Lee Enterprises (LEE) 4 May 232023 Q2 Earnings call transcript

Welcome to the Lee Enterprise 2023 Second Quarter Webcast and Conference Call. The call is being recorded and will be available for replay at investors.lee.net. [Operator Instructions] A link to the live webcast can be found at investors.lee.net.

Now, I will turn the call over to your host, Josh Rinehults, Vice President, Finance. Please go ahead.

you us. thank and morning for joining Good

today Speaking and Millage, Chief morning’s Vice call President, with Vice Nathan questions Mowbray, President are Kevin us Also Executive Treasurer. Chief Audience Officer on available Bekke, Financial for is this President, and and Officer; Strategy. and Tim

our as news also with XXXX. at available It results we presentation at financial our Please for earnings well websites. major today, to investors.lee.net Earlier supplemental release second at issued refer is lee.net a information. preliminary that fiscal of found as quarter includes

include As These a morning’s news reminder, are forward-looking certain that this statements also subject to and are release actual on morning’s risks, expectations. factors our discussion differ current cause in and SEC Such filings. uncertainties will could described our this to in trends based statements results materially.

certain measures refer in are measures, call, GAAP relevant release. to adjusted the news accompanying tables which our non-GAAP During costs, and defined release. the EBITDA are in financial included the cash to we including Reconciliations

open And earnings Kevin conversation is Officer, and Executive open Chief will following Kevin Mowbray. Slide discussion now those along. for X of on the presentation our the President to the

you cover thank dynamic Lee’s for And vibrant ‘XX a Growth stakeholders. and results, us. into well company everyone, themes We’ll joining value also FY reaffirming quarter we’ll environment. that drive centric our our Lee guidance. digitally transforming operating morning, Good industry-leading is performance Strategy key Tim all including will Three our second us to lastly, review positions on Digital Pillar The include call a today’s for delivering in discuss how

company, with provides news. intensive are transforming valuable, centric and subscription our platform Lee communities We a into local digitally

we’re Digital execute Lee is we positioned digitally to Pillar as continue well Strategy company, And to through of mix to Three our which a our value drive shareholders transforming revenue. Growth for Our transforming the centric is transformation.

platform in be of continues subscribers. XXX,XXX to our grew subscribers digital digital local to in second outpaced pleased we’ve XX% subscription Through fastest-growing industry performance consistently media. fiscal as market the total in approach the our thoughtful digital industry-leading We now Lee addressable readers our Digital vast our with to growth. are and quarter products, the converting data-driven

we’ve last the along nearly even gives subscribers years, confidence X growing right our And grown is XX% digital industry-leading Over us annually. we’re growth. unit with more ARPU what

last the digital deploys and including we’ve created years side, in has advertising a and ago, regional from $XX million X Digital grown rate it provides of revenue XX growth advertisers. approach services to sales products the growth. several and marketing suite built Amplified over full On Amplified and last and has XX% agency an Amplified revenue at the meeting the local earned ground we years, omnichannel over compound the up. of months a and annual industry

Growth and in Lee. at advertising is subscription digital total revenue revenue revenue digital digital rapidly growing

revenue. of Lee’s the Three year-over-year. XX strategy more transformed Growth the revenue last Pillar at significant XX% digital million, Digital Strategy The composition $XXX Lee growth from our Over months, than digital of our up has digital total is digital execution, only we Three revenue our represented our years revenue. Strategy, after of XX% When our overall Digital of now first revenue. Growth operating XX% launched represents Pillar strong total of X.X And revenue

line allowing half overall expect our top of revenue As than performance. for we by more consistent we will continue our more transformation, XXXX, digital, revenue that be

both will subscriptions drive industry-leading and point. growth continue to digital in to inflection this Our Lee Amplified

digital our Growth transformation. Our Three guiding Strategy Pillar is Digital

$XXX expected strategy by recurring result XXXX. and digital execution to base expanding We’re revenue digital advertisers. in growing million diversifying and revenue our focused offerings and for local on audiences, and sustainable our are of subscriber expanding digital This

This foundation. in audiences reporting serve. digital at meaningful an in-depth and in-depth change as offers coverage leads to encompasses communities that breaking everything of Pillar with investigative from X focused expanding X on the local we to look local the Slide news journalism business

goal an uplift expand the native communities X products Our audio. is compelling made to progress experience emphasis hiring serve. our video we user top redesigned products local best-in-class our multimedia We’ve Pillar significant reflects our to that our in providing and improved content an We’ve storytelling with and digital by and using audiences on improving talent. in digital by digital presentation

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more inform will subscribers. converting As tactics about at to marketing sophisticated are information we learn our readers our that readers, aimed that

time. lot a our progress that readers solid strategy, front subscribers. more the allow at our digital growth by driving made us the known months. points the of right importance, confidence known million rates and our maintained Knowing XXX% is X known conversion in user XX base one user than nearly have in now subscription the growth put Also We our of of have us gives we’ve on We user in we’ve the in of grown right proof right And users. offer base. the to digital

and is million and subscription revenue drive Our $XXX to highly strategy expected XXX,XXX digital than of subscribers Pillar more X is profitable XXXX. by working digital

for growth. pillar owned-and-operated to specialized video techs, third custom diversifying expanding is for businesses and powerful focuses expertise, category both a advertisers, With drive Amplified XX, strong first-party regional data-driven and products. and our digital looking offerings ad content and our Slide scalable Amplified access, to partner through data advanced Turning our local on

We this we on strategy. growth continue execute as a runway to significant see

line our digital audience top massive high-margin While advertising digital growth revenue. for advertising owned-and-operated fuel engine digital revenue, Amplified the our

and Execution massive of revenue boost million properties advertising attract drive we’re offering owned-and-operated expected Our to revenue. to opportunities tactics $XXX audiences, of Pillar more annual XXXX. video inventory and digital our advertising X branded is in digital content

be expect million By $XXX $XXX up $XXX more and we make total revenue total than half million digital revenue. will is digital million. revenue to year outlook to XXXX, full of our Our revenue digital for XXXX total

both total subscription by be Digital Our growth our will revenue. rapid Amplified and of continued revenue digital-only digital led the

Here key digital transformation. in digital the subscription are fastest-growing takeaways our some local Lee media. platform to is

than We have reach XXXX. fastest-growing digital is than a services. demand is subscribers of digital XXX,XXX addressable to $XXX provider, more expected advertisers’ platform $XXX on digital Vision million market the to goals digital side, This And subscription subscribers our revenue. high to our uniquely drive million XXX,XXX million sufficient us the and advertising marketing of marketing and and our service positions by for than local more vast achieve Lee more digital revenue advertising of

digital Lee. of incredibly the transformation well are We at underway proud

Digital the driving Pillar composition Three Strategy our growth Our revenue. industry-leading Growth our is and of transforming

expect As is company. be achieve converting proud to significant we of our a We move shareholders team where long-term through and headed. our more goals, remain repositioning drive has our and to through we value for progress made couldn’t as equity this digital and debt our transformation Lee Lee through confident

with I’ll quarter And details now Tim second our over it results. on more turn to

the growth digital digital the the over and have was growth everyone. XXX,XXX subscription we a digital Kevin at you, by of a subscribers growth the Thank prior in to products, quarter. with year. in good XX% pace driven revenue strong continued our morning up quarter, revenue. At second XX%, end revenue total Total a $XXX XX% revenue Digital operating million

advertising quarter the year, at totaled digital Digital. increased the advertising growth by in to driven in last Amplified $XX revenue Amplified quarter. XX% side, X% revenue million second On revenue compared the

challenged. As to industry, continues our the be seen in broader print performance revenue

the slowdown the side, ad On slowdown a impacted broader both the digital in seeing we’re as local of modest both from well the of impact advertising contributed side in and print growth as national accounts accounts. This advertising. to spending

the keeping full to erosion, higher-than-historical industry do access revenue were we’re the down XX% seeing to On year. soft fiscal costs as continue responded Cash and expect is for subscription these the environment. trends, our quickly revenue closer trends which print remainder we side, the to trends we continued unit down of

Adjusted we trend first year-over-year trends as quarter, cut improved half. the second dramatically with EBITDA million $XX the totaled quarter in in

advertising combined of to we further our with the a a soft to As in decline opportunities print optimize continued structure. cost continue secular revenue, environment, result identify

to quarter that transformation The are directly the business executed $XX services corporate particularly base year, tied initiatives and fiscal quarter through costs to through million benefits this $XX our a year. year reductions last benefit second second in year cost reductions fiscal have new million in executed of $XX $XX advertising. cost in will midway distribution, expect million the manufacturing, midway realize we middle executed of from print between the XXXX. print, well to of These annualized as include and initiatives For in million the cost of as actions

will have this $XX permanent a the to number temporary benefit of cost that are on actions, year. In there addition actions million cost costs a

main high-quality the on long-term While operational structure and to to is print future, and our cost news steadfast. of commitment profits, growth. and reducing we our remain our our revenue digital local technology talent to business invest sustainable in priority continue digital Therefore, we focused of areas in business drive tied and excellence growing remains our to

‘XX. drive will investments impact will our cash targeted in fiscal costs The digital year our future and

digital and year. We are new on have cost short-term to sold margin but by impact transformation. in These making goods increased $XX will profile million and our expect costs to talent cost we’re increase Lee’s drive this technology of investment approximately the total expected the a digital our

XX. Moving to Slide

We million, quarter strengthen The $XXX amount of our continue was of $X second last to million balance at down principal end debt quarter. sheet. the the from

for interest in we us the execute has the sustainable we to few agreement and a recurring favorable incredibly As have favorable XX-year that credit seen Berkshire a rising terms revenue executed last lender our in make years. a the reminder, rate our are have necessary agreement It over have as and important been XXXX Hathaway, our us helpful fuel our was sole fixed that These maturity. rate The growth. environment the terms ability strategy. incredibly investments with allows

expect any In quarter, contributions, not did the year for make any to of we fiscal second XXXX. pension and remainder the do not we make

we monetize, this $X.X accelerated identify various have assets an fiscal the year assets, are We identified through which Finally, $XX process. asset to million monetize which phases sale in to repayment. closed quarter of non-core continue and sales million the facilitate opportunities of to of second debt non-core additional

as sheet, our our As our to achieve X.Xx. a Strategy well commitment goal improving as Growth balance Pillar target reminder, our is of solid leverage our of long-term execution to under with Digital Three

represents half growth revenue subscription improvement, and to $XXX strong $XXX are our digital XX, we we’re summarizing to fiscal actions taken XXXX by Total due the dynamic midpoint operating is of modest be at in team. Despite million. strong driven revenue million to On digital outlook. Hitting growth continued range expected environment, Amplified. reaffirming our the the guidance Slide back the swift by the

Digital to and macro and that side, guidance. organization, environment, million expected range swift reset growth is subscribers end taken our unit projected and action confident have as EBITDA gives half moderate us are $XX achieving between EBITDA bit to million a our projections we the Adjusted of and at taking $XXX full the back total back out year, achieve highly within can year are adjusted the on $XX Despite the and pathway XXX,XXX million. the and half the of the cost of we our the growth still outlook.

with wrap up. to back to it I And that, turn Kevin will over

Thanks, Tim. Directors, sets oversight team’s significant for of the Board stage continued and leadership of execution value strategy our of long-term growth our creation. Under the guidance our

investment Strategy Growth Digital creating core our that shareholders. and at of Pillar is the strategy value Three execution the is the foundation of on for Our thesis,

To efforts the entire our thank Lee driving of for their wrap transformation. I’d like up, to team

believe the and we’re right and better right the long-term for Board, and than readers, create well have value I the users, right advertisers team our ever We positioned our to shareholders. strategy,

questions. our The the line Operator, for remain concludes questions. on open for will please team This the any remarks. line

[Operator have Noble question Kupinski Capital a from Markets. Michael of Instructions] I

Your line open. is

you. couple A Thank questions. of

on First solid of all, congratulations quarter. your

cost through in to million you $XX related of if that wondering, was further reductions. were annualized latest in this much and were announcement the – were was the cost in indicated this quarter, that around again, You that how so, went this there cost effective costs you I last talking then, the initiated about And cuts reductions quarter? any effective year And quarter? in were last that

Yes.

is And We have quarter in quarter million Mike, we to results a mentioned, impact, quarter. $XX a were took you the when reductions As quarter. full we not $X million expect partial impact the million. in half second did that quite had about year about impact $XX second which, $XX quarter, The do million. the annualized, the

there was is $XX or of but... – been – that how million way know it us And was on have quarter? would so were thought I give any a to there in this kind much of mid-quarter, color

Around $X million impact. $XX to million

that. little $XX to about I’m in just quarter then kind million, margins And million bit and give you you $X the of thoughts are I the about they missed how can okay. sorry, digital talk that? trending? a us some Can

Yes, it’s a really I question. think good

digital think subscription revenue, a a of from there of the almost see scaling scaling subscribers dollar incremental I that – every side, on that with profit. pure and is really we

So we seeing good side. subscription are the margins the scaling on of digital

I On is the also the think Amplified, thing side, true. on the digital same advertising

the not in We’re Amplified, seeing on some growth with in really costs are and top good line that. revenue scaling correlation

margin the side some advertising on improvement So well. as we’re seeing

great. expansion our digital is through I margin we think bottom of line a digital are transformation, that So the seeing which as good business, we move is,

Got looking revenue stronger it. subscription was total I for. your a little And was than

can trends moderation little that, are there, there? revenue might a hit target, but you were color a little and some the half. this second guidance be add that seems were little at might effective increases there in above you Maybe there better in pretty see in that it bit also, rate you’re cautious. then your could that for any just point, indicated a trending your to I the quarter accounted positive – even You assume trends? like you And

Yes.

to that drive of our always rate is back guidance transact about some trying digital-only does the subscriber and imply we’re So things revenue. moderation. units half And talked XXX,XXX overall one we’ve

growth as so to as unit isn’t we’re well be pulling because rate going And perfectly linear a levers. levers this unit

unit revenue, saw that and and plus on second half. units continue some quarters, in XX% growth grow was teens rates expect And And that higher-than-expected low the XX% some in we driving the growth. as so we we continue in revenue, to what expect we quarters, in we ARPU in back growth. see higher-than-expected will that’s growth quarter double-digit And growth to

Got it. Well, good results. you. Thank

Alright.

questions have We web. the on some

Yes.

and adjusting Our considering considered products of year? the this first question is, frequency you have print daily your

Yes.

the rest of in seen industry. we lot years, to the have X and last relative what of And of the that resulting unit industry over has trends able So seeing declines accelerating retain a to in subscription to to more our print for in of said, subscribers the revenue are years. couple others XXXX, closer been more our we X print a revenue

high-quality print we’re You produce move may seen they the with week. we product X at in news local cash revenue same have robust, print markets, and questions our and possible flow the to announce print is products days our one with our And managing That of did markets best our to goal as to the a web. communities continuing streams provide product local the evaluating the in mature. time robust, a high-quality as it these over from local of

thank for your thank like I’d call to the interest you everybody in today. joining with that, for And Lee and

all Thank That for conference joining. concludes call. today’s you

disconnect. a may day. have now Everyone, great You