Lee Enterprises(LEE) - 2025 Q3 - Quarterly Report

FORM 10-Q Cover Page Provides essential registration details for Lee Enterprises, Incorporated, including its status as an accelerated and smaller reporting company Registrant Information This section provides basic information about Lee Enterprises, Incorporated as the registrant, including its state of incorporation, principal executive offices, telephone number, and securities registered on The Nasdaq Global Select Market, noting its status as an accelerated and smaller reporting company - Company Name: LEE ENTERPRISES, INCORPORATED[1] - State of Incorporation: Delaware[1] - Principal Executive Offices: 4600 E. 53rd Street, Davenport, Iowa 52807[1] Securities Registration Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $.01 per share | LEE | The Nasdaq Global Select Market | | Preferred Share Purchase Rights | LEE | The Nasdaq Global Select Market | Filing Status | Filer Type | Status | | :-------------------- | :----- | | Large accelerated filer | o | | Accelerated filer | x | | Non-accelerated filer | o | | Smaller reporting company | x | | Emerging growth company | o | - As of July 31, 2025, 6,262,967 shares of common stock were outstanding[3] FORWARD LOOKING STATEMENTS This section outlines the nature of forward-looking statements within the report and the inherent risks and uncertainties that could cause actual results to differ materially from expectations Safe Harbor Statement and Risks This section details the 'safe harbor' provisions under the Private Securities Litigation Reform Act of 1995, addressing risks, trends, and uncertainties that may cause actual results to differ materially from forward-looking statements in the report - The report contains forward-looking statements based on current expectations and subject to specific risks, trends, and uncertainties[6] - Forward-looking statements are not guarantees of performance, and the company does not undertake to publicly update or revise them unless required by law[7] - Major risks include: - Potential indemnification for unknown legal and other matters to former owners of BH Media or Buffalo News - Ability to manage declines in print revenue and subscribers - Impact and duration of unfavorable economic conditions on business - Changes in advertising and subscription demand - Technological changes affecting digital advertising delivery - Potential changes in newsprint, other commodity, and energy costs - Interest rates and labor costs - Significant cybersecurity breaches or information technology system failures - Ability to achieve planned expense reductions and anticipated benefits from acquisitions - Ability to maintain employee and customer relationships - Ability to manage increased capital costs - Ability to maintain Nasdaq listing status - Market competition[8] PART I FINANCIAL INFORMATION This section presents the company's unaudited financial information, including statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the company's unaudited consolidated financial statements, including balance sheets, statements of loss and comprehensive loss, stockholders' equity (deficit), and cash flows, along with detailed notes for the quarter and nine months ended June 29, 2025 Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Key Data (Thousands of Dollars) | (Thousands of Dollars) | June 29, 2025 | September 29, 2024 | | :--------------------- | :------------ | :----------------- | | ASSETS | | | | Cash and cash equivalents | 14,125 | 9,598 | | Total current assets | 96,869 | 97,773 | | Property and equipment, net | 39,733 | 44,372 | | Goodwill | 323,858 | 328,040 | | Total assets | 622,652 | 649,171 | | LIABILITIES AND EQUITY | | | | Total current liabilities | 117,876 | 115,354 | | Long-term debt, net of current maturities | 455,469 | 445,943 | | Total liabilities | 660,849 | 656,505 | | Total Lee Enterprises, Inc. Stockholders' deficit | (40,499) | (9,889) | | Total deficit | (38,197) | (7,334) | | Total liabilities and deficit | 622,652 | 649,171 | - As of June 29, 2025, total assets were $622.7 million, a 4.1% decrease from $649.2 million on September 29, 2024[11] - As of June 29, 2025, total liabilities were $660.8 million, a 0.6% increase from $656.5 million on September 29, 2024[13] - As of June 29, 2025, stockholders' deficit expanded to $40.5 million, compared to $9.89 million on September 29, 2024[13] Consolidated Statements of Loss and Comprehensive Loss This section presents the company's financial performance over specific periods, detailing revenues, expenses, and net loss Consolidated Statements of Loss and Comprehensive Loss Key Data (Thousands of Dollars) | (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total operating revenue | 141,294 | 150,578 | 423,235 | 452,806 | | Total operating expenses | 137,318 | 146,775 | 429,391 | 448,469 | | Operating (loss) income | 4,662 | 4,925 | (3,193) | 8,206 | | Loss before income taxes | (4,420) | (4,540) | (31,196) | (17,532) | | Net loss | (1,676) | (3,691) | (29,915) | (14,094) | | Loss attributable to Lee Enterprises, Incorporated | (1,920) | (4,266) | (31,179) | (15,757) | | Basic Loss per common share | (0.31) | (0.73) | (5.16) | (2.68) | | Diluted Loss per common share | (0.31) | (0.73) | (5.16) | (2.68) | - Total operating revenue for the third quarter of 2025 decreased by 6.2% year-over-year to $141.3 million[15] - Total operating revenue for the first nine months of 2025 decreased by 6.5% year-over-year to $423.2 million[15] - Net loss for the third quarter of 2025 narrowed to $1.7 million, compared to $3.7 million in the prior-year period[15] - Net loss for the first nine months of 2025 expanded to $29.9 million, compared to $14.1 million in the prior-year period[15] Consolidated Statements of Stockholders' Equity (Deficit) This section outlines changes in the company's equity or deficit over time, reflecting accumulated earnings, stock transactions, and other comprehensive income Consolidated Statements of Stockholders' Equity (Deficit) Key Data (Thousands of Dollars) | (Thousands of Dollars) | September 30, 2024 | June 29, 2025 | | :--------------------- | :----------------- | :------------ | | Accumulated Deficit | (292,341) | (323,520) | | Common Stock | 62 | 63 | | Additional paid-in capital | 262,470 | 263,383 | | Accumulated Other Comprehensive Income | 19,920 | 19,575 | | Non Controlling Interests | 2,555 | 2,302 | | Total | (7,334) | (38,197) | - As of June 29, 2025, accumulated deficit increased to $323.5 million, compared to $292.3 million on September 30, 2024[17] - As of June 29, 2025, total deficit was $38.2 million, a significant increase from $7.3 million on September 30, 2024[17] Consolidated Statements of Cash Flows This section details the inflows and outflows of cash from operating, investing, and financing activities, providing insight into the company's liquidity Consolidated Statements of Cash Flows Key Data (Thousands of Dollars) | (Thousands of Dollars) | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------ | :------------------------------ | | Net cash provided by (required for) operating activities | 765 | 1,378 | | Net cash provided by investing activities | 5,134 | 514 | | Net cash required for financing activities | (1,372) | (3,015) | | Net increase (decrease) in cash and cash equivalents | 4,527 | (1,123) | | Cash and cash equivalents, End of period | 14,125 | 13,425 | - Net cash provided by operating activities for the first nine months of 2025 was $0.765 million, a decrease from $1.378 million in the prior-year period[20] - Net cash provided by investing activities for the first nine months of 2025 significantly increased to $5.134 million, compared to $0.514 million in the prior-year period[20] - Net cash required for financing activities for the first nine months of 2025 was $1.372 million, a decrease from $3.015 million in the prior-year period[20] - As of June 29, 2025, the cash and cash equivalents balance was $14.125 million, an increase from $13.425 million in the prior-year period[20] Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements, clarifying accounting policies and significant events 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the fundamental principles and key accounting policies used in preparing the financial statements, including consolidation and fiscal year details - The financial statements are unaudited and include all adjustments management deems necessary for a fair presentation of the financial position and results of operations as of June 29, 2025[22] - The company's fiscal year ends on the last Sunday in September, with fiscal year 2025 having 52 weeks and fiscal year 2024 having 53 weeks[23] - Consolidated financial statements include the company and its wholly-owned subsidiaries, an 82.5% interest in INN Partners, L.C. (BLOX Digital), and 50% interests in TNI Partners and Madison Newspapers, Inc. accounted for using the equity method[24] - Cybersecurity Incident: - On February 3, 2025, the company experienced a cybersecurity attack, causing system disruptions, encryption of critical applications, and data exfiltration[25] - The company initiated its incident response plan and engaged third-party cybersecurity experts[26] - The incident may have resulted in access to or acquisition of personal information of customers and subscribers, for whom the company has offered identity theft protection services[27] - The company incurred $1.2 million and $3.1 million in cybersecurity incident-related expenses for the third quarter and first nine months of 2025, respectively, recorded in 'Restructuring and other' expenses[28] - The incident had a significant negative impact on fiscal year 2025 operating results, affecting revenue lines, increasing operating expenses, and delaying projects[29] - The company has cyber insurance, has submitted claims, and has received $0.707 million in payments to date[30] 2 REVENUE This section details the company's revenue recognition policies and provides a breakdown of revenue by source, including advertising and subscription categories Revenue by Source (Thousands of Dollars) | (Thousands of Dollars) | Three months Ended June 29, 2025 | Three months Ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Print advertising revenue | 17,474 | 18,941 | 53,867 | 62,118 | | Digital advertising revenue | 49,097 | 49,903 | 139,766 | 141,747 | | Advertising and marketing services revenue | 66,571 | 68,844 | 193,633 | 203,865 | | Print subscription revenue | 38,076 | 47,605 | 122,587 | 148,443 | | Digital subscription revenue | 23,482 | 20,701 | 68,836 | 60,429 | | Subscription revenue | 61,558 | 68,306 | 191,423 | 208,872 | | Other revenue | 13,165 | 13,428 | 38,179 | 40,069 | | Total operating revenue | 141,294 | 150,578 | 423,235 | 452,806 | - Revenue recognition principle: Revenue is recognized when performance obligations are satisfied by transferring control of promised goods or services to customers[31] - Contract liabilities primarily arise from deferred subscription revenue, expected to be recognized within the next twelve months[32] Allowance for Credit Losses (Thousands of Dollars) | (Thousands of Dollars) | June 29, 2025 | September 29, 2024 | | :--------------------- | :------------ | :----------------- | | Balance, beginning of period | 6,514 | 5,260 | | Additions charged to expense | 10,853 | 13,633 | | Deductions from reserves | (12,370) | (12,379) | | Balance, end of period | 4,997 | 6,514 | 3 INVESTMENTS IN ASSOCIATED COMPANIES This section describes the company's equity method investments in associated companies, including their operational responsibilities and financial performance - TNI Partners: The company holds a 50% interest in TNI in Tucson, Arizona, responsible for printing, distribution, advertising, and subscription activities, with pre-tax profit and loss shared equally between the company's subsidiary Star Publishing and Gannett's subsidiary Citizen[35][36] TNI Partners Performance Summary (Thousands of Dollars) | (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating revenue | 5,320 | 6,667 | 17,609 | 21,018 | | Operating income | 1,556 | 1,591 | 4,559 | 5,811 | | Net income | 1,529 | 1,544 | 4,596 | 5,764 | | Equity in earnings of TNI | 765 | 772 | 2,298 | 2,882 | - Madison Newspapers, Inc. (MNI): The company holds a 50% interest in MNI in Madison, Wisconsin, responsible for publishing newspapers and related digital platforms, with after-tax net profit and loss shared equally between the company and The Capital Times Company[37] MNI Performance Summary (Thousands of Dollars) | (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating revenue | 9,136 | 10,136 | 27,974 | 30,560 | | Operating income | 1,700 | 2,182 | 5,867 | 6,811 | | Net income | (157) | 699 | 1,330 | 1,973 | | Equity in earnings of MNI | (79) | 350 | 665 | 987 | 4 GOODWILL AND OTHER INTANGIBLE ASSETS This section provides a breakdown of the company's goodwill and other intangible assets, including details on amortization and changes due to business activities Goodwill and Other Intangible Assets (Thousands of Dollars) | (Thousands of Dollars) | June 29, 2025 | September 29, 2024 | | :--------------------- | :------------ | :----------------- | | Goodwill, end of period | 323,858 | 328,040 | | Non-amortized intangible assets: Mastheads | 10,917 | 10,917 | | Amortizable intangible assets, net | 49,990 | 59,158 | | Total intangibles, net | 384,765 | 398,115 | - For the first nine months of 2025, the company's sale of non-core businesses resulted in a $4.2 million decrease in goodwill[41] - The weighted-average amortization period for amortizable assets is approximately ten years[40] 5 DEBT This section details the company's debt structure, including a long-term term loan, its fair value, and changes due to principal payments and waivers - The company's debt includes a 25-year term loan with a total principal amount of $455.9 million, bearing a fixed annual interest rate of 9%, maturing on March 16, 2045[42] - As of June 29, 2025, the fair value of this loan was $375.6 million[42] - For the first nine months of 2025, net cash proceeds from asset sales totaled $6.5 million, and the company paid $1.4 million in principal debt[43] - In response to the cybersecurity incident, BH Finance LLC waived interest and lease payments in February, April, and May 2025, resulting in an $11.3 million increase in the outstanding debt balance as a modification to the existing credit agreement[44] 6 PENSION, POSTRETIREMENT AND POSTEMPLOYMENT DEFINIT BENEFIT PLANS This section details the company's defined benefit plans, including pension, postretirement, and postemployment benefits, and their associated costs and liabilities Net Periodic Pension (Benefit) Cost (Thousands of Dollars) | PENSION PLANS (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net periodic pension (benefit) cost | (72) | 155 | (214) | (1,826) | Net Periodic Postretirement Medical Benefits (Thousands of Dollars) | POSTRETIREMENT MEDICAL PLANS (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net periodic postretirement benefit | (664) | (560) | (1,994) | (2,865) | - For the first nine months of 2025, the company made no contributions to its pension plans, and no mandatory contributions are required for 2025[47] - In the first nine months of 2024, the company offered a voluntary lump-sum payment option for future benefits to 522 terminated vested participants, resulting in a $22.6 million settlement of pension plan liabilities and recognition of a $2.4 million non-cash settlement gain[48] - As of June 29, 2025, and September 29, 2024, the company had $22.7 million and $23.6 million, respectively, in accrued exit liabilities, payable over 20 years[49] 7 INCOME TAXES This section provides an overview of the company's income tax benefits and effective tax rates, explaining key differences from the statutory federal rate Income Tax Benefit and Effective Tax Rate | Period | Loss before income taxes (Thousands of Dollars) | Income tax benefit (Thousands of Dollars) | Effective income tax rate | | :-------------------------------- | :-------------------------------------- | :---------------------------------------- | :------------------------ | | Three months ended June 29, 2025 | (4,420) | (2,744) | 61.4% | | Nine months ended June 29, 2025 | (31,196) | (1,281) | 4.2% | | Three months ended June 23, 2024 | (4,540) | (849) | 18.7% | | Nine months ended June 23, 2024 | (17,532) | (3,438) | 19.6% | - Key differences between the effective tax rate and the U.S. federal statutory rate of 21% arise from state taxes, non-deductible expenses, increases in valuation allowances, and adjustments to uncertain tax positions[51] - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), which is expected to be reflected in the fiscal year 2025 10-K annual report[53] 8 LOSS PER COMMON SHARE This section details the calculation of basic and diluted loss per common share, along with information on the company's shareholder rights plan Loss Per Common Share Calculation (Thousands of Dollars and Shares) | (Thousands of Dollars and Shares) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Loss attributable to Lee Enterprises, Incorporated | (1,920) | (4,266) | (31,179) | (15,757) | | Basic average common shares | 6,112 | 5,865 | 6,043 | 5,885 | | Diluted average common shares | 6,112 | 5,865 | 6,043 | 5,885 | | Basic Loss per common share | (0.31) | (0.73) | (5.16) | (2.68) | | Diluted Loss per common share | (0.31) | (0.73) | (5.16) | (2.68) | - No dilutive common shares were considered in the calculation of diluted earnings per share due to the company recording a net loss[55] - Rights Agreement: - On March 28, 2024, the Board of Directors adopted a shareholder rights plan, distributing one preferred share purchase right for each share of common stock[56] - The rights become exercisable if any person or group (with certain exceptions) acquires beneficial ownership of 15% or more of the company's common stock[57] - Upon exercisability, each right holder, except for the acquiring person, is entitled to purchase additional common stock at a 50% discount, or the company may exchange each right for one share of common stock[57] - The expiration date of the rights agreement has been extended from March 27, 2025, to March 27, 2026[57] 9 COMMITMENTS AND CONTINGENT LIABILITIES This section outlines the company's commitments and contingent liabilities, including ongoing legal proceedings and their potential financial implications - The company is involved in various legal proceedings arising in the normal course of business, with insurance coverage mitigating potential losses, and management believes the disposition of these matters will not have a material adverse effect on the consolidated financial statements[59][60] - Video Privacy Protection Act Litigation Settlement: - The company was sued for alleged violations of the VPPA, for tracking subscriber video viewing activities and sharing data with Meta without consent[61] - The company has agreed to a preliminary settlement of $9.5 million, which will be fully covered by insurance[62] - Cybersecurity Incident Litigation: - Multiple class action lawsuits have been filed against the company regarding the cybersecurity incident in the second quarter of 2025, alleging failure to adequately protect sensitive personal information[63] - The company is actively defending these lawsuits, and given the early stage of litigation, potential losses cannot be estimated[64] - The company holds cyber liability insurance and believes potential losses will be covered by insurance, subject to deductibles and policy limits[64] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of the company's financial condition and results of operations for the three and nine months ended June 29, 2025, focusing on business strategy, operating performance, non-GAAP financial measures, and liquidity and capital resources EXECUTIVE OVERVIEW This section provides a high-level summary of Lee Enterprises' business model, core strategy, product portfolio, and revenue generation methods - Lee Enterprises is a digital-first subscription business providing local news, information, advertising, and marketing services to 72 mid-sized communities, with 670,000 digital subscribers[67] - The company's core strategy is to grow audience and engagement by creating, collecting, and distributing trusted local news and information, continuously improving the subscriber experience, and offering a full suite of omnichannel advertising and marketing services to over 20,000 local advertisers[67] - The product portfolio includes digital subscription platforms, daily, weekly, monthly, and niche products, offering original local news alongside national and international news[68] - The company generates revenue through subscription products, advertising and marketing solutions for local advertisers, and digital services for a diverse customer base[70][71] STRATEGY This section outlines the company's strategic positioning and core operational pillars aimed at expanding its digital audience, subscription base, and advertising offerings - The company positions itself as a leading subscription and advertising platform, a trusted local news provider, and an innovative digital marketing solutions company, focused on local markets[72] - Operational strategy revolves around three core pillars: - Digital Subscription Platform: The fastest-growing digital subscription platform in local media - Amplified Digital Agency: A digital marketing services agency offering a full suite of digital marketing solutions - BLOX Digital (TownNews): One of North America's largest web hosting and content management SaaS providers, serving over 2,000 clients[72] - Strategic objectives include: - Expanding digital audience by transforming how local news and information is presented - Growing the digital subscription base and revenue through audience growth and continuous conversion of large digital audiences - Diversifying and expanding advertiser offerings through rapidly growing digital products, a large digital sales force, and the Amplified agency[73] RESULTS OF OPERATIONS This section analyzes the company's financial performance, detailing revenue and expense trends for both the quarterly and nine-month periods Three Months Ended June 29, 2025 This section provides a detailed analysis of the company's operating performance for the three months ended June 29, 2025, highlighting key revenue and expense drivers Q3 2025 Operating Results Summary (Thousands of Dollars) | (Thousands of Dollars) | June 29, 2025 | June 23, 2024 | Percent Change | | :--------------------- | :------------ | :------------ | :------------- | | Total operating revenue | 141,294 | 150,578 | (6.2)% | | Advertising and marketing services revenue | 66,571 | 68,844 | (3.3)% | | Print advertising revenue | 17,474 | 18,941 | (7.7)% | | Digital advertising revenue | 49,097 | 49,903 | (1.6)% | | Subscription revenue | 61,558 | 68,306 | (9.9)% | | Digital subscription revenue | 23,482 | 20,701 | 13.4 % | | Other revenue | 13,165 | 13,428 | (2.0)% | | Total operating expenses | 137,318 | 146,775 | (6.4)% | | Compensation | 47,436 | 59,278 | (20.0)% | | Newsprint and ink | 3,268 | 4,096 | (20.2)% | | Other operating expenses | 77,252 | 74,177 | 4.1 % | | Restructuring costs and other | 7,141 | 3,795 | 88.2 % | | Depreciation and amortization | 3,783 | 6,850 | (44.8)% | | Operating income | 4,662 | 4,925 | (5.3)% | | Net loss | (1,676) | (3,691) | (54.6)% | | Diluted Loss per common share | (0.31) | (0.73) | (56.8)% | - Total operating revenue decreased by 6.2% to $141.3 million, primarily due to declines in print advertising and subscription revenue, partially offset by growth in digital subscription revenue[78][79][80] - Digital subscription revenue increased by 13.4%, and digital services revenue increased by 3.5%[80][81] - Total digital revenue (including digital advertising, digital subscription, and digital services) grew by 2.8% to $77.9 million, representing 55.1% of total operating revenue[82] - Total operating expenses decreased by 6.4%, primarily due to reductions in compensation (-20.0%) and newsprint and ink costs (-20.2%), partially offset by increases in other operating expenses (+4.1%) and restructuring and other costs (+88.2%)[84][85][86][87] - Restructuring and other costs increased by 88.2%, primarily stemming from cybersecurity incident recovery costs, outsourced production facility closures, business transformation, and severance expenses[87] - Operating income decreased by 5.3% to $4.7 million[89] - Net loss narrowed by 54.6% to $1.7 million, with diluted loss per common share at $0.31[95] Nine Months Ended June 29, 2025 This section provides a detailed analysis of the company's operating performance for the nine months ended June 29, 2025, highlighting key revenue and expense trends First Nine Months 2025 Operating Results Summary (Thousands of Dollars) | (Thousands of Dollars) | June 29, 2025 | June 23, 2024 | Percent Change | | :--------------------- | :------------ | :------------ | :------------- | | Total operating revenue | 423,235 | 452,806 | (6.5)% | | Advertising and marketing services revenue | 193,633 | 203,865 | (5.0)% | | Print advertising revenue | 53,867 | 62,118 | (13.3)% | | Digital advertising revenue | 139,766 | 141,747 | (1.4)% | | Subscription revenue | 191,423 | 208,872 | (8.4)% | | Digital subscription revenue | 68,836 | 60,429 | 13.9 % | | Other revenue | 38,179 | 40,069 | (4.7)% | | Total operating expenses | 429,391 | 448,469 | (4.3)% | | Compensation | 164,349 | 175,757 | (6.5)% | | Newsprint and ink | 9,996 | 13,101 | (23.7)% | | Other operating expenses | 223,387 | 221,247 | 1.0 % | | Restructuring costs and other | 18,806 | 12,199 | 54.2 % | | Depreciation and amortization | 15,218 | 21,438 | (29.0)% | | Operating (loss) income | (3,193) | 8,206 | NM | | Loss before income taxes | (31,196) | (17,532) | 77.9 % | | Net loss | (29,915) | (14,094) | NM | | Diluted Loss per common share | (5.16) | (2.68) | 92.7 % | - Total operating revenue decreased by 6.5% to $423.2 million, primarily due to declines in print advertising (-13.3%) and print subscription (-17.4%) revenue, partially offset by growth in digital subscription revenue (+13.9%)[100][101][102] - Total digital revenue grew by 3.0% to $223.8 million, representing 52.9% of total operating revenue[104] - Total operating expenses decreased by 4.3%, primarily due to reductions in compensation (-6.5%) and newsprint and ink costs (-23.7%), partially offset by increases in other operating expenses (+1.0%) and restructuring and other costs (+54.2%)[106][107][108][109] - Operating loss was $3.2 million, compared to operating income of $8.2 million in the prior-year period[112] - Net loss expanded to $29.9 million, with diluted loss per common share at $5.16[119] NON-GAAP FINANCIAL MEASURES This section explains the company's use of non-GAAP financial measures, such as Adjusted EBITDA and Cash Costs, to provide a clearer view of operational performance - The company uses non-GAAP financial performance measures, such as Adjusted EBITDA and Cash Costs, to supplement GAAP financial information for a better understanding of operating performance and to exclude the impact of certain non-recurring or non-cash transactions[120][121] - Adjusted EBITDA is defined as net loss plus non-operating expenses, income tax expense, depreciation and amortization, loss (gain) on asset sales, impairment and other, restructuring costs and other, equity-based compensation, and 50% share of EBITDA from TNI and MNI, less equity in earnings of TNI and MNI[122][123] - Cash Costs are defined as compensation, newsprint and ink, and other operating expenses, excluding depreciation and amortization, loss (gain) on asset sales, impairment and other, other non-cash operating expenses, and restructuring costs and other[124] RECONCILIATION OF NON-GAAP FINANCIAL MEASURES This section provides reconciliation tables for non-GAAP financial measures, including Adjusted EBITDA and Cash Costs, to their most directly comparable GAAP counterparts Reconciliation of Adjusted EBITDA to Net Loss (Thousands of Dollars) | (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net loss | (1,676) | (3,691) | (29,915) | (14,094) | | Adjusted EBITDA | 14,944 | 14,824 | 30,319 | 48,534 | Reconciliation of Cash Costs to Operating Expenses (Thousands of Dollars) | (Thousands of Dollars) | Three months ended June 29, 2025 | Three months ended June 23, 2024 | Nine months ended June 29, 2025 | Nine months ended June 23, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating expenses | 137,318 | 146,775 | 429,391 | 448,469 | | Cash Costs | 127,956 | 137,551 | 397,732 | 410,105 | - Adjusted EBITDA for the third quarter of 2025 was $14.9 million, a slight increase from the prior-year period[126] - Adjusted EBITDA for the first nine months of 2025 was $30.3 million, a significant decrease from $48.5 million in the prior-year period[126] - Cash costs decreased by 7.0% in the third quarter of 2025 and decreased by 3.0% for the first nine months of 2025[84][106] LIQUIDITY AND CAPITAL RESOURCES This section analyzes the company's liquidity position and capital resources, examining cash flows from operating, investing, and financing activities Operating Activities This section details the cash flows generated from or used in the company's primary business operations - Net cash required for operating activities for the first nine months of 2025 was $0.8 million, compared to net cash provided by operating activities of $1.4 million in the prior-year period, a decrease of $0.6 million[130] - The decrease was primarily due to a $24.1 million reduction in operating results, partially offset by $10.1 million in non-cash interest expense and a $13.4 million increase in working capital[130] Investing Activities This section outlines the cash flows related to the acquisition and disposal of long-term assets and other investments - Net cash provided by investing activities for the first nine months of 2025 was $5.1 million, compared to $0.5 million in the prior-year period[132] - This includes $8.7 million for the first nine months of 2025 and $7.1 million for the prior-year period from asset sales, primarily from the divestiture of non-core real estate[132] - Capital expenditures for 2025 are projected to be up to $7.0 million, funded by internally generated cash[133] Financing Activities This section details the cash flows related to debt, equity, and dividend transactions, reflecting how the company raises and repays capital - Net cash required for financing activities for the first nine months of 2025 was $1.4 million, compared to $3.0 million in the prior-year period[135] - Debt reduction accounted for almost all of the cash used in both periods[135] Additional Information on Liquidity This section provides further details on the company's liquidity position, including cash balances, factors affecting cash flow, and measures taken to maintain sufficient liquidity - As of June 29, 2025, the company's liquidity (cash on the balance sheet) was $14.1 million[137] - The current operating environment, business transformation expenditures, and the cybersecurity incident have reduced net cash flow and pressured the company's liquidity[137] - The company has implemented plans to maintain adequate liquidity, including reducing operating and capital expenditures and decreasing outstanding accounts receivable[138] - Following the cybersecurity incident, the company received a three-month waiver of interest and lease payments to improve liquidity[138] - Operating results improved during the 13 weeks ended June 29, 2025, with all mandatory and principal payments since May 2025 funded by operating cash flow[139][140] CHANGES IN LAWS AND REGULATIONS This section discusses potential impacts of changes in laws and regulations, specifically regarding minimum wage increases, on the company's operations - U.S. federal, state, and local governments are considering minimum wage increases, but the specific impact is yet to be determined as most employees are paid above current minimum wage[141][142] Item 3. Controls and Procedures This section states that there were no changes in the company's internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control during the 13 weeks ended June 29, 2025 - No material changes occurred in internal control over financial reporting during the 13 weeks ended June 29, 2025[143] PART II OTHER INFORMATION This section provides additional disclosures not covered in Part I, including legal proceedings, risk factors, and other significant events Item 1. Legal Proceedings This section details the company's legal proceedings, including Video Privacy Protection Act litigation and cybersecurity incident-related class action lawsuits, reiterating the company's position and insurance coverage - The company is involved in various legal proceedings arising in the normal course of business, with insurance coverage mitigating potential losses, and management believes the disposition of these matters will not have a material adverse effect on the consolidated financial statements[145] - Video Privacy Protection Act Litigation Settlement: - The company was sued for alleged violations of the VPPA, for tracking subscriber video viewing activities and sharing data with Meta without consent[146] - The company has agreed to a preliminary settlement of $9.5 million, which will be fully covered by insurance[147] - Cybersecurity Incident Litigation: - Multiple class action lawsuits have been filed against the company regarding the cybersecurity incident in the second quarter of 2025, alleging failure to adequately protect sensitive personal information[148] - The company is actively defending these lawsuits, and given the early stage of litigation, potential losses cannot be estimated[149] - The company holds cyber liability insurance and believes potential losses will be covered by insurance, subject to deductibles and policy limits[149] Item 1A. Risk Factors This section indicates no material changes to the risk factors previously disclosed in the 2024 Form 10-K, except as otherwise noted in this report - Except as otherwise noted in this report, there have been no material changes to the risk factors disclosed in the 2024 Form 10-K[150] Item 5. Other Information This section provides additional information on the cybersecurity incident and the shareholder rights agreement, including event details, financial impact, insurance coverage, and the terms and extension of the rights agreement Cybersecurity Incident This section details the cybersecurity attack, its financial impact, and the company's response, including insurance claims and identity theft protection services - On February 3, 2025, the company experienced a cybersecurity attack, causing system disruptions, encryption of critical applications, and data exfiltration[151] - The incident may have resulted in access to or acquisition of personal information of customers and subscribers, for whom the company has offered identity theft protection services[152] - For the third quarter and first nine months of 2025, the company incurred $1.2 million and $3.1 million, respectively, in cybersecurity incident-related expenses[153] - The incident had a significant negative impact on fiscal year 2025 operating results, with an estimated revenue impact exceeding $10 million[154] - The company has cyber insurance, has submitted claims, and has received $0.707 million in payments to date, with claim processing ongoing[155] Rights Agreement This section describes the shareholder rights plan, including its terms, conditions for exercisability, and the recent extension of its termination date - On March 28, 2024, the Board of Directors adopted a shareholder rights plan, distributing one preferred share purchase right for each share of common stock[156] - The rights become exercisable if any person or group (with certain exceptions) acquires beneficial ownership of 15% or more of the company's common stock[157] - Upon exercisability, each right holder, except for the acquiring person, is entitled to purchase additional common stock at a 50% discount, or the company may exchange each right for one share of common stock[157] - The expiration date of the rights agreement has been extended from March 27, 2025, to March 27, 2026[157] - The rights agreement aims to protect all shareholders' interests but may make mergers, tender offers, or other business combinations not supported by the Board more difficult[158][159] Item 6. Exhibits This section lists the exhibits filed with this quarterly report, including amendments to the rights agreement, waivers and amendments to the credit agreement, and various certification documents Exhibit List | Number | Description | | :----- | :---------- | | 4.2* | Amendment No. 1 to Rights Agreement, dated as of March 26, 2025 | | 10.1* | Waiver and Amendment to Credit Agreement among Lee Enterprises, Incorporated, BH Finance LLC, and BH Media Group, Inc. dated May 1, 2025 | | 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer | | 31.2 | Rule 13a-14(a) Certification of Chief Financial Officer | | 32.1 | Section 1350 Certification of Chief Executive Officer | | 32.2 | Section 1350 Certification of Chief Financial Officer | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File | SIGNATURES This section contains the required signatures for the report, affirming its submission by duly authorized officers of the registrant Report Signature This section contains the report information signed by the registrant's duly authorized officer, as required by the Securities Exchange Act of 1934 - The report was signed by Timothy R. Millage, Vice President, Chief Financial Officer, and Treasurer of Lee Enterprises, Incorporated, on August 8, 2025[163]