Lee Enterprises(LEE) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2022, total operating revenue was $195 million, down less than 1% compared to the prior year, as digital revenue growth almost offset the decline in print revenue [25] - Total digital revenue increased 27% in Q3 to $61 million, now representing 32% of total operating revenue, up from 25% a year ago [26][22] - Adjusted EBITDA for Q3 totaled $23 million, with a reaffirmed full-year guidance of $95 million to $98 million [30][38] Business Line Data and Key Metrics Changes - Digital subscribers grew by 49% year-over-year, reaching 501,000, exceeding the year-end target of 495,000 a quarter early [15][26] - Digital-only subscription revenue increased 50% to $11 million in Q3, with a total of $37 million over the last 12 months, surpassing the full-year target of $33 million [26][21] - Amplified Digital revenue grew by 74% in Q3, totaling $21 million, with a total of $66 million over the last 12 months, exceeding the fiscal year-end estimate of $65 million [28][21] Market Data and Key Metrics Changes - Total print revenue was $134 million in Q3, a 10% decline compared to the same quarter a year ago, attributed to secular declines and supply chain constraints [29] - Digital advertising revenue increased 27% to $46 million in Q3, with digital advertising and marketing services now representing 51% of total advertising revenue [27] Company Strategy and Development Direction - The company is focused on a Three Pillar Digital Growth strategy aimed at expanding digital audiences, increasing digital-only subscriptions, and diversifying offerings for advertisers [10][12] - The goal is to achieve $435 million in digital revenue by 2026, driven by increased digital subscriptions and advertising revenue [12][46] - Investments in digital talent and technology are prioritized to support the digital transformation and long-term sustainable revenue growth [34][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges such as supply chain shortages, declining print advertising demand, and inflation affecting costs [23] - The company remains confident in achieving its digital revenue targets and reaffirmed its adjusted EBITDA outlook for the fiscal year [39][38] - The leadership team emphasized the importance of the Vision platform in driving local advertising success and strong retention rates [55] Other Important Information - The principal amount of debt at the end of the quarter was $463 million, down $113 million since refinancing in March 2020 [40] - The company aims to achieve a long-term leverage target of under 2.5 times by the end of 2026 [41] Q&A Session Summary Question: Growth in Amplified Digital - Management highlighted the success of the Vision platform in enabling local sales reps to create effective omnichannel marketing campaigns, leading to strong growth and retention [55][56] Question: Cost Reductions Implementation - Cost reduction actions began in April and were focused on optimizing the cost structure related to print revenue streams [57][58] Question: Digital-only Subscription Rates - The average rate for digital-only subscriptions is just under $7 per month, with a focus on data-driven marketing strategies [60] Question: Expectations for Margin Expansion - Management expects to see margin expansion in late 2023 and into 2024 as returns on digital investments materialize [64]