026 Senior Notes, and the 2027 Notes. In addition, our leverage may limit cash flow available for general corporate purposes such as capital expenditures as well as share repurchases and acquisitions and our flexibility to react to competitive, technological, and other changes in our industry and economic conditions generally. We continue to closely monitor economic factors, including, but not limited to, the current inflationary market and rising interest rates, and we expect to continue to take the steps necessary to appropriately manage liquidity. As of December 31, 2023, we had no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. 71 Table of Contents Contractual obligations and commitments We enter into various contractual arrangements as a part of our operations. Many of these contractual obligations are discussed in the notes to our Consolidated financial statements. As of December 31, 2023, material obligations discussed in the notes to our Consolidated financial statements included (i) principal payments on our long-term debt discussed in Note 8 — Debt, (ii) operating leases discussed in Note 4 — Leases, and (iii) pension and postretirement benefits discussed in Note 9 — Pensions and other postretirement benefit plans. We anticipate interest payments associated with our long-term debt totaling $79.6 million in 2024, $70.0 million in 2025 and $90.0 million thereafter. Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31, 2023, we are unable to make reasonably reliable estimates of the period of cash settlement. See Note 11 — Income taxes to the Consolidated financial statements for a further discussion of income taxes. In addition, we have purchase obligations which include digital licenses and information technology services, printing contracts, professional services, interactive marketing agreements, and other legally binding commitments. As of December 31, 2023, we had future purchase obligations totaling $163.2 million due in 2024, $66.0 million due in 2025, and $27.0 million due thereafter. Amounts for which we are liable under purchase orders outstanding at December 31, 2023 are reflected in the Consolidated balance sheets as Accounts payable and accrued liabilities. We also have other noncurrent liabilities totaling $2.6 million due in 2024, $2.0 million due in 2025, and $5.1 million due thereafter. NON-GAAP FINANCIAL MEASURES A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position, or cash flows, but excludes or includes amounts that would not be so excluded or included in the most comparable U.S. generally accepted accounting principles ("U.S. GAAP") measure. Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures we believe offer a useful view of the overall operation of our businesses and may be different than similarly-titled measures used by other companies. We define Adjusted EBITDA as Net income (loss) attributable to Gannett before (1) Income tax expense (benefit), (2) Interest expense, (3) Gains or losses on the early extinguishment of debt, (4) Non-operating pension income, (5) Loss on convertible notes derivative, (6) Depreciation and amortization, (7) Integration and reorganization costs, (8) Other operating expenses, including third-party debt expenses and acquisition costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets, (12) Share-based compensation, and (13) certain other non-recurring charges. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Revenues. Management's use of Adjusted EBITDA and Adjusted EBITDA margin Adjusted EBITDA and Adjusted EBITDA margin are not measurements of financial performance under U.S. GAAP and should not be considered in isolation or as an alternative to income (loss) from operations, net income (loss), or any other measure of performance or liquidity derived in accordance with U.S. GAAP. We believe these non-GAAP financial measures, as we have defined them, are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. We use Adjusted EBITDA and Adjusted EBITDA margin as measures of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results. Limitations of Adjusted EBITDA and Adjusted EBITDA margin Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools. They should not be viewed in isolation or as a substitute for U.S. GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and Adjusted EBITDA margin and using these non-GAAP financial measures as compared to U.S. GAAP net income (loss) include: the cash portion of interest/financing expense, income tax (benefit) provision, and charges related to asset impairments, which may significantly affect our financial results. Management believes these items are important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. 72 Table of Contents Adjusted EBITDA and Adjusted EBITDA margin are not alternatives to Net income (loss) attributable to Gannett and margin as calculated and presented in accordance with U.S. GAAP. As such, they should not be considered or relied upon as substitutes or alternatives for any such U.S. GAAP financial measures. We strongly urge you to review the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA and Adjusted EBITDA margin along with our Consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We also strongly urge you not to rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA and Adjusted EBITDA margin are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, the Adjusted EBITDA and Adjusted EBITDA margin measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies. The table below shows the reconciliation of Net loss attributable to Gannett to Adjusted EBITDA and Net loss attributable to Gannett margin to Adjusted EBITDA margin for the periods presented: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands","2023","","2022","","2021"],["Net loss attributable to Gannett","$","(27,791)","","","$","(78,002)","","","$","(134,962)"],["Provision for income taxes","21,729","","","1,349","","","48,250"],["Interest expense","111,776","","","108,366","","","135,748"],["Gain on early extinguishment of debt","(4,529)","","","(399)","","","48,708"],["Non-operating pension income","(9,382)","","","(58,953)","","","(95,357)"],["Loss on convertible notes derivative","\u2014","","","\u2014","","","126,600"],["Depreciation and amortization","162,622","","","182,022","","","203,958"],["Integration and reorganization costs(a)","24,468","","","87,974","","","49,284"],["Other operating expenses","1,550","","","1,892","","","20,952"],["Asset impairments","1,370","","","1,056","","","3,976"],["Gain on sale or disposal of assets, net","(40,101)","","","(6,883)","","","17,208"],["Share-based compensation expense","16,567","","","16,751","","","18,439"],["Other items","9,404","","","2,110","","","(9,092)"],["Adjusted EBITDA (non-GAAP basis)","$","267,683","","","$","257,283","","","$","433,712"],["Net loss attributable to Gannett margin","(1.0)","%","","(2.6)","%","","(4.2)","%"],["Adjusted EBITDA margin (non-GAAP basis)","10.0","%","","8.7","%","","13.5","%"]] [[/GREPCENT_TABLE]] (a)    For the years ended December 31, 2023, 2022 and 2021, Integration and restructuring costs mainly reflect severance-related expenses and other restructuring-related expenses, which represent costs for consolidating operations, systems implementation, outsourcing of corporate functions and facility consolidations. 73 Table of Contents KEY PERFORMANCE INDICATORS A key performance indicator ("KPI") is generally defined as a quantifiable measurement or metric used to gauge performance, specifically to help determine strategic, financial, and operational achievements, especially compared to those of similar businesses. We define Digital-only ARPU as digital-only subscription average monthly revenues divided by the average digital-only paid subscriptions within the respective period. We define Core platform ARPU as core platform average monthly revenues divided by average monthly customer count within the period. We define Core platform revenues as revenue derived from customers utilizing our proprietary digital marketing services platform that are sold by either our direct or local market teams. Management believes Digital-only ARPU, Core platform ARPU, digital-only paid subscriptions, core platform revenues and core platform average customer count are KPIs that offer useful information in understanding consumer behavior, trends in our business, and our overall operating results. Management utilizes these KPIs to track and analyze trends across our segments. The following tables provide information regarding certain KPIs for the Domestic Gannett Media, Newsquest and DMS segments: [[GREPCENT_TABLE]] [["","Year ended December 31,"],["In thousands, except ARPU","2023","","2022","","Change","","% Change","","2021","","Change","","% Change"],["Domestic Gannett Media:"],["Digital-only ARPU","$","6.46","","","$","5.99","","","$","0.47","","","7.8","%","","$","6.02","","","$","(0.03)","","","(0.5)","%"],["Newsquest:"],["Digital-only ARPU","$","6.14","","","$","7.44","","","$","(1.30)","","","(17.5)","%","","$","9.23","","","$","(1.79)","","","(19.4)","%"],["Total Gannett:"],["Digital-only ARPU","$","6.45","","","$","6.04","","","$","0.41","","","6.8","%","","$","6.13","","","$","(0.09)","","","(1.5)","%"],["DMS:"],["Core platform revenues","$","473,172","","","$","462,067","","","$","11,105","","","2.4","%","","$","421,468","","","$","40,599","","","9.6","%"],["Core platform ARPU","$","2,620","","","$","2,459","","","$","161","","","6.5","%","","$","2,367","","","$","92","","","3.9","%"],["Core platform average customer count","15.1","","","15.7","","","(0.6)","","","(3.8)","%","","14.8","","","0.9","","","6.1","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","As of December 31,"],["In thousands","","2023","","2022","","% Change","2021","","% Change"],["Digital-only paid subscriptions:"],["Domestic Gannett Media:","","1,912","","","1,970","","(2.9)","%","1,581","","24.6","%"],["Newsquest","","83","","","59","","40.7","%","52","","13.5","%"],["Total Gannett","","1,995","","2,029","","(1.7)","%","1,633","","24.2","%"]] [[/GREPCENT_TABLE]] CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with U.S. GAAP requires management to make decisions based on estimates, assumptions, and factors it considers relevant to the circumstances. Such decisions include the selection of applicable principles and the use of judgment in their application, the results of which could differ from those anticipated. Goodwill and Indefinite-Lived Intangible Assets Goodwill is tested for impairment annually on November 30 and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have the option to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value, although we did not elect to use this option for the Company's evaluation as of November 30, 2023. If we elect to perform a qualitative assessment and conclude it is more likely than not that the fair value of the reporting unit is equal to or greater than 74 Table of Contents its carrying value, no further assessment of that reporting unit's goodwill is necessary; otherwise goodwill must be tested for impairment. In the quantitative test, we are required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. Fair value of the reporting unit is defined as the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. We generally determine the fair value of a reporting unit using a combination of a discounted cash flow analysis and a market-based approach. Estimates of fair value include inputs that are subjective in nature, involve uncertainties, and involve matters of significant judgment that are made at a specific point in time. Changes in key assumptions from period to period could significantly affect the estimates of fair value. Significant assumptions used in the fair value estimates include projected revenues and related growth rates over time, projected operating cash flow margins, discount rates, and future economic and market conditions. If the carrying value of the reporting unit exceeds the estimate of fair value, we calculate the impairment as the excess of the carrying value of goodwill over its implied fair value. While the Company believes its judgments represent reasonably possible outcomes based on available facts and circumstances, adverse changes to the assumptions, including those related to macroeconomic factors, comparable public company trading values and prevailing conditions in the capital markets, could lead to future declines in the fair value of a reporting unit. The Company continually evaluates whether current factors or indicators, such as prevailing conditions in the business environment, capital markets or the economy generally, and actual or projected operating results, require the performance of an interim impairment assessment of goodwill, as well as other long-lived assets. For example, any significant shortfall, now or in the future, in advertising revenues or subscribers and/or consumer acceptance of our products could lead to a downward revision in the fair value of certain reporting units. Newspaper mastheads (newspaper titles) are not subject to amortization as it has been determined that the useful lives of such mastheads are indefinite. Newspaper mastheads are tested for impairment annually, or more frequently if events or changes in circumstances indicate the asset might be impaired. The impairment test consists of a comparison of the fair value of each group of mastheads with their carrying amount. We used a relief from royalty approach, which utilizes a discounted cash flow model to determine the fair value of newspaper mastheads. Our judgments and estimates of future operating results in determining the reporting unit fair values are consistently applied in determining the fair value of mastheads. The performance of our annual impairment analysis resulted in no impairments to goodwill or indefinite-lived intangible assets for the year ended December 31, 2023. See Note 6 — Goodwill and intangible assets for further discussion. If our future operating results are not in line with the cash flow forecasts underlying our impairment analysis, we could have an impairment of our goodwill or intangible assets in the future and such impairment could materially affect our operating results. Long-Lived Assets We evaluate the carrying value of property, plant, and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. The evaluation is performed by asset group, which is the lowest level of identifiable cash flows independent of other assets. The assessment of recoverability is based on management's estimates by comparing the sum of the estimated undiscounted cash flows generated by the underlying asset groups to its carrying value of the asset groups to determine whether an impairment existed at its lowest level of identifiable cash flows. If the carrying amount of the asset group is greater than the expected undiscounted cash flows to be generated by the asset group, an impairment is recognized to the extent the carrying value of such asset group exceeds its fair value. The market approach is used in some cases to estimate the fair value of property, plant, and equipment, particularly when there is a change in the use of an asset. As part of ongoing cost-efficiency programs, we have ceased a number of print operations. Pursuant to these actions, certain assets and real estate to be retired have been assessed for impairment. 75 Table of Contents Revenue Recognition Our contracts with customers sometimes include promises to transfer multiple products and services to a customer. Revenue from sales agreements that contain multiple performance obligations are allocated to each obligation based on the relative standalone selling price. We determine standalone selling prices based on observable prices charged to customers. See Note 2 — Summary of significant accounting policies for further discussion. Income Taxes We are subject to income taxes in the U.S. and various foreign jurisdictions in which we operate and record our tax provision for the anticipated tax consequences in our reported results of operations. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties in the application of tax laws and regulations. We account for income taxes under the provisions of ASC 740, "Income Taxes" ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to affect taxable income. The assessment of the realizability of deferred tax assets involves a high degree of judgment and complexity. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are expected to be realized. When we determine that it is more likely than not that we will be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax asset would be made and reflected either in income or as an adjustment to goodwill. This determination will be made by considering various factors, including our expected future results, that in our judgment will make it more likely than not that these deferred tax assets will be realized. Our actual effective tax rate and income tax expense could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, tax planning and our forecasted financial condition, and results of operations in future periods. Although we believe current estimates are reasonable, actual results could differ from these estimates. ASC 740 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. Under ASC 740, the financial statements reflect expected future tax consequences of such positions presuming the taxing authorities' full knowledge of the position and all relevant facts, but without considering time values. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Pension and Postretirement Liabilities ASC 715, "Compensation—Retirement Benefits," requires recognition of an asset or liability in the consolidated balance sheet reflecting the funded status of pension and other postretirement benefit plans, such as retiree health and life, with current-year changes in the funded status recognized in the statement of stockholders' equity. The determination of pension plan obligations and expense is based on a number of actuarial assumptions. Two critical assumptions are the expected long-term rate of return on plan assets and the discount rate applied to pension plan obligations. For other postretirement benefit plans, which provide for certain health care and life insurance benefits for qualifying retired employees and which are not funded, critical assumptions in determining other postretirement benefit obligations and expense are the discount rate and the assumed health care cost-trend rates. Our pension plans had assets valued at $1.8 billion as of December 31, 2023 and the plans' benefit obligation was $1.7 billion, resulting in the plans being 108% funded at such date. For 2023, the assumption used for the funded status discount rate was 5.40% for our principal retirement plan obligations. As an indication of the sensitivity of pension liabilities to the discount rate assumption, a 50 basis point reduction in the discount rate at the end of 2023 would have increased plan obligations by approximately $31.6 million. A 50 basis point change in the discount rate used to calculate the benefit for 2023 would have decreased total pension plan expense for 2023 by approximately $2.4 million. To determine the expected long-term rate of return on pension plan assets, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets, input from the actuaries and investment consultants, and long-term inflation assumptions. For our principal retirement plan, we used an 76 Table of Contents assumption of 5.3% for our expected return on pension plan assets for 2023. If we were to reduce our expected rate of return assumption by 50 basis points, the benefit for 2023 would have increased by approximately $4.4 million.