Lee Enterprises reports strong digital growth in the second quarter

May 4, 2023

Total Digital Revenue(1) totaled $65M (+12% YOY)
Digital-only subscribers total 596,000 (+21% YOY) with revenue +39% YOY
Amplified Digital® revenue totaled $22M in the fiscal quarter (+20% YOY)
Reaffirms Adjusted EBITDA(2) guidance for fiscal 2023

DAVENPORT, Iowa, May 04, 2023 (GLOBE NEWSWIRE) --  Lee Enterprises, Incorporated (NASDAQ: LEE), a digital-first subscription platform providing high quality, trusted, local news, information and a major platform for advertising in 77 markets, today reported preliminary second quarter fiscal 2023 financial results(3) for the period ended March 26, 2023.

“We are encouraged by the solid pace of digital revenue growth in the second fiscal quarter,” said Kevin Mowbray, President and Chief Executive Officer. “Our Three Pillar Digital Growth Strategy is driving digital revenue growth, transforming the mix of our top line revenue, and positioning us towards a vibrant, sustainable, and profitable digital model. Total Digital Revenue grew 12% in the quarter, driven by 39% digital subscription revenue growth. We remain steadfast investing in our Three Pillar Digital Growth Strategy that is driving digital revenue growth. At the same time, due to the soft advertising environment, particularly on the print side, we reset our print cost structure, providing an additional $76 million of cost benefit."

“The strong performance in the quarter has us on track to achieve all of our fiscal year guidance including digital subscriptions, digital revenue and Adjusted EBITDA, and has us well positioned to drive value for our stakeholders,” Mowbray added.

Key Second Quarter Highlights:

  • Total operating revenue was $171 million.
  • Total Digital Revenue was $65 million, a 12% increase over the prior year, and represented 38% of our total operating revenue.
  • Digital-only subscription revenue increased 39% in the second quarter compared to the same quarter last year due to a 21% increase in digital-only subscribers and increases in average rates. Digital-only subscribers totaled 596,000 at the end of the March quarter.
  • Digital advertising and marketing services revenue represented 60% of our total advertising revenue and totaled $46 million, a 7% increase over the prior year. Digital marketing services revenue at Amplified Digital® fueled the growth, with quarterly revenue of $22 million, a 20% increase compared to the prior year.
  • Digital services revenue, which is predominantly BLOX Digital, totaled $5 million in the quarter. On a standalone basis, revenue at BLOX Digital totaled $8 million, a 10% increase over the prior year.
  • Operating expenses totaled $169 million and Cash Costs totaled $158 million, a 13% and 10% decrease compared to the prior year, respectively.
  • Net loss totaled $5 million and Adjusted EBITDA totaled $14 million, a significant improvement from the first quarter year over year trends.

2023 Fiscal Year Outlook:

Total Digital Revenue $270 million (+13% YOY) - $285 million (+19% YOY)
Digital-only Subscribers 632,000 (+19% YOY)
Adjusted EBITDA $94 million (-2% YOY) - $100 million (+4% YOY)

Debt and Free Cash Flow:

The Company has $460 million of debt outstanding under our Credit Agreement(4) with BH Finance. The financing has favorable terms including a 25-year maturity, a fixed annual interest rate of 9.0%, no fixed principal payments, and no financial performance covenants.

As of and for the period ended March 26, 2023:

  • The principal amount of debt totaled $460.0 million.
  • Cash on the balance sheet totaled $19.0 million. Debt, net of cash on the balance sheet, totaled $441.0 million, a $3.3 million reduction from the December quarter.
  • Capital expenditures totaled $2.2 million in the 26 weeks ended March 26, 2023. For 2023, we expect cash paid for capital expenditures to total less than $10 million.
  • For 2023, we expect cash paid for income taxes to total between $7 million and $11 million.
  • We do not expect any material pension contributions in the fiscal year as our plans are fully funded in the aggregate.

Conference Call Information:

As previously announced, we will hold an earnings conference call and audio webcast today at 9 a.m. Central Time. The live webcast will be accessible at www.lee.net and will be available for replay 24 hours later. Analysts have been invited to ask questions on the call. Questions from other participants may be submitted by participating in the webcast. To participate in the live conference call via telephone, please register here. Upon registering, a dial-in number and unique PIN will be provided to join the conference call.

About Lee:

Lee Enterprises is a major subscription and advertising platform and a leading provider of local news and information, with daily newspapers, rapidly growing digital products and nearly 350 weekly and specialty publications serving 77 markets in 26 states. Year to date, Lee's newspapers have an average daily circulation of 1.0 million, and our legacy websites, including acquisitions, reach more than 36 million digital unique visitors. Lee's markets include St. Louis, MO; Buffalo, NY; Omaha, NE; Richmond, VA; Lincoln, NE; Madison, WI; Davenport, IA; and Tucson, AZ. Lee Common Stock is traded on NASDAQ under the symbol LEE. For more information about Lee, please visit www.lee.net.

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:

  • The overall impact the COVID-19 pandemic has on the Company's revenues and costs;
  • The long-term or permanent changes the COVID-19 pandemic may have on the publishing industry, which may result in permanent revenue reductions and other risks and uncertainties;
  • We may be required to indemnify the previous owners of BH Media or The Buffalo News for unknown legal and other matters that may arise;
  • Our ability to manage declining print revenue and circulation subscribers;
  • 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 NASDAQ;
  • 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 "aim", “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.

(563) 383-2100


  Three months ended Six months ended
(Thousands of Dollars, Except Per Common Share Data) March 26,
  March 27,
  March 26,
  March 27,
Operating revenue:        
Print advertising revenue 31,450   44,248   73,286   100,218  
Digital advertising revenue 46,250   43,385   93,999   86,169  
Advertising and marketing services revenue 77,700   87,633   167,285   186,387  
Print subscription revenue 64,586   77,255   131,956   156,883  
Digital subscription revenue 13,996   10,093   26,325   17,984  
Subscription revenue 78,582   87,348   158,281   174,867  
Print other revenue 9,649   10,374   20,769   21,759  
Digital other revenue 4,756   4,659   9,483   9,283  
Other revenue 14,405   15,033   30,252   31,042  
Total operating revenue 170,687   190,014   355,818   392,296  
Operating expenses:        
Compensation 68,831   83,513   144,277   168,207  
Newsprint and ink 6,466   7,068   13,898   14,712  
Other operating expenses 82,569   84,679   169,343   170,661  
Depreciation and amortization 7,733   8,951   15,619   18,627  
Assets gain on sales, impairments and other, net (792 ) (152 ) (3,355 ) (12,426 )
Restructuring costs and other 3,694   10,590   4,340   13,790  
Total operating expenses 168,501   194,649   344,122   373,571  
Equity in earnings of associated companies 672   1,407   2,340   3,161  
Operating income (loss) 2,858   (3,228 ) 14,036   21,886  
Non-operating income (expense):        
Interest expense (10,501 ) (10,523 ) (20,909 ) (21,186 )
Curtailment gain       1,027  
Pension withdrawal cost   (2,335 )   (2,335 )
Pension and OPEB related benefit (cost) and other, net 206   6,248   1,700   9,320  
Total non-operating expense, net (10,295 ) (6,610 ) (19,209 ) (13,174 )
(Loss) income before income taxes (7,437 ) (9,838 ) (5,173 ) 8,712  
Income tax (benefit) expense (2,071 ) (3,144 ) (1,631 ) 2,207  
Net (loss) income (5,366 ) (6,694 ) (3,542 ) 6,505  
Net income attributable to non-controlling interests (519 ) (582 ) (1,244 ) (1,123 )
(Loss) income attributable to Lee Enterprises, Incorporated (5,885 ) (7,276 ) (4,786 ) 5,382  
Earnings per common share:        
Basic: (1.01 ) (1.26 ) (0.82 ) 0.94  
Diluted: (1.01 ) (1.26 ) (0.82 ) 0.92  


  Three months ended Six months ended
(Thousands of Dollars) March 26,
March 27,
March 26,
March 27,
Digital Advertising and Marketing Services Revenue 46,250 43,385 93,999 86,169
Digital Only Subscription Revenue 13,996 10,093 26,325 17,984
Digital Services Revenue 4,756 4,659 9,483 9,283
Total Digital Revenue 65,002 58,137 129,807 113,436
Print Advertising Revenue 31,450 44,248 73,286 100,218
Print Subscription Revenue 64,586 77,255 131,956 156,883
Other Print Revenue 9,649 10,374 20,769 21,759
Total Print Revenue 105,685 131,877 226,011 278,860
Total Operating Revenue 170,687 190,014 355,818 392,296


The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income, its most directly comparable GAAP measure:

  Three months ended Six months ended
(Thousands of Dollars) March 26,
  March 27,
  March 26,
  March 27,
Net (loss) income (5,366 ) (6,694 ) (3,542 ) 6,505  
Adjusted to exclude        
Income tax (benefit) expense (2,071 ) (3,144 ) (1,631 ) 2,207  
Non-operating expenses, net 10,295   6,610   19,209   13,174  
Equity in earnings of TNI and MNI(5) (672 ) (1,407 ) (2,340 ) (3,161 )
Depreciation and amortization 7,733   8,951   15,619   18,627  
Restructuring costs and other 3,694   10,590   4,340   13,790  
Assets gain on sales, impairments and other, net (792 ) (152 ) (3,355 ) (12,426 )
Stock compensation 573   512   922   699  
Ownership share of TNI and MNI EBITDA (50%) 930   1,657   2,722   3,596  
Adjusted EBITDA 14,324   16,923   31,944   43,011  

The table below reconciles the non-GAAP financial performance measure of Cash Costs to Operating expenses, the most directly comparable GAAP measure:

  Three months ended Six months ended
(Thousands of Dollars) March 26,
  March 27,
  March 26,
  March 27,
Operating expenses 168,501   194,649   344,122   373,571  
Depreciation and amortization 7,733   8,951   15,619   18,627  
Assets gain on sales, impairments and other, net (792 ) (152 ) (3,355 ) (12,426 )
Restructuring costs and other 3,694   10,590   4,340   13,790  
Cash Costs 157,866   175,260   327,518   353,580  


(1)        Total Digital Revenue is defined as digital advertising and marketing services revenue (including Amplified Digital®), digital-only subscription revenue and digital services revenue.

(2)        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.

(3)        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.

(4)        The Company's debt is the $576 million term loan under a credit agreement with BH Finance LLC dated January 29, 2020 (the "Credit Agreement"). Excess Cash Flow is defined under the Credit Agreement as any cash greater than $20,000,000 on the balance sheet in accordance with GAAP at the end of each fiscal quarter, beginning with the quarter ending June 28, 2020.

(5)        TNI refers to TNI Partners publishing operations in Tucson, AZ. MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI.


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Source: Lee Enterprises Inc.