Hello, everyone. Thank you for joining us today. I'm Ryan Vaughan. I am the Needham TMT and Special Situations Desk Analyst. Thank you for joining us for the Needham Growth Conference as we conclude the week-long conference today. I'm very excited to have the Gannett Senior Management Team with us today. We have Michael Reed, who's the CEO, and Douglas Horn, who's the CFO. We've been doing this for, gosh, maybe five years, something like that in a row. And I'll only say that and lead with that because big credit to the team because you've done a lot in that time, had to deal with a lot, especially in 2020 and 2021. But I look forward to the conversation. And for those of you that might have questions along the way, I'll keep an eye on the dashboard. So let us know.
But Michael, Doug, thank you for joining us today.
Ryan, thanks for having us. I think this is year five, fifth year in a row, and it's great to be back. It's nice to kick the year off of this conference every year.
Well, thank you.
Thank you, everybody.
T hank you for joining us. I guess first things first. I think we jump right into 2025, and again, fully understanding that we still haven't reported for Q yet, but I only say that because what you guys have talked to us about last year was just expecting to hit this inflection point, and again, I say that because I've been working with you guys for the last five years and to get to this point now where your digital businesses are set to exceed the legacy business and the company to return to growth, monumental step here, a game-changing step, as much as you could talk about, but just maybe identify if you can what's driving that, what are the key steps, and maybe just focus a little bit on that digital as it becomes a larger part of the business.
Thanks, Ryan. And we are on the doorstep of that inflection point, which is an exciting time for us. It's been a bit of a long journey to get here. We have about 40, I think as of Q3, about 45% of our revenue coming from digital and about 55% from print. So we're getting close to that 50/50 mark. We have publicly said that we expect to surpass 50% from digital by the end of 2025. So here we are in January of 2025, and we expect by the end of this year to have more than half of our business be digital. That, of course, is an instrumental driver in overall same-store revenue growth or hitting that inflection point. I'd say it's been a long journey.
I think we've taken a different tack than some of our peers in the local media business because we see value in print, and we throw off a lot of cash in print. Our approach has been to invest and grow digital while also trying to extend the tail of print so that from an overall perspective, we have a much more profitable business. I think some of our peers have probably gotten to 50+% of their revenue from digital faster than ours by really letting print go. But in letting print go, you also let a lot of your free cash flow go. We've taken the opposite approach.
And so while I think our approach has been a longer journey, what we've been able to do over that longer journey is maintain and grow profitability and reduce debt, which has been a big focus of ours. So what gives us confidence that we're going to hit the inflection point? I'd say number one in 2025, number one is that we do expect digital to surpass 50% of total revenue. And print's a smaller business. And so we're getting closer and closer to that core customer base that's sticky on the print side. So with the things we're doing to temper the print losses combined with getting down to the much more sticky print customers that will be with us for life or their life, we'll continue to lower print declines off of a lower base.
And then the investments we're making across all the digital revenue categories leading to what we think will continue to be improved digital revenue growth trends puts us there at the inflection point in some point in 2025. I think we may be a bit optimistic too because we have such scale in our digital business. We have 180 million uniques per month on average at our platform, over a billion page views. That scale gives us an opportunity on the digital side, not just to grow subscriptions, but to grow our advertising business, to grow our e-commerce business, to grow our affiliate marketing business. And there's a now growing opportunity for licensing our content on the B2B side to tech and AI companies who are building LLMs and want to play with, want to have a commercial business based on content that's not stolen.
So I think we see a lot of opportunity across many different digital revenue categories that have us excited about the growth opportunity. And then our DMS business is a big one for us. It's struggled a bit, as probably everybody knows. And we're really working hard internally with investments and strategy on returning that to growth in 2025 as well.
So, maybe that's a good segue because when you think about maybe some of your peers or some of the digital media companies, there's a heavy emphasis on subs. And while that's certainly important and you have a really nice base and that base is going to continue to grow, that's not just Gannett. Gannett has other digital assets. And maybe you want to just talk about the broader strategy. I know you mentioned DMS. Just highlight that for investors, just what makes up some of that soon-to-be 50% and some of your monetization strategy there versus maybe what folks are used to seeing with only kind of digital sub business.
Ryan, it's a great point, and I think it's a differentiator for us in terms of strategy, and I think one that will lead to more stability over a longer period of time. If you're going to be an investor in Gannett for three to five years or five to seven years, I think you're going to see more stability out of Gannett over that long run because of this diversified digital revenue strategy. Look, on the sub side, it's a great category for us. It's about $200 million a year now in revenue, and it's still growing, and we expect to grow at 20-plus% type clips, but putting all of our eggs in that basket for us doesn't make any sense because when you have 180 million uniques coming to your platform per month, we know not all of them are going to pay for news.
As a matter of fact, we know only a small percentage of them are going to pay for news. And so while we maximize that small percentage that are going to pay for news, our bigger opportunity is really focusing on the rest of that audience and monetizing them through other different all the touchpoints they have with us, whether it's advertising, our own advertising campaigns or programmatic advertising, our move into video advertising, which has a big opportunity for growth for us because we're relatively small in that part of the advertising ecosystem today, e-commerce and affiliate marketing, our opportunities we see as well.
So our focus on touchpoints where we can monetize the consumer in their journey with us through newsletters, clubs, specific aggregated content that's of interest to a lot of consumers will put us in a position, we believe, and is already doing so, to have monetization across a variety of categories so that we're not entirely dependent on subs. If we're entirely dependent on subscriptions and the subscription environment continues to get even more competitive than it is now, there are going to be winners and losers. And we don't want to put all of our eggs in that basket. We think there's plenty of opportunity to grow with first-party data and would continue to build that first-party data.
There's plenty of opportunity to grow our advertising business with stronger ROIs for our business customers, plenty of opportunity to grow programmatic as we grow page views and audience, plenty of opportunity to grow digital advertising, or I mean, video advertising and then e-commerce and affiliate marketing are relatively small categories for us today, but 180 million uniques coming to us every month for specific things, building out that platform to be able to allow those consumers to transact and take action is a huge opportunity for us, so many businesses in the digital ecosystem, they start and they have great ideas and great technology and no audience and no scale, and so we're starting from a position of strength where we have that audience and have that scale. Identifying the right partners to help us really monetize that audience is where our focus is now.
And so we're pretty excited, but we think it's the right strategy to have a very diversified strategy in terms of the revenue categories. And that also positions us to not be underexposed in any given time over the long run for whatever's hot. At some point, advertising's hot, video's hot, subscriptions' hot, e-commerce is hot. And those things rotate. They're cyclical, right? And so we want to be in all of them so that when one is not hot, we're not overexposed. And when one is hot, we have the opportunity to ride it. So it's really our strategy.
So I've heard you mention two or three times now, Michael, the 180 million monthly uniques. It just seems like a staggering number. Can you walk us through your success around the audience and some of the steps that you're doing to improve that engagement? And then I know you said 180, I think 200 was mentioned. It's like a record the last reporting quarter. But just talk to us about how sustainable that is moving forward and what you're doing to continue to grow that and then monetize.
We did have 200 last quarter. We did kind of caution the market that we didn't have expectations to have 200 every quarter going forward. There were a bunch of very hot news topics in the Q3 that gave us a lot of extra audience. We had the Olympics, right, and we had great coverage of the Olympics. We had the assassination attempt on President Trump and those things, and there was one other thing, I think, but those things, they gave us probably a little more audience than we would typically expect to see, so we took it and it was great, but our expectation is probably more around 180-ish million uniques. What's driving that and what's driving the tremendous increases in page views is we really are letting data drive our content-making decisions, and that's an overhaul. It's a change to strategy.
It's a change that news media companies have to make. We can't tell the audience what they want to hear. We have to listen to what they want to know and produce that. Our Chief Content Officer and her team have done a magnificent job of listening to the consumer, looking at the data, and allowing that to drive our content-making decisions. The other thing is we have technology partnerships in place that are now in place for longer periods of time and some new ones starting that allow us to provide a more personalized experience to the consumer, delivering each individual consumer something that's a little more geared to what we know they want to see. That allows us to have better engagement with that consumer. Better engagement with each consumer leads to more page views.
And we think over the long term, more subscription opportunity as well. So look, data is driving content-making decisions, and personalization is helping to drive engagement. And it really starts with the leadership, though, of the content team embracing that we don't know everything and we need to tell you what you need to know. Let the consumers tell us what they want and listen to them.
Just if I could just add to that, I think the key point, just to highlight one thing that Michael sad, is that the UVs are going to bounce around a bit. But whether it's 180 or 200, we have tremendous scale and we're a leading organization in our space. And so what we're really focused on as we go forward are all the things that drive that deeper engagement, that continued engagement with both our subscribers, but also our non-subscribers, because overall, we're going to be able to monetize those experiences and provide an overall lift to our revenues.
Vince, no question on the scale. I'd argue more than just about anybody out there on the news content side. Let's jump into AI, and maybe you guys have, from the very beginning, embraced it. Every time I talk to your team, it's always a topic. I think it's important because everything's moving very, very quickly, and it's encouraging to see the team saying, "Hey, it's there. We need to focus on it. How can it help us?" And then ultimately, how can we monetize it. So I guess my question's a lot of news about other publishers seeking compensation from AI. So maybe bigger picture, how are you approaching the AI landscape? And then how are you using it to drive revenue or drive business?
Ryan, we think about AI in a couple of ways for our business. One is how using AI internally can make our business that much better, but right from both a growth standpoint as well as an efficiency standpoint. We think there are opportunities to lower our cost structure through the use of artificial intelligence, and there are ways to grow our revenue opportunities through the use of AI. So internally, we've embraced that. I think we have over 50 different initiatives and projects going on inside the company with some are tests and some are beyond tests. We're actually deploying AI both here in the U.S. and in the U.K., and it's really across all facets of the business, from content to sales to our DMS business to just efficiencies in our back office.
And so that's one thing we think about with AI is just the overall improvement we can make to our business through embracing it, not running from it. The second is how do we leverage our own content in this AI world, which as companies build models and as companies build search businesses, how do we know our content is a very important part of how they build their businesses out? And so being compensated for that is another part of our AI strategy. Right now, I think some of the media companies, there are a bunch of media companies that have announced deals mostly with OpenAI. To date, there's maybe some smaller deals with Perplexity, but it's mostly been with OpenAI. And I'd say we haven't done that yet.
We have done a few smaller deals that weren't worthy of public-type press release information, but smaller deals that are one-off where we're testing our content in a very specific situation with a technology company that's building a very niche-oriented AI business, so we have a handful of those going on, and we're seeing some licensing revenue from that, but from a bigger perspective, we think there's real value in our content, and while we're not looking to be egregious at all, we're looking to find opportunities where we can make our business better, the experience for our consumer better, utilizing technology maybe from AI companies at the same time they utilize our content to make their business better. Finding the right partnerships where we can help each other feel good about the outcome is what we're really seeking at this point.
What I think you've seen from OpenAI so far is a lot of deals with sexy brands that have a bit of a different strategy than more of a news company like us or The New York Times or The Washington Post or McClatchy or Lee. You haven't seen OpenAI do deals with those kinds of companies. The deals have been more with sexy brands where they could probably get some great exposure and maybe not pay. The content's not quite. It's a little bit different in nature, and therefore, maybe they're not paying quite as much. So we're confident we'll get to a good spot, but it's taken a little bit of time.
Let's just touch real quick. You had mentioned you're using AI internally on the cost side, obviously, on the business engagement revenue side. Just going back to the cost, you put the two companies together back in 2019. Hit with the pandemic, managed to get through all of that, but the company's done a fantastic job driving cost efficiencies. Doug or Michael, where are we in that? Are we toward the I assume we're toward the later innings there, but just remind us, and then I want to jump into the Google lawsuit after.
A bsolutely. I mean, expense management has been a real key piece of, obviously, our work over the last several years in terms of taking out as many costs as we could in terms of bringing the organizations together. Also, one area that has been a key focus has been continuing to maintain the profitability of our print business. And so you've seen a lot of consolidation of our footprint and looking at alternate ways of delivering the product to the consumer in a much more cost-efficient way. We think, though, that even though we've taken out a significant amount of costs historically, there's still a big opportunity for us. And quite honestly, some opportunities that weren't necessarily available to us over the last couple of years until we were able to bring together things like our technology stack in some of our organizations.
And so I think what you'll see us do going forward is really double down in this area in terms of looking for further simplification on the tech side, further leveraging of low-cost sources of labor, and really trying to leverage our third-party relationships to variabilize our cost structure moving forward because we think that's important. We think there is still opportunity there. We want to make sure we go after it. So we feel pretty good about it, and we have a number of plans that we're working, which will continue to benefit overall results for the company.
Great. Let's jump over to the Google lawsuit. Maybe for either of you, Michael, remind us just of the claims. I know it's been out there for a little while. Also, any key dates? I won't steal some of the answer. I'll let you guys talk about what you're expecting just on the timeline. And then lastly, everybody, these things are hard to know, certainly, but how are you thinking about the potential outcomes, what those potential benefits could be to Gannett?
So just a quick reminder on the case, and our case is very similar to a case the DOJ is in the middle of with Google right now. Actually, the DOJ case has concluded. Closing arguments were made right before Thanksgiving, and the judge is set to rule really at any time. We would expect the judge actually had said she was going to rule before the end of the year, but we're still waiting on a ruling, so I feel really good about the DOJ's case. We think it presented well, and they're in a good spot. We're hopeful that the DOJ has a good outcome there.
And that really then our case is so similar to the DOJ case that our case would then move towards less having to go to court to prove the merits of the case because it's already been proven and ruled on, and more towards what does Google want to do. But just a reminder on the case itself. Google, the DOJ's case and ours as well, Google has a monopoly on the advertising ecosystem, and that really forces at a very high level, simply it forces publishers to really sell all their ad slots to Google at reduced prices. And Google really controls that and the pricing and who gets first dibs to buy the ads. And essentially, Google makes all the money. And so you have a media business like ours that creates content that drives an audience, and you have a business that wants to reach that audience.
But in order for that to happen, all the infrastructure in the middle is owned by Google and controlled by Google. And so even though they're not selling the product and even though they're not producing the content that creates the audience, they're making all the money on the advertising. So that's really the crux of the cases at a very, very high level. From a timing standpoint, we're hopeful that the judge rules this quarter on that case in favor of the DOJ. And then there's another very, very similar lawsuit against Google from Texas and 17 other states joined Texas. That's scheduled to begin on March 31st. So we're hopeful that that trial gets started here at the end of the Q1. That's probably six to eight weeks wrap.
And then, hopefully by the summer, we're seeing a ruling in favor of the states in that particular case too. So, we're probably Google has appeal rights and that kind of thing. So, we're probably a couple of years away from any real resolution. But I think the state case and the DOJ case rulings in favor of the plaintiffs in those cases really help our case and put us more in the position of starting to talk to Google about what's a fair outcome here for both companies. And so, that's really how we're thinking about it. It's probably a couple of years away, but the claims are substantial. I mean, we've documented very serious and large instances where they've exercised their antitrust opportunities to make all the money. And so, where we land, I don't know, but we think it's a substantial figure.
We're not doing this for $50 million. This is a big opportunity for us.
Michael, just to clarify, I understand there's a couple of other outstanding court issues or decisions to still come and other ones to start. But when do you think you could hear something, fully understanding they'll appeal? I just want to make sure I understand what you're saying. You could get some sort of decision, then there's an appeal. It kicks out for a couple of years, I think is what you're saying, before there would be some monetary benefit. Am I understanding it correctly, or is it I couldn't hear some sort of.
I want to temper expectations out there. We don't know, right? I mean, Google can appeal this thing. Google may settle, right? They lost their search case with the DOJ a few months ago, right, and so there's remedy negotiations going on there. The DOJ could win this ad tech case, and Google lost its case against Epic Games earlier in 2024, so it's hard to tell, Ryan, which way this will all go. We want to temper expectations, not to expect any near-term conclusion, but Google could try to wrap all this up. If they're losing a bunch of these cases and they want to get to a remedy with the government, they may pursue that, and then that would put us on a path to talk to Google at the same time or soon after, but it's hard to really tell.
I think we want to temper expectations, and this could take a couple more years to sort itself out.
Understood. Understood. As I led off with the introduction, I started working closely with you, with the team, back in late 2019. When you put the two companies together, you had went to a large asset manager to do all the funding for you. It was very, at one point, was it $8 billion, something along those lines? It was 11 something percent, maybe 12%. With the discount, it was 13%. It gave you a lot of flexibility to do what you want. Anyways, I say all of that because Michael or I'm sorry, Doug, I'll lead in it for you. The profile, the leverage profile is just substantially different today. You've done an unbelievable job from using free cash flow, asset sales just to really kind of right-size it. First-lien leverage is very manageable.
Maybe just talk about just on refinancing a few months ago and maybe just walk us through the recent refinancing and then also the current structure of the current change in the capital structure and then how you see things over the next foreseeable future, how investors should think about the balance sheet and asset sales and a couple of other things that have been driving deleveraging.
A bsolutely. And I appreciate the context there because it's easy to forget how far we have come. I mean, when this all started post-merger, there was $1.8 billion of debt. And following the refinancing, that's on a net debt basis for right around $1 billion. And so the company has made substantial progress in bringing down the absolute level of debt through that timeframe. Where we sit today, I think we're in a much better position both with regard to debt, but also with regard to our equity holders because as part of this refinancing effort, one of the kind of most basic things we did was we extended maturities, which was great. We got out of the 2026, 2027 timeframe into the 2029 and 2031 timeframe, which is good from a cash flow perspective and a maturity perspective.
But importantly, we were also able to reduce the potential dilution associated with our convertible notes by about 46%. And we think that is extremely meaningful to our equity holders. And we think it's been something that's impacted kind of the trading of the stock over time. And so we think that is a huge benefit. And as we sit now, we have a term loan, which is the primary vehicle of our debt with maturity in 2029, similar terms to what we had previously. And then we have about $224 million of convert that's going to be due in 2031. But it's convertible at $5. We have a right to buy back some of it at a certain point if we want to.
And then there is just the last remaining piece of our kind of legacy debt structure was about $38 million of notes that are due in 2027, but we feel that's very manageable, one relative to the equity and where we expect the equity to be, but also relative to our cash flows. And so we feel really good about where we sit now and feel like it demonstrates the progress we've made to date, but sets us up well to execute going forward as well. And I would just kind of close out that debt repayment remains our top priority. This is what we're focused on, although our first-lien debt increased as a result of this because we took some of that second-lien convertible debt and essentially converted it into that first-lien facility.
And we're still targeting we want to get that first-lien down to kind of below one times at or below one times. It's going to take us a little bit longer given kind of the refinance structure, but we think it was the right thing to do on balance. And we remain committed to getting to that target long term.
Look, I think just with everything that's going on from the top line and how you expect digital to exceed legacy print, that should help drive equity value, which will certainly open up the doors to further, easier, natural deleveraging with a larger equity cushion there. Doug, if you don't mind, I don't need to throw out particular numbers, but after CapEx, after interest, there's still, let's call it, I'll just make up $100 million plus of free cash flow. Certainly, some of that will be used for amortization, but just higher level, what's some of the priorities? I think I know the answer, but what is the priority? Then just remind us where we sit with asset sales. The company's been very successful monetizing either non-core or real estate.
So on those two things, one, use of free cash, and then two, where we sit with asset sales.
A bsolutely. I mean, our number one priority is debt repayment. So repaying debt with our free cash flow is the first priority. I will say that we're also making sure we're making the right investments from a digital perspective too. We want to make sure that we're doing things that set us up for the long term, set us up for long-term sustained top-line revenue growth. And so we're going to balance our CapEx and really optimize our CapEx to allow us to do that. With regard to asset sales, we have sold a lot of excess real estate, some of our non-core assets. I would say we're at the later stages of that. There is still some in the pipeline, but the pipeline for real estate sales is much smaller than it has been in prior years, just given everything that we have sold.
And the other opportunity there, though, is we'll continue to look at asset sales where it makes sense from a debt repayment and valuation perspective. So we're opportunistic there. And so I think we'll continue to evaluate those opportunities as we go forward. And if we see something that makes sense on both those accounts, we would consider transacting them. So it's really debt repayment.
Debt repayment and the digital investments make sense too. Okay. I think that let me see if there are any if anybody has any questions, please let me know. I see the chat is just wrapping up here. Not seeing anything yet. So I guess , maybe just any closing thoughts, maybe from you, Michael, especially just you've been on this journey for a long time. Someone that's been watching it from the outside seems like this could be a really big year for the company. I was talking to the rest of the team about it a few days ago. Just maybe just set it up, just big picture as much as you can without talking specifics. If you don't want to cross any rules here. But how do you think how do you want investors to think about top priorities for 2025?
Ryan. So I think what I really want investors to take away and think about it and hopefully see value in investing in Gannett is that there's an opportunity here for a re-rating of a multiple that comes from multiple channels. One is lower leverage. I mean, obviously, there's less risk to the equity in the future from leverage, but also surpassing that inflection point where revenue is growing versus declining. That's another multiple re-rating lever. Third is it's a digital business versus a legacy print business over the next few years, and that is another multiple re-rating opportunity. So we see those as all levers that we will pull this year and over the next couple of years. What I really think investors should do, though, is make the investment in Gannett a longer-term thought process. It's not a casino.
We're not going quarter to quarter like Nvidia. What's the countdown to earnings? And it really is. If you think back to the journey we've been on with you, Ryan, you go back to when COVID hit, I mean, our share price had fallen to $0.75, and we're now at $5, and the 52-week high is closer to $6. And it's a journey, right? It's not a quarterly gain when you're going through a transformation. It's long-term. And we need investors who see this opportunity, want to be part of the opportunity because the upside is huge as we execute on these things. That's really where I think investors should do the work and then hopefully make decisions to ride along with us over the next two, three, four years because I think the upside is tremendous, but it is a little bit of a longer-term gain.
A bsolutely. And it's been rewarding, especially the last couple of years. And like you said, as the equity story continues to work, there's just that natural deleveraging. Doug was talking about some of the convert that will obviously move over. That's already happened. So I guess we can leave it there. Michael, Doug, thank you so much for joining us again at the Needham Growth Conference. It's great having you and wish you and the team all the best success for 2025.
Thank you. Great to be with you.
Thank you, Ryan. Appreciate it. Bye-bye.