Ladies and gentlemen, thank you for standing-by, and welcome to the Gannett Company Inc. Third Quarter, 2019 Earnings Conference Call. [Operator Instructions]. I’d now like to turn the conference over to our speaker today, Stacy Cunningham, Vice President of Financial Planning and Investor Relations. Thank you Please go ahead madam.

Thank you. Good morning everyone, and welcome to Gannett's third quarter 2019 earnings conference call. As a reminder, this call is being recorded and webcast. Joining us today from Gannett is Paul Bascobert, Chief Executive Officer and Ali Engel, Chief Financial Officer. Before we begin, I would like to call your attention to our Safe Harbor provision for forward-looking statements in our financial results press release. The Safe Harbor provision identifies risk factors that may cause actual results to differ materially from the contents of our forward-looking statements. For more detailed description of the risk factors that may affect our results, please refer to our financial results press release and our SEC filings, including our 2018 Form 10-K. Also during this call, management's commentary will include non-GAAP financial measures, reconciliations between GAAP and non-GAAP metrics for our reported results can be found in the tables of our financial results press release, which we have posted to our Investor Relations website. With these formalities out of the way, I'd now like to turn the call over to Paul.

Thanks, Stacy. Good morning, and thank you everyone for joining us today. Before I talk about third quarter results, I want to take a moment to say how honored I am to lead Gannett during this exciting new chapter. From the beginning, I was drawn to Gannett's mission to help our communities connect, act and thrive. I've always been passionate about this industry, and I share this Company's commitment to supporting and investing in quality, local journalism. Next, I'd like to take a moment this morning to give a brief update on our pending merger with New Media, which is expected to close following our special shareholder meeting scheduled for November 14, assuming we receive the necessary shareholder approvals. The merger creates an exciting opportunity to deliver on our shared mission of journalistic excellence, or also driving compelling value for shareholders of both companies. Once the transaction closes, we will more than double our number of local markets, enhancing both our scale and our ability to monetize our technology and product investments. The combined operations will have a broad, local to national network of incredibly talented, experienced journalists who can continue to deliver unique award-winning content for both local communities and national audiences. We'll have an even stronger digital marketing solutions portfolio to better service SMBs and help them grow their businesses, as we bring together New Media's UpCurve in our ReachLocal operations. Importantly, as we look to the future, Gannett will continue to innovate around what we believe is our core competitive advantage, our local brands and our engaged local communities built over decades on the backs of outstanding journalism. While there's a lot of integration work ahead of us following close, we're excited about the future of Gannett, and we are confident our companies will be stronger together.…

Thank you, Paul and good morning everyone. Consolidated revenues in the third quarter were $636 million compared to $712 million a year-ago. The revenue decline reflects continued weakness in both print advertising and circulation revenues, partially offset by growth at WordStream, digital-only subscription revenue, and local digital marketing services revenues. Additionally, the third quarter had one fewer Sunday, offset by one additional Monday compared to a year ago, which negatively impacted revenue by $6.4 million. On a same-store basis, total revenues declined 7.8%, a 200 basis point improvement over second quarter results, reflecting the addition of WordStream to the same-store calculation and moderate improvement in local digital advertising and marketing services trends. Total digital revenues of $244 million, represented 38% of total revenue, up from 37% a year ago. Adjusted EBITDA totaled $62.2 million in the quarter, down 11% versus the prior-year quarter, reflecting lower revenues, offset in part by strong expense management. Despite the continued revenue pressures, adjusted EBITDA margins were flat to the prior year at 9.8%. Total third quarter same-store operating expenses declined approximately 8%, reflecting payroll savings from various cost reduction initiatives, significant newsprint savings from both lower volumes and prices, and continued production and distribution efficiencies. Turning to the Publishing segment, third quarter revenues were down 9.1% on a same-store basis, an 80 basis point improvement over second quarter trends, reflecting improvement within advertising and marketing services, as well as other revenue due to strong digital syndication revenue growth. Same-store digital advertising and marketing services revenues declined 3.7% year-over-year, an improvement over second quarter results, which were down 4.5%. Digital marketing services revenues grew 11% year-over-year on a same-store basis, reflecting strong growth in our local markets and at Newsquest. The local growth of 6.6%, reflects both higher client counts and single-digit growth in average…

[Operator Instructions] Our first question comes from Kyle Evans with Stephens. Your line is now open.

Hi thanks, good morning.

Good morning, Kyle.

I guess, I'll start with kind of cost cutting. This has been a cost-cutting story for years now. You're about to do a deal that's got a pretty substantial cost synergy laid on top of it. Could you help us think about the long-term potential to continue taking cost out of the business, and how close you are to kind of hitting muscle and bone where you materially impact more products? I've got some follow-ups as well.

Yes. Hey, good morning, Kyle. Good to hear from you. I think that -- look, we've talked about this a lot of different times. And I think as a stand-alone company, as we've said, we're always looking for ways to cut cost and those projects do become more difficult, a little bit more of a long-tail all of them require advanced planning and we were thinking about that kind of over the summer, as we were starting to think about our budgets and what we would have to do as a stand-alone company, I think as we're looking to integrate with New Media. We have a lot of opportunities with respect to the manufacturing and [distribution] process, potential facility consolidations, duplicative public company costs, and similar things that are driving our synergy-related work. I think both companies have core competencies in efficiently running their operations and doing integrations through acquisitions. So we both have those skill sets and combined, I think we can be very judicious and actually be very good at this process. Our focus include the hiring of AlixPartners and how they're helping us kick this off and WordStream that they're leading and I think that would be also enlightening for everyone on the call. So I'll turn that over to Paul.

Yes, thanks. So we've -- we have engaged AlixPartners over the last several weeks. Both companies have been actively engaged in setting up work teams, looking through the detailed synergy estimates, getting a line of sight, and how we're actually going to achieve those. And at this point, we feel good about our ability to hit the numbers that we have articulated publicly. So I think the process is going well and everybody's pretty actively engaged.

Great. It wouldn't be a quarter, if I didn't ask you your volume numbers on circulation. Also just -- while we're talking about circulation, maybe some higher-level thoughts from Paul about print and delivery, hand delivery as a means for distribution. I'm sitting in Rock, Arkansas DMA#57 and there are some pretty radical changes going on here as it relates to print distribution. I'm just wondering what you think of that and how you could use that going forward?

Can you say a little bit more about what radical things are going on in Arkansas?

We're doing away with print unless it's on Sundays.

Okay. In terms of just --.

The frequency.

Yes, frequency of reduction. Look, just in general, I would tell you that our print business is a healthy business. It generates a lot of cash flow and EBITDA to help power our journalism, to help power our products, and so as long as that continues, we're going to continue to push our business forward. We're always looking at frequency of delivery and looking at the trade-offs between the advertising and circulation revenue. We're going to keep looking at that, it's a moving target in terms of just the number of people and the cost to deliver. And so, you can expect us to keep revisiting that, but no specific plans at this point to change frequency. So I'll just leave it at that.

Maribel, if you want to...?

Sure. Hi, Kyle. And thank you always [for your good] questions, we appreciate it. The -- you asked about volumes. We continue to see our volume decline as expected in the high-teens to low 20% range. And of course, some declines in our overall full-access subscription revenue, which is tied to the cycling of the pricing actions that we started last year, and we'll continue to see that -- we've mentioned in the past, we began to moderate some of our pricing. We're going to continue with that plan going forward. So we expect to see continued moderation of our overall revenues.

Great, one last one, and maybe this is one for after the call, and if you want to hit the delay button on it, that's fine. But I was interested in where video sits as a percent of overall digital advertising, and kind of what the views were there to create more video content given the much higher effective CPMs that you have in video over display in desktop and mobile settings? Thanks.

Yes, we'll have to get the specific percentage for you, but I mean certainly video is an area that we have focused on and are seeing strong views there. We continue to report those to -- give those numbers to you guys. Maribel maybe can speak to some of the things that we're specifically giving on the content side [indiscernible].

Yes. I mean, we definitely have put a focus on creating more video content, and that's been both for on-platform distribution and you're absolutely right, of course, the effect of CPMs there being considerably higher, and something that we see strong demand from advertisers to specifically wanting to associate with video content. And we've also focused on off-platform distribution. You've seen our syndication revenue continue to grow in strong double-digits year-over-year. As a result, a lot of that specifically tied to video. So we'll follow up with the exact percentages as a percentage of total advertising after this call.

Great, thank you.

[Operator Instructions] Our next question comes from Doug Arthur with Huber Research. Your line is now open.

Yes, thanks. Three questions. First on the $244.3 million total digital. Stacy, I think you and I've been through this a few times, that's net of interest segment, right?

Yes.

So, if that's if it's net, that implies that the digital revenue associated with publishing outside of the digital year revenues you break out and we struggle was about $61 million. That seems like an uptick from the Q1 and Q2 run rate.

Yes, we had a stronger quarter for digital marketing services, as we highlighted on the call. So we saw 11% growth in DMS, which was a trend reversal from what we've seen in the second quarter.

Yes, no, I'm netting -- to get to $244 million, I'm looking at the -- I guess, it's really the digital circulation revenue number specifically associated with Publishing outside of digital advertising. So that -- so, in other words to get to the $244 million, that number you talked about the strong digital sub-number, looks better than in the first two quarters. I don't know if that's true or if I'm doing the numbers correctly, or we can take it up afterward?

Yes, we can take it up offline. I mean, the other thing that is in there, as Maribel alluded to, is digital syndication, which has been a strong growth story for us as well. We do continue to see very strong digital-only circulation growth. But I think Doug, as we've discussed, I mean there is the allocated portion of our full-access that does get included in this calculation, and I would say that trend has been consistent and that does weigh on this number, just given the full access numbers are down.

Okay, terrific. The second question, in getting to your adjusted EBITDA of $62.2 million, you have a item at the bottom call other items. Is that the $8.8 million total, is that number included in SG&A and cost of operating expenses?

That's probably mostly in SG&A. Most of that relates to M&A-related activities.

Okay. So that would be a back out of it mostly of SG&A? Okay, thank you. And then finally, Ali, you talked about newsprint down a lot. Can you put a percentage on that?

Yes, 30% in the quarter, 20% related to volume, and 10% pricing, Doug.

Well okay, thank you very much.

You're welcome. Operator, are there any other question?

At this time, I'm showing no further questions. Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.