Segment reporting

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segment reporting

NOTE 13 — Segment reporting

We define our reportable segments based on the way the Chief Operating Decision Maker ("CODM"), which is our Chief Executive Officer, manages the operations for purposes of allocating resources and assessing performance. Our reportable segments include the following:

•Publishing is comprised of our portfolio of local, regional, national, and international newspaper publishers. The results of this segment include Advertising and marketing services revenues from local, classified, and national advertising across multiple platforms, including print, online, mobile, and tablet as well as niche publications, Circulation revenues from home delivery, digital distribution and single copy sales of our publications, and Other revenues, mainly from commercial printing, distribution arrangements, revenues from our events business, digital content syndication and affiliate revenues, and third-party newsprint sales. The Publishing reportable segment is an aggregation of two operating segments: Domestic Publishing and U.K. Publishing.

•Digital Marketing Solutions is comprised of our digital marketing solutions subsidiary, ReachLocal. The results of this segment include Advertising and marketing services revenues 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.

In addition to the above operating segments, we have a Corporate and other category that includes activities not directly attributable to a specific segment. This category primarily consists of broad corporate functions, including legal, human resources, accounting, finance and marketing as well as other general business costs.

In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.

The CODM uses Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett to evaluate the performance of the segments and allocate resources. Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are non-GAAP financial performance 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 (expense), (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, including gains or losses on the sale of investments. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues. We define Adjusted Net income (loss) attributable to Gannett before (1) Gains or losses on the early extinguishment of debt, (2) Loss on convertible notes derivative, (3) Integration and reorganization costs, (4) Other operating expenses, including third-party debt expenses and acquisition costs, (5) Asset impairments, (6) Goodwill and intangibles impairments, (7) Gains or losses on the sale or disposal of assets, (8) Gains or losses on the sale of investments, and (9) the tax impact of the above items.

Management considers Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett to be the appropriate metrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as it eliminates the effect of items which we do not believe are indicative of each segment's core operating performance.

The following tables present our segment information:

	Three months ended September 30, 2021
In thousands	Publishing		Digital Marketing Solutions		Corporate and other		Intersegment Eliminations		Consolidated
Advertising and marketing services - external sales	$	294,742	$	116,771	$	507	$	—	$	412,020
Advertising and marketing services - intersegment sales	34,042		—		—		(34,042)		—
Circulation	306,698		—		4		—		306,702
Other	80,325		—		1,138		—		81,463
Total operating revenues	$	715,807	$	116,771	$	1,649	$	(34,042)	$	800,185
Adjusted EBITDA (non-GAAP basis)	$	101,001	$	15,024	$	(13,958)	$	—	$	102,067

	Three months ended September 30, 2020
In thousands	Publishing		Digital Marketing Solutions		Corporate and other		Intersegment Eliminations		Consolidated
Advertising and marketing services - external sales	$	303,646	$	100,807	$	774	$	—	$	405,227
Advertising and marketing services - intersegment sales	25,862		—		—		(25,862)		—
Circulation	336,152		—		6		—		336,158
Other	66,566		4,636		1,952		—		73,154
Total operating revenues	$	732,226	$	105,443	$	2,732	$	(25,862)	$	814,539
Adjusted EBITDA (non-GAAP basis)	$	108,752	$	4,177	$	(24,949)	$	—	$	87,980

	Nine months ended September 30, 2021
In thousands	Publishing		Digital Marketing Solutions		Corporate and other		Intersegment Eliminations		Consolidated
Advertising and marketing services - external sales	$	890,665	$	328,184	$	1,638	$	—	$	1,220,487
Advertising and marketing services - intersegment sales	93,910		—		—		(93,910)		—
Circulation	942,392		—		6		—		942,398
Other	212,970		905		4,784		—		218,659
Total operating revenues	$	2,139,937	$	329,089	$	6,428	$	(93,910)	$	2,381,544
Adjusted EBITDA (non-GAAP basis)	$	317,398	$	36,725	$	(35,822)	$	—	$	318,301

	Nine months ended September 30, 2020
In thousands	Publishing		Digital Marketing Solutions		Corporate and other		Intersegment Eliminations		Consolidated
Advertising and marketing services - external sales	$	939,923	$	306,899	$	2,334	$	—	$	1,249,156
Advertising and marketing services - intersegment sales	85,472		—		—		(85,472)		—
Circulation	1,053,518		—		10		—		1,053,528
Other	207,355		14,388		5,796		—		227,539
Total operating revenues	$	2,286,268	$	321,287	$	8,140	$	(85,472)	$	2,530,223
Adjusted EBITDA (non-GAAP basis)	$	311,767	$	14,847	$	(61,548)	$	—	$	265,066

The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA and Net income (loss) attributable to Gannett margin to Adjusted EBITDA margin:

	Three months ended September 30,						Nine months ended September 30,
In thousands	2021			2020			2021			2020
Net income (loss) attributable to Gannett	$	14,687		$	(31,260)		$	(112,514)		$	(548,305)
Provision (benefit) for income taxes	2,984			3,098			11,567			(22,200)
Interest expense	34,603			58,063			109,370			173,890
Loss on early extinguishment of debt	3,761			476			25,996			1,650
Non-operating pension income	(23,860)			(18,334)			(71,644)			(54,433)
Loss on convertible notes derivative	—			—			126,600			—
Depreciation and amortization	48,107			61,355			154,452			205,706
Integration and reorganization costs	13,619			13,417			35,467			73,978
Other operating expenses	4			1,913			11,354			10,261
Asset impairments	2,301			1,585			3,134			8,444
Goodwill and intangible impairments	—			—			—			393,446
(Gain) loss on sale or disposal of assets, net	(833)			795			9,206			1,540
Share-based compensation expense	4,602			3,844			13,804			22,812
Other items	2,092			(6,972)			1,509			(1,723)
Adjusted EBITDA (non-GAAP basis)	$	102,067		$	87,980		$	318,301		$	265,066
Net income (loss) attributable to Gannett margin	1.8		%	(3.8)		%	(4.7)		%	(21.7)		%
Adjusted EBITDA margin (non-GAAP basis)	12.8		%	10.8		%	13.4		%	10.5		%

The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted Net income (loss) attributable to Gannett:

	Three months ended September 30,				Nine months ended September 30,
In thousands	2021		2020		2021		2020
Net income (loss) attributable to Gannett	$	14,687	$	(31,260)	$	(112,514)	$	(548,305)
Loss on early extinguishment of debt	3,761		476		25,996		1,650
Loss on convertible notes derivative	—		—		126,600		—
Integration and reorganization costs	13,619		13,417		35,467		73,978
Other operating expenses	4		1,913		11,354		10,261
Asset impairments	2,301		1,585		3,134		8,444
Goodwill and intangible impairments	—		—		—		393,446
(Gain) loss on sale or disposal of assets, net	(833)		795		9,206		1,540
Gain on sale of investments	—		(7,800)		—		(7,995)
Subtotal	33,539		(20,874)		99,243		(66,981)
Tax impact of above items	(7,033)		(25,449)		(28,042)		(61,364)
Adjusted Net income (loss) attributable to Gannett (non-GAAP basis)	$	26,506	$	(46,323)	$	71,201	$	(128,345)

Asset information by segment is not a key measure of performance used by the CODM function. Accordingly, we have not disclosed asset information by segment. Additionally, equity income in unconsolidated investees, net, interest expense, other non-operating items, net, and benefit for income taxes, as reported in the condensed consolidated financial statements, are not part of operating income and are primarily recorded at the corporate level.