Cover Internet here at Citizens. I'm very pleased to be hosting a conversation with Michael Reed, the CEO of Gannett. Thank you so much for being here and participating. Thank you, Andrew. Thanks for having us. Let's kick it off. The business is nearing an inflection point in 2025. Digital is expected to reach 50% of the business. What are the key steps to get there? Talk about kind of the guidance range in terms of that 7%-10% growth of digital and the drivers to be able to achieve that. Yeah, it is a milestone year for us in terms of hitting that inflection point. For those that may be new to Gannett, we have this legacy print business that's been in secular decline, and we have this growing and large-scale digital business. The digital business is nearing 50% of total revenues and surpassing 50% of total digital total revenue coming from digital. With that revenue stream growing at 7%-10% and seeing print declines kind of in that 7%-10% range, we reach that inflection point where we become a sustainable, growing top-line business with sustainable, growing profit, EBITDA, and free cash flow. It is a big year for us. We do think that the legacy print business has some legs in it, so it's not anything that's going away, and we are moderating those declines. The key really is the digital growth, and we are forecasting 7%-10% growth in that category. It really comes from a variety of revenue streams. We're not banking on just one thing, but we have a digital advertising business, and that digital advertising business has various segments, including premium that we sell, as well as programmatic. Video is a new and growing part of our advertising business. We have a digital subscription business, which has room to grow, and we have essentially a big bucket where we leverage all the content we produce to either license it to third parties who can use it or to use it on platform to drive different types of revenues through affiliate partnerships and e-commerce. We look collectively at all these different revenue opportunities, and with the scale we now have, which is more than 200 million uniques a month and over 1 billion page views a month, we see this opportunity to kind of really have a prolonged, accelerated digital revenue growth opportunity. Let's double-click on the scale of that engagement that you just talked about. 200 million, it's impressive. Can you walk us through the plans to monetize your audience in 2025? And then how additionally should we be thinking about audience growth for this year? Yeah, so I think the hardest part is building the scale, right? We've done that, which was a huge accomplishment. We've put a lot of resource and effort and utilizing data and then making the investments to really drive that audience. We're now the largest media audience in the U.S. with that 200 million uniques. From here, now it's all about monetization. We have scale, and now it's monetization. We're using data, and we're using technology to really drive that digital revenue growth. We're using data to drive engagement, and we're using technology to make a more personalized experience for every single consumer on our platform. One of the tools we've introduced is identifying as consumers use our platform, whether they're more likely to be a subscriber or more likely to be somebody that we need to serve advertising to, or whether they're more likely to be somebody that we should engage from a paid perspective through newsletters or a club that we have started or potentially an e-commerce opportunity. Really, the way to think about our revenue opportunity is we have scale, we built that, now we monetize that audience through data and technology, driving more engagement in a more personalized effect and leveraging essentially AI to help us really fine-tune with every single consumer where the best opportunity is with that consumer. We think the growth opportunity is just quite tremendous. We are, from a scale perspective, over a billion now in revenue. We have about $1.1 billion total digital revenue. As I said, we're closing in on 50% of total revenue coming from digital. We will surpass that this year. We have taken steps to moderate the print declines too because we do think there's legs there, and they do throw off a lot of our print business throws off a lot of cash flow. We're excited about the digital opportunity, and we think the hardest part is done in terms of building that audience and that scale. Now it's leveraging the technology and the tools we have in place to drive engagement and a personalized experience. Sports content was a big win in 2024. Yeah, sports has been a huge win for us. Also, health and wellness, lifestyle, not the things you think of from a traditional news standpoint. Our investigative reporting is always a big driver of audience and stickiness with audience. Investigative reporting is a little more lumpy because you don't know when and where news is going to break. We've had a ton of success with investments in breaking news, what's trending, sports, health and wellness, and lifestyle. They've been huge categories for us this year. Look, we're not sitting in a room making it up and saying, "We think this is going to be where we need to go." We're listening to the data. Our audience is so big, and we're just watching, and we understand what they're consuming, what are they interested in, what do they spend the most time with. Part of the personalized experience is taking this huge, vast archive of content that we have and making it more evergreen. As somebody's reading a story, at the bottom of that story, we can have three or four links to other content we've done that is very relevant to that story. To bring consumers down through the whole story, we're utilizing AI to help us with essentially editing. Like what should the lead be? What should the headline be? What should the first couple of paragraphs look like? What's going to help a consumer stay engaged all the way through the end? We're really excited about the opportunity here. Talk about video in terms of the evolution of the content strategy for kind of 2025 and then probably even 2026, right? Yeah, for sure. I mean, video is a central part of our strategy, both from a content distribution standpoint as well as an advertising play standpoint. We understand that consumers, in many cases, would rather listen and watch a video and listen to the piece than read the story. Our ability to meet the needs of consumers and to be able to deliver much higher CPMs around that with video advertising is a big opportunity for us. In video advertising, CPMs for what I would say zero and zero on our platform would be somewhere in the neighborhood of $10 CPMs, and video can be north of 30. It is a tremendous opportunity, but it is where consumers are going. It is what they want. We have partnered with a couple of different companies on the technology side to help make it seamless for us to produce video content and to sell video advertising and to help our clients who do not have the sophistication to prepare a video ad to have that done for them. Subscriber growth has been very solid. Subscriber revenue, double digits. Talk about the persistence of that, and let's very specifically double-click in terms of pricing and how you perceive that as a growth lever going forward. Yeah. Our RPUs right now are in the neighborhood of $8 a month, and our industry in most markets around the country that we're able to track, and we're part of a consortium where everybody shares their information. We understand that the industry-wide RPU right now is closer to $16 a month. We understand there are some real leaders out there, like the Dallas Morning News or like the Boston Globe, that are over $20 a month. Again, we're at $8 a month. We understand that our opportunity on the pricing side is quite significant. We're particularly excited when you drill into digital subscription revenue because our penetration rates are still low with 2 million paid digital subscribers. We have plenty of room to grow from a volume perspective, but we also have a ton of room to grow from an RPU perspective. Over the next five years, seeing both volume and RPU growth gets us particularly excited. It's basically close to a $200 million revenue category for us now that could triple over the next few years. Just talk about subscriber in terms of the unit growth of subs, right? What are the levers you have to be able to continue to move that forward, especially as you have seen the strong engagement up top? Yeah, the main drivers of subscription growth will be, there's really three things. Number one will be the technology or the tools we have to personalize the experience right now. Having a more personalized experience and engaging with that consumer more, we believe, will lead to increased subscriptions. Secondly is understanding which of our audience are more likely to be a subscriber versus our audience that's never going to subscribe and focusing our subscription efforts with pricing and promotion and things like that geared towards those that are most likely to become a subscriber. Third is simply our promotional efforts and getting a lot smarter using AI to target what the right promotional offerings are, what are the right ways to engage. Say the first two, three weeks, we know if a subscriber is going to stay based on their usage on the platform those first two or three weeks. Really that third bucket for us is retention. How do we do the best job we possibly can when somebody subscribes, comes in most likely through a promotional pricing promotion, and then how do we engage with them so that we improve the retention on the back end? You announced a Reuters deal recently in terms of licensing the content. Can you talk about the process of that strategy in terms of what's kind of the opportunity at large? Help us understand kind of the TAM. Where are you in terms of executing on that opportunity? Yeah, so it's actually an area of the business. I'm glad you brought up. It's an area of the business I don't think we get enough credit for. We have close to $100 million in essentially licensing revenues today based on the content we produce. We have licensing deals with companies like Yahoo and MSN. We have smaller licensing deals we've just cut in the AI space with Microsoft. I don't know if anybody saw there was an announcement from Amazon. They have an AI tool for Alexa that they're launching in April, and they did a promotion last week, and we're one of their few publishing partners there. We've cut a licensing deal with Amazon. We did the Reuters deal, which you mentioned. There's this whole arena, and we don't know what the addressable market is yet, but it's big. There is this whole arena around all of these AI technologies, and especially as AI moves to search and the need for copyright-protected content. That is a huge opportunity for us. We've done a couple of deals today. We have a pipeline of deals to come. These are all what I would say relatively smaller in nature, $1-$3 million type deals a year. We see an opportunity to build a robust pipeline or a robust number of those deals. The bigger AI plays are really around licensing all of our copyright-protected content to the big AI search engines that materialize over the next few years. On the Reuters side, a little bit of a different strategy in that we saw a need in the news industry, not just newspapers, but broadcast, radio, those businesses as well, where the Associated Press was not making the changes it needed to make to adapt to the new world. What businesses want today from the Associated Press is a much more à la carte type service with much more flexible pricing. The association was not able to make those changes, and it was not working for us. We were spending way too much money and not really getting the sliver of the content they produced that we actually wanted. We said, "We can do this better ourselves," which we did. We said, "Why don't we? This is a business opportunity. We partnered with Reuters and said, "Look, there's a market out there for news organizations around the world who want a much more flexible model for purchasing content with lower price points." What the addressable market is, it remains to be seen, but we're pretty excited about that. You mentioned AI deals in that response. It feels like that's slowed down just universally, right? Like look at Reddit over the last kind of year. What's your sense of the AI deal market, and how does that relate to Gannett? I think there's two things that my view is there's two things. One is there's going to be a series of smaller deals that we will be players in because we have such a breadth of content that we can provide niche content at scale. If somebody's looking for a significant amount of sports content, we can provide that or lifestyle or local news or something like that. There's a pipeline, and that pipeline is going to continue to grow for smaller deals with niche content needs that we will be at the top of the list because of our scale. We're excited about that opportunity. We do not necessarily think it's a game changer for our company. The other part really, which I think is, and you mentioned slowing down, there's not as many deals right now. There's a pretty far bridge between where media companies value the content that they produce every day and monetize every day versus what the AI technology companies view as value and what they're willing to pay for it. Ultimately, I think there's some cases in the courts right now that rulings will come out, and I really think that those rulings in favor of copyright-protected news organizations like the New York Times lawsuit against OpenAI and Microsoft or Tribune's lawsuit against them, those cases probably settle. We have more established law right now that says this is copyright-protected content. If you want to use it for commercial purposes, you got to pay for it. We need to hammer out fair value. I think the bridge is too far right now to meet somewhere from a fair value perspective. I think there needs to be some rulings from a judge. What's your view of the timeline of that? Yeah, I think the two big cases from the New York Times and Tribune have summary judgment in the next couple of months. I think based on summary judgment, assuming that nothing's thrown out and this thing moves forward, you're probably 12 to 24 months away from being in the courtroom and having. Before you guys materialize that kind of opportunity of monetizing that asset via AI. Yeah, definitely more of a long-term opportunity. All right, let's transition a little bit. Let's talk about the cost redundancy opportunity. How do you feel about areas to continue to create efficiencies? And then are you able to quantify that? Yeah, so we have about $2.2 billion or so in costs. We do have still significant opportunities, mostly on the legacy side. From a quantification standpoint, what I would say is our costs were down last year about 6% year over year. I would expect that again. I think we'll be able to have costs down again at least another 6% year over year this year. The three big areas that we're focused on are really tied to the legacy business and not to the digital business. Number one is manufacturing, print sites, continuing to consolidate our printing operations, and in some cases, outsourcing printing and shutting down our printing operations is a big area of savings today, but future savings going forward. Distribution is another big one for us. We have been converting from using our own independent contractors to carry newspapers to the house to the post office. What we have seen there is actually an improvement in customer service. Independent contractors have been very flighty, especially since COVID. We have had much lower issue rates with consumers from a delivery perspective moving to the post office. We are saving about 50% of our costs. It costs us about $0.41 to deliver a newspaper to somebody's house, and through the post office, it is about $0.22. We are seeing significant savings there with improvements in customer service. That has been a real nice thing for us. We are going to continue to move that ball forward. Distribution cost savings, manufacturing cost savings, and then third is our centralized and corporate services, which we are continuing to focus on. How do we leverage AI to become more efficient? How do we automate more tasks that we've been doing on a more manualized basis? Especially when you have multiple companies that have been pulled together over the last 10 years. There are disparate technology systems and different systems that we're doing a lot of different things on, pulling them together, having one technology system, outsourcing, automating, and then using AI to get more efficient. We see a pretty big opportunity to further remove centralized costs. Centralized costs, manufacturing costs, distribution costs are the three big buckets we're focused on. There is no reason why we can't do another 6%+ cost reductions in 2025 and in 2026. You announced the sale of the Austin American-Statesman. Can you talk a little bit about how you're thinking about sales of other publications going forward and just big picture? Talk about the strategy of kind of what may be for sale and what may not be. Yeah, so I would say we're not actively marketing anything. We do actively listen to inbounds from locals who may have a reason to really want to own that paper and are willing to pay up for it. We're not in the business of selling our businesses at multiples that aren't highly accretive to where we trade today. We listen to inbounds. Nothing's actively marketed for sale. The thing I would say is we've talked actually for the first 25 minutes today about the importance of scale to our strategy. Going and selling a whole bunch of these markets or these assets has an impact on our strategy, right? Because you start to lose some of that scale. We're not actively marketing anything. I wouldn't expect to see a whole bunch more sales like we did with Austin, but we will be opportunistic. The right buyer at the right price for a market is something we would entertain because it does help us pay down debt. We have leverage to a pretty good spot, but obviously we're going to continue to pay down debt as fast as we can. An asset sale doesn't hurt that. I'm going to keep you on this same topic, right? Maybe not something that's strategic in terms of maybe another publication, but certainly real estate or non-strategic assets. How do you think about the sale of those items? What inning are you in in terms of optimizing that portion of the portfolio? Yeah, late innings. Since we bought Gannett in November of 2019, we have sold, we've paid down about $800 million of debt in the five-year period. Some of that's obviously through mandatory Amort and cash flows, but a large chunk of that's been through asset sales as well. We're late inning in terms of real estate and things like that we can sell. We're not done. We've publicly forecasted about $70 million in asset sales this year from real estate as well as Austin, essentially. We're not done, but we're definitely late innings. The majority of our debt repayment over the next five years will come through mandatory Amort, excess cash flow sweeps, and just the cash flow we're throwing off. Can you confirm that, right? Just talk about capital allocation priorities and where are the uses of capital near to. Our primary use of capital over the next few years will be to continue to pay down debt. Right now, our first lien debt sits in the high twos from a leverage perspective. Through debt pay down and EBITDA growth, we think that will be down close to two by the end of this year, first lien net debt. We'd like to see it at one as soon as possible. We think there's some overhang on the stock, and there's some higher multiple we could trade at as we continue to lower that leverage. We've already seen it as we've moved first lien leverage down to where it is today. As we've pushed maturity dates out with a refinancing we did in Q4 last year, our maturity on first lien debt is not until the fourth quarter of 2029. We do think there's some value to unlock as we continue to pay down debt. That is our primary kind of thought for use of capital for the next few years. There is ample runway to pay that off with cash flows. Okay, we're at one minute, and I'm going to let you bring it all together here, right? What do you think investors are missing in terms of the Gannett story? Yeah, so I think first of all, you have a business that is about to hit a sustainable growth trajectory. Not a melting ice cube any longer, which will bring a multiple re-rating for sure. That growth in both revenue, profitability is driven by a digital business moving away from a print business. You have the largest scaled media business in the United States, and you have a business that's throwing off a ton of cash and paying down debt rapidly. Leverage is going off the table. When I think about a leverage issue, we're moving away from that. It's going off the table. When I think about a digital growth business in a massively scaled media business with a clean balance sheet with ample liquidity, I think the multiple re-rating is quite significant. I think there's also optionality for investors in that the AI deals that we think will come, especially as courts rule in favor of copyright-protected content producers, will be significant and 100% margin. We have a lawsuit for those that have filed our company. We've sued Google for antitrust violations in the digital technology ecosystem. The exact same, really almost the exact same lawsuit as the DOJ has filed, and that case is now sitting in the judge's hands. We're really expecting a ruling any day, any week. Our lawsuit is very similar. There's the optionality for investors of a billion plus type claim that we filed against Google for antitrust violations in the digital advertising ecosystem, combined with AI deals and a multiple re-rating from a growing profitable digital business that's delivering. That's perfect. It's huge.