Lee Enterprises(US:LEE)2021-12-09 18:04Financial Data and Key Metrics Changes - Total operating revenue for Q4 2021 was $194 million, up 1% year-over-year, attributed to digital transformation [32] - Adjusted EBITDA for Q4 totaled $25.8 million, marking the third consecutive quarter of growth, with full-year adjusted EBITDA at $116.6 million [34] - Cash costs increased by 2% in Q4 due to one-time favorable impacts from the prior year, but were down 1% when excluding these impacts [34] Business Line Data and Key Metrics Changes - Subscription revenue in 2021 was $358 million, slightly up from fiscal year 2020, supported by a 65% growth in digital-only subscriptions [17] - Amplified Digital Agency revenue grew 43% year-over-year, with Q4 growth at 71%, indicating strong momentum in digital marketing services [26] - TownNews, a digital services platform, contributed to recurring revenue growth with a 10% compound annual growth rate over the past decade [20] Market Data and Key Metrics Changes - Digital revenue accounted for more than 33% of total operating revenue in Q4, up from 25% in the same quarter last year [32] - The company captured a monthly average of 50 million unique website visitors in Q4, showcasing its strong audience engagement [19] Company Strategy and Development Direction - The company is executing a Three Pillar Digital Growth Strategy aimed at increasing digital subscriptions and advertising revenue, which is expected to drive long-term growth [9][22] - The strategy focuses on enhancing local news presentation, accelerating digital-only subscriber growth, and diversifying offerings for advertisers [23] - The company aims to achieve 900,000 digital-only subscribers and $100 million in annual revenue from Amplified Digital Agency within the next five years [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future, highlighting a strong foundation and a clear path to value creation for stakeholders [37] - The company remains committed to local journalism, emphasizing its importance during the pandemic and local political events [10] - Management noted that the favorable debt structure allows for necessary investments in talent and technology to support digital growth [29] Other Important Information - The company paid down $56 million in debt in 2021, reducing the principal balance to $483 million at year-end [28] - The company has a net leverage ratio of 3.9x adjusted EBITDA, with a target of achieving 2.5x in five years [28][29] Q&A Session Summary Question: What is the number of FTEs in the quarter and expectations for staffing growth? - Management indicated that FTE counts are down due to transformation initiatives, but investments in digital talent are being made [41] Question: Can you discuss the prospects of further opportunities on adjusting paywalls for subscriptions? - Management confirmed that reducing paywalls has positively impacted digital-only subscriber growth and plans to implement dynamic meters to enhance growth further [42] Question: What was the total revenue for digital O and O in the quarter? - Digital O and O revenue for Q4 was reported at $16.5 million, with expectations for continued strong performance [43] Question: Does the leverage target of 2.5x include asset sales? - Management clarified that the target includes asset sales, with approximately $30 million of assets currently for sale to help reduce debt [45][46] Question: How does EBITDA convert to debt reduction? - Management provided a breakdown showing $117 million in adjusted EBITDA leading to approximately $45 million in debt reduction after accounting for interest, capital expenditures, and taxes [49] Question: How much do you anticipate Lee's deal with Mudd Advertising contributing to revenue in 2022? - Management expressed excitement about the deal, indicating it would contribute positively to revenue growth in 2022 [50]