Lee Enterprises Reports Fourth Quarter and Full-Year FY24 results

Total Digital Revenue⁽¹⁾ was 51% of revenue in the quarter, representing $82M
Digital-only subscription revenue increased 30%⁽²⁾ in the quarter
Amplified Digital^® Agency revenue totaled $28M in the quarter, up 21% YOY⁽²⁾, approaching $100M for the fiscal year

DAVENPORT, Iowa, Dec. 12, 2024 (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 73 markets, today reported preliminary fourth quarter fiscal 2024 financial results⁽³⁾ for the period ended September 29, 2024.

“The team achieved significant milestones in FY24, driving 41% revenue growth⁽²⁾ in digital subscriptions and approaching $100 million in Amplified Digital^® revenue for the fiscal year,” said Kevin Mowbray, Lee’s President and Chief Executive Officer. “We successfully met our digital subscription unit target and laid a robust foundation for our digital transformation through talent investments in AI, technology expertise, and complex IT infrastructure. While these accomplishments reflect strong execution of our strategy, we are not satisfied with the overall operating metrics, as we fell short of our Adjusted EBITDA target,” Mowbray added.

Key Fiscal Year 2024 Highlights:

• Total operating revenue was $611 million.
• Total Digital Revenue was $299 million, a 11% increase over the prior year⁽²⁾, and represented about half of our total operating revenue.
• Total Print Revenue was $312 million, a 21% decrease over the prior year⁽²⁾.
• Operating expenses totaled $611 million and Cash Costs⁽⁴⁾ totaled $553 million, a 7% and 10% decrease compared to the prior year, respectively.
• Adjusted EBITDA⁽⁴⁾ totaled $65 million.

"As we look ahead to FY25, we remain confident in the strength of our core strategy and the opportunities it presents. We are uniquely positioned to lead the growth of local advertising driven by advancements in AI. With our vast library of hyper-local content and strong relationships with over 25,000 local advertisers, we have an unparalleled foundation to capitalize on this shift. Through strategic partnerships with leading AI and technology companies, like Perplexity and ProRata.ai, that were recently announced, we aim to scale rapidly and further solidify our dominant position in the local market, unlocking new growth opportunities and delivering enhanced value to our stakeholders," said Mowbray.

Key Fourth Quarter Highlights:

• Total operating revenue was $159 million.
• Total Digital Revenue was $82 million, a 13% increase over the prior year⁽²⁾, and represented 51% of our total operating revenue.
• Revenue from digital-only subscribers totaled $24 million, up 30% over the prior year⁽²⁾.
• Digital advertising and marketing services revenue represented 73% of our total advertising revenue and totaled $52 million. Revenue at Amplified increased 21%⁽²⁾ and totaled $28 million.
• Digital services revenue, which is predominantly from BLOX Digital, totaled $5 million in the quarter.
• Operating expenses totaled $163 million and Cash Costs totaled $143 million, a 4% and 4% increase compared to the prior year, respectively.
• Adjusted EBITDA totaled $17 million.

2025 Fiscal Year Outlook:

Debt and Free Cash Flow:

The Company has $446 million of debt outstanding under our Credit Agreement⁽⁵⁾ 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 September 29, 2024:

• The principal amount of debt totaled $446 million, a reduction of $10 million for the fiscal year.
• Cash on the balance sheet totaled $10 million. Debt, net of cash on the balance sheet, totaled $436 million.
• Capital expenditures totaled $9 million in FY24. We expect capital expenditures in FY25 to be approximately $12 million.
• For fiscal year 2024, cash paid for income taxes totaled $7 million. We expect cash paid for income taxes to total between $4 million and $10 million in FY25.
• We made no pension contributions in the fiscal year.

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 73 markets in 26 states. Our core commitment is to provide valuable, intensely local news and information to the communities we serve. Our 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:

• 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 “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 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 report. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.

Contact:
IR@lee.net
(563) 383-2100

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

DIGITAL / PRINT REVENUE COMPOSITION

(UNAUDITED)

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to Net loss, its most directly comparable U.S. GAAP measure:

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

The table below reconciles the non-GAAP financial performance measure of Same-store Revenues to Operating Revenues, its most directly comparable U.S. GAAP measure:

NOTES

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

(2)   Same-store revenues is a non-GAAP performance measure based on U.S. GAAP revenues for Lee for the current period, excluding exited operations. Exited operations include (1) business divestitures and (2) the elimination of stand-alone print products discontinued within our markets.

(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 following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant U.S 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 $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 U.S. GAAP at the end of each fiscal quarter, beginning with the quarter ending June 28, 2020.

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