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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
_______________________

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-36097
___________________________
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
___________________________
Delaware38-3910250
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
7950 Jones Branch Drive,McLean,Virginia22107-0910
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (703) 854-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareGCIThe New York Stock Exchange
Preferred Stock Purchase RightsN/AThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☒
Accelerated Filer
☐
Non-Accelerated Filer
☐
Smaller Reporting Company
☐
Emerging Growth Company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of October 31, 2022, 146,092,325 shares of the registrant's Common Stock were outstanding.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views regarding, among other things, our future growth, results of operations, performance, business prospects and opportunities, and our environmental, social and governance goals, and are not statements of historical fact. Words such as "anticipate(s)," "expect(s)," "plan(s)," "project(s)," "believe(s)," "forecast," "will," "aim," "would," "may," "seek(s)," "estimate(s)" and similar expressions are intended to identify such forward-looking statements.

Forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of known and unknown risks, uncertainties, and other factors that could lead to actual results materially different from those described in the forward-looking statements. We can give no assurance our expectations will be attained. Our actual results, liquidity, and financial condition may differ from the anticipated results, liquidity, and financial condition indicated in the forward-looking statements. Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others:

•General economic and market conditions, including inflation and interest rates;
•Global hostilities and any resulting effects and uncertainties;
•The competitive environment in which we operate;
•Risks and uncertainties associated with the COVID-19 pandemic;
•Economic conditions in the various regions of the United States, the United Kingdom, and other regions in which we operate our business;
•Our ability to meet our performance goals while implementing our cost control programs;
•The shift within the publishing industry from traditional print media to digital forms of publication;
•Risks and uncertainties associated with our Digital Marketing Solutions segment, including its significant reliance on Google for media purchases, its international operations, and its ability to develop and gain market acceptance for new products or services;
•Declining print advertising revenue and circulation subscribers;
•Our ability to grow our digital marketing services initiatives, digital audience, and advertiser base;
•Our ability to grow our business organically;
•Variability in the exchange rate relative to the U.S. dollar of currencies in foreign jurisdictions in which we operate;
•Our ability to realize the anticipated benefits of our acquisitions;
•The availability and cost of capital for future investments;
•Our indebtedness may restrict our operations and/or require us to dedicate a portion of cash flow from operations to payments associated with our debt;
•Our current intention not to pay dividends and our ability to pay dividends in the future, if at all;
•Our ability to reduce costs and expenses;
•Our ability to maintain proper and effective internal control over financial reporting;
•Our ability to recruit and retain key personnel; and
•Any shortage of skilled or experienced employees with the capabilities necessary to support our business strategies, or our inability to retain such employees.

Additional risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risks identified by us under the heading "Risk Factors" in this Quarterly Report on Form 10-Q, under the heading "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the "SEC") on February 24, 2022, and the statements made in subsequent filings. Such forward-looking statements speak only as of the date they are made. Except to the extent required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.



INDEX TO GANNETT CO., INC.
Q3 2022 FORM 10-Q
 
Item No.Page
Part I. Financial Information
1
2
3
4
Part II. Other Information
1
1A
2
3
4
5
6


Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

GANNETT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share dataSeptember 30, 2022December 31, 2021
Assets(Unaudited)
Current assets:
Cash and cash equivalents$124,867 $130,756 
Accounts receivable, net of allowance for doubtful accounts of $12,056 and $16,470 as of September 30, 2022 and December 31, 2021, respectively
270,440 328,733 
Inventories37,853 37,662 
Prepaid expenses and other current assets70,088 80,110 
Total current assets503,248 577,261 
Property, plant and equipment, net of accumulated depreciation of $348,363 and $336,500 as of September 30, 2022 and December 31, 2021, respectively
328,607 415,384 
Operating lease assets243,096 271,935 
Goodwill537,898 533,709 
Intangible assets, net638,337 713,153 
Deferred tax assets— 32,399 
Pension and other assets230,466 284,228 
Total assets $2,481,652 $2,828,069 
Liabilities and equity
Current liabilities:
Accounts payable and accrued liabilities$342,815 $357,014 
Deferred revenue161,585 184,838 
Current portion of long-term debt91,117 69,456 
Other current liabilities53,142 51,218 
Total current liabilities648,659 662,526 
Long-term debt708,970 769,446 
Convertible debt402,469 393,354 
Deferred tax liabilities7,161 28,812 
Pension and other postretirement benefit obligations65,911 71,937 
Long-term operating lease liabilities228,412 254,969 
Other long-term liabilities106,935 117,410 
Total noncurrent liabilities1,519,858 1,635,928 
Total liabilities 2,168,517 2,298,454 
Commitments and contingent liabilities (See Note 11)
Equity
Preferred stock, $0.01 par value per share, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were issued and outstanding at September 30, 2022 and December 31, 2021
— — 
Common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 152,710,398 shares issued and 146,218,045 shares outstanding at September 30, 2022; 144,667,389 shares issued and 142,299,399 shares outstanding at December 31, 2021
1,527 1,446 
Treasury stock, at cost, 6,492,353 shares and 2,367,990 shares at September 30, 2022 and December 31, 2021, respectively
(14,706)(8,151)
Additional paid-in capital1,406,556 1,400,206 
Accumulated deficit(1,032,168)(921,399)
Accumulated other comprehensive (loss) income(47,803)59,998 
Total Gannett stockholders equity313,406 532,100 
Noncontrolling interests(271)(2,485)
Total equity313,135 529,615 
Total liabilities and equity$2,481,652 $2,828,069 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Table of Contents
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
In thousands, except per share amounts2022202120222021
Advertising and marketing services$361,847 $412,020 $1,120,570 $1,220,487 
Circulation264,732 306,702 827,958 942,398 
Other91,323 81,463 266,111 218,659 
Total operating revenues717,902 800,185 2,214,639 2,381,544 
Operating costs459,343 480,289 1,405,230 1,431,259 
Selling, general and administrative expenses212,473 225,596 662,146 652,184 
Depreciation and amortization44,778 48,107 142,091 154,452 
Integration and reorganization costs33,311 13,619 60,454 35,467 
Asset impairments71 2,301 1,010 3,134 
(Gain) loss on sale or disposal of assets, net(7,180)(833)(9,612)9,206 
Other operating expenses249 4 1,665 11,354 
Total operating expenses743,045 769,083 2,262,984 2,297,056 
Operating income (loss) (25,143)31,102 (48,345)84,488 
Interest expense27,750 34,603 79,840 109,370 
(Gain) loss on early extinguishment of debt(1,228)3,761 2,264 25,996 
Non-operating pension income(14,990)(23,860)(51,363)(71,644)
Loss on convertible notes derivative— — — 126,600 
Other non-operating income, net(651)(931)(811)(3,954)
Non-operating expenses10,881 13,573 29,930 186,368 
Income (loss) before income taxes(36,024)17,529 (78,275)(101,880)
Provision for income taxes18,098 2,984 32,649 11,567 
Net income (loss) (54,122)14,545 (110,924)(113,447)
Net loss attributable to noncontrolling interests(a)
(8)(142)(155)(933)
Net income (loss) attributable to Gannett$(54,114)$14,687 $(110,769)$(112,514)
Income (loss) per share attributable to Gannett - basic$(0.39)$0.11 $(0.81)$(0.84)
Income (loss) per share attributable to Gannett - diluted$(0.39)$0.09 $(0.81)$(0.84)
Other comprehensive loss:
Foreign currency translation adjustments$(21,721)$(5,487)$(44,925)$(700)
Pension and other postretirement benefit items:
Net actuarial loss(99,904)— (88,914)(300)
Amortization of net actuarial (gain) loss (125)25 (374)40 
Other1,153 1,051 3,158 205 
Total pension and other postretirement benefit items(98,876)1,076 (86,130)(55)
Other comprehensive loss before tax(120,597)(4,411)(131,055)(755)
Income tax expense (benefit) related to components of other comprehensive income (loss) (26,047)7 (23,254)(177)
Other comprehensive loss, net of tax(94,550)(4,418)(107,801)(578)
Comprehensive income (loss)(148,672)10,127 (218,725)(114,025)
Comprehensive loss attributable to noncontrolling interests(a)
(8)(142)(155)(933)
Comprehensive income (loss) attributable to Gannett$(148,664)$10,269 $(218,570)$(113,092)
(a)     For the three and nine months ended September 30, 2022, there were no redeemable noncontrolling interests included in Net loss attributable to noncontrolling interests. For the three and nine months ended September 30, 2021, Net loss attributable to noncontrolling interests included $0.1 million and $0.9 million, respectively, relating to redeemable noncontrolling interests.

The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
In thousands20222021
Operating activities
Net loss$(110,924)$(113,447)
Adjustments to reconcile net loss to operating cash flows:
Depreciation and amortization142,091 154,452 
Share-based compensation expense13,277 13,804 
Non-cash interest expense15,954 18,719 
(Gain) loss on sale or disposal of assets, net(9,612)9,206 
Loss on convertible notes derivative— 126,600 
Loss on early extinguishment of debt2,264 25,996 
Asset impairments1,010 3,134 
Pension and other postretirement benefit obligations(71,640)(114,663)
Change in other assets and liabilities, net50,562 9,546 
Cash provided by operating activities32,982 133,347 
Investing activities
Acquisitions, net of cash acquired(15,432)— 
Purchase of property, plant and equipment(35,943)(27,265)
Proceeds from sale of real estate and other assets71,004 67,434 
Change in other investing activities(548)(933)
Cash provided by investing activities19,081 39,236 
Financing activities
Payments of deferred financing costs(957)(33,921)
Borrowings under term loans80,000 1,045,000 
Repayments under term loans(92,212)(1,220,751)
Repayments of long-term debt(35,355)— 
Acquisition of noncontrolling interests(2,050)— 
Treasury stock(6,529)(2,034)
Changes in other financing activities(941)(578)
Cash used for financing activities(58,044)(212,284)
Effect of currency exchange rate change on cash(1,447)389 
Decrease in cash, cash equivalents and restricted cash(7,428)(39,312)
Cash, cash equivalents and restricted cash at beginning of period143,619 206,726 
Cash, cash equivalents and restricted cash at end of period$136,191 $167,414 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
Three months ended September 30, 2022
Common stockAdditional
paid-in
capital		Accumulated other comprehensive income (loss)Accumulated deficitTreasury stock
Non-controlling interest(a)
In thousandsSharesAmountSharesAmountTotal
Balance at June 30, 2022152,598 $1,526 $1,402,652 $46,747 $(978,054)5,810 $(14,700)$(263)$457,908 
Net loss attributable to Gannett— — — — (54,114)— — (8)(54,122)
Restricted stock awards settled, net of withholdings— — (178)— — — — — (178)
Restricted share grants96 1 (1)— — — — — — 
Other comprehensive loss, net(b)
— — — (94,550)— — — — (94,550)
Share-based compensation expense— — 4,499 — — — — — 4,499 
Issuance of common stock16 — 25 — — — — — 25 
Restricted share forfeiture— — — — — 682 (6)— (6)
Other activity— — (441)— — — — — (441)
Balance at September 30, 2022152,710 $1,527 $1,406,556 $(47,803)$(1,032,168)6,492 $(14,706)$(271)$313,135 
Three months ended September 30, 2021
Common stockAdditional
paid-in
capital		Accumulated other comprehensive income (loss) Accumulated deficitTreasury stock
Non-controlling interest(a)
In thousandsSharesAmountSharesAmountTotal
Balance at June 30, 2021144,639 $1,446 $1,395,191 $54,013 $(913,638)2,015 $(6,935)$— $530,077 
Net income attributable to Gannett— — — — 14,687 — — — 14,687 
Restricted stock awards settled, net of withholdings3 — (6)— — — — — (6)
Restricted share grants5 — — — — — — — — 
Other comprehensive loss, net(b)
— — — (4,418)— — — — (4,418)
Share-based compensation expense— — 4,602 — — — — — 4,602 
Issuance of common stock7 — 38 — — — — — 38 
Treasury stock— — — — — 119 (4)— (4)
Restricted share forfeiture— — — — — — (1)— (1)
Other activity— — (132)— — — — — (132)
Balance at September 30, 2021144,654 $1,446 $1,399,693 $49,595 $(898,951)2,134 $(6,940)$— $544,843 
(a) Excludes Redeemable noncontrolling interests which are reflected in temporary equity.
(b) For the three months ended September 30, 2022 and 2021, Other comprehensive loss is net of income tax benefit of $26.0 million and income tax provision of $7.0 thousand, respectively.
5
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - CONTINUED
(Unaudited)
Nine months ended September 30, 2022
Common stockAdditional
paid-in
capital		Accumulated other comprehensive income (loss)Accumulated deficitTreasury stock
Non-controlling interest(a)
In thousandsSharesAmountSharesAmountTotal
Balance at December 31, 2021144,667 $1,446 $1,400,206 $59,998 $(921,399)2,368 $(8,151)$(2,485)$529,615 
Net loss attributable to Gannett— — — — (110,769)— — (155)(110,924)
Acquisition of noncontrolling interests— — (4,419)— — — — 2,369 (2,050)
Restricted stock awards settled, net of withholdings615 7 (1,737)— — — — — (1,730)
Restricted share grants7,127 71 (71)— — — — — — 
Other comprehensive loss, net(c)
— — — (107,801)— — — — (107,801)
Share-based compensation expense— — 13,277 — — — — — 13,277 
Issuance of common stock301 3 110 — — — — — 113 
Treasury stock— — — — — 1,555 (6,529)— (6,529)
Restricted share forfeiture— — — — — 2,569 (26)— (26)
Other activity— — (810)— — — — — (810)
Balance at September 30, 2022152,710 $1,527 $1,406,556 $(47,803)$(1,032,168)6,492 $(14,706)$(271)$313,135 
Nine months ended September 30, 2021
Common stockAdditional
paid-in
capital		Accumulated other comprehensive income (loss)Accumulated deficitTreasury stock
Non-controlling interest(a)
In thousandsSharesAmountSharesAmountTotal
Balance at December 30, 2020139,495 $1,395 $1,103,881 $50,173 $(786,437)1,392 $(4,903)$— $364,109 
Net loss attributable to Gannett— — — — (112,514)— — — (112,514)
Restricted stock awards settled, net of withholdings1,065 10 (1,912)— — — — — (1,902)
Restricted share grants3,883 39 (39)— — — — — — 
Equity component - 2027 Notes— — 283,718 — — — — — 283,718 
Other comprehensive loss, net(c)
— — — (578)— — — — (578)
Share-based compensation expense— — 13,804 — — — — — 13,804 
Issuance of common stock211 2 99 — — — — — 101 
Remeasurement of redeemable noncontrolling interests— — 126 — — — — — 126 
Treasury stock— — — — — 512 (2,034)— (2,034)
Restricted share forfeiture— — — — — 230 (3)— (3)
Other activity— — 16 — — — — — 16 
Balance at September 30, 2021144,654 $1,446 $1,399,693 $49,595 $(898,951)2,134 $(6,940)$— $544,843 
(a) Excludes Redeemable noncontrolling interests which are reflected in temporary equity.
(c) For the nine months ended September 30, 2022 and 2021, Other comprehensive loss is net of income tax benefit of $23.3 million and $0.2 million, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — Description of business and basis of presentation

Description of business
Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") is a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. Gannett operates a scalable, data-driven media platform that aligns with consumer and digital marketing trends. We aim to be the premier source for clarity, connections and solutions within our communities. Our strategy is focused on driving audience growth and engagement by delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers desire. We expect the execution of this strategy to enable us to continue our evolution from a more traditional print media business to a digitally-focused content platform.

On June 1, 2022, the Company announced a strategic organizational restructuring, which centralized the operations within each of its U.S. operating business units, Gannett Media and Digital Marketing Solutions ("DMS"). This change did not have any impact on segment reporting. However, the Company's historical Publishing segment will be referred to as Gannett Media moving forward. The Gannett Media reportable segment is an aggregation of two operating segments: Domestic Gannett Media (formerly referred to as Domestic Publishing) and Newsquest (formerly referred to as U.K. Publishing).

Our current portfolio of media assets includes USA TODAY, local media organizations in 45 states in the U.S., and Newsquest, a wholly-owned subsidiary operating in the United Kingdom (the "U.K.") with more than 150 local news media brands. We also own digital marketing services companies branded LocaliQ, which provide a cloud-based platform of products to enable small and medium-sized businesses to accomplish their marketing goals. In addition, we run what we believe is the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures.

Through USA TODAY, our local property network, and Newsquest, we deliver high-quality, trusted content with a commitment to balanced, unbiased journalism, where and when consumers want to engage with it on virtually any device or platform. Additionally, the Company has 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 marketing solutions product suite. The Company reports in two segments, Gannett Media and 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, and marketing. A full description of our reportable segments is included in Note 12 — Segment reporting in the notes to the condensed consolidated financial statements.

Impacts of the COVID-19 pandemic

As a result of the COVID-19 pandemic, we initially experienced a significant decline in Advertising and marketing services revenues, which accelerated the secular declines that we continue to experience. We continue to experience constraints on the sales of single copy newspapers, largely tied to reduced business travel. While COVID-19 related operating trends have improved since the second quarter of 2020, which represents the quarter that was most significantly impacted by the pandemic, we expect that the resulting changes in consumer behavior will continue to have a negative impact on our business and results of operations in the near-term, including lower revenues and attendance associated with events as compared to pre-COVID-19 pandemic levels and lower sales of single copy newspapers. If the COVID-19 pandemic were to revert to conditions that existed during 2020, including measures to help mitigate and control the spread of the virus, we would expect to experience further negative impacts in Advertising and marketing services revenues and Circulation revenues.

Basis of presentation

The condensed consolidated financial statements included in this report are unaudited; however, in the opinion of management, they contain all of the adjustments (consisting of those of a normal, recurring nature) considered necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") applicable to interim periods. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates entities that it controls due to ownership of a majority voting interest. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

7
Use of estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and footnotes thereto. Actual results could differ materially from those estimates.

Significant estimates inherent in the preparation of the condensed consolidated financial statements include pension and postretirement benefit obligation assumptions, income taxes, goodwill and intangible asset impairment analysis, valuation of property, plant and equipment and intangible assets.

Recent accounting pronouncements adopted

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the Financial Accounting Standards Board (the "FASB") issued new guidance, ASU 2020-06, that simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. In addition to eliminating certain accounting models, the guidance amends the disclosures for convertible instruments and earnings-per-share guidance. It also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the accounting for the Company's $497.1 million in aggregate principal amount of 6.0% Senior Secured Convertible Notes due 2027 issued by the Company on November 17, 2020 (the "2027 Notes"), or the condensed consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued guidance, ASU 2020-04, that provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate ("LIBOR"). ASU 2020-04 is effective prospectively for all entities through December 31, 2022, when the reference rate replacement activity is expected to have been completed. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During Q1 2022, the Company applied the optional expedient for contract modifications to the amendment of its five-year senior secured term loan facility in an aggregate principal amount of $516.0 million (the "New Senior Secured Term Loan") with Citibank N.A., as collateral agent and administrative agent for the lenders. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

Disclosures by Business Entities about Government Assistance

In November 2021, the FASB issued new guidance, ASU 2021-10, that requires annual disclosures for transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy, including: (i) information about the nature of the transactions and related accounting policy used to account for the transactions; (ii) the line items on the condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive income (loss) affected by these transactions, including amounts applicable to each line; and (iii) significant terms and conditions of the transactions, including commitments and contingencies. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in a Business Combination

In October 2021, the FASB issued new guidance, ASU 2021-08, that requires an acquirer to recognize and measure certain contract assets and contract liabilities in a business combination in accordance with ASC 606, "Revenue from Contracts with Customers", rather than at fair value on the acquisition date as required under current U.S. GAAP. This guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including interim periods within those fiscal years. The early adoption of this guidance effective January 1, 2022 did not have a material impact on the condensed consolidated financial statements.

NOTE 2 — Revenues

Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

8
The Company’s condensed consolidated statements of operations and comprehensive income (loss) present revenues disaggregated by revenue type. Sales taxes and other usage-based taxes are excluded from revenues. The following table presents our revenues disaggregated by source:

Three months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Print advertising$159,324 $190,044 $506,295 $584,165 
Digital advertising and marketing services202,523 221,976 614,275 636,322 
Total advertising and marketing services361,847 412,020 1,120,570 1,220,487 
Circulation264,732 306,702 827,958 942,398 
Other91,323 81,463 266,111 218,659 
Total revenues$717,902 $800,185 $2,214,639 $2,381,544 

For the three and nine months ended September 30, 2022, revenues generated from international locations were approximately 9.6% and 9.4% of total revenues, respectively. For the three and nine months ended September 30, 2021, revenues generated from international locations were approximately 7.9% and 7.7% of total revenues, respectively.

Deferred revenues

The Company records deferred revenues when cash payments are received in advance of the Company’s performance obligation. The Company's primary source of deferred revenues is from circulation subscriptions paid in advance of the service provided, which represents future delivery of publications (the performance obligation) to subscription customers. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next one to twelve months in accordance with the terms of the subscriptions.

The Company's payment terms vary by the type and location of the customer and the products or services offered. The period between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer. The majority of our subscription customers are billed and pay on monthly terms.

The following table presents changes in the deferred revenues balance by type of revenues:

Nine months ended September 30, 2022Nine months ended September 30, 2021
In thousandsAdvertising, marketing services, and otherCirculationTotalAdvertising, marketing services, and otherCirculationTotal
Beginning balance$60,665 $124,173 $184,838 $51,686 $134,321 $186,007 
Acquisition— 2,388 2,388 — — — 
Cash receipts203,704 725,621 929,325 226,214 738,366 964,580 
Revenue recognized(216,540)(738,426)(954,966)(206,203)(748,125)(954,328)
Ending balance$47,829 $113,756 $161,585 $71,697 $124,562 $196,259 

NOTE 3 — Accounts receivable, net

The Company performs its evaluation of the collectability of trade receivables based on customer category. For example, trade receivables from individual subscribers to our publications are evaluated separately from trade receivables related to advertising customers. For advertising trade receivables, the Company applies a "black motor formula" methodology as the baseline to calculate the allowance for doubtful accounts. The reserve percentage is calculated as a ratio of total net bad debts (less write-offs and recoveries) for the prior three-year period to total outstanding trade accounts receivable for the same three-year period. The calculated reserve percentage by customer category is applied to the consolidated gross advertising receivable balance, irrespective of aging. In addition, each category has specific reserves for at risk accounts that vary based on the nature of the underlying trade receivables. Due to the short-term nature of our circulation receivables, the Company reserves all receivables aged over 90 days.

9
The following table presents changes in the allowance for doubtful accounts:
Nine months ended September 30,
In thousands20222021
Beginning balance$16,470 $20,843 
Current period provision5,074 3,478 
Write-offs charged against the allowance(13,149)(10,998)
Recoveries of amounts previously written-off3,469 3,076 
Other192 12 
Ending balance$12,056 $16,411 

The calculation of the allowance considers current economic, industry and customer-specific conditions relative to their respective operating environments in the incremental allowances recorded related to high-risk accounts, bankruptcies, receivables in repayment plan and other aging specific reserves. As a result of this analysis, the Company adjusts specific reserves and the amount of allowable credit as appropriate. The collectability of trade receivables related to advertising, marketing services and other customers depends on a variety of factors, including trends in local, regional or national economic conditions that affect our customers' ability to pay. The advertisers in our newspapers and other publications and related websites are primarily retail businesses that can be significantly affected by regional or national economic downturns and other developments that may impact our ability to collect on the related receivables. Similarly, while circulation revenues related to individual subscribers are primarily prepaid, changes in economic conditions may also affect our ability to collect on amounts owed from single copy circulation customers.

For the three and nine months ended September 30, 2022, the Company recorded $3.5 million and $5.1 million in bad debt expense, respectively. For the three and nine months ended September 30, 2021, the Company recorded $2.8 million and $3.5 million in bad debt expense, respectively. Bad debt expense is included in Selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss). For both the three months and nine months ended September 30, 2022, the Company recorded an increase in bad debt expense due to increased write-offs and reserves associated with circulation revenue in the third quarter of 2022.

NOTE 4 — Goodwill and intangible assets

Goodwill and intangible assets consisted of the following:
September 30, 2022December 31, 2021
 In thousandsGross carrying amountAccumulated
amortization		Net carrying
amount		Gross carrying amountAccumulated
amortization		Net carrying
amount
Finite-lived intangible assets:
Advertiser relationships$452,018 $185,930 $266,088 $453,038 $153,988 $299,050 
Other customer relationships102,287 43,544 58,743 102,486 35,237 67,249 
Subscriber relationships253,715 122,209 131,506 254,162 99,905 154,257 
Other intangible assets68,780 53,885 14,895 68,690 44,291 24,399 
Sub-total$876,800 $405,568 $471,232 $878,376 $333,421 $544,955 
Indefinite-lived intangible assets:
Mastheads167,105 168,198 
Total intangible assets$638,337 $713,153 
Goodwill$537,898 $533,709 

10
Consistent with the Company’s past practice, the Company performed its annual goodwill and indefinite-lived intangible impairment assessment in the second quarter of 2022 with the assistance of third-party valuation specialists. Within the impairment analyses performed, the Company considered the current and expected future economic and market conditions and the impact on the fair value of each of the reporting units. The most significant assumptions utilized in the determination of the estimated fair values included revenue and cash flow projections, discount rates and long-term growth rates. The long-term growth rates are dependent on various factors and could be adversely impacted by a sustained decrease in overall market growth rates, the competitive environment, and relative currency exchange rates, and could be adversely impacted by a sustained increase in inflation, all of which the Company considered in determining the long-term growth rates used in the analysis, which ranged from 0.0% to 3.0%. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. The discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the equity and debt markets. The Company considered these factors in determining the discount rates used in the analysis, which ranged from 13.0% to 17.0%.

For goodwill, the Company determined the fair value of each reporting unit using a combination of a discounted cash flow analysis and a market-based approach. During the second quarter of 2022, the Company compared the fair value of each reporting unit to its carrying amount, which resulted in the fair value of all the reporting units being in excess of their carrying values. While the fair value of all reporting units exceeded their respective carrying values at June 30, 2022, the excess amount of fair value over carrying value for our Domestic Gannett Media reporting unit decreased from 126% during the 2021 annual impairment test to 22% during the 2022 annual impairment test.

For mastheads, the Company applied a "relief from royalty" approach, a discounted cash flow model, reflecting current assumptions, to fair value of the indefinite-lived intangible assets. During the second quarter of 2022, the Company compared the fair value of each indefinite-lived intangible asset to its carrying amount, which resulted in the fair value of each indefinite-lived intangible asset being in excess of its carrying value.

In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred under both ASC 350 and ASC 360, which would require interim impairment testing. As of September 30, 2022, the Company performed a review of potential impairment indicators under both ASC 350 and ASC 360 and it was determined that no indicators of impairment were present.

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.

NOTE 5 — Integration and reorganization costs and asset impairments

Over the past several years, the Company has engaged in a series of individual restructuring programs, designed primarily to right-size the Company’s employee base, consolidate facilities and improve operations, including those of recently acquired entities. These initiatives impact all the Company’s operations and can be influenced by the terms of union contracts. Costs related to these programs, which primarily include severance expense, facility consolidation and other restructuring-related expenses, are accrued when probable and reasonably estimable or at the time of program announcement.

Severance-related expenses

The Company recorded severance-related expenses by segment as follows:
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Three months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Gannett Media$11,334 $1,941 $27,106 $10,125 
Digital Marketing Solutions191 402 340 321 
Corporate and other4,212 317 5,288 440 
Total$15,737 $2,660 $32,734 $10,886 

A rollforward of the accrued severance and related costs included in Accounts payable and accrued expenses on the condensed consolidated balance sheets for the nine months ended September 30, 2022 is as follows:
In thousandsSeverance and
related costs
Beginning balance$12,558 
Restructuring provision included in integration and reorganization costs32,734 
Cash payments(25,704)
Ending balance$19,588 

The restructuring reserve balance is expected to be paid out over the next twelve months.

Facility consolidation and other restructuring-related expenses

Facility consolidation and other restructuring-related expenses represent costs for consolidating operations, systems implementation, and outsourcing of corporate functions. The Company recorded facility consolidation charges and other restructuring-related costs by segment as follows:

Three months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Gannett Media (a)
$14,044 $1,571 $15,034 $516 
Digital Marketing Solutions240 529 535 980 
Corporate and other (b)
3,290 8,859 12,151 23,085 
Total$17,574 $10,959 $27,720 $24,581 
(a) The increase in Facility consolidation and other restructuring-related expenses at the Gannett Media segment for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 was driven primarily by an increase in other costs, including a withdrawal liability which was expensed as a result of ceasing contributions to a multiemployer pension plan, as well as facilities consolidation expenses associated with exiting a lease.
(b) The decrease in Facility consolidation and other restructuring-related expenses at the Corporate and other segment for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 was driven primarily by a decrease in costs associated with systems implementation and outsourcing of corporate functions.

Accelerated depreciation

The Company incurred accelerated depreciation, a component of Depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income (loss) related to the shortened useful life of assets due to the closing of print facilities and sale of property primarily at the Gannett Media segment, of $0.3 million and $1.1 million for the three months ended September 30, 2022 and 2021, respectively, and $10.5 million and $11.4 million for the nine months ended September 30, 2022 and 2021, respectively.

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NOTE 6 — Debt

The Company's debt consisted of the following:

September 30, 2022December 31, 2021
(in millions)Principal balanceUnamortized original issue discountUnamortized deferred financing costsCarrying valuePrincipal balanceUnamortized original issue discountUnamortized deferred financing costsCarrying value
New Senior Secured Term Loan$467.9 $(10.0)$(2.2)$455.7 $480.1 $(14.1)$(2.7)$463.3 
2026 Senior Notes363.0 (10.5)(8.2)344.3 400.0 (13.7)(10.7)375.6 
2027 Notes485.3 (84.3)(1.8)399.2 485.3 (93.2)(2.0)390.1 
2024 Notes3.3 — — 3.3 3.3 — — 3.3 
Total debt$1,319.5 $(104.8)$(12.2)$1,202.5 $1,368.7 $(121.0)$(15.4)$1,232.3 
Less: Current portion of long-term debt$(91.1)$— $— $(91.1)$(69.5)$— $— $(69.5)
Non-current portion of long-term debt$1,228.4 $(104.8)$(12.2)$1,111.4 $1,299.2 $(121.0)$(15.4)$1,162.8 

New Senior Secured Term Loan

On October 15, 2021, Gannett Holdings LLC ("Gannett Holdings"), a wholly-owned subsidiary of the Company, entered into the New Senior Secured Term Loan with Citibank N.A., as collateral agent and administrative agent for the lenders. On January 31, 2022, Gannett Holdings entered into an amendment (the "Term Loan Amendment") to its New Senior Secured Term Loan to provide for new incremental senior secured term loans (the "Incremental Term Loans") in an aggregate principal amount of $50 million. The Incremental Term Loans have substantially identical terms as the New Senior Secured Term Loan and are treated as a single tranche with the New Senior Secured Term Loan. The Term Loan Amendment also amended the New Senior Secured Term Loan to transition the interest rate base from LIBOR to Adjusted Term SOFR and to permit the repurchase of up to $50 million of the Company's common stock, par value $0.01 per share ("Common Stock") under the Stock Repurchase Program (defined below in Note 10 — Supplemental equity information) consummated on or prior to December 31, 2022, in addition to capacity for Gannett Holdings to make restricted payments, including stock repurchases, currently permitted under other provisions of the New Senior Secured Term Loan and our other debt facilities, including the 2026 Senior Secured Notes Indenture and the 2027 Notes Indenture (terms defined below). On March 21, 2022 and April 8, 2022, Gannett Holdings entered into amendments to its New Senior Secured Term Loan to provide for incremental senior secured term loans in an aggregate principal amount of $22.5 million and $7.5 million, respectively.

The New Senior Secured Term Loan bears interest at a per annum rate equal to Adjusted Term SOFR (which shall not be less than 0.50% per annum) plus a margin of 5.00% or an alternate base rate (which shall not be less than 1.50% per annum) plus a margin equal to 4.00%. Loans under the New Senior Secured Term Loan may be prepaid, at the option of Gannett Holdings, at any time without premium, except a premium equal to 1.00% of the aggregate principal amount of the loans being repaid in connection with certain refinancing or repricing events that reduce the all-in yield applicable to the loans and occur on or before October 15, 2022. In addition, we are required to repay the New 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 New 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. The New Senior Secured Term Loan amortizes in equal quarterly installments, beginning June 30, 2022, at a rate equal to 10.00% per annum (or, if the ratio of debt secured on an equal basis with the New Senior Secured Term Loan less unrestricted cash of the Company and its restricted subsidiaries to Consolidated EBITDA (as such terms are defined in the New 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, 5.00% per annum). All obligations under the New 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 "New Senior Secured Term Loan Guarantors"). The obligations of Gannett Holdings under the New Senior Secured Term Loan are guaranteed on a senior secured basis by the Company and the New Senior Secured Term Loan Guarantors.

The New Senior Secured Term Loan contains usual and customary covenants for credit facilities of this type, including a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal quarter, and restricts, among
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other things, our ability to incur debt, grant liens, sell assets, and make investments and pay dividends, in each case with customary exceptions, including an exception that permits dividends and repurchases of outstanding junior debt or equity in (i) an amount of up to $25 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 2.00 to 1.00, (ii) an amount of up to $50 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.50 to 1.00, and (iii) an unlimited amount if First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.00 to 1.00. As of September 30, 2022, the Company was in compliance with all of the covenants and obligations under the New Senior Secured Term Loan.

The New Senior Secured Term Loan was recorded at carrying value, which approximates fair value in the condensed consolidated balance sheets and was classified as Level 2.

For the three and nine months ended September 30, 2022, the Company recognized interest expense of $8.9 million and $23.3 million, respectively, and paid interest expense of $8.9 million and $23.3 million, respectively. For the three and nine months ended September 30, 2022, the Company recognized amortization of original issue discount of $0.9 million and $2.7 million, respectively, and amortization of deferred financing costs of $0.2 million and $0.6 million, respectively. Additionally, during the three and nine months ended September 30, 2022, the Company recognized losses on early extinguishment of debt which were immaterial and $1.8 million, respectively, related to the write-off of original issue discount and deferred financing costs as a result of early prepayments on the New Senior Secured Term Loan.

For the three and nine months ended September 30, 2022, the Company made prepayments, inclusive of both mandatory and optional prepayments, totaling $17.3 million and $92.2 million, respectively, which were classified as financing activities in the condensed consolidated statements of cash flows. As of September 30, 2022, the effective interest rate for the New Senior Secured Term Loan was 6.4%.

Senior Secured Notes due 2026

On October 15, 2021, Gannett Holdings completed a private offering of $400 million aggregate principal amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes"). The 2026 Senior Notes were issued pursuant to an indenture, dated October 15, 2021 (the "2026 Senior Notes Indenture") among Gannett Holdings, the Company, the guarantors from time to time party thereto (the "2026 Senior Notes Guarantors"), U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent, registrar, paying agent and authenticating agent.

Interest on the 2026 Senior Notes is payable semi-annually in arrears, beginning on May 1, 2022. The 2026 Senior Notes mature on November 1, 2026, unless redeemed or repurchased earlier pursuant to the 2026 Senior Notes Indenture. The 2026 Senior Notes may be redeemed at the option of Gannett Holdings, in whole or in part, at any time and from time to time after November 1, 2023, at the redemption prices set forth in the 2026 Senior Notes Indenture. At any time prior to such date, Gannett Holdings will be entitled at its option to redeem all, but not less than all, of the 2026 Senior Notes at the "make-whole" redemption price set forth in the 2026 Senior Notes Indenture. Additionally, at any time prior to November 1, 2023, Gannett Holdings may, on one or more occasions, redeem up to 40% of the aggregate principal amount of the 2026 Senior Notes at the redemption price set forth in the 2026 Senior Notes Indenture with the net cash proceeds of certain equity offerings. If certain changes of control with respect to Gannett Holdings or the Company occur, Gannett Holdings must offer to purchase the 2026 Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest to, but excluding, the date of purchase. In addition, during any twelve-month period commencing on or after October 15, 2021 and ending prior to November 1, 2023, up to 10% of the aggregate principal amount of the 2026 Senior Notes issued under the 2026 Senior Notes Indenture may be redeemed at a purchase price equal to 103% of the aggregate principal amount of the 2026 Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to but excluding, the redemption date.

The 2026 Senior Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by the 2026 Senior Notes Guarantors. The 2026 Senior Notes and such guarantees are secured on a first-priority basis by the collateral, consisting of substantially all of the assets of Gannett Holdings and the 2026 Senior Notes Guarantors, subject to certain intercreditor arrangements.

The 2026 Senior Notes Indenture limits the Company and its restricted subsidiaries’ ability to, among other things, make investments, loans, advances, guarantees and acquisitions; incur or guarantee additional debt and issue certain disqualified equity interests and preferred stock; make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness; dispose of assets; create liens on assets to secure debt; engage in transactions with affiliates; enter into certain restrictive agreements; and consolidate, merge, sell or
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otherwise dispose of all or substantially all of their or a 2026 Senior Notes Guarantor’s assets. These covenants are subject to a number of limitations and exceptions. The 2026 Senior Notes Indenture also contains customary events of default.

The 2026 Senior Notes are classified as Level 2 because they are measured at fair value using commonly accepted valuation methodologies and indirectly observable, market-based risk measurements and historical data, and a review of prices and terms available for similar debt instruments.

The unamortized deferred financing costs will be amortized over the remaining contractual life of the 2026 Senior Notes. For the three and nine months ended September 30, 2022, the Company recognized interest expense of $5.6 million and $17.1 million, respectively, and paid interest expense of $0.2 million and $13.1 million, respectively. For the three and nine months ended September 30, 2022, the Company recognized amortization of original issue discount of $0.7 million and $2.1 million, respectively, and amortization of deferred financing costs of $0.5 million and $1.6 million, respectively, in connection with the 2026 Senior Notes. As of September 30, 2022, the effective interest rate on the 2026 Senior Notes was 7.3%.

The Company entered into privately negotiated agreements with certain holders of our 2026 Senior Notes, and for the three and nine months ended September 30, 2022, repurchased $7.0 million and $37.0 million, respectively, of principal of our outstanding 2026 Senior Notes. In connection with these repurchases, the Company exchanged $30.0 million of our 2026 Senior Notes for $30.0 million of our New Senior Secured Term Loan. The repurchases were treated as an extinguishment of a portion of the 2026 Senior Notes, and as a result, the Company recognized a gain on the early extinguishment of debt of approximately $1.3 million for the three months ended September 30, 2022, and a loss on the early extinguishment of debt of approximately $0.4 million for the nine months ended September 30, 2022, related to the write-off of unamortized original issue discount and deferred financing costs.

Senior Secured Convertible Notes due 2027

The 2027 Notes were issued pursuant to an Indenture dated as of November 17, 2020, as amended by the First Supplemental Indenture dated as of December 21, 2020 and the Second Supplemental Indenture dated as of February 9, 2021 (collectively, the "2027 Notes Indenture"), between the Company and U.S. Bank National Association, as trustee.

In connection with the issuance of the 2027 Notes, the Company entered into an Investor Agreement (the "Investor Agreement") with the holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders' ownership of the 2027 Notes. The Company also entered into an amendment to the Registration Rights Agreement dated November 19, 2019, between the Company and FIG LLC, the Company's former manager.

Interest on 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 the Company’s Common Stock or any combination of cash and Common Stock, at the Company's 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").

The conversion rate is subject to customary adjustment provisions as provided in the 2027 Notes Indenture. In addition, the conversion rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027 Notes would be convertible into approximately 42% (adjusted for repurchases and certain other events that reduce the outstanding amount of the 2027 Notes) of the Common Stock after giving effect to such issuance or sale (assuming the initial principal amount of the 2027 Notes remains outstanding). After giving effect to the repurchase of $11.8 million in aggregate principal outstanding of the 2027 Notes during the year ended December 31, 2021, such percentage is approximately 41%.

Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the 2027 Notes Indenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the 2027 Notes Indenture) occurs, the Company will be required to offer to repurchase the 2027 Notes at a repurchase price of 110% of the principal amount thereof.

Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after the date that is 91 days after the maturity date of the New Senior Secured Term Loan.

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Under the 2027 Notes Indenture, the Company can only pay cash dividends up to an agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the 2027 Notes Indenture) does not exceed a specified ratio. In addition, the 2027 Notes Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the 2027 Notes Indenture) exceeds 1.5 and the Company approves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the dividend.

Until the four-year anniversary of the issuance date, the Company will have the right to redeem for cash up to approximately $99.4 million of the 2027 Notes at a redemption price of 130% of the principal amount thereof, with such amount reduced ratably by any principal amount of 2027 Notes that has been converted by the holders or redeemed or purchased by the Company.

The 2027 Notes are guaranteed by Gannett Holdings and any subsidiaries of the Company that guarantee the New Senior Secured Term Loan. The 2027 Notes are secured by the same collateral that secures the New Senior Secured Term Loan. The 2027 Notes rank as senior secured debt of the Company and are secured by a second priority lien on the same collateral package that secured the indebtedness incurred in connection with the New Senior Secured Term Loan.

The 2027 Notes Indenture includes affirmative and negative covenants, including limitations on liens, indebtedness, dispositions, loan, advances and investors, sale and leaseback transactions, restricted payments, transactions with affiliates, restrictions on dividends and other payment restrictions affecting restricted subsidiaries, negative pledges and modifications to certain agreements. The 2027 Notes Indenture also requires that the Company maintain, as of the last day of each fiscal quarter, at least $30.0 million of Qualified Cash (as defined in the 2027 Notes Indenture). The 2027 Notes Indenture includes customary events of default.

The 2027 Notes have two components: (i) a debt component, and (ii) an equity component. The debt component of the 2027 Notes is classified as Level 2 because it is measured at fair value using commonly accepted valuation methodologies and indirectly observable, market-based risk measurements and historical data, and a review of prices and terms available for similar debt instruments that do not contain a conversion feature. The fair value of the equity component is classified as Level 3 because it is measured at fair value using a binomial lattice model using assumptions based on market information and historical data, and significant unobservable inputs. As of September 30, 2022 and December 31, 2021, the amount of the conversion feature recorded in Additional paid-in capital was $279.6 million.

For the three and nine months ended September 30, 2022, the Company recognized interest expense of $7.3 million and $21.8 million, respectively, and paid no interest expense for the three months ended September 30, 2022 and paid interest expense of $14.6 million for the nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the Company recognized interest expense of $7.5 million and $22.4 million, respectively, and paid no interest expense for the three months ended September 30, 2021 and paid interest expense of $16.1 million for the nine months ended September 30, 2021. In addition, during the three and nine months ended September 30, 2022, the Company recognized amortization of the original issue discount of $3.1 million and $8.9 million, respectively, and amortization of deferred financing costs related to the 2027 Notes was immaterial for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the Company recognized amortization of original issue discount of $2.9 million and $7.9 million, respectively, and amortization of deferred financing costs related to the 2027 Notes was immaterial and $0.2 million for the three and nine months ended September 30, 2021, respectively. The effective interest rate on the liability component of the 2027 Notes was 10.5% as of both September 30, 2022 and 2021.

For the nine months ended September 30, 2022, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to Note 10 — Supplemental equity information for details on the convertible debt's impact to diluted earnings per share under the if-converted method.

Senior Convertible Notes due 2024

The $3.3 million principal value of the remaining 4.75% convertible senior notes due 2024 (the "2024 Notes") outstanding is reported as convertible debt in the condensed consolidated balance sheets. As of September 30, 2022, the effective interest rate on the 2024 Notes was 6.05%.

NOTE 7 — Pensions and other postretirement benefit plans

We, along with our subsidiaries, sponsor various defined benefit retirement plans, including plans established under collective bargaining agreements. Our retirement plans include the Gannett Retirement Plan (the "GR Plan"), the Newsquest
16
and Romanes Pension Schemes in the U.K., and other defined benefit and defined contribution plans. We also provide health care and life insurance benefits to certain retired employees who meet age and service requirements.

Retirement plan costs include the following components:
Pension benefits
Postretirement benefits
Three months ended September 30,Three months ended September 30,
In thousands2022202120222021
Operating expenses:
Service cost - benefits earned during the period$448 $490 $19 $23 
Non-operating expenses:
Interest cost on benefit obligation17,715 17,042 442 428 
Expected return on plan assets(32,316)(41,355)— — 
Amortization of actuarial loss (gain)22 38 (147)(13)
Pension settlement gain(706)— n/an/a
Total non-operating (benefit) expenses$(15,285)$(24,275)$295 $415 
Total expense (benefit) for retirement plans$(14,837)$(23,785)$314 $438 
Pension benefits
Postretirement benefits
Nine months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Operating expenses:
Service cost - benefits earned during the period$1,357 $1,470 $57 $67 
Non-operating expenses:
Interest cost on benefit obligation54,496 51,179 1,327 1,330 
Expected return on plan assets(106,106)(124,193)— — 
Amortization of actuarial loss (gain)67 115 (441)(75)
Pension settlement gain(706)— n/an/a
Total non-operating (benefit) expenses$(52,249)$(72,899)$886 $1,255 
Total expense (benefit) for retirement plans$(50,892)$(71,429)$943 $1,322 

Purchase of Pension Annuity Contract

On August 31, 2022, Gannett Media Corp., a wholly-owned subsidiary of the Company, as sponsor of the GR Plan, entered into an agreement pursuant to which the GR Plan used a portion of its assets to purchase annuities from two insurance companies (the "Insurers") and transferred approximately $450 million of the GR Plan's pension liabilities and related pension assets. As of August 31, 2022, this agreement irrevocably transferred to the Insurers future GR Plan benefit obligations for certain U.S. retirees and beneficiaries ("Participants") beginning with payments due to the Participants on November 1, 2022 (the "Effective Date") and Gannett Media Corp. has no financial responsibility for the Participants' benefits on or after such date. As of the Effective Date, the Insurers have assumed responsibility for administrative and customer service support, including distribution of payments to the Participants. Participants' benefits were not reduced as a result of this transaction. As a result of this transaction, we were required to remeasure the related plan benefit obligations and assets as of August 31, 2022 reflecting the use of an updated discount rate. The plan remeasurement resulted in a decrease of $99.9 million to our net funded pension obligation, which includes a decrease in benefit obligation of $281.8 million (primarily due to an increase in the discount rate from 2.95% at January 1, 2022 to 5.05%) and an incremental decrease in plan assets of $381.7 million. In addition, we recognized a noncash pension settlement gain of $0.7 million ($0.5 million after tax) for the GR Plan for the quarter ended September 30, 2022, which represents the accelerated recognition of actuarial gains that were included in accumulated other comprehensive income (loss) within stockholders' equity.

Contributions

During the nine months ended September 30, 2022, we contributed $17.9 million and $3.8 million to our pension and other postretirement plans, respectively. Additionally, in response to the COVID-19 pandemic, our GR Plan in the U.S. has deferred certain contractual contributions and negotiated a contribution payment plan of $5.0 million per quarter from December 31,
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2020 through the end of June 30, 2022. Beginning with the quarter ending December 31, 2022, and ending with the quarter ending September 30, 2024, the GR Plan's appointed actuary 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, the Company 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 the Company's 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 the Company has made a total of $5 million of contractual contributions subsequent to June 30, 2022.

NOTE 8 — Fair value measurement

In accordance with ASC 820, "Fair Value Measurement," fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Level 1 refers to fair values determined based on quoted prices in active markets for identical assets or liabilities, Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.

As of September 30, 2022 and December 31, 2021, assets and liabilities recorded at fair value and measured on a recurring basis primarily consist of pension plan assets. As permitted by U.S. GAAP, we use net asset values ("NAV") as a practical expedient to determine the fair value of certain investments. These investments measured at NAV have not been classified in the fair value hierarchy.

Refer to Note 6 — Debt for additional discussion regarding fair value of the New Senior Secured Term Loan, the 2026 Senior Notes, the 2027 Notes and the 2024 Notes.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Assets held for sale (Level 3) are measured on a nonrecurring basis and are evaluated using executed purchase agreements, letters of intent or third-party valuation analyses when certain circumstances arise. Assets held for sale totaled $0.6 million and $3.5 million as of September 30, 2022 and December 31, 2021, respectively. The Company performs its annual goodwill and indefinite-lived intangible impairment assessment during the second quarter of the year. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements. Refer to Note 4 — Goodwill and intangible assets for additional discussion regarding the annual impairment assessment.

NOTE 9 — Income taxes

The following table outlines our pre-tax net income (loss) and income tax amounts:
Three months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Income (loss) before income taxes$(36,024)$17,529 $(78,275)$(101,880)
Provision for income taxes18,098 2,984 32,649 11,567 
Effective tax rate(50.2)%17.0 %(41.7)%(11.4)%

The provision for income taxes is calculated by applying the projected annual effective tax rate for the year to the current period income or loss before tax plus the tax effect of any significant or unusual items (discrete events), or changes in tax law. The provision for income taxes for the three months ended September 30, 2022 was mainly driven by the valuation allowances on non-deductible interest expense carryforwards and the global intangible low-taxed income inclusion from our wholly owned U.K. subsidiary. The provision was calculated using an estimated annual effective tax rate of negative 46.3%. The estimated annual effective tax rate is principally impacted by the valuation allowances on non-deductible interest expense carryforwards, the benefit of a pre-tax book loss, the global intangible low taxed income inclusion, and foreign tax expense. The estimated annual effective tax rate is based on the projected tax expense for the full year.

The provision for income taxes for the nine months ended September 30, 2022 was mainly driven by the valuation allowances on non-deductible interest expense carryforwards, the global intangible low taxed income inclusion and foreign taxes, offset by the benefit of the pre-tax loss.

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The total amount of unrecognized tax benefits that, if recognized, may impact the effective tax rate was approximately $43.2 million and $45.0 million as of September 30, 2022 and December 31, 2021, respectively. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $4.3 million and $3.7 million as of September 30, 2022 and December 31, 2021, respectively.

It is reasonably possible that further adjustments to our unrecognized tax benefits may be made within the next twelve months due to audit settlements and regulatory interpretations of existing tax laws. At this time, an estimate of potential change to the amount of unrecognized tax benefits cannot be made.

The provision for income taxes for the three months ended September 30, 2021 was mainly driven by the pre-tax income and was impacted by forgiveness of Paycheck Protection Program ("PPP") loans during the quarter. For federal tax purposes, book income from forgiven loans is not included in taxable income, and expenses paid utilizing the loan proceeds can be deducted. The impact of PPP loan forgiveness was partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards. The provision was calculated using the estimated annual effective tax rate of 77.7%.

The provision for income taxes for the nine months ended September 30, 2021 was mainly driven by the pre-tax net loss generated during the first quarter of 2021. The tax provision was also impacted by the derivative revaluation, which is nondeductible for tax purposes, the creation of valuation allowances on non-deductible interest expense carryforwards, and PPP loan forgiveness, in combination with state income tax and foreign tax expense.

NOTE 10 — Supplemental equity information

Income (loss) per share

The following table sets forth the information to compute basic and diluted income (loss) per share:
Three months ended September 30,Nine months ended September 30,
In thousands, except per share data2022202120222021
Net income (loss) attributable to Gannett$(54,114)$14,687 $(110,769)$(112,514)
Interest adjustment to Net income (loss) attributable to Gannett related to assumed conversions of the 2027 Notes, net of taxes— 7,598 — — 
Net income (loss) attributable to Gannett for diluted earnings per share$(54,114)$22,285 $(110,769)$(112,514)
Basic weighted average shares outstanding137,008 135,002 136,857 134,610 
Effect of dilutive securities:
Restricted stock grants— 5,032 — — 
2027 Notes— 99,419 — — 
Diluted weighted average shares outstanding137,008 239,453 136,857 134,610 
Income (loss) per share attributable to Gannett - basic$(0.39)$0.11 $(0.81)$(0.84)
Income (loss) per share attributable to Gannett - diluted$(0.39)$0.09 $(0.81)$(0.84)

The Company excluded the following securities from the computation of diluted income (loss) per share because their effect would have been antidilutive:
Three months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Warrants845 845 845 845 
Stock options6,068 6,068 6,068 6,068 
Restricted stock grants (a)
11,211 42 11,211 10,442 
2027 Notes (b)
97,057 — 97,057 99,419 
(a)Includes Restricted stock awards ("RSAs"), Restricted stock units ("RSUs") and Performance stock units ("PSUs").
(b)Represents the total number of shares that would be convertible at September 30, 2022 and 2021 as stipulated in the 2027 Notes Indenture.

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The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s Common Stock or any combination of cash and Common Stock, at the Company’s election. Conversion of all of the 2027 Notes into Common Stock (assuming the maximum increase in the conversion rate as a result of a Make-Whole Fundamental Change but no other adjustments to the conversion rate), would result in the issuance of an aggregate of 287.2 million shares of Common Stock. The Company has excluded approximately 190.1 million shares from the income (loss) per share calculation, representing the difference between the total number of shares that would be convertible at September 30, 2022 and the total number of shares issuable assuming the maximum increase in the conversion rate.

Share-based compensation

The Company recognized compensation cost for share-based payments of $4.5 million and $13.3 million for the three and nine months ended September 30, 2022, respectively, and $4.6 million and $13.8 million for the three and nine months ended September 30, 2021, respectively.

The total compensation cost not yet recognized related to non-vested awards as of September 30, 2022 was $34.1 million, which is expected to be recognized over a weighted-average period of 2.1 years through November 2024.

Equity awards

During the nine months ended September 30, 2022, a total of 7.4 million RSAs were granted. RSAs generally vest 33.3% on the first and second anniversary of the date of grant, and 33.4% on the third anniversary of the date of grant, subject to the participants' continued employment with the Company and the terms of the applicable award agreement. The weighted average grant date fair value of RSAs granted during the nine months ended September 30, 2022 was $4.29. During the nine months ended September 30, 2022, a total of 2.6 million RSAs were forfeited, with a weighted average grant date fair value of $3.54.

During the nine months ended September 30, 2022, a total of 0.3 million PSUs were granted. PSUs are subject to the achievement of certain performance goals over the eligible period. Compensation cost ultimately recognized for these PSUs will equal the grant-date fair market value of the unit that coincides with the actual outcome of the performance conditions. On an interim basis, we record compensation cost based on the expected level of achievement of the performance conditions.

Preferred stock

The Company has authorized 300,000 shares of preferred stock, par value $0.01 per share, issuable in one or more series designated by the Board, of which 150,000 shares have been designated as Series A Junior Participating Preferred Stock, none of which are outstanding. There were no issuances of preferred stock during the nine months ended September 30, 2022.

Stock Repurchase Program

On February 1, 2022, the Company's board of directors authorized the repurchase of up to $100 million of the Company's Common Stock (the "Stock Repurchase Program"). 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 will depend on a number of factors including, but not limited to, the price and availability of the Company’s shares, trading volume, capital availability, Company performance and general economic and market conditions. The Stock Repurchase Program may be suspended or discontinued at any time.

During the three months ended September 30, 2022, the Company did not repurchase any shares of Common Stock under the Stock Repurchase Program. During the nine months ended September 30, 2022, the Company repurchased 800 thousand shares of Common Stock under the Stock Repurchase Program for approximately $3.1 million, excluding commissions. As of September 30, 2022, the remaining authorized amount under the Stock Repurchase Program was approximately $96.9 million.
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Accumulated other comprehensive (loss) income

The following tables summarize the components of, and the changes in, Accumulated other comprehensive (loss) income, net of tax for the nine months ended September 30, 2022 and 2021:
Nine months ended September 30, 2022Nine months ended September 30, 2021
In thousandsPension and postretirement plansForeign currency translation



TotalPension and postretirement plansForeign currency translationTotal
Beginning balance$50,870 $9,128 $59,998 $40,441 $9,732 $50,173 
Other comprehensive (loss) income before reclassifications, net of taxes(62,075)(44,925)(107,000)93 (700)(607)
Amounts reclassified from accumulated other comprehensive (loss) income(a)(b)(c)
(801)— (801)29 — 29 
Net current period other comprehensive (loss) income, net of taxes(62,876)(44,925)(107,801)122 (700)(578)
Ending balance$(12,006)$(35,797)$(47,803)$40,563 $9,032 $49,595 
(a)This accumulated other comprehensive (loss) income component is included in the computation of net periodic benefit cost. See Note 7 — Pensions and other postretirement benefit plans.
(b)Amounts reclassified from accumulated other comprehensive (loss) income are recorded net of tax impacts of $0.3 million and $11 thousand for the nine months ended September 30, 2022 and 2021, respectively.
(c)Amounts reclassified from accumulated other comprehensive (loss) income include a net pension settlement gain of $0.7 million ($0.5 million, net of tax) for the nine months ended September 30, 2022. See Note 7 — Pensions and other postretirement benefit plans.

NOTE 11 — Commitments, contingencies and other matters

Legal Proceedings

The Company is and may become involved from time to time in legal proceedings in the ordinary course of its business, including but not limited to matters such as libel, invasion of privacy, intellectual property infringement, wrongful termination actions, complaints alleging employment discrimination, and regulatory investigations and inquiries. In addition, the Company is involved from time to time in governmental and administrative proceedings concerning employment, labor, environmental, and other claims. Insurance coverage mitigates potential loss for certain of these matters. Historically, such claims and proceedings have not had a material adverse effect on the Company’s consolidated results of operations or financial position.

We are also defendants in judicial and administrative proceedings involving matters incidental to our business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, the Company does not expect its current and any threatened legal proceedings to have a material adverse effect on the Company’s business, financial position or consolidated results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on the Company’s financial results.

NOTE 12 — 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:

•Gannett Media 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 Gannett Media reportable segment is an aggregation of two operating segments: Domestic Gannett Media and Newsquest.
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•Digital Marketing Solutions is comprised of our digital marketing services companies branded LocaliQ. 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 reportable segments above, 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 and Adjusted EBITDA margin to evaluate the performance of the segments and allocate resources. Adjusted EBITDA and Adjusted EBITDA margin 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, (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 Operating revenues.

Management considers Adjusted EBITDA and Adjusted EBITDA margin to be important metrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as they eliminate the effect of items that 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, 2022
In thousandsGannett MediaDigital Marketing SolutionsCorporate and otherIntersegment EliminationsConsolidated
Advertising and marketing services - external sales$241,798 $120,049 $— $— $361,847 
Advertising and marketing services - intersegment sales36,481 — — (36,481)— 
Circulation264,732 — — — 264,732 
Other89,995 — 1,328 — 91,323 
Total operating revenues$633,006 $120,049 $1,328 $(36,481)$717,902 
Adjusted EBITDA (non-GAAP basis)$46,023 $15,690 $(9,804)$— $51,909 
Adjusted EBITDA margin (non-GAAP basis)7.3 %13.1 %NMNM7.2 %
NM indicates not meaningful.

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Three months ended September 30, 2021
In thousandsGannett MediaDigital Marketing SolutionsCorporate and otherIntersegment EliminationsConsolidated
Advertising and marketing services - external sales$294,742 $116,771 $507 $— $412,020 
Advertising and marketing services - intersegment sales34,042 — — (34,042)— 
Circulation306,698 — 4 — 306,702 
Other80,325 — 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 
Adjusted EBITDA margin (non-GAAP basis)14.1 %12.9 %NMNM12.8 %
NM indicates not meaningful.

Nine months ended September 30, 2022
In thousandsGannett MediaDigital Marketing SolutionsCorporate and otherIntersegment EliminationsConsolidated
Advertising and marketing services - external sales$772,799 $347,771 $— $— $1,120,570 
Advertising and marketing services - intersegment sales105,443 — — (105,443)— 
Circulation827,958 — — — 827,958 
Other262,069 — 4,042 — 266,111 
Total operating revenues$1,968,269 $347,771 $4,042 $(105,443)$2,214,639 
Adjusted EBITDA (non-GAAP basis)$165,527 $41,176 $(39,772)$— $166,931 
Adjusted EBITDA margin (non-GAAP basis)8.4 %11.8 %NMNM7.5 %
NM indicates not meaningful.

Nine months ended September 30, 2021
In thousandsGannett MediaDigital Marketing SolutionsCorporate and otherIntersegment EliminationsConsolidated
Advertising and marketing services - external sales$890,665 $328,184 $1,638 $— $1,220,487 
Advertising and marketing services - intersegment sales93,910 — — (93,910)— 
Circulation942,392 — 6 — 942,398 
Other212,970 905 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 
Adjusted EBITDA margin (non-GAAP basis)14.8 %11.2 %NMNM13.4 %
NM indicates not meaningful.

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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 thousands2022202120222021
Net income (loss) attributable to Gannett$(54,114)$14,687 $(110,769)$(112,514)
Provision for income taxes18,098 2,984 32,649 11,567 
Interest expense27,750 34,603 79,840 109,370 
(Gain) loss on early extinguishment of debt(1,228)3,761 2,264 25,996 
Non-operating pension income(14,990)(23,860)(51,363)(71,644)
Loss on convertible notes derivative— — — 126,600 
Depreciation and amortization44,778 48,107 142,091 154,452 
Integration and reorganization costs33,311 13,619 60,454 35,467 
Other operating expenses249 4 1,665 11,354 
Asset impairments71 2,301 1,010 3,134 
(Gain) loss on sale or disposal of assets, net(7,180)(833)(9,612)9,206 
Share-based compensation expense4,499 4,602 13,277 13,804 
Other Items665 2,092 5,425 1,509 
Adjusted EBITDA (non-GAAP basis)$51,909 $102,067 $166,931 $318,301 
Net income (loss) attributable to Gannett margin(7.5)%1.8 %(5.0)%(4.7)%
Adjusted EBITDA margin (non-GAAP basis)7.2 %12.8 %7.5 %13.4 %

Asset information by segment is not a key measure of performance used by the CODM. Accordingly, we have not disclosed asset information by segment. Additionally, equity income in unconsolidated investees, net, interest expense, other non-operating items, net, and provision (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.

NOTE 13 — Other supplemental information

Cash and cash equivalents, including restricted cash

Cash equivalents represent highly liquid certificates of deposit which have original maturities of three months or less. Restricted cash is held as cash collateral for certain business operations. Restricted cash primarily consists of funding for letters of credit and cash held in an irrevocable grantor trust for our deferred compensation plans. The restrictions will lapse when benefits are paid to plan participants and their beneficiaries as specified in the plans.

The following table presents a reconciliation of cash, cash equivalents and restricted cash:

September 30,
In thousands20222021
Cash and cash equivalents$124,867 $141,302 
Restricted cash included in prepaid expenses and other current assets1,078 4,845 
Restricted cash included in other assets (a)
10,246 21,267 
Total cash, cash equivalents and restricted cash$136,191 $167,414 
(a) The decrease in Restricted cash included in other assets from September 30, 2021 to September 30, 2022 was mainly driven by the reclassification of amounts from Restricted cash to Deposits as the cash was no longer separately identifiable.

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Supplemental cash flow information

The following table presents supplemental cash flow information, including non-cash investing and financing activities:

Nine months ended September 30,
In thousands20222021
Cash paid for taxes, net of refunds$2,726 $(9,031)
Cash paid for interest51,021 80,280 
Non-cash investing and financing activities:
Accrued capital expenditures$970 $2,836 

Accounts payable and accrued liabilities

A breakout of Accounts payable and accrued liabilities is presented below:

In thousands September 30, 2022December 31, 2021
Accounts payable$162,646 $157,257 
Compensation86,596 107,585 
Taxes (primarily property, sales, and payroll taxes)14,400 26,042 
Benefits21,542 21,056 
Interest18,852 7,577 
Other38,779 37,497 
Accounts payable and accrued liabilities$342,815 $357,014 

NOTE 14 — Subsequent events

In October 2022, the Company entered into a privately negotiated agreement with a holder of our 2026 Senior Notes to repurchase $17.8 million of principal of our outstanding 2026 Senior Notes at 78.0% of par value. As a result of this transaction, the Company expects to recognize a gain on the early extinguishment of debt of approximately $3.0 million during the fourth quarter of 2022, which would include the write-off of unamortized original issue discount and deferred financing costs of approximately $0.9 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations and quantitative and qualitative disclosures should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission. Management's Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements that reflect our plans, estimates, and beliefs, all of which are based on our current expectations and could be affected by certain uncertainties, risks, and other factors described under Cautionary Note Regarding Forward-Looking Statements, Risk Factors, and elsewhere throughout this Quarterly Report, as well as the factors described in our Annual Report on Form 10-K for the year ended December 31, 2021, and subsequent periodic reports filed with the Securities and Exchange Commission, particularly under "Risk Factors." Our actual results could differ materially from those discussed in the forward-looking statements.

OVERVIEW

We are a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. We operate a scalable, data-driven media platform that aligns with consumer and digital marketing trends. We aim to be the premier source for clarity, connections, and solutions within our communities. Our strategy is focused on driving audience growth and engagement by delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers desire. We expect the execution of this strategy to enable us to continue our evolution from a more traditional print media business to a digitally-focused content platform.

On June 1, 2022, we announced a strategic organizational restructuring, which centralized the operations within each of our U.S. operating business units, Gannett Media and Digital Marketing Solutions ("DMS"). This change did not have any impact on segment reporting. However, our historical Publishing segment will be referred to as Gannett Media moving forward. The Gannett Media reportable segment is an aggregation of two operating segments: Domestic Gannett Media (formerly referred to as Domestic Publishing) and Newsquest (formerly referred to as U.K. Publishing).

Our current portfolio of media assets includes USA TODAY, local media organizations in 45 states in the U.S., and Newsquest, a wholly-owned subsidiary operating in the United Kingdom ("U.K.") with more than 150 local news media brands. We also own digital marketing services companies branded LocaliQ, which provide a cloud-based platform of products to enable small and medium-sized businesses ("SMBs") to accomplish their marketing goals. In addition, we run what we believe is the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures.

Through USA TODAY, our local property network, and Newsquest, we deliver high-quality, trusted content with a commitment to balanced, unbiased journalism, where and when consumers want to engage with it on virtually any device or platform. Additionally, 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.

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. Additionally, during the second and third quarters of 2022, we saw an acceleration in the rate of decline of our print advertising and circulation revenues as a result of macroeconomic factors and consumer price sensitivity. 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 digital-only subscribers to our publications.

•SMBs are facing an increasingly complex marketing environment and need to create digital presence to capture audience online. 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 broader, challenging economic environment, we experienced a longer sales cycle for digital advertising and digital marketing solutions during the third quarter of 2022 than we experienced in prior quarters in 2022 and we expect this trend to continue in the near term. In addition, we experienced a reduction in demand for digital advertising in the second and third quarters of 2022 due to reduced marketer spend as a result of a more challenging macroeconomic environment.
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•Consumers are looking for experience-based, emotional connections and communities. USA TODAY NETWORK Ventures was designed to celebrate local communities and create opportunities for meaningful in-person and virtual experiences. While operating trends have improved since the second quarter of 2020, which represents the quarter that was most significantly impacted by the COVID-19 pandemic, we have experienced and expect to continue to experience a negative impact on our business and results of operations in the near-term, including lower revenues and attendance associated with events as compared to pre-COVID-19 pandemic levels.

•Newsprint availability remains constrained globally due to manufacturing facility closures and ongoing capacity shifts between newsprint and specialty paper grades. Further, supply chain issues have challenged and continue to challenge deliveries, resulting in significant delays, although we do not anticipate that this will impact our print operations.

•Inflationary prices across a number of categories such as labor, fuel, delivery costs, newsprint, ink, and printing plates are having a negative impact on our overall cost structure.

Recent Developments

Debt Repurchase

In October 2022, the Company entered into a privately negotiated agreement with a holder of our 2026 Senior Notes to repurchase $17.8 million of principal of our outstanding 2026 Senior Notes at 78.0% of par value. As a result of this transaction, the Company expects to recognize a gain on the early extinguishment of debt of approximately $3.0 million during the fourth quarter of 2022, which would include the write-off of unamortized original issue discount and deferred financing costs of approximately $0.9 million.

Purchase of Pension Annuity Contract

On August 31, 2022, Gannett Media Corp., our wholly-owned subsidiary, as sponsor of the Gannett Retirement Plan (the "GR Plan"), entered into an agreement pursuant to which the GR Plan used a portion of its assets to purchase annuities from two insurance companies (the "Insurers") and transferred approximately $450 million of the GR Plan's pension liabilities and related pension assets. As of August 31, 2022, this agreement irrevocably transferred to the Insurers future GR Plan benefit obligations for certain U.S. retirees and beneficiaries ("Participants") beginning with the payments due to the Participants on November 1, 2022 (the "Effective Date") and Gannett Media Corp. has no financial responsibility for the Participants' benefits on or after such date. As of the Effective Date, the Insurers have assumed responsibility for administrative and customer service support, including distribution of payments to the Participants. Participants' benefits were not reduced as a result of this transaction. As a result of this transaction, we were required to remeasure the related plan benefit obligations and assets as of August 31, 2022 reflecting the use of an updated discount rate. The plan remeasurement resulted in a decrease of $99.9 million to our net funded pension obligation, which includes a decrease in benefit obligation of $281.8 million (primarily due to an increase in the discount rate from 2.95% at January 1, 2022 to 5.05%) and an incremental decrease in plan assets of $381.7 million. In addition, with this transaction, we recognized a noncash pension settlement gain of $0.7 million ($0.5 million after tax) for the GR Plan for the quarter ended September 30, 2022, which represents the accelerated recognition of actuarial gains that were included in accumulated other comprehensive income (loss) within stockholders' equity.

Stock Repurchase Program

On February 1, 2022, our board of directors authorized the repurchase of up to $100 million (the "Stock Repurchase Program") of our common stock, par value $0.01 per share ("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 will depend on a number of factors including, but not limited to, the price and availability of shares of Common Stock, trading volume, capital availability, our performance and general economic and market conditions. The Stock Repurchase Program may be suspended or discontinued at any time.

During the three months ended September 30, 2022, we did not repurchase any shares of Common Stock under the Stock Repurchase Program. During the nine months ended September 30, 2022, we repurchased 800 thousand shares of Common Stock under the Stock Repurchase Program for approximately $3.1 million, excluding commissions. As of September 30, 2022, the remaining authorized amount under the Stock Repurchase Program was approximately $96.9 million.

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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 2021, we formed an executive-led, cross-functional committee to help deepen our commitment to people, planet, and communities through the formalization of an environmental, social and governance ("ESG") strategy. In early 2022, we published our inaugural 2022 ESG report detailing the alignment of our efforts across our company's corporate social responsibility pillars which are people, planet, and communities, with the U.N. Sustainable Development Goals ("SDGs"). The 2022 ESG report reflects an important initial step towards providing increased transparency of Gannett's priorities and measured progress.

We selected Reduced Inequalities, Climate Action, and Peace, Justice & Strong Institutions as our key priorities. We aim to contribute to all 17 U.N. SDGs, but have chosen these three as our key priorities for sustainability where we believe we can help make the most significant impact. Each year we plan to update our progress and share more details about how we are working to achieve our goals.

Certain matters affecting comparability

The following items affect period-over-period comparisons and will continue to affect period-over-period comparisons for future results:

Integration and reorganization costs

For the three and nine months ended September 30, 2022, we incurred Integration and reorganization costs of $33.3 million and $60.5 million, respectively. Of the total costs incurred, $15.7 million and $32.7 million, respectively, were related to severance activities and $17.6 million and $27.7 million, respectively, were related to other costs, including a withdrawal liability which was expensed as a result of ceasing contributions to a multiemployer pension plan, costs related to consolidating operations, primarily related to systems implementation and the outsourcing of corporate functions as well as facilities consolidation expenses associated with exiting a lease. For the three and nine months ended September 30, 2021, we incurred Integration and reorganization costs of $13.6 million and $35.5 million, respectively. Of the total costs incurred, $2.7 million and $10.9 million, respectively, were related to severance activities and $11.0 million and $24.6 million, respectively, were related to other costs, including those for the purpose of consolidating operations, mainly related to outsourcing of corporate functions and systems implementation.

For the three months ended September 30, 2022, we did not cease any printing operations resulting in accelerated depreciation, and for the nine months ended September 30, 2022, we ceased four printing operations as part of the synergy and ongoing cost reduction programs. As a result, we recognized accelerated depreciation of $0.3 million and $10.5 million during the three and nine months ended September 30, 2022, respectively, driven primarily by the closure of a local printing facility in the first quarter of 2022. For the three and nine months ended September 30, 2021, we ceased operations of four and 14 printing operations, respectively, as part of the synergy and ongoing cost reduction programs. As a result, we recognized accelerated depreciation of $1.1 million and $11.4 million during the three and nine months ended September 30, 2021, respectively.

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. During the third quarter of 2022, 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 nine months ended September 30, 2022, and may continue to negatively impact our financial results in the fourth quarter of 2022.

Outlook for 2022

Strategy

On June 1, 2022, we announced a strategic organizational restructuring, which centralized the operations within each of our
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U.S. operating business units, Gannett Media and DMS. This structure was designed to align with our long-term strategic pillars and our commitment to becoming a subscription-led and digitally-focused media and marketing solutions company that is committed to empowering communities to thrive. Our areas of strategic focus continue to include:

Accelerating digital subscriber growth

The broad reach of our newsroom network, linking leading national journalism at USA TODAY, our local property network in 45 states in the U.S., and Newsquest in the U.K. with more than 150 local news media brands, gives us the ability to deepen our relationships with consumers at both the national and local levels. We bring consumers local news and information that impacts their day-to-day lives while keeping them informed of the national events that impact their country. We believe this local content is not readily obtainable elsewhere, and we are able to deliver that content to our customers across multiple print and digital platforms. As such, a key element of our consumer strategy is growing our paid digital-only subscriber base. As part of our digital subscriber growth strategy, we expect to continue to develop and launch new digital subscription offerings tailored to specific topics and audiences and expand the penetration of newer subscription products.

Driving digital marketing services growth by engaging more clients in a subscriber relationship

We are now of significant digital scale, with unique reach at both the national and local community levels. We expect to leverage our integrated sales structure and lead generation strategy to continue to aggressively expand our digital marketing services business into our local markets, both domestically and internationally. Given our extensive client base and volume of digital campaigns, we plan to use data and insights to inform new and dynamic advertising products, such as our "freemium" offering to complement our sales structures, which we believe will deliver superior results.

Optimizing our traditional businesses across print and advertising

We plan to continue to drive the profitability of our traditional print operations through the continued evolution of the core print product, economies of scale, process improvements, and operational focus. We will continue to evolve our business model, evaluating our print portfolio and frequencies in alignment with consumer's habits and moving toward a portfolio of products that are in line with our long-term digital subscription strategies. Print advertising continues to offer a compelling branding opportunity across our network due to our scale and unique reach at both the national and local community levels and we will continue to provide products that best serve our readers' and advertisers' needs. The Company is responding to the recent increased rate of revenue decline in the traditional print business with operational changes designed to mitigate the rate of volume decline in the future.

Prioritizing investments into growth businesses that have significant potential and support our vision

By leveraging our unique footprint, trusted brands, and media reach, we identify, experiment, and invest in potential growth businesses. USA TODAY NETWORK Ventures is a strong example of one such experiment that has grown significantly since its founding in 2015. For the three and nine months ended September 30, 2022, USA TODAY NETWORK Ventures hosted 65 and 152 events, respectively, and revenues decreased 9.9% and increased 20.5%, respectively, compared to the same periods in the prior year. The decline in revenues for the three months ended September 30, 2022, was mainly driven by the shift in the timing of in-person events compared to the same period in the prior year, where in-person events were pushed to the second half of the year as COVID-19 related restrictions were lifted. We anticipate events revenues to be relatively flat in the fourth quarter of 2022, but expect them to increase for the full year compared to the prior year.

Building on our inclusive and diverse culture to center around meaningful purpose, individual growth and customer focus

Inclusion, Diversity and Equity are core pillars of our organization and influence all that we do, from recruiting, development and retention, to day-to-day operations including hiring, onboarding, education, leadership training and professional development. We have published our inclusion goals for 2025 and our ongoing efforts to progress toward them, including our annual Inclusion Report, most recently released in April 2022. We believe aligning our culture around empowering our communities to thrive and putting our customers at the center of everything we do will provide the foundation for our broader strategic efforts.

Macroeconomic Environment

The U.S. and global economies and markets have experienced increased volatility in 2022 due to factors including higher inflation, increased interest rates, supply chain disruptions, fluctuating foreign currency exchange rates and other geopolitical events. In the second and third quarters of 2022, uncertain economic conditions adversely impacted our advertising revenues,
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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 reduce or stop spend.

These challenging conditions, especially higher inflation and interest rates, have negatively impacted the consumer and resulted in increased price sensitivity from our print and 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. In the second and third quarters of 2022, increased consumer price sensitivity, along with delivery challenges associated with labor shortages, and ongoing consumer sentiment negatively impacted print circulation volumes as compared to the same periods in the prior year.

As a result of the macroeconomic volatility year to date, as compared to the prior year, we have experienced an increase in costs associated with labor, newsprint, delivery costs, ink, printing plates, fuel, and utilities. We are also exposed to potential increases in interest rates associated with our New Senior Secured Term Loan 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. Tax Legislation

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which includes, among other provisions, changes to the U.S. corporate income tax system, including a 15% minimum tax based on "adjusted financial statement income" exceeding $1 billion and a 1% excise tax on net repurchases of stock after December 31, 2022. We are continuing to evaluate the Inflation Reduction Act of 2022 and its requirements, as well as any potential impact on our business.

Impacts of the COVID-19 pandemic

As a result of the COVID-19 pandemic, we initially experienced a significant decline in Advertising and marketing services revenues, which accelerated the secular declines that we continue to experience. We continue to experience constraints on the sales of single copy newspapers, largely tied to reduced business travel. While COVID-19 related operating trends have improved since the second quarter of 2020, which represents the quarter that was most significantly impacted by the pandemic, we expect that the resulting changes in consumer behavior will continue to have a negative impact on our business and results of operations in the near-term, including lower revenues and attendance associated with events as compared to pre-COVID-19 pandemic levels and lower sales of single copy newspapers. If the COVID-19 pandemic were to revert to conditions that existed during 2020, including measures to help mitigate and control the spread of the virus, we would expect to experience further negative impacts in Advertising and marketing services revenues and Circulation revenues.

Seasonality

Our revenues are subject to moderate seasonality, due primarily to fluctuations in advertising volumes. Advertising and marketing services revenues for our 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. 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. In the second and third quarters of 2022, 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 reduce or stop spend. Refer to "Macroeconomic Environment" above for further discussion.

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RESULTS OF OPERATIONS

Consolidated Summary

A summary of our consolidated results is presented below:
Three months ended September 30,Nine months ended September 30,
In thousands, except per share amountsChangeChange
20222021$%20222021$%
Operating revenues:
Local and national print$92,957 $118,292 (25,335)(21)%$301,422 $363,291 (61,869)(17)%
Classified print66,367 71,752 (5,385)(8)%204,873 220,874 (16,001)(7)%
Print advertising159,324 190,044 (30,720)(16)%506,295 584,165 (77,870)(13)%
Digital media67,886 91,611 (23,725)(26)%223,916 267,090 (43,174)(16)%
Digital marketing services (a)
119,745 117,040 2,705 2 %346,201 329,896 16,305 5 %
Digital classified14,892 13,325 1,567 12 %44,158 39,336 4,822 12 %
Digital advertising and marketing services202,523 221,976 (19,453)(9)%614,275 636,322 (22,047)(3)%
Advertising and marketing services361,847 412,020 (50,173)(12)%1,120,570 1,220,487 (99,917)(8)%
Print circulation230,200 280,984 (50,784)(18)%730,827 869,495 (138,668)(16)%
Digital-only circulation34,532 25,718 8,814 34 %97,131 72,903 24,228 33 %
Circulation264,732 306,702 (41,970)(14)%827,958 942,398 (114,440)(12)%
Other91,323 81,463 9,860 12 %266,111 218,659 47,452 22 %
Total operating revenues717,902 800,185 (82,283)(10)%2,214,639 2,381,544 (166,905)(7)%
Total operating expenses (a)
743,045 769,083 (26,038)(3)%2,262,984 2,297,056 (34,072)(1)%
Operating income (loss)
(25,143)31,102 (56,245)***(48,345)84,488 (132,833)***
Non-operating expenses10,881 13,573 (2,692)(20)%29,930 186,368 (156,438)(84)%
Income (loss) before income taxes(36,024)17,529 (53,553)***(78,275)(101,880)23,605 (23)%
Provision for income taxes18,098 2,984 15,114 ***32,649 11,567 21,082 ***
Net income (loss) (54,122)14,545 (68,667)***(110,924)(113,447)2,523 (2)%
Net loss attributable to noncontrolling interests(8)(142)134 (94)%(155)(933)778 (83)%
Net income (loss) attributable to Gannett$(54,114)$14,687 $(68,801)***$(110,769)$(112,514)$1,745 (2)%
Income (loss) per share attributable to Gannett - basic$(0.39)$0.11 $(0.50)***$(0.81)$(0.84)$0.03 (4)%
Income (loss) per share attributable to Gannett - diluted$(0.39)$0.09 $(0.48)***$(0.81)$(0.84)$0.03 (4)%
(a)     Amounts are net of intersegment eliminations of $36.5 million and $34.0 million for the three months ended September 30, 2022 and 2021, respectively, and $105.4 million and $93.9 million for the nine months ended September 30, 2022 and 2021, respectively, that represent digital advertising marketing services revenues and expenses associated with products sold by our U.S. local Gannett Media sales teams but fulfilled by our DMS segment. When discussing segment results, these revenues and expenses are presented gross but are eliminated in consolidation.
*** Indicates an absolute value percentage change greater than 100.

Operating revenues

Advertising and marketing services revenues are generated by both the Gannett Media and DMS segments. At the Gannett Media segment, 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 digital marketing services delivered by our DMS segment. At the DMS segment, Advertising and marketing services revenues are generated through multiple services, including search
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advertising, display advertising, search optimization, social media, website development, web presence products, customer relationship management, and software-as-a-service solutions.

Circulation revenues, which are generated at the Gannett Media segment, are derived from home delivery, digital distribution and single copy sales of our publications.

Other revenues, which are primarily generated at the Gannett Media segment, are derived mainly from commercial printing, distribution arrangements, revenues from our events business, digital content syndication and affiliate revenues and third-party newsprint sales, and to a lesser extent generated at our Corporate and other category, 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 Gannett Media segment 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 three and nine months ended September 30, 2022, Interest expense was $27.8 million and $79.8 million, respectively, compared to $34.6 million and $109.4 million for the three and nine months ended September 30, 2021, respectively. The decrease in interest expense for the three and nine months ended September 30, 2022 compared to the same periods in 2021 was mainly due to a lower debt balance and the impact of lower interest rates on our outstanding fixed-rate debt. The impact of the increase in interest rates on our five-year senior secured term loan facility in an aggregate principal amount of $516.0 million (the "New Senior Secured Term Loan") was partially offset by a lower balance due to payments of quarterly amortization and required prepayments.

(Gain) loss on early extinguishment of debt: For the three months ended September 30, 2022, the Gain on early extinguishment of debt was $1.2 million compared to a Loss on early extinguishment of debt of $3.8 million for the three months ended September 30, 2021. For the three months ended September 30, 2022, the Gain on early extinguishment of debt was mainly due to the repurchase of $7.0 million of principal of our outstanding $400 million aggregate principal amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes") at 76.5% of par value compared to losses incurred on early prepayments of debt made during the third quarter of 2021. For the nine months ended September 30, 2022, the Loss on early extinguishment of debt was $2.3 million compared to a loss of $26.0 million for the nine months ended September 31, 2021. For the nine months ended September 30, 2022, the decrease in Loss on early extinguishment of debt compared to the same period in the prior year was mainly due to the absence of 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.

Non-operating pension income: For the three and nine months ended September 30, 2022, Non-operating pension income was $15.0 million and $51.4 million, respectively, compared to $23.9 million and $71.6 million for the three and nine months ended September 30, 2021, respectively. The decrease in non-operating pension income for the three and nine months ended September 30, 2022 compared to the same periods in 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.

Loss on convertible notes derivative: For the three and nine months ended September 30, 2022, we had no Loss on convertible notes derivative. For the three months ended September 30, 2021, we had no Loss on convertible notes derivative and for the nine months ended September 30, 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.
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Other non-operating income, net: Other non-operating income, net consisted of certain items that fall outside of our normal business operations. For the three and nine months ended September 30, 2022, we recorded Other non-operating income, net of $0.7 million and $0.8 million, respectively, compared to Other non-operating income, net of $0.9 million and $4.0 million for the three and nine months ended September 30, 2021, respectively. The decrease in Other non-operating income, net for the three and nine months ended September 30, 2022 compared to the same periods in 2021 was primarily due to foreign currency losses, partially offset by other non-operating gains.

Provision for income taxes

The following table summarizes our pre-tax net income (loss) before income taxes and income tax accounts:
Three months ended September 30,Nine months ended September 30,
In thousands2022202120222021
Income (loss) before income taxes$(36,024)$17,529 $(78,275)$(101,880)
Provision for income taxes18,098 2,984 32,649 11,567 
Effective tax rate(50.2)%17.0 %(41.7)%(11.4)%

The provision for income taxes is calculated by applying the projected annual effective tax rate for the year to the current period income or loss before tax plus the tax effect of any significant or unusual items (discrete events), or changes in tax law. The provision for income taxes for the three months ended September 30, 2022 was mainly driven by the valuation allowances on non-deductible interest expense carryforwards and the global intangible low-taxed income inclusion from our wholly owned U.K. subsidiary. The provision was calculated using an estimated annual effective tax rate of negative 46.3%. The estimated annual effective tax rate is principally impacted by the valuation allowances on non-deductible interest expense carryforwards, the benefit of a pre-tax book loss, the global intangible low taxed income inclusion, and foreign income tax expense. The estimated annual effective tax rate is based on the projected tax expense for the full year.

The provision for income taxes for the nine months ended September 30, 2022 was mainly driven by the valuation allowances on non-deductible interest expense carryforwards, the global intangible low taxed income inclusion and foreign taxes, offset by the benefit of the pre-tax book loss.

The provision for income taxes for the three months ended September 30, 2021 was mainly driven by pre-tax income and was impacted by forgiveness of Paycheck Protection Program ("PPP") loans during the quarter. For federal tax purposes, book income from forgiven loans is not included in taxable income, and expenses paid utilizing the loan proceeds can be deducted. The impact of PPP loan forgiveness was partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards. The provision was calculated using the estimated annual effective tax rate of 77.7%.
The provision for income taxes for the nine months ended September 30, 2021 was mainly impacted by the pre-tax net loss generated during the first quarter of 2021. The tax provision was also impacted by the derivative revaluation, which is nondeductible for tax purposes, the creation of valuation allowances on non-deductible interest expense carryforwards, and PPP loan forgiveness, in combination with state income tax and foreign tax expense.

Net income (loss) attributable to Gannett and diluted income (loss) per share attributable to Gannett

For the three months ended September 30, 2022, Net loss attributable to Gannett and diluted loss per share attributable to Gannett were $54.1 million and $0.39, respectively, compared to Net income attributable to Gannett and diluted income per share attributable to Gannett of $14.7 million and $0.09, respectively, for the three months ended September 30, 2021. For the nine months ended September 30, 2022, Net loss attributable to Gannett and diluted loss per share attributable to Gannett were $110.8 million and $0.81, respectively, compared to $112.5 million and $0.84, respectively, for the nine months ended September 30, 2021. The change for the three and nine months ended September 30, 2022 compared to the same periods in the prior year reflects the various items discussed above.

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Segment Results

Gannett Media segment

A summary of our Gannett Media segment results is presented below:
Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Operating revenues:
Advertising and marketing services$278,279 $328,784 $(50,505)(15)%$878,242 $984,575 $(106,333)(11)%
Circulation264,732 306,698 (41,966)(14)%827,958 942,392 (114,434)(12)%
Other89,995 80,325 9,670 12 %262,069 212,970 49,099 23 %
Total operating revenues633,006 715,807 (82,801)(12)%1,968,269 2,139,937 (171,668)(8)%
Operating expenses:
Operating costs411,236 427,887 (16,651)(4)%1,268,427 1,285,904 (17,477)(1)%
Selling, general and administrative expenses176,806 189,032 (12,226)(6)%537,470 541,165 (3,695)(1)%
Depreciation and amortization32,821 35,861 (3,040)(8)%108,810 118,664 (9,854)(8)%
Integration and reorganization costs25,378 3,512 21,866 ***42,140 10,641 31,499 ***
Asset impairments71 2,301 (2,230)(97)%1,010 3,134 (2,124)(68)%
(Gain) loss on sale or disposal of assets, net(7,171)(1,032)(6,139)***(9,786)9,538 (19,324)***
Other operating (income) expenses (48)— (48)***727 — 727 ***
Total operating expenses639,093 657,561 (18,420)(3)%1,948,798 1,969,046 (20,248)(1)%
Operating income (loss)$(6,087)$58,246 $(64,381)***$19,471 $170,891 $(151,420)(89)%
*** Indicates an absolute value percentage change greater than 100.

Operating revenues

The following table provides the breakout of Operating revenues by category:
Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Local and national print $92,957 $118,292 $(25,335)(21)%$301,422 $363,291 $(61,869)(17)%
Classified print66,367 71,752 (5,385)(8)%204,873 220,874 (16,001)(7)%
Print advertising159,324 190,044 (30,720)(16)%506,295 584,165 (77,870)(13)%
Digital media67,886 91,344 (23,458)(26)%223,916 265,450 (41,534)(16)%
Digital marketing services36,177 34,078 2,099 6 %103,873 95,652 8,221 9 %
Digital classified14,892 13,318 1,574 12 %44,158 39,308 4,850 12 %
Digital advertising and marketing services118,955 138,740 (19,785)(14)%371,947 400,410 (28,463)(7)%
Advertising and marketing services278,279 328,784 (50,505)(15)%878,242 984,575 (106,333)(11)%
Print circulation230,200 280,980 (50,780)(18)%730,827 869,489 (138,662)(16)%
Digital-only circulation34,532 25,718 8,814 34 %97,131 72,903 24,228 33 %
Circulation 264,732 306,698 (41,966)(14)%827,958 942,392 (114,434)(12)%
Other 89,995 80,325 9,670 12 %262,069 212,970 49,099 23 %
Total operating revenues$633,006 $715,807 $(82,801)(12)%$1,968,269 $2,139,937 $(171,668)(8)%

The overall decline in Print advertising revenues for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 was driven by secular industry trends impacting all categories. In addition,
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during the nine months ended September 30, 2022, and specifically during the second and third quarters of 2022, we saw an acceleration in the rate of decline of our Print advertising revenues as a result of macroeconomic factors. For the three and nine months ended September 30, 2022, Local and national print advertising revenues decreased compared to the three and nine months ended September 30, 2021, primarily due to a decrease in advertiser inserts as well as the absence of $10.4 million and $25.5 million of revenues for the three and nine months ended September 30, 2022, respectively, associated with both businesses divested and non-core products which were sunset in 2022 and 2021. For the three and nine months ended September 30, 2022, Classified print advertising revenues decreased compared to the three and nine months ended September 30, 2021, due to lower spend on classified advertisements, including obituaries, real estate, and automotive, partially offset by an increase in spend on legal classified advertisements.

For the three and nine months ended September 30, 2022, Digital media revenues decreased compared to the three and nine months ended September 30, 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 three and nine months ended September 30, 2022, we experienced a reduction in digital advertising demand as a result of a more challenging macroeconomic environment. For the three and nine months ended September 30, 2022, Digital marketing services revenues increased compared to the three and nine months ended September 30, 2021 due to an increase in client counts as well as an increase in average revenue per user ("ARPU"), which we define as monthly revenue divided by average client count within the period. For the three and nine months ended September 30, 2022, Digital classified revenues increased compared to the three and nine months ended September 30, 2021 due to higher client spend, mainly driven by automotive advertisements.

For the three and nine months ended September 30, 2022, Print circulation revenues decreased compared to the three and nine months ended September 30, 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 our advertising 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 nine months ended September 30, 2022, and specifically during the second and third quarters of 2022, the decline in print circulation revenues accelerated as compared to the same period in the prior year as our audience increasingly moves to digital platforms and as a result of consumer price sensitivity. For the three and nine months ended September 30, 2022, Digital-only circulation revenues increased compared to the three and nine months ended September 30, 2021, driven by an increase of 28.5% in paid digital-only subscribers, including those subscribers on introductory subscription offers, to approximately 1.98 million as of September 30, 2022. For the three months ended September 30, 2022, the increase in Digital-only circulation revenues was also driven by an increase in ARPU compared to the same period in the prior year. The increase in Digital-only circulation revenues for the nine months ended September 30, 2022 was offset by overall lower ARPU compared to the same period in the prior year.

For the three months ended September 30, 2022, Other revenues increased compared to the three months ended September 30, 2021, primarily due to commercial print growth in local markets and an increase in digital content syndication volume and other digital revenues, partially offset by a decline in event revenues primarily due to a shift in the timing of in-person events compared to the same period in the prior year, where in-person events were pushed to the second half of the year as COVID-19 related restrictions were lifted. For the nine months ended September 30, 2022, Other revenues increased compared to the nine months ended September 30, 2021, primarily due to commercial print growth in local markets, an increase in digital content syndication volume and other digital revenues as well as 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, where our ability to host in-person events was more significantly impacted by the COVID-19 pandemic.

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Operating expenses

For the three and nine months ended September 30, 2022, Operating costs decreased $16.7 million and $17.5 million, respectively, compared to the three and nine months ended September 30, 2021. The following table provides the breakout of Operating costs:

Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Newsprint and ink$35,957 $26,176 $9,781 37 %$107,664 $78,160 $29,504 38 %
Distribution93,267 112,884 (19,617)(17)%295,385 321,435 (26,050)(8)%
Compensation and benefits134,411 129,620 4,791 4 %414,970 414,513 457 — %
Outside services87,681 90,428 (2,747)(3)%259,578 248,110 11,468 5 %
Other59,920 68,779 (8,859)(13)%190,830 223,686 (32,856)(15)%
Total operating costs$411,236 $427,887 $(16,651)(4)%$1,268,427 $1,285,904 $(17,477)(1)%

For the three and nine months ended September 30, 2022, Newsprint and ink costs increased compared to the three and nine months ended September 30, 2021, primarily due to an increase in newsprint prices 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 three and nine months ended September 30, 2022, Distribution costs decreased compared to the three and nine months ended September 30, 2021, primarily due to the reduced volume of home delivery and single copy sales, cost savings driven by the reduction of print offerings, lower delivery and postage costs associated with lower volumes, as well as the absence of expenses associated with both businesses divested and non-core products which were sunset in 2022 and 2021, partially offset by higher rates per copy, an increase in commercial delivery activity, and an increase in third party distribution costs.

For the three and nine months ended September 30, 2022, Compensation and benefits costs increased compared to the three and nine months ended September 30, 2021, primarily due to the absence of $11.1 million of PPP loan forgiveness received in the third quarter of 2021, partially offset by lower domestic payroll expense driven by a decrease in headcount tied to ongoing cost control initiatives. In addition, for the nine months ended September 30, 2022, the increase in Compensation and benefits costs was also due to an increase in employer 401(k) matching contributions, which were reinstated during the third quarter of 2021, partially offset by lower benefit costs, including medical costs.

For the three months ended September 30, 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, decreased compared to the three months ended September 30, 2021, primarily due to lower costs associated with revenue share expense driven by lower Digital media revenues, partially offset by higher costs associated with the increase in Digital marketing services revenues, including email fees, and higher costs associated with the increase in Digital classified revenues. For the nine months ended September 30, 2022, Outside services increased compared to the nine months ended September 30, 2021, primarily due to higher costs associated with the increase in Digital marketing services revenues, including paid search and email fees, an increase in costs related to events, mainly related to the number and mix of live versus virtual events compared to the prior year, and higher costs associated with the increase in Digital classified revenues, partially offset by lower costs associated with revenue share expense driven by lower Digital media revenues.

For the three and nine months ended September 30, 2022, Other costs decreased compared to the three and nine months ended September 30, 2021, due primarily to the absence of expenses associated with both businesses divested and non-core products which were sunset in 2022 and 2021, cost containment initiatives, including a reduction in supplies and utility expenses, and a decrease in property taxes, mainly due to real estate sales.

For the three and nine months ended September 30, 2022, Selling, general and administrative expenses decreased $12.2 million and $3.7 million, respectively, compared to the three and nine months ended September 30, 2021. The following table provides the breakout of Selling, general and administrative expenses:

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Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Compensation and benefits$84,709 $93,762 $(9,053)(10)%$263,052 $283,875 $(20,823)(7)%
Outside services and other92,097 95,270 (3,173)(3)%274,418 257,290 17,128 7 %
Total Selling, general and administrative expenses$176,806 $189,032 $(12,226)(6)%$537,470 $541,165 $(3,695)(1)%

For the three and nine months ended September 30, 2022, Compensation and benefits costs decreased compared to the three and nine months ended September 30, 2021, primarily due to lower incentive pay and lower domestic payroll expense driven by headcount savings as well as lower benefit costs, including medical costs, partially offset by the absence of PPP loan forgiveness of $4.0 million received in the third quarter of 2021, and higher payroll expense at Newsquest driven by an acquisition completed in the first quarter of 2022. In addition, the decrease in Compensation and benefits costs for the nine months ended September 30, 2022 was partially offset by an increase in employer 401(k) matching contributions, which were reinstated during the third quarter of 2021.

For the three months ended September 30, 2022, Outside services and other costs, which include services fulfilled by third parties, decreased compared to the three months ended September 30, 2021, due mainly to decreases in various miscellaneous expenses, including lower technology costs, partially offset by an increase in marketing and acquisition costs associated with growing subscribers. For the nine months ended September 30, 2022, Outside services and other costs increased compared to the nine months ended September 30, 2021, due to higher professional services costs associated with advertising operations and client success as well as marketing and acquisition costs associated with growing subscribers.

For the three and nine months ended September 30, 2022, Depreciation and amortization expenses decreased compared to the three and nine months ended September 30, 2021, reflecting the impact of fewer print facilities compared to the same periods in the prior year.

For the three and nine months ended September 30, 2022, Integration and reorganization costs increased compared to the three and nine months ended September 30, 2021, due to an increase in other costs of $12.5 million and $14.5 million, respectively, 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, as well as an increase in severance costs of $9.4 million and $17.0 million, respectively, primarily driven by ongoing integration and restructuring activities.

For the three months ended September 30, 2022, the Gain on sale or disposal of assets, net increased compared to the three months ended September 30, 2021 primarily due to the gain on the sales of domestic facilities, partially offset by the absence of a gain on the sale of real estate at Newsquest in the third quarter of 2021. For the nine months ended September 30, 2022, the Gain on sale or disposal of assets, net was primarily due to the gain on the sales of domestic facilities as well as net gains on the sale of various other assets in connection with our plan to monetize non-core assets, compared to a Loss on sale or disposal of assets, net for the nine months ended September 30, 2021, primarily due to net losses on the sale of various assets, partially offset by a gain on the sale of real estate at Newsquest.
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Gannett Media segment Adjusted EBITDA
Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Net income attributable to Gannett$9,774 $84,137 $(74,363)(88)%$71,733 $246,792 $(175,059)(71)%
Non-operating pension income(14,990)(23,860)8,870 (37)%(51,363)(71,644)20,281 (28)%
Depreciation and amortization32,821 35,861 (3,040)(8)%108,810 118,664 (9,854)(8)%
Integration and reorganization costs25,378 3,512 21,866 ***42,140 10,641 31,499 ***
Other operating expenses(48)— (48)***727 — 727 ***
Asset impairments71 2,301 (2,230)(97)%1,010 3,134 (2,124)(68)%
 (Gain) loss on sale or disposal of assets, net(7,171)(1,032)(6,139)***(9,786)9,538 (19,324)***
Other items188 82 106 ***2,256 273 1,983 ***
Adjusted EBITDA (non-GAAP basis)(a)
$46,023 $101,001 $(54,978)(54)%$165,527 $317,398 $(151,871)(48)%
Net income attributable to Gannett margin1.5 %11.8 %3.6 %11.5 %
Adjusted EBITDA margin (non-GAAP basis)(a)(b)
7.3 %14.1 %8.4 %14.8 %
*** 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 Operating revenues.

For the three and nine months ended September 30, 2022, the decrease in Adjusted EBITDA compared to the three and nine months ended September 30, 2021 was primarily attributable to the changes discussed above.

Digital Marketing Solutions segment

A summary of our DMS segment results is presented below:
Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Operating revenues:
Advertising and marketing services$120,049 $116,771 $3,278 3 %$347,771 $328,184 $19,587 6 %
Other— — — — %— 905 (905)(100)%
Total operating revenues120,049 116,771 3,278 3 %347,771 329,089 18,682 6 %
Operating expenses:
Operating costs82,216 80,405 1,811 2 %239,657 224,112 15,545 7 %
Selling, general and administrative expenses22,143 21,342 801 4 %66,938 68,252 (1,314)(2)%
Depreciation and amortization7,252 7,986 (734)(9)%20,539 23,665 (3,126)(13)%
Integration and reorganization costs431 931 (500)(54)%875 1,301 (426)(33)%
Loss (gain) on sale or disposal of assets, net2 (91)93 ***178 (618)796 ***
Total operating expenses112,044 110,573 1,471 1 %328,187 316,712 11,475 4 %
Operating income$8,005 $6,198 $1,807 29 %$19,584 $12,377 $7,207 58 %
*** Indicates an absolute value percentage change greater than 100.

Operating revenues

For the three and nine months ended September 30, 2022, Advertising and marketing services revenues increased compared to the three and nine months ended September 30, 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.

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Operating expenses

For the three and nine months ended September 30, 2022, Operating costs increased $1.8 million and $15.5 million compared to the three and nine months ended September 30, 2021, respectively. The following table provides the breakout of Operating costs:

Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Outside services$72,016 $70,332 $1,684 2 %$209,281 $193,423 $15,858 8 %
Compensation and benefits8,530 7,593 937 12 %24,333 23,408 925 4 %
Other1,670 2,480 (810)(33)%6,043 7,281 (1,238)(17)%
Total operating costs$82,216 $80,405 $1,811 2 %$239,657 $224,112 $15,545 7 %


For the three and nine months ended September 30, 2022, Outside services costs, which includes professional services fulfilled by third parties, media fees and other digital costs, paid search and ad serving services, increased compared to the three and nine months ended September 30, 2021, due to an increase in expenses associated with third-party media fees, driven by a corresponding increase in revenues.

For the three and nine months ended September 30, 2022, Compensation and benefits costs increased compared to the three and nine months ended September 30, 2021, primarily due to an increase in payroll expense driven by higher headcount.

For the three and nine months ended September 30, 2022, Other costs decreased compared to the three and nine months ended September 30, 2021, primarily due to a decrease in lease costs, mainly driven by exiting leases for unused office space.

For the three and nine months ended September 30, 2022, Selling, general and administrative expenses increased $0.8 million and decreased $1.3 million compared to the three and nine months ended September 30, 2021. The following table provides the breakout of Selling, general and administrative expenses:

Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Compensation and benefits$19,258 $17,046 $2,212 13 %$56,691 $52,283 $4,408 8 %
Outside services and other2,885 4,296 (1,411)(33)%10,247 15,969 (5,722)(36)%
Total Selling, general and administrative expenses$22,143 $21,342 $801 4 %$66,938 $68,252 $(1,314)(2)%

For the three and nine months ended September 30, 2022, Compensation and benefits costs increased compared to the three and nine months ended September 30, 2021, primarily due to an increase in payroll expense driven by higher headcount as well as an increase in incentive pay, driven by a corresponding increase in revenues.

For the three and nine months ended September 30, 2022, Outside services and other costs decreased compared to the three and nine months ended September 30, 2021, due to a decrease in various miscellaneous expenses, including lower technology and software costs as well as lower bad debt expense.

For the three and nine months ended September 30, 2022, Depreciation and amortization expense decreased compared to the three and nine months ended September 30, 2021, primarily due to the impact of capitalized software fully amortized in the third quarter of 2021.
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DMS segment Adjusted EBITDA
Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Net income attributable to Gannett$5,385 $5,005 $380 8 %$14,948 $10,990 $3,958 36 %
Depreciation and amortization7,252 7,986 (734)(9)%20,539 23,665 (3,126)(13)%
Integration and reorganization costs431 931 (500)(54)%875 1,301 (426)(33)%
Loss (gain) on sale or disposal of assets, net2 (91)93 ***178 (618)796 ***
Other items2,620 1,193 1,427 ***4,636 1,387 3,249 ***
Adjusted EBITDA (non-GAAP basis)(a)
$15,690 $15,024 $666 4 %$41,176 $36,725 $4,451 12 %
Net income attributable to Gannett margin4.5 %4.3 %4.3 %3.3 %
Adjusted EBITDA margin (non-GAAP basis)(a)(b)
13.1 %12.9 %11.8 %11.2 %
*** 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 Operating revenues.

For the three and nine months ended September 30, 2022, the increase in Adjusted EBITDA compared to the three and nine months ended September 30, 2021 was primarily attributable to the changes discussed above.

Corporate and other category

For the three months ended September 30, 2022, Corporate and other operating revenues were $1.3 million compared to $1.6 million for the three months ended September 30, 2021. For the nine months ended September 30, 2022, Corporate and other operating revenues were $4.0 million compared to $6.4 million for the nine months ended September 30, 2021.

For the three and nine months ended September 30, 2022, Corporate and other operating expenses decreased $6.6 million and $13.8 million compared to the three and nine months ended September 30, 2021. The following table provides the breakout of Corporate and other operating expenses:

Three months ended September 30,Nine months ended September 30,
ChangeChange
In thousands20222021$%20222021$%
Operating costs$2,372 $6,039 $(3,667)(61)%$2,589 $14,534 $(11,945)(82)%
Selling, general and administrative expenses13,524 15,222 (1,698)(11)%57,738 43,386 14,352 33 %
Depreciation and amortization4,705 4,260 445 10 %12,742 12,123 619 5 %
Integration and reorganization costs7,502 9,176 (1,674)(18)%17,439 23,525 (6,086)(26)%
 (Gain) loss on sale or disposal of assets, net(11)290 (301)***(4)286 (290)***
Other operating expenses297 4 293 ***938 11,354 (10,416)(92)%
Total operating expenses$28,389 $34,991 $(6,602)(19)%$91,442 $105,208 $(13,766)(13)%
*** Indicates an absolute value percentage change greater than 100.

For the three and nine months ended September 30, 2022, Corporate and other operating expenses decreased compared to the three and nine months ended September 30, 2021. The decrease for the three months ended September 30, 2022 was primarily due to a decrease in Operating costs, mainly due to lower professional fees, a decrease in Selling, general and administrative expenses, primarily driven by a decrease in compensation and benefits costs and a decrease in Integration and reorganization costs, mainly driven by a decrease in costs related to systems implementation and outsourcing of corporate functions. The decrease for the nine months ended September 30, 2022, was primarily due to a decrease in Operating costs, mainly due to lower compensation costs and professional fees, a decrease in Integration and reorganization costs, mainly driven by a decline in costs related to systems implementation and outsourcing of corporate functions and a decrease in Other operating expenses, driven by the absence of $10.9 million of third-party fees related to our previous five-year, senior-secured
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term loan facility which were expensed during the nine months ended September 30, 2021, partially offset by an increase in Selling, general and administrative expenses, primarily driven by higher outside services, including outsourcing and legal fees.

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash requirements are for working capital, debt obligations, and capital expenditures.

We expect to fund our operations through cash provided by 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 - Outlook for 2022 - Macroeconomic Environment" above for further discussion.

Details of our cash flows are included in the table below:
Nine months ended September 30,
In thousands20222021
Cash provided by operating activities$32,982 $133,347 
Cash provided by investing activities19,081 39,236 
Cash used for financing activities(58,044)(212,284)
Effect of currency exchange rate change on cash(1,447)389 
Decrease in cash, cash equivalents and restricted cash$(7,428)$(39,312)

Cash flows provided by operating activities: Our largest source of cash provided by our operations is Advertising revenues, primarily generated from Local and national advertising and marketing services revenues (retail, classified, and 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.

Our cash flow provided by operating activities was $33.0 million for the nine months ended September 30, 2022, compared to $133.3 million for the nine months ended September 30, 2021. The decrease in cash flow provided by operating activities was primarily due to lower cash receipts related to deferred revenues of $35.3 million, an increase in taxes paid, net of refunds, of $11.8 million and $16.4 million in Paycheck Protection Program funding received during the nine months ended September 30, 2021 that was not received in 2022, partially offset by lower severance payments of $6.2 million, a decrease in interest paid on debt of $29.3 million and a decrease in contributions to our pension and other postretirement benefit plans of $22.9 million.

Cash flows provided by investing activities: Cash flows provided by investing activities was $19.1 million for the nine months ended September 30, 2022, compared to $39.2 million for the nine months ended September 30, 2021. The decrease was primarily due to payments for acquisitions, net of cash acquired, of $15.4 million and an increase in purchases of property, plant and equipment of $8.7 million, offset by an increase in proceeds from the sale of real estate and other assets of $3.6 million.

Cash flows used for financing activities: Cash flows used for financing activities was $58.0 million for the nine months ended September 30, 2022, compared to $212.3 million for the nine months ended September 30, 2021. The decrease was primarily due to lower repayments, net under term loans of $163.5 million and a $33.0 million decrease in payments related to deferred financing costs, partially offset by repayments of $35.4 million related to the 2026 Senior Notes and payments related to treasury stock of $4.5 million, including $3.1 million related to the Stock Repurchase Program.

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Debt

New Senior Secured Term Loan

On October 15, 2021, Gannett Holdings LLC ("Gannett Holdings"), our wholly-owned subsidiary, entered into the New Senior Secured Term Loan with Citibank N.A., as collateral agent and administrative agent for the lenders. On January 31, 2022, Gannett Holdings entered into an amendment (the "Term Loan Amendment") to its New Senior Secured Term Loan to provide for new incremental senior secured term loans (the "Incremental Term Loans") in an aggregate principal amount of $50 million. The Incremental Term Loans have substantially identical terms as the New Senior Secured Term Loan and are treated as a single tranche with the New Senior Secured Term Loan. The Term Loan Amendment also amended the New Senior Secured Term Loan to transition the interest rate base from LIBOR to Adjusted Term SOFR and to permit the repurchase of up to $50 million of the Company's Common Stock under the Stock Repurchase Program consummated on or prior to December 31, 2022, in addition to capacity for Gannett Holdings to make restricted payments, including stock repurchases, currently permitted under other provisions of the New Senior Secured Term Loan and our other debt facilities, including the 2026 Senior Secured Notes Indenture and the 2027 Notes Indenture (terms defined below). On March 21, 2022 and April 8, 2022, Gannett Holdings entered into amendments to its New Senior Secured Term Loan to provide for incremental senior secured term loans in an aggregate principal amount of $22.5 million and $7.5 million, respectively.

The New Senior Secured Term Loan bears interest at a per annum rate equal to Adjusted Term SOFR (which shall not be less than 0.50% per annum) plus a margin of 5.00% or an alternate base rate (which shall not be less than 1.50% per annum) plus a margin equal to 4.00%. Loans under the New Senior Secured Term Loan may be prepaid, at the option of Gannett Holdings, at any time without premium, except a premium equal to 1.00% of the aggregate principal amount of the loans being repaid in connection with certain refinancing or repricing events that reduce the all-in yield applicable to the loans and occur on or before October 15, 2022. In addition, we are required to repay the New 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 New 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. The New Senior Secured Term Loan amortizes in equal quarterly installments, beginning June 30, 2022, at a rate equal to 10.00% per annum (or, if the ratio of debt secured on an equal basis with the New Senior Secured Term Loan less unrestricted cash of the Company and its restricted subsidiaries to Consolidated EBITDA (as such terms are defined in the New 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, 5.00% per annum). All obligations under the New 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 "New Senior Secured Term Loan Guarantors"). The obligations of Gannett Holdings under the New Senior Secured Term Loan are guaranteed on a senior secured basis by the Company and the New Senior Secured Term Loan Guarantors.

The New Senior Secured Term Loan contains usual and customary covenants for credit facilities of this type, including a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal quarter, and restricts, among other things, our ability to incur debt, grant liens, sell assets, and make investments and pay dividends, in each case with customary exceptions, including an exception that permits dividends and repurchases of outstanding junior debt or equity in (i) an amount of up to $25 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 2.00 to 1.00, (ii) an amount of up to $50 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.50 to 1.00, and (iii) an unlimited amount if First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.00 to 1.00. As of September 30, 2022, we were in compliance with all of the covenants and obligations under the New Senior Secured Term Loan.

For the three and nine months ended September 30, 2022, we recognized interest expense of $8.9 million and $23.3 million, respectively, and paid interest expense of $8.9 million and $23.3 million, respectively. For the three and nine months ended September 30, 2022, we recognized amortization of original issue discount of $0.9 million and $2.7 million, respectively, and amortization of deferred financing costs of $0.2 million and $0.6 million, respectively. Additionally, during the three and nine months ended September 30, 2022, we recognized losses on early extinguishment of debt which were immaterial and $1.8 million, respectively, related to the write-off of original issue discount and deferred financing costs as a result of early prepayments on the New Senior Secured Term Loan.

For the three and nine months ended September 30, 2022, we made prepayments, inclusive of both mandatory and optional prepayments, totaling $17.3 million and $92.2 million, respectively, which were classified as financing activities in the condensed consolidated statements of cash flows. As of September 30, 2022, the effective interest rate for the New Senior Secured Term Loan was 6.4%.
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Senior Secured Notes due 2026

On October 15, 2021, Gannett Holdings completed a private offering of $400 million aggregate principal amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes"). The 2026 Senior Notes were issued pursuant to an indenture, dated October 15, 2021 (the "2026 Senior Notes Indenture") among Gannett Holdings, the Company, the guarantors from time to time party thereto (the "2026 Senior Notes Guarantors"), U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent, registrar, paying agent and authenticating agent.

Interest on the 2026 Senior Notes is payable semi-annually in arrears, beginning on May 1, 2022. The 2026 Senior Notes mature on November 1, 2026, unless redeemed or repurchased earlier pursuant to the 2026 Senior Notes Indenture. The 2026 Senior Notes may be redeemed at the option of Gannett Holdings, in whole or in part, at any time and from time to time after November 1, 2023, at the redemption prices set forth in the 2026 Senior Notes Indenture. At any time prior to such date, Gannett Holdings will be entitled at its option to redeem all, but not less than all, of the 2026 Senior Notes at the "make-whole" redemption price set forth in the 2026 Senior Notes Indenture. Additionally, at any time prior to November 1, 2023, Gannett Holdings may, on one or more occasions, redeem up to 40% of the aggregate principal amount of the 2026 Senior Notes at the redemption price set forth in the 2026 Senior Notes Indenture with the net cash proceeds of certain equity offerings. If certain changes of control with respect to Gannett Holdings or the Company occur, Gannett Holdings must offer to purchase the 2026 Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest to, but excluding, the date of purchase. In addition, during any twelve-month period commencing on or after October 15, 2021 and ending prior to November 1, 2023, up to 10% of the aggregate principal amount of the 2026 Senior Notes issued under the 2026 Senior Notes Indenture may be redeemed at a purchase price equal to 103% of the aggregate principal amount of the 2026 Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to but excluding, the redemption date.

The 2026 Senior Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by the 2026 Senior Notes Guarantors. The 2026 Senior Notes and such guarantees are secured on a first-priority basis by the collateral, consisting of substantially all of the assets of Gannett Holdings and the 2026 Senior Notes Guarantors, subject to certain intercreditor arrangements.

The 2026 Senior Notes Indenture limits our and our restricted subsidiaries’ ability to, among other things, make investments, loans, advances, guarantees and acquisitions; incur or guarantee additional debt and issue certain disqualified equity interests and preferred stock; make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness; dispose of assets; create liens on assets to secure debt; engage in transactions with affiliates; enter into certain restrictive agreements; and consolidate, merge, sell or otherwise dispose of all or substantially all of their or a 2026 Senior Notes Guarantor’s assets. These covenants are subject to a number of limitations and exceptions. The 2026 Senior Notes Indenture also contains customary events of default.

The unamortized deferred financing costs will be amortized over the remaining contractual life of the 2026 Senior Notes. For the three and nine months ended September 30, 2022, we recognized interest expense of $5.6 million and $17.1 million, respectively, and paid interest expense of $0.2 million and $13.1 million, respectively. For the three and nine months ended September 30, 2022, we recognized amortization of original issue discount of $0.7 million and $2.1 million, respectively, and amortization of deferred financing costs of $0.5 million and $1.6 million, respectively, in connection with the 2026 Senior Notes. As of September 30, 2022, the effective interest rate on the 2026 Senior Notes was 7.3%.

We entered into privately negotiated agreements with certain holders of our 2026 Senior Notes, and for the three and nine months ended September 30, 2022, repurchased $7.0 million and $37.0 million, respectively, of principal of our outstanding 2026 Senior Notes. In connection with these repurchases, we exchanged $30.0 million of our 2026 Senior Notes for $30.0 million of our New Senior Secured Term Loan. The repurchases were treated as an extinguishment of a portion of the 2026 Senior Notes, and as a result, we recognized a gain on the early extinguishment of debt of approximately $1.3 million for the three months ended September 30, 2022, and a loss on the early extinguishment of debt of approximately $0.4 million for the nine months ended September 30, 2022, related to the write-off of unamortized original issue discount and deferred financing costs.

Senior Secured Convertible Notes due 2027

We issued $497.1 million in aggregate principal amount of 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes") pursuant to an Indenture dated as of November 17, 2020, as amended by the First Supplemental Indenture dated as of
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December 21, 2020 and the Second Supplemental Indenture dated as of February 9, 2021 (collectively, the "2027 Notes Indenture"), between the Company and U.S. Bank National Association, as trustee.

In connection with the issuance of the 2027 Notes, we entered into an Investor Agreement (the "Investor Agreement") with the holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders' ownership of the 2027 Notes. We also entered into an amendment to the Registration Rights Agreement dated November 19, 2019, with FIG LLC, our former manager.

Interest on 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 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").

The conversion rate is subject to customary adjustment provisions as provided in the 2027 Notes Indenture. In addition, the conversion rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027 Notes would be convertible into approximately 42% (adjusted for repurchases and certain other events that reduce the outstanding amount of the 2027 Notes) of the Common Stock after giving effect to such issuance or sale (assuming the initial principal amount of the 2027 Notes remains outstanding). After giving effect to the repurchase of $11.8 million in aggregate principal outstanding of the 2027 Notes during the year ended December 31, 2021, such percentage is approximately 41%.

Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the 2027 Notes Indenture), we will in certain circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the 2027 Notes Indenture) occurs, we will be required to offer to repurchase the 2027 Notes at a repurchase price of 110% of the principal amount thereof.

Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after the date that is 91 days after the maturity date of the New Senior Secured Term Loan.

Under the 2027 Notes Indenture, we can only pay cash dividends up to an agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the 2027 Notes Indenture) does not exceed a specified ratio. In addition, the 2027 Notes Indenture provides that, at any time that our Total Gross Leverage Ratio (as defined in the 2027 Notes Indenture) exceeds 1.5 and we approve the declaration of a dividend, we must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the dividend.

Until the four-year anniversary of the issuance date, we will have the right to redeem for cash up to approximately $99.4 million of the 2027 Notes at a redemption price of 130% of the principal amount thereof, with such amount reduced ratably by any principal amount of 2027 Notes that has been converted by the holders or redeemed or purchased by us.

The 2027 Notes are guaranteed by Gannett Holdings and any subsidiaries of the Company that guarantee the New Senior Secured Term Loan. The 2027 Notes are secured by the same collateral that secures the New Senior Secured Term Loan. The 2027 Notes rank as senior secured debt of the Company and are secured by a second priority lien on the same collateral package that secured the indebtedness incurred in connection with the New Senior Secured Term Loan.

The 2027 Notes Indenture includes affirmative and negative covenants, including limitations on liens, indebtedness, dispositions, loan, advances and investors, sale and leaseback transactions, restricted payments, transactions with affiliates, restrictions on dividends and other payment restrictions affecting restricted subsidiaries, negative pledges and modifications to certain agreements. The 2027 Notes Indenture also requires that we maintain, as of the last day of each fiscal quarter, at least $30.0 million of Qualified Cash (as defined in the 2027 Notes Indenture). The 2027 Notes Indenture includes customary events of default.

For the three and nine months ended September 30, 2022, we recognized interest expense of $7.3 million and $21.8 million, respectively, and paid no interest expense for the three months ended September 30, 2022 and paid interest expense of $14.6 million for the nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, we recognized interest expense of $7.5 million and $22.4 million, respectively, and paid no interest expense for the three months ended September 30, 2021 and paid interest expense of $16.1 million for the nine months ended September 30, 2021. In addition, during the three and nine months ended September 30, 2022, we recognized amortization of the original issue discount
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of $3.1 million and $8.9 million, respectively, and amortization of deferred financing costs related to the 2027 Notes was immaterial for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, we recognized amortization of original issue discount of $2.9 million and $7.9 million, respectively, and amortization of deferred financing costs related to the 2027 Notes was immaterial and $0.2 million for the three and nine months ended September 30, 2021, respectively. The effective interest rate on the liability component of the 2027 Notes was 10.5% as of both September 30, 2022 and 2021.

For the nine months ended September 30, 2022, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to Note 10 — Supplemental equity information for details on the convertible debt's impact to diluted earnings per share under the if-converted method.

Senior Convertible Notes due 2024

The $3.3 million principal value of the remaining 4.75% convertible senior notes due 2024 (the "2024 Notes") outstanding is reported as convertible debt in the condensed consolidated balance sheets. As of September 30, 2022, the effective interest rate on the 2024 Notes was 6.05%.

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 containment initiatives. We do not presently pay a quarterly dividend and have no current intention to reinstate the dividend. In addition, the terms of our indebtedness, including our credit facility, the New Senior Secured Term Loan, the 2026 Senior Secured Notes Indenture and the 2027 Notes Indenture have terms that restrict our ability to pay dividends.

The CARES Act, enacted March 27, 2020, provided various forms of relief to companies impacted by the COVID-19 pandemic. As part of the relief available under the CARES Act, we deferred remittance of our 2020 Federal Insurance Contributions Act ("FICA") taxes as allowed by the legislation. We deferred $41.6 million of the employer portion of FICA taxes for payroll paid between March 27, 2020 and December 31, 2020. We paid 50% of the FICA deferral during the year ended December 31, 2021 with the remaining 50% expected to be remitted on January 3, 2023.

For the GR Plan in the U.S., we have deferred our contractual contribution and negotiated a contribution payment plan of $5.0 million per quarter through June 30, 2022. Additionally, in response to the COVID-19 pandemic, our GR Plan in the U.S. has deferred certain contractual contributions and negotiated a contribution payment plan of $5.0 million per quarter from December 31, 2020 through the end of June 30, 2022. Beginning with the quarter ending December 31, 2022, and ending with the quarter ending September 30, 2024, the GR Plan's appointed actuary 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, the Company 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 the Company's 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 the Company has made a total of $5 million of contractual contributions subsequent to June 30, 2022. On August 31, 2022, Gannett Media Corp., our wholly-owned subsidiary, as sponsor of the GR Plan, entered into an agreement pursuant to which the GR Plan used a portion of its assets to purchase annuities from the Insurers and thereby transferred approximately $450 million of the GR Plan's pension liabilities and related pension assets. As of August 31, 2022, this agreement irrevocably transferred to the Insurers future GR Plan benefit obligations for certain Participants on the Effective Date and Gannett Media Corp. has no financial responsibility for the Participants' benefits on or after such date. As of the Effective Date, the Insurers have assumed responsibility for administrative and customer service support, including distribution of payments to the Participants. Participants' benefits were not reduced as a result of this transaction.

We expect our capital expenditures for the remainder of 2022 to total approximately $9.5 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.

During the three months ended September 30, 2022, we did not repurchase any shares of Common Stock under the Stock Repurchase Program. During the nine months ended September 30, 2022, we repurchased 800 thousand shares of Common Stock under the Stock Repurchase Program for approximately $3.1 million, excluding commissions. As of September 30, 2022, the remaining authorized amount under the Stock Repurchase Program was approximately $96.9 million.

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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 New 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.

Although we currently forecast sufficient liquidity, a resurgence of the COVID-19 pandemic and related counter-measures could have a material adverse impact on our liquidity and our ability to meet our ongoing obligations, including obligations under the New Senior Secured Term Loan, the 2026 Senior Notes, and the 2027 Notes. We continue to closely monitor the COVID-19 pandemic and other 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.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

See our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for a discussion of our critical accounting policies and use of estimates. There have been no material changes to our critical accounting policies and use of estimates discussed in such report.

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 Operating 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 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.

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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.

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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. 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 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 thousands2022202120222021
Net income (loss) attributable to Gannett$(54,114)$14,687 $(110,769)$(112,514)
Provision for income taxes18,098 2,984 32,649 11,567 
Interest expense27,750 34,603 79,840 109,370 
(Gain) loss on early extinguishment of debt(1,228)3,761 2,264 25,996 
Non-operating pension income(14,990)(23,860)(51,363)(71,644)
Loss on convertible notes derivative— — — 126,600 
Depreciation and amortization44,778 48,107 142,091 154,452 
Integration and reorganization costs33,311 13,619 60,454 35,467 
Other operating expenses249 4 1,665 11,354 
Asset impairments71 2,301 1,010 3,134 
(Gain) loss on sale or disposal of assets, net(7,180)(833)(9,612)9,206 
Share-based compensation expense4,499 4,602 13,277 13,804 
Other Items665 2,092 5,425 1,509 
Adjusted EBITDA (non-GAAP basis)$51,909 $102,067 $166,931 $318,301 
Net income (loss) attributable to Gannett margin(7.5)%1.8 %(5.0)%(4.7)%
Adjusted EBITDA margin (non-GAAP basis)7.2 %12.8 %7.5 %13.4 %

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, including from changes in interest rates and foreign currency exchange rates. Changes in these factors could cause fluctuations in earnings and cash flow. In the normal course of business, exposure to certain of these market risks is managed as described below.

Interest Rates

We generally manage our risk associated with changes in interest rates through the use of a combination of variable and fixed-rate debt. As of September 30, 2022, we had variable and fixed-rate debt totaling $467.9 million and $851.6 million, respectively. Our variable-rate debt consisted of the New Senior Secured Term Loan, which bears interest at the Adjusted Term SOFR which was 2.46% at September 30, 2022. A hypothetical interest rate increase of 150 basis points would have increased interest expense related to our variable rate debt and likewise decreased our income and cash flows by approximately $1.8 million and $5.3 million for the three and nine months ended September 30, 2022, respectively. See Note 6 — Debt to our condensed consolidated financial statements for further discussion of our debt.

Foreign Currency

We are exposed to foreign exchange rate risk due to our operations in the U.K., for which the British pound sterling is the functional currency. We are also exposed to foreign exchange rate risk due to our DMS segment which has operating activities denominated in currencies other than the U.S. dollar, including the Australian dollar, Canadian dollar, Indian rupee, and New Zealand dollar.

Translation gains or losses affecting the condensed consolidated statements of operations and comprehensive income (loss) have not been significant in the past. Cumulative foreign currency translation gains and losses reported as part of equity equated to a loss of $35.8 million at September 30, 2022, primarily due to the strengthening of the U.S. dollar compared to the British pound sterling.

Newsquest's assets and liabilities were translated from British pounds sterling to U.S. dollars at the September 30, 2022 exchange rate of 1.09. For the nine months ended September 30, 2022, Newsquest's financial results were translated at an average rate of 1.26. A hypothetical 10% fluctuation of the price of the British pound sterling and the currencies in our DMS segment against the U.S. dollar would not have materially impacted operating income for the three and nine months ended September 30, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments with respect to the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should consider the risks described in Part I, Item 1A, "Risk Factors" of our Form 10-K for the year ended December 31, 2021. Except as set forth below, there have been no material changes from the risk factors previously disclosed in the Form 10-K for the year ended December 31, 2021. Any of these risks and uncertainties, including those discussed below, could materially and adversely affect our business, results of operations, financial condition, and/or the market price of our Common Stock. The risks described below and in our Annual Report on Form 10-K for the year ended December 31, 2021, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our financial condition and/or operating results.

Risks Related to Macroeconomic Factors

Volatility in the U.S. and global economies, macroeconomic events and market disruptions have had, and may in the future have, a material and adverse impact on our business, financial condition, and results of operations.

We are currently operating in, and expect for the foreseeable future to continue to operate in, a period of economic uncertainty and market volatility, including as a result of higher inflation, increased interest rates, supply chain disruptions, fluctuating foreign currency exchange rates and other geopolitical events. These conditions have had, and may continue to have, a negative impact on our business, including the demand for advertising and advertising revenues. As a result of the challenging economic environment, we experienced a longer than anticipated sales cycle for digital advertising and digital marketing solutions during the third quarter of 2022 compared to the first and second quarters of 2022. In addition, during the second and third quarters of 2022, uncertain economic conditions resulted in a reduction in demand for our print and digital advertising, reduced the rates for our advertising, caused marketers to reduce or stop spend, and adversely impacted our advertising revenues. Continued declines in market spend or advertisers’ changing priorities in response to any further economic slowdown or decline could have a material adverse impact on our business.

These challenging economic conditions, especially higher inflation and interest rates, have had, and may continue to have, an adverse impact on our consumers and consumer spending, which, in turn, could materially and adversely affect our business. Discretionary purchases, including for 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. In the second and third quarters of 2022, increased consumer price sensitivity from our print and digital-only subscribers, along with delivery challenges associated with labor shortages, and ongoing consumer sentiment negatively impacted print circulation volumes.

Higher interest rates, which may continue to rise in the future, could result in increased borrowing costs which may negatively affect our operating results. We are exposed to potential increases in interest rates associated with our New Senior Secured Term Loan. Further, if the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain in a timely manner, if at all, or on favorable terms, as well as more costly or dilutive.

Our operations in foreign jurisdictions have also been affected by volatile markets, uncertain economies, and geopolitical and local events. We have been and will continue to be impacted by fluctuations in foreign currency exchange rates, primarily related to our operations in the U.K. In addition, the invasion of Ukraine and its resulting impacts, including supply chain disruptions, increased fuel prices, international sanctions and other measures that have been imposed, have adversely affected, and may continue to adversely affect, our international operations.

We have been, and may continue to be, impacted by inflation, higher costs associated with labor, newsprint, ink, printing plates, fuel, delivery costs and utilities, higher interest rates, and supply chain disruptions. Global or regional recessions, perceived or actual, higher unemployment and declines in income levels may also materially and adversely affect our business and financial condition. Any sustained economic downturn in the U.S. or any of the other countries in which we conduct significant business could materially and adversely affect our business, operating results, and financial condition.

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Additional Risks Related to Our Business

Our future financial results will suffer and we may not be able to achieve our financial performance goals if we are unable to successfully implement our cost control programs and initiatives to improve profitability.

In the third quarter of 2022, we announced that we were implementing cost control programs and initiatives to help mitigate the impact of the challenging economic environment. We may not be able to achieve the expected operational efficiencies, cost savings, and other benefits from these initiatives. The actual amount and timing of the initiatives and related cost savings resulting from these actions may differ from our current expectations and estimates. If we are not able to successfully implement our cost control actions to improve profitability, our future financial results, including the Company's liquidity, will suffer and we may not be able to achieve our financial performance goals.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Purchases of Equity Securities

In February 2022, the Company's board of directors authorized the repurchase of up to $100 million of the Company's Common Stock (the "Stock Repurchase Program"). 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 will depend on a number of factors including, but not limited to, the price and availability of the Company's shares, trading volume, capital availability, Company performance and general economic and market conditions. The Stock Repurchase Program may be suspended or discontinued at any time. During the three months ended September 30, 2022, the Company did not repurchase any shares of Common Stock under the Stock Repurchase Program. During the nine months ended September 30, 2022, the Company repurchased 800 thousand shares of Common Stock under the Stock Repurchase Program for approximately $3.1 million, excluding commissions. As of September 30, 2022, the remaining authorized amount under the Stock Repurchase Program was approximately $96.9 million.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

This item is not applicable.

ITEM 5. OTHER INFORMATION

None.
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ITEM 6. EXHIBITS
Exhibit Number
Description
Location
10.1
Binding Term Sheet by and between Gannett Media Corp., Gannett SB, Inc., Tipico USA Technology, Inc., and Tipico US Group Corp., dated as of July 29, 2022.*
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(d) of the Securities Exchange Act of 1934.
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(d) of the Securities Exchange Act of 1934.
32.1Section 1350 Certification of Principal Executive Officer.
32.2Section 1350 Certification of Principal Financial Officer.
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The following financial information from Gannett Co., Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income; (iii) Condensed Consolidated Statements of Cash Flow; (iv) Condensed Consolidated Statements of Equity; and (v) Notes to Condensed Consolidated Financial Statements
Attached.
104Cover Page Interactive Data File (formatted as Inline XBRL and embedded within the Inline XBRL document)Attached.

* Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 3, 2022
GANNETT CO., INC.
/s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and Chief Accounting Officer
(On behalf of the Registrant and as principal financial and principal accounting officer)

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EXHIBIT 10.1

Certain identified information has been excluded from this exhibit (indicated by double asterisks) because it is both (i) not material and (ii) the type of information that the registrant treats as private or confidential.












BINDING TERM SHEET




















    
This Binding Term Sheet (the “term sheet”) is dated July 29 2022 (the “Effective Date”), by and among Tipico USA Technology, Inc., a Delaware corporation (“Tipico”), Tipico US Group Corp., a Delaware corporation ((“Tipico US Group”), Gannett Media Corp., a Delaware corporation (“Gannett Media”), and Gannett SB, Inc., a Delaware corporation (“Gannett SB”). Tipico and Gannett Media are each individually referred to herein as an “Agreement Party” and collectively referred to herein as the “Agreement Parties.” Tipico US Group and Gannett SB are each individually referred to herein as a “Warrant Party” and collectively referred to herein as the “Warrant Parties.” Tipico, Gannett Media and Gannett SB are each individually referred to herein as a “Party” and collectively referred to herein as the “Parties.”
BACKGROUND
(A)The Agreement Parties entered into a Strategic Alliance Agreement (the “Agreement”) with an Effective Date of July 26, 2021 whereby Tipico would utilize Gannett Media’s various assets and solutions to market and promote the Tipico Gambling Services as set forth therein. In addition, pursuant to the Agreement, Tipico US Group issued a warrant to Gannett SB with a $0.00 strike price to acquire up to 4,990 shares of common stock, representing a minority interest, of Tipico US Group, a portion of which vested upon signing and the remainder of which vests in four tranches based upon qualified player referrals (the “Tipico Warrant”).
(B)The Agreement Parties have mutually consented to terminate the Agreement and have agreed terms for the full and final settlement of the early termination and wish to record those terms of settlement, on a binding basis, in this term sheet and to set forth the terms of a new agreement between the Parties (the “New Agreement”). The Warrant Parties have mutually consented to terminate the Tipico Warrant and have agreed terms for the purchase of the Tipico Warrant and wish to record those terms, on a binding basis, in this term sheet. It is understood that the New Agreement will be solely a media partnership and not include any grant of equity (or rights to equity) to Gannett Media or any of its Affiliates by Tipico US Group or its Affiliates.
(C)The Parties agree that the Agreement is hereby terminated as of the Effective Date, as defined below (the “Termination”). For the avoidance of doubt, the exclusivity provisions set forth in the Agreement shall be of no further force or effect, it being understood the New Agreement will set forth any applicable exclusivity provisions.
(D)All defined terms in this term sheet shall have the same meaning as under the Agreement unless otherwise defined herein. All dollar amounts set forth herein are US dollars.
For good and valuable consideration, the Parties hereby agree as follows:
1.EFFECT OF THIS AGREEMENT
The Parties hereby agree that on signature by an authorized representative of both Parties, this term sheet shall immediately be fully and effectively binding on them. The Parties may agree the terms of a long-form agreement and other related documentation customary for transactions of this type that
2



contain (among other things) customary representations, warranties and indemnities. The Parties will use commercially reasonable efforts to negotiate and execute such long-form agreement and other documentation promptly following the date of this binding term sheet. However, until such time as this binding term sheet is replaced by any such further documentation, this binding term sheet remains binding on, and memorializes the legal and enforceable rights and obligations of, the Parties. The Parties acknowledge that Gannett Media is in receipt of a payment of twenty million dollars ($20,000,000) from Tipico under the Agreement (the “Funds”); such Funds will continue to be held by Gannett Media and used to apply to and offset payments required to be made by Tipico under the New Agreement.
2.NEW AGREEMENT
The Parties agree to the material terms of the New Agreement as set forth in Exhibit A.
3.TIPICO WARRANT PURCHASE
The purchase price for the Tipico Warrant will be [**], payable upon execution of this term sheet by applying the Funds and delivery of the Tipico Warrant by Gannett SB to Tipico US Group (or any of its Affiliates) and allocable as follows:
o[**] with respect to the vested portion of the Tipico Warrant
o[**] with respect to the unvested portion of the Tipico Warrant

Gannett SB represents and warrants to Tipico that: (i) Gannett SB has, and at the time of sale of the Tipico Warrant to Tipico US Group (or any of its Affiliates) will have, good and valid title to the Tipico Warrant, free and clear of all liens, security interests, encumbrances, equities and claims, with no defects of title whatsoever (other than any restrictions set forth in the Tipico Warrant and related agreements and securities law); and (ii) Gannett SB is not a party to or bound by any agreement, or any judgment, decree or ruling of any governmental authority, affecting or relating to Gannett SB’s right to transfer the Tipico Warrant.
 
4.CONSIDERATION UNDER NEW AGREEMENT
The Agreement Parties agree to the consideration terms of the New Agreement as set forth in Exhibit A.
5.RELEASE
Each Party acknowledges that the grant of the consideration, as described in this term sheet, is in part in consideration of full and final settlement of, and each Party hereby releases and forever discharges, all and/or any actions, claims, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to the Parties or to the law, and whether in law or equity, that it, its Related Parties (as defined below) or any of them ever had, may have or hereafter can, shall or may have against the other Party or any of its Related Parties arising out of or connected with the Agreement and the Tipico Warrant and the termination thereof (together the “Released Claims”). Notwithstanding anything to the contrary contained herein, the Released Claims shall not include any right or obligation of any Party under or related to this term sheet or the New Agreement.
3



6.AGREEMENT NOT TO SUE
6.1Each Party agrees on behalf of itself and on behalf of its Related Parties, not to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the other Party or its Related Parties any action, suit or other proceeding concerning the Released Claims, in this jurisdiction or any other.
6.2Clause 6.1 shall not apply to, and the Released Claims shall not include any claims in respect of any breach of or otherwise under this term sheet.
6.3“Related Parties” means, with respect to any Party, all persons and entities controlled by, controlling or under common control with such Party.
7.COSTS
The Parties shall each bear their own legal costs in relation to this term sheet and the New Agreement except as otherwise provided herein or therein.
8.WARRANTIES AND AUTHORITY
8.1Each Party warrants and represents that it has not sold, transferred, assigned or otherwise disposed of its interest in the Released Claims.
8.2Each Party warrants and represents to the other with respect to itself that it has the full right, power and authority to execute, deliver and perform this term sheet and the New Agreement and will perform its obligations in full compliance with applicable law.
9.INDEMNITIES
Each Party hereby indemnifies, and shall keep indemnified, the other Party against all costs and damages (including the entire legal expenses of the Parties) incurred (a) in all future actions, claims and proceedings in respect of any of the Released Claims which it or its Related Parties or any of them may bring against the other Party or its Related Parties or any of them or (b) related to or arising from third party claims alleging or resulting from an alleged breach of this term sheet (including but not limited to the matters contemplated by clause (a)) or the New Agreement by the indemnifying party.
10.NO ADMISSION
This term sheet is entered into, in part, in connection with the compromise of the Agreement and in the light of other considerations. It is not and shall not be represented or construed by the Parties as, an admission of liability or wrongdoing on the part of any Party to this term sheet or any other person or entity.
4



11.CONFIDENTIALITY
11.1The terms of this term sheet, and the substance of all negotiations in connection with it, are confidential to the Parties and their advisers, who shall not disclose them to, or otherwise communicate them to, any third party without the written consent of the other Party other than:
(a)To the Parties' respective auditors, insurers and lawyers on terms which preserve confidentiality.
(b)Pursuant to an order of a court of competent jurisdiction, or pursuant to any proper order or demand made by any competent authority or body where they are under a legal or regulatory obligation to make such a disclosure.
(c)As far as necessary to implement and enforce any of the terms of this term sheet; and
(d)To issue an agreed statement or press release in terms to be agreed by the Parties
12.MISCELLANEOUS
The provisions of Sections 14 and 15 (other than Section 15.4) of the Agreement are incorporated herein by reference.
WITHOUT LIMITING EITHER PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTION 9, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR DELAYS, INDIRECT, SPECIAL, INCIDENTAL, RELIANCE, OR CONSEQUENTIAL DAMAGES OF ANY KIND (INCLUDING LOST PROFITS), INTERRUPTIONS, SERVICE FAILURES, AND OTHER PROBLEMS INHERENT IN USE OF THE INTERNET AND ELECTRONIC COMMUNICATIONS OR OTHER SYSTEMS OUTSIDE OF THE PARTY’S REASONABLE CONTROL REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE, EXCEPT IN THE CASE OF FRAUD, WILLFUL MISCONDUCT, OR BREACH OF SECTIONS 3, 5, 6, 9 OR 11. The Parties agree that the limitations specified in this Section 12 will survive and apply even if any limited remedy specified in this term sheet is found to have failed of its essential purpose.

5




This term sheet has been entered into on the date stated first above written.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

TIPICO USA TECHNOLOGY, INC.


By:    /s/ Adrian Vella    
Name:    Adrian Vella
Title:    President
GANNETT MEDIA CORP.


By: /s/ Michael E. Reed                      
Name:    Michael E. Reed
Title:    CEO

GANNETT SB, INC.


By: /s/ Michael E. Reed                  
Name:    Michael E. Reed
Title:        CEO

TIPICO US GROUP CORP.


By:    /s/ Adrian Vella    
Name:    Adrian Vella
Title:    President


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EXHIBIT A




•Term of Strategic Media Partnership: Four (4) years starting 1 August 2022

•Termination Of Existing Deal - Existing Strategic Alliance Agreement to be mutually terminated to coincide with the execution of this term sheet
•Minimum Annual Commitment –as outlined in Exhibit 1 (“Minimum Annual Commitment”) which results in a Total Commitment under the New Agreement (including Service Fees) of [**].

•Quarterly Media Spend Allocation - To be determined for each annual period of the Strategic Media Partnership to meet the agreed upon Minimum Annual Commitment as illustrated in the example provided in Exhibit 1.
oQuarterly periods to coincide with calendar year quarters (i.e., Q3 July – September)
oQuarterly media plans for the third (3rd) and fourth (4th) quarters of 2022 to be submitted by August 1st, 2022
oThe media below has been committed to prior to execution of this agreement and will thus maintain pricing as shown below [**]
oFuture Quarterly media plans to be agreed upon ninety (90) days prior to quarter
oQuarterly media spend allocation to be at least fifteen percent (15%) of Minimum Annual Commitment for a given quarter (“Minimum Quarterly Commitment”)
oIf actual spend in a quarter is above the agreed quarterly allocation, the excess will apply to Minimum Quarterly Commitment in next quarter for the annual period; any excess over Minimum Quarterly Commitment or Minimum Annual Commitment will not roll over to subsequent annual periods
oOnly spend on Owned and Operated media and, to the extent expressly set forth herein, will be applied against the Minimum Quarterly Commitment and Minimum Annual Commitment. No other spend will be credited or applied against such minimums.

•Owned and Operated Media Discount & Services – As detailed in Exhibit 5, Owned and Operated media to be provided at a twenty-five percent (25%) discount to Rate Card
oRate Card means the rates that are generally made available to advertisers at any time at the same or similar level of advertising dollars spent as Tipico’s Minimum Annual Commitment for that annual period
oDiscount to adjust upward based upon increased annual spend as outlined in Exhibit 4.
oAny third-party media coordinated by Gannett (i.e., Dark Social) subject to additional fifteen percent (15%) account services fee
Account services fees will be applied toward Minimum Quarterly Commitment and Minimum Annual Commitment
oGannett to provide access to creative production services at fair market rates
Production must follow GET Creative schedule in Exhibit 3 and can be utilized for Gannett on-platform, Gannett-managed third-party media, paid social and Tipico owned and operated channels
GET Creative will provide layered PSD file templates for all creative assets, which Tipico may edit and use as they see fit
Creative production costs will be applied toward Minimum Quarterly Commitment and Minimum Annual Commitment up to ten percent (10%) of Minimum Annual Commitment.
oBranded content that runs on O&O platforms will be reduced by twenty percent (20%) from Rate Card
Branded content cost will be applied toward Minimum Quarterly Commitment and Minimum Annual Commitment
oProgrammatic
Non-guaranteed preferred deal/fixed rate (PD) – Tipico receives additional ten percent (10%) discount off standard IAB units at rate card on top of standard 25% discount, or then applicable discount per Exhibit 4. Cannot facilitate high-impact and take-overs through non-guaranteed programmatic channels.
Non-guaranteed private auctions/floor (PA) – Tipico receives additional twenty percent (20%) discount off standard IAB units at rate card on top of standard 25% discount, or then
7



applicable discount per Exhibit 4. Cannot facilitate high-impact and take-overs through non-guaranteed programmatic channels.
oGannett to provide Tipico access to marketing, research, and creative team services at fair market rate
Associated fees to be credited against the Minimum Quarterly Commitment and Minimum Annual Commitment up to ten percent (10%) of the Minimum Annual Commitment
oTen percent (10%) of actual media spend but no more than $350,000 to be paid as services fee for account management, planning and staffing
Paid quarterly net-thirty (30) days corresponding to actual quarterly media spend; 10% of Annual Minimum Commitment must be met during annual period
Continued Gannett support on par with Minimum Annual Commitment

•Exclusivity
oTipico to retain exclusive category rights in Colorado, Indiana, Iowa, New Jersey, and Ohio during the term based on satisfying the Minimum Annual Commitment outlined in Exhibit 1
oTipico will have “Exclusive Sports Betting and iGaming Partner” designation in the states in which it owns exclusive category rights
oTipico may use “Official Betting Partner” designation for any nationally focused advertising

•Future Exclusivity
oFuture Regulated State Exclusivity - Tipico receives right of first offer (ROFO) for exclusivity in NEW states legalizing online betting and/or iGaming (i.e. states which have not legalized online betting or iGaming as of the date of this term sheet)
•Tipico to notify Gannett in writing no later than ninety (90) days post legalization (the date the sports betting and or iGaming bill was passed) of its intent to secure exclusivity based on the current State Media Value (Exhibit 2) as determined for the annual period in which the state legalizes.
•New state exclusivity to be added through an amendment to the New Agreement with corresponding State Media Value added to the applicable Minimum Annual Commitment for such annual period prorated based on Tipico launch date in such New State based upon a mutually agreed upon start date for media spend
oLive Sports Betting States Exclusivity – States in which sports betting or iGaming have been legalized on the date of this term sheet may be added to exclusivity list with six (6) months’ advance written request by Tipico
•To be based on the current State Media Value (Exhibit 2) as determined for the annual period for the launch of the Tipico sportsbook or online Casino in the state
•Live sports betting states that are added to exclusive list shall be done so through an amendment to the New Agreement with corresponding State Media Value added to the applicable Minimum Annual Commitment for such annual period prorated based on a mutually agreed upon start date for media spend
•National Media Elements - Gannett shall provide Tipico offers/odds in the following national media elements free of charge during the term. Tipico odds/offers will be provided on an exclusive basis in Tipico exclusive states and a non-exclusive base in all other states. Tipico will pay Gannett a CPA of [**] for each Qualified Player (QP) generated through these assets as long as Tipico agrees to participate in these channels [**].
oSponsored Editorial
oBest Bets Widget
oOdds & Scores Hub
oAffiliate Links

•Teams will make their best effort to continue collaboration on existing and future integrations (i.e., single sign-on capabilities)

•Tipico to have ROFO to participate in Gannett owned events
oEvent opportunities and associated cost to be presented to Tipico no less than eight (8) months in advance of go-live, with binding agreement to participate required no later than seven (7) months in advance
oEvent cost will be reduced by twenty percent (20%) off fair market value and count towards the Minimum Quarterly Commitment and Minimum Annual Commitment, up to twenty percent (20%) of the Minimum Annual Commitment


8



•Syndication
oSubject to the exclusivity rights of Tipico under the New Agreement and any gaming laws, Gannett permitted to syndicate sports betting content to third-party platforms

•New Agreement to include customary default, termination, warranty, representation, and indemnification provisions.

Cash Consideration:
Payments due under the New Agreement (including the purchase price for the Tipico Warrant) will first come from the Funds (see estimates in table below). Once the Funds have been exhausted Tipico will be responsible for making all additional payments due on a timely basis. [**]

Exhibit 1 – Minimum Annual Commitment [**]

Quarterly Minimum Spend Example [**]

Exhibit 2 – 2022 State Media Value

State Media Value to be adjusted annually by January 31st based on the current market value of sports audience as determined by unique users, rate card and market demand. Future increases not to exceed three percent (3%) annual growth, on a cumulative basis, in the State Media Value. [**]

Exhibit 3
GET CREATIVE production schedule

Timeline
Creative ProductTiming
Concepting2 weeks
Digital Ads3 - 4 weeks
Social Ads3 weeks
Print Ads3 - 4 weeks
Email4 weeks
Audio12 – 14 weeks
Video12 – 14 weeks
Written Content4 – 5 weeks
One-sheet & Brochure4 – 5 weeks
Branded content article6 weeks
Branded content interactive9 – 10 weeks
Branded content video12 – 14 weeks


Exhibit 4 [**]


Exhibit 5
Owned & operated (O&O) media eligible for the discount to include:
•Standard IAB units, including high-impact and take-overs, direct and programmatic guaranteed (PG) advertising
•sponsorship of video franchises (i.e. Lorenzo’s Locks) or features (i.e. Expert Picks)
•podcasts
•Standard print advertising placements, excluding stickers, inserts and cover wraps

Upon agreement by both parties, other media may be added during the term.


9

EXHIBIT 31-1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(d) OF THE SECURITIES EXCHANGE ACT OF 1934
I,     Michael E. Reed, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Gannett Co., Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2022
/s/ Michael E. Reed
Michael E. Reed
President and Chief Executive Officer
(principal executive officer)

EXHIBIT 31-2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(d) OF THE SECURITIES EXCHANGE ACT OF 1934
I,     Douglas E. Horne, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Gannett Co., Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2022
/s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and
Chief Accounting Officer (principal financial and principal accounting officer)

EXHIBIT 32-1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Gannett Co., Inc. (“Gannett”) on Form 10-Q for the quarter ended September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. Reed, President and Chief Executive Officer of Gannett, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)    the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2)    the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Gannett.
/s/ Michael E. Reed
Michael E. Reed
President and Chief Executive Officer
(principal executive officer)
November 3, 2022

EXHIBIT 32-2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Gannett Co., Inc. (“Gannett”) on Form 10-Q for the quarter ended September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas E. Horne, Chief Financial Officer of Gannett, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)    the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2)    the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Gannett.
/s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and
Chief Accounting Officer (principal financial and
principal accounting officer)
November 3, 2022