Lee Enterprises(LEE) - 2024 Q4 - Annual Results

Executive Summary & Key Highlights This section provides an overview of the company's fiscal year 2024 performance, key financial highlights, and strategic direction Fiscal Year 2024 Performance Overview Lee Enterprises achieved significant digital growth in FY24, with total digital revenue reaching $299 million, representing about half of total operating revenue. Digital subscriptions saw a 41% revenue increase, and Amplified Digital revenue approached $100 million. However, the company fell short of its Adjusted EBITDA target Key Fiscal Year 2024 Financial Highlights | Metric | Value (Millions USD) | | :---------------------- | :------------------- | | Total operating revenue | $611 | | Total Digital Revenue | $299 (up 11% YoY) | | Total Print Revenue | $312 (down 21% YoY) | | Operating expenses | $611 (down 7% YoY) | | Cash Costs | $553 (down 10% YoY) | | Adjusted EBITDA | $65 | - Digital subscriptions revenue increased 41% in FY24[1] - Amplified Digital revenue approached $100 million for the fiscal year[1] - The company fell short of its Adjusted EBITDA target for FY24[1] Fourth Quarter 2024 Performance Overview In Q4 FY24, total digital revenue constituted 51% of total operating revenue, reaching $82 million, a 13% increase year-over-year. Digital-only subscription revenue grew by 30%, and Amplified Digital Agency revenue increased by 21% to $28 million. Operating expenses and Cash Costs both increased by 4% YoY, while Adjusted EBITDA was $17 million Key Fourth Quarter 2024 Financial Highlights | Metric | Value (Millions USD) | | :-------------------------------------- | :------------------- | | Total operating revenue | $159 | | Total Digital Revenue | $82 (up 13% YoY) | | Digital-only subscription revenue | $24 (up 30% YoY) | | Amplified Digital Agency revenue | $28 (up 21% YoY) | | Digital advertising & marketing services revenue | $52 (73% of total advertising) | | Digital services revenue (BLOX Digital) | $5 | | Operating expenses | $163 (up 4% YoY) | | Cash Costs | $143 (up 4% YoY) | | Adjusted EBITDA | $17 | CEO Commentary and Strategic Direction CEO Kevin Mowbray highlighted significant FY24 milestones in digital subscriptions and Amplified Digital revenue, attributing success to talent investments in AI, technology, and IT infrastructure. Looking ahead to FY25, the company remains confident in its core strategy, aiming to lead local advertising growth through AI advancements and strategic partnerships with companies like Perplexity and ProRata.ai - FY24 achievements include 41% revenue growth in digital subscriptions, Amplified Digital revenue approaching $100 million, meeting digital subscription unit targets, and laying a robust foundation for digital transformation through investments in AI, technology expertise, and complex IT infrastructure[1] - Despite accomplishments, the company was not satisfied with overall operating metrics, falling short of its Adjusted EBITDA target[1] - For FY25, the company remains confident in its core strategy and is uniquely positioned to lead local advertising growth driven by advancements in AI[4] - Strategic partnerships with leading AI and technology companies, such as Perplexity and ProRata.ai, are aimed at rapid scaling and solidifying a dominant position in the local market[4] Detailed Financial Results This section presents the consolidated statements of operations, digital and print revenue composition, and non-GAAP financial measure reconciliations Consolidated Statements of Operations The consolidated statements of operations show a decline in total operating revenue for both the three and twelve months ended September 29, 2024, compared to the prior year. The company reported a net loss for both periods, with a significant increase in loss attributable to Lee Enterprises for the full fiscal year Consolidated Statements of Operations (Thousands of Dollars) | Metric | 3 Months Ended Sep 29, 2024 | 3 Months Ended Sep 24, 2023 | 12 Months Ended Sep 29, 2024 | 12 Months Ended Sep 24, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Total operating revenue | 158,573 | 164,011 | 611,380 | 691,138 | | Operating income (loss) | (3,662) | 10,927 | 4,546 | 37,169 | | Net (loss) income | (9,481) | (1,325) | (23,573) | (2,733) | | Loss attributable to Lee Enterprises, Inc. | (10,090) | (1,984) | (25,845) | (5,267) | | Basic Loss per common share | (1.69) | (0.32) | (4.35) | (0.90) | Digital and Print Revenue Composition Digital revenue streams continued to grow, with Total Digital Revenue increasing by 12% for the quarter and 9% for the full year. Conversely, all print revenue categories experienced declines, leading to a significant decrease in Total Print Revenue for both periods Digital / Print Revenue Composition (Thousands of Dollars) | Revenue Category | 3 Months Ended Sep 29, 2024 | 3 Months Ended Sep 24, 2023 | 12 Months Ended Sep 29, 2024 | 12 Months Ended Sep 24, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Digital Advertising and Marketing Services Revenue | 52,466 | 49,270 | 194,213 | 193,173 | | Digital Only Subscription Revenue | 23,902 | 18,661 | 84,331 | 60,700 | | Digital Services Revenue | 5,276 | 5,020 | 20,507 | 19,362 | | Total Digital Revenue | 81,644 | 72,951 | 299,051 | 273,235 | | Print Advertising Revenue | 19,370 | 23,302 | 81,488 | 125,804 | | Print Subscription Revenue | 49,141 | 58,792 | 197,584 | 252,591 | | Other Print Revenue | 8,418 | 8,966 | 33,257 | 39,508 | | Total Print Revenue | 76,929 | 91,060 | 312,329 | 417,903 | | Total Operating Revenue | 158,573 | 164,011 | 611,380 | 691,138 | Non-GAAP Financial Measures Reconciliation The report provides reconciliations for key non-GAAP financial measures, including Adjusted EBITDA, Cash Costs, and Same-store Revenues, offering insights into the company's operational performance excluding certain non-cash or non-recurring items and the impact of exited operations Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation (Thousands of Dollars) | Metric | 3 Months Ended Sep 29, 2024 | 3 Months Ended Sep 24, 2023 | 12 Months Ended Sep 29, 2024 | 12 Months Ended Sep 24, 2023 | | :---------------------- | :-------------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Net loss | (9,481) | (1,325) | (23,573) | (2,733) | | Adjusted EBITDA | 16,760 | 30,044 | 65,306 | 85,228 | Cash Costs Reconciliation Cash Costs Reconciliation (Thousands of Dollars) | Metric | 3 Months Ended Sep 29, 2024 | 3 Months Ended Sep 24, 2023 | 12 Months Ended Sep 29, 2024 | 12 Months Ended Sep 24, 2023 | | :------------------- | :-------------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Operating expenses | 162,938 | 156,077 | 611,406 | 660,496 | | Cash Costs | 143,240 | 137,864 | 553,344 | 615,320 | Same-store Revenues Reconciliation Same-store Revenues Reconciliation (Thousands of Dollars) | Revenue Category | 3 Months Ended Sep 29, 2024 | 3 Months Ended Sep 24, 2023 | 12 Months Ended Sep 29, 2024 | 12 Months Ended Sep 24, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | :--------------------------- | | Same-store, Digital Advertising and Marketing Services Revenue | 52,465 | 48,827 | 194,117 | 190,276 | | Same-store, Digital Subscription Revenue | 23,902 | 18,399 | 84,247 | 59,662 | | Same-store, Total Operating Revenue | 158,581 | 162,069 | 610,125 | 665,593 | Fiscal Year 2025 Outlook This section outlines the company's financial guidance for fiscal year 2025, including revenue growth, Adjusted EBITDA, and capital structure Financial Guidance For fiscal year 2025, Lee Enterprises anticipates Total Digital Revenue to grow in the range of 7% to 10% year-over-year, with Adjusted EBITDA expected to show low-single digit year-over-year growth. The company also provided guidance for capital expenditures and cash paid for income taxes - Total Digital Revenue YOY growth is projected to be in the range of 7% - 10% for FY25[7] - Adjusted EBITDA YOY growth is expected to be in the low-single digits for FY25[7] - Capital expenditures in FY25 are expected to be approximately $12 million (compared to $9 million in FY24)[10] - Cash paid for income taxes in FY25 is expected to total between $4 million and $10 million (compared to $7 million in FY24)[10] Debt and Capital Structure The company's outstanding debt under its Credit Agreement with BH Finance totals $446 million, with favorable terms including a 25-year maturity and a fixed annual interest rate of 9.0%. Debt, net of cash, was $436 million at fiscal year-end 2024, reflecting a $10 million reduction in principal debt for the year Debt and Cash Position (as of Sep 29, 2024) | Metric | Value (Millions USD) | | :-------------------------------- | :------------------- | | Principal amount of debt outstanding | $446 | | Debt reduction for FY24 | $10 | | Cash on balance sheet | $10 | | Debt, net of cash | $436 | - The debt 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[9] - No pension contributions were made in FY24[10] Company Overview & Disclosures This section provides information about Lee Enterprises, conference call details, and important forward-looking statements and risk factors About Lee Enterprises Lee Enterprises is a digital-first subscription and advertising platform, a leading provider of local news and information across 73 markets in 26 states, with daily newspapers, rapidly growing digital products, and nearly 350 weekly and specialty publications - Lee Enterprises is a digital-first subscription and advertising platform, providing high quality, trusted, local news and information[2][12] - The company serves 73 markets in 26 states, including St. Louis, MO; Buffalo, NY; and Omaha, NE[2][12] - Offerings include daily newspapers, rapidly growing digital products, and nearly 350 weekly and specialty publications[12] - Lee Common Stock is traded on NASDAQ under the symbol LEE[12] Conference Call Information Lee Enterprises held an earnings conference call and audio webcast on December 12, 2024, at 9 a.m. Central Time, accessible via www.lee.net, with replay available - An earnings conference call and audio webcast was held on December 12, 2024, at 9 a.m. Central Time[11] - The live webcast was accessible at www.lee.net and available for replay 24 hours later[11] - Analysts were invited to ask questions, and other participants could submit questions via the webcast[11] Forward-Looking Statements The report contains forward-looking statements subject to various risks, trends, and uncertainties that could cause actual results to differ materially from expectations. These risks include managing declining print revenue, changes in demand, technology impacts, costs, cybersecurity, and ability to achieve planned reductions - The release contains forward-looking statements based on current expectations, subject to risks, trends, and uncertainties that could cause actual results to differ materially[13][16] - Key risks include managing declining print revenue and circulation subscribers, impact of adverse economic conditions, changes in advertising and subscription demand, and changes in technology affecting digital advertising[13][15] - Other risks involve potential changes in newsprint, other commodities and energy costs, interest rates, labor costs, cybersecurity breaches, ability to achieve planned expense reductions, and maintaining NASDAQ listing status[15] - Readers are cautioned not to place undue reliance on such statements, and the company does not undertake to publicly update or revise them, except as required by law[16] Notes to Financial Statements This section defines key financial measures, and provides details on debt and joint venture information Definitions of Key Financial Measures This section provides definitions for key non-GAAP financial measures used in the report, including Total Digital Revenue, Same-store revenues, Adjusted EBITDA, and Cash Costs, explaining their components and purpose for financial analysis - Total Digital Revenue is defined as digital advertising and marketing services revenue (including Amplified Digital Agency), digital-only subscription revenue, and digital services revenue[26] - Same-store revenues is a non-GAAP measure based on U.S. GAAP revenues, excluding exited operations (business divestitures and discontinued stand-alone print products)[26] - Adjusted EBITDA is a non-GAAP measure to enhance understanding of operating performance by isolating unusual, infrequent, or non-cash transactions. It is defined as net income (loss) plus various adjustments[27] - Cash Costs represent a non-GAAP measure of operating expenses measured on an accrual basis and settled in cash, defined as compensation, newsprint and ink, and other operating expenses, excluding certain non-cash and restructuring costs[28] Debt Information The company's debt consists of a $576 million term loan under a credit agreement with BH Finance LLC, dated January 29, 2020. The Credit Agreement defines Excess Cash Flow as cash greater than $20 million on the balance sheet at the end of each fiscal quarter - The Company's debt is a $576 million term loan under a credit agreement with BH Finance LLC, dated January 29, 2020[29] - Excess Cash Flow is defined under the Credit Agreement as any cash greater than $20,000,000 on the balance sheet at the end of each fiscal quarter[29] Joint Venture Information The report clarifies that TNI refers to TNI Partners publishing operations in Tucson, AZ, and MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI - TNI refers to TNI Partners publishing operations in Tucson, AZ[30] - MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI[30]