Lee Enterprises (LEE) Q2 2025 Earnings Call May 08, 2025 10:00 AM ET Company Participants Jared Marks - Vice President, FinanceKevin Mowbray - President and Chief Executive OfficerTimothy Millage - Vice President, Chief Financial Officer and Treasurer Operator Welcome to the Lee Enterprises twenty twenty five Second Quarter Webcast and Conference Call. The call is being recorded and will be available for replay at investors.lee.net. At the close of the plant remarks, there will be an opportunity for questio ...

Financial Data and Key Metrics Changes - The total operating revenue for the second quarter was $137 million, showing an improvement in trend from the first quarter despite the impact of a cyber incident [12] - The net loss for the quarter totaled $12 million, which included expenses associated with debt, even though payments were waived [22] - Free cash flow was minimal, but the company expects to be free cash flow positive in the second half of fiscal year 2025 due to significant changes in cost structure [22] Business Line Data and Key Metrics Changes - Total digital revenue grew 4% year over year on a same-store basis, with digital subscription revenue leading the way at a growth rate of 20% [9][13] - Amplified Digital agency revenue grew 9% year over year, contributing to the overall digital revenue growth [13] - The company executed approximately $40 million in annualized cost reductions in the second quarter, aimed at driving margin improvements [14] Market Data and Key Metrics Changes - Digital subscription revenue has grown 40% annually over the last three years, significantly outpacing the nearest industry competitor [8] - The company’s digital revenue has grown more than 17% annually since fiscal year 2021, translating to comparable annual growth in digital gross margin [12] Company Strategy and Development Direction - The company is committed to a digital transformation strategy, aiming for $450 million in digital revenue by 2028 [7] - The introduction of a suite of AI products is expected to accelerate digital revenue growth, with the first product, AI enablement, aimed at local businesses [10] - The focus remains on replacing print revenue with growing and profitable digital revenue to achieve long-term sustainability [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive sustainable growth and deliver long-term value to shareholders despite the challenges faced during the quarter [7] - The updated outlook reflects improved total digital revenue growth trends in the second half of the fiscal year, with expectations for year-over-year growth in adjusted EBITDA [19] Other Important Information - The cyber incident in February caused significant disruption, impacting operations and financial performance, but the company has since fully recovered [6][7] - The company has made considerable progress in paying down debt and remains committed to reducing debt going forward [16] Q&A Session Summary Question: Did the net loss of $12 million in the quarter include the interest deferral? When does the company expect to be free cash flow positive? - The net loss includes expenses associated with debt, even though payments were waived. The company expects to be free cash flow positive in the second half of fiscal year 2025 due to changes in cost structure and digital revenue outlook [22]