Lee Enterprises ((LEE)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Lee Enterprises’ recent earnings call painted a picture of robust digital transformation and financial health. The company reported significant growth in digital revenue and effective cost management strategies. Despite facing challenges from a previous cyber incident, Lee Enterprises remains on track to meet its ambitious digital revenue targets and continues to innovate with AI-driven products.
Significant Growth in Adjusted EBITDA
The third quarter saw a notable increase in adjusted EBITDA compared to the previous quarter, underscoring Lee Enterprises’ strong financial performance. This growth reflects the company’s successful strategies in enhancing operational efficiency and revenue generation.
Appointment of New Chief Operating Officer
Nathan Bekke has been appointed as the new Chief Operating Officer. His strategic leadership and operational expertise are expected to drive further digital growth and innovation within the company, reinforcing its commitment to digital transformation.
Improvement in Local Advertising Revenue
Local advertising revenue trends showed a 7-point improvement year-over-year. This growth is attributed to the robust performance of a core base of 20,000 local advertisers, highlighting the company’s strong foothold in local markets.
Successful Launch of AI-Powered Suite
In collaboration with WeLevel, Lee Enterprises successfully launched an AI-powered suite aimed at accelerating digital advertising growth. This initiative is part of the company’s broader strategy to leverage technology for enhanced digital engagement.
Digital Subscription Revenue Growth
Digital subscription revenue experienced a 16% year-over-year increase on a same-store basis, driven by a 28% growth in average revenue per user (ARPU). This growth signifies the company’s effective strategies in enhancing digital content monetization.
Ambitious Digital Revenue Target
Lee Enterprises has set an ambitious target to achieve $450 million in digital revenue by 2028. With $305 million in annual digital revenue reported this quarter, the company is well on its way to meeting this goal.
AI Product Suite Expansion
The expansion of the AI product suite is anticipated to boost digital revenue in fiscal year 2025, supporting the company’s long-term digital revenue sustainability and innovation efforts.
Annual Cost Reductions and Effective Management
The company executed $40 million in annualized cost reductions, resulting in a 7% decrease in cash costs compared to the same quarter last year. This reflects Lee Enterprises’ commitment to maintaining financial discipline and operational efficiency.
Favorable Credit Terms with Berkshire Hathaway
Lee Enterprises benefits from favorable credit terms with Berkshire Hathaway, including a 20-year runway and fixed interest rate. This financial stability is crucial as the company continues to recover from the cyber incident.
Monetization of Non-Core Assets
The company has successfully closed $9 million in asset sales and identified an additional $20 million for monetization. These efforts are aimed at improving liquidity and reducing debt.
Impact of Cyber Incident on Digital Subscribers
The cyber incident had a lingering impact on digital subscribers, leading to a sequential decline in digitally-only subscribers. However, recovery efforts are ongoing to mitigate these effects.
Temporary Increase in Principal Debt Balance
There was a temporary increase in the principal debt balance due to waived payments following the cyber incident. The company is actively working on recovery strategies to address this issue.
Forward-Looking Guidance
Lee Enterprises’ forward-looking guidance emphasizes its digital transformation progress, with digital revenue reaching $305 million on a trailing 12-month basis, comprising 55% of the overall revenue for the quarter. The company aims to achieve a long-term digital revenue target of $450 million by 2028, while continuing to focus on debt reduction and asset monetization.
In conclusion, Lee Enterprises’ earnings call reflects a positive sentiment, driven by strong digital revenue growth and effective cost management. The company’s strategic initiatives, including AI innovation and leadership appointments, position it well for future success despite challenges posed by past cyber incidents.