Lee Enterprises reports first quarter results
Digital only subscribers totaled 286,000, up 69% compared to prior year
Audience revenue was +1.9% compared to prior year
Strong liquidity position with
“We are off to a great start in fiscal year 2021 as we continue to improve our operating results mitigating the effects of the pandemic,” said
“To that end, we have made significant progress on our digital transformation strategy. Total digital revenue in the quarter totaled
“On the advertising side, we are focused on diversifying the products and services that we offer to local advertisers. We are seeing growth at
“TownNews is the digital backbone of our operations and provides a platform for enhancing our product development efforts across the organization. Revenue at TownNews on a standalone basis increased 8.5%, continuing a long line of quarter over quarter revenue growth. With growth in audience revenue and revenue at TownNews, 45% of our total operating revenue is now subscription-based," said Mowbray.
“The first quarter marked a significant milestone in our transformation efforts as we achieved our
FIRST QUARTER HIGHLIGHTS
- Total operating revenue was
$211.8 millioncompared to $122.3 millionin the same quarter last year, reflecting the acquisition of BH Media and Buffalo News. On a pro forma basis, total operating revenue was down 10.9% to the same quarter last year.
- Subscription revenue totaled
$90.5 million, a 1.9% increase compared to the prior year. Digital-only subscriptions at the end of the quarter totaled 286,000, or up 69.2% compared to the same period last year.
- Our audiences remain strong in both print and digital due to our focus on relevant news in our local markets. Monthly average page views totaled 488 million, a 13.2% increase compared to the prior year, and monthly average unique visitors totaled 55 million.
- Total advertising revenue was
$102.6 million, a 20.0% decrease compared to the same quarter last year on a pro forma basis. We improved our advertising revenue trends sequentially 670 bps compared to fourth quarter 2020 trends.
- Revenue at TownNews increased 8.5% in the first quarter and revenue over the last twelve months totaled
- Total digital revenue, including digital advertising, digital subscription revenue and digital services, was
$62.5 millionand represented 29.4% of our operating revenue.
- Operating expenses totaled
$192.5 millionand Cash Costs(3) on a pro forma basis were down 10.1%. Since the acquisition in March 2020, we achieved $103 millionof cash cost synergies, reaching our target established for September 2021.
- Due to changes in one of our employee contracts, we recognized a
$23.8 millionnoncash curtailment gain associated with elimination of retiree medical benefits. Additionally, we recognized a $12.3 millionliability associated with the withdrawal from a multiemployer pension plan. Payments toward the liability are made over 20-years.
- Net Income totaled
$16.4 millionand Adjusted EBITDA totaled $40.0 million.
DEBT AND FREE CASH FLOW
As of and for the 13-weeks ended
- The principal amount of debt totaled
$523.6 million, a $52.4 millionreduction since the March 2020refinancing.
- Cash on the balance sheet totaled
- Excess Cash Flow for the first quarter totaled
$17.1 millionand was used to repay debt in the second quarter.
- Capital expenditures totaled
$1.6 million. For 2021, we expect capital expenditures to total $9.6 million.
- For 2021, we expect cash paid for income taxes to total between
$4and $6 million.
- Pension contributions totaled
$400,000. For 2021, we expect pension contributions to total $3.2 million.
CONFERENCE CALL INFORMATION
As previously announced, we will hold an earnings conference call and audio webcast today at
FORWARD-LOOKING STATEMENTS — The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release contains information that may be deemed forward-looking that is based largely on our current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and other uncertainties, which in some instances are beyond our control, are:
- Revenues may continue to diminish or declines in revenue could accelerate as a result of the COVID-19 pandemic;
- Revenues may continue to be diminished longer than anticipated as a result of the COVID-19 pandemic;
- The COVID-19 pandemic may result in material long-term changes to the publishing industry which may result in permanent revenue reductions for the Company and other risks and uncertainties;
- We may experience increased costs, inefficiencies and other disruptions as a result of the COVID-19 pandemic;
- We may be required to indemnify the previous owners of the BH Media or the
Buffalofor unknown legal and other matters that may arise;
- Our ability to manage declining print revenue and circulation subscribers;
- That the warrants issued in our 2014 refinancing will not be exercised;
- The impact and duration of adverse conditions in certain aspects of the economy affecting our business;
- Changes in advertising and subscription demand;
- Changes in technology that impact our ability to deliver digital advertising;
- Potential changes in newsprint, other commodities and energy costs;
- Interest rates;
- Labor costs;
- Significant cyber security breaches or failure of our information technology systems;
- Our ability to achieve planned expense reductions and realize the expected benefit of our acquisitions;
- Our ability to maintain employee and customer relationships;
- Our ability to manage increased capital costs;
- Our ability to maintain our listing status on the NYSE;
- Competition; and
- Other risks detailed from time to time in our publicly filed documents.
Any statements that are not statements of historical fact (including statements containing the words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Statements regarding our plans, strategies, prospects and expectations regarding our business and industry, including statements regarding the impacts that the COVID-19 pandemic and our responses thereto may have on our future operations, are forward-looking statements. They reflect our expectations, are not guarantees of performance and speak only as of the date the statement is made. Readers are cautioned not to place undue reliance on such forward- looking statements, which are made as of the date of this release. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.
CONSOLIDATED STATEMENTS OF OPERATIONS
|13 Weeks Ended|
|(Thousands of Dollars, Except Per Share Data)||
|Advertising and marketing services||102,629||65,727||56.1|
|Total operating revenue||211,817||122,343||73.1|
|Newsprint and ink||7,992||4,736||68.8|
|Other operating expenses||81,767||48,462||68.7|
|Total operating revenue less cash costs||37,895||25,902||46.3|
|Depreciation and amortization||10,441||6,719||55.4|
|Assets loss on sales, impairments and other, net||5,222||814||NM|
|Restructuring costs and other||3,167||1,632||94.1|
|Equity in earnings of associated companies||1,743||1,569||11.1|
|Non-operating income (expense):|
|Debt financing and administrative costs||—||(1,196||)||NM|
|Pension withdrawal cost||(12,310||)||—||NM|
|Non-operating expenses, net||1,906||(12,311||)||NM|
|Income before income taxes||22,714||7,588||NM|
|Income tax expense||6,311||1,871||NM|
|Net income attributable to non-controlling interests||(501||)||(397||)||26.2|
|Income attributable to
|Earnings per common share:|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income, its most directly comparable GAAP measure:
|13 Weeks Ended|
|(Thousands of Dollars)||
|Adjusted to exclude|
|Income tax expense||6,311||1,871|
|Non-operating expenses, net||(1,906||)||10,718|
|Equity in earnings of TNI and MNI||(1,743||)||(1,569||)|
|Loss (gain) on sale of assets and other, net||5,222||814|
|Depreciation and amortization||10,441||6,719|
|Restructuring costs and other||3,167||1,632|
|Ownership share of TNI and MNI EBITDA (50%)||1,890||1,918|
(1) This earnings release is a preliminary report of results for the periods included. The reader should refer to the Company's most recent reports on Form 10-Q and on Form 10-K for definitive information.
(2) Due to the BH Media(4) acquisition, our basis of presentation includes (i) our actual GAAP results, which reflect a full quarter of Lee Legacy(4), BH Media(4) and
(3) The following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant GAAP measures are included in tables accompanying this release:
- Adjusted EBITDA is a non-GAAP financial performance measure that enhances financial statement users overall understanding of the operating performance of the Company. The measure isolates unusual, infrequent or non-cash transactions from the operating performance of the business. This allows users to easily compare operating performance among various fiscal periods and how management measures the performance of the business. This measure also provides users with a benchmark that can be used when forecasting future operating performance of the Company that excludes unusual, nonrecurring or one time transactions. Adjusted EBITDA is a component of the calculation used by stockholders and analysts to determine the value of our business when using the market approach, which applies a market multiple to financial metrics. It is also a measure used to calculate the leverage ratio of the Company, which is a key financial ratio monitored and used by the Company and its investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, income tax expense, depreciation and amortization, assets loss (gain) on sales, impairments and other, restructuring costs and other, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI.
- Cash Costs represent a non-GAAP financial performance measure of operating expenses which are measured on an accrual basis and settled in cash. This measure is useful to investors in understanding the components of the Company’s cash-settled operating costs. Periodically, the Company provides forward-looking guidance of Cash Costs, which can be used by financial statement users to assess the Company's ability to manage and control its operating cost structure. Cash Costs are defined as compensation, newsprint and ink and other operating expenses. Depreciation and amortization, assets loss (gain) on sales, impairments and other, other non-cash operating expenses and other expenses are excluded. Cash Costs also exclude restructuring costs and other, which are typically paid in cash.
(5) The Company's debt is the
(6) TNI refers to
Source: Lee Enterprises Inc.