LEE - Earnings call transcript Q3 2018 | Lee Enterprises, Incorporated

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Operator

Welcome to the Lee Enterprises’ 2018 Third Quarter Webcast and Conference Call. The call is being recorded and will be available for replay beginning later this morning at lee.net. [Operator Instructions]. Several analysts have been invited to participate. Also, participants accessing this call by the website may submit written questions through the website, and they will be answered during the call as time permits. a receive will you response later. Otherwise, to www.lee.net. link the live at found be can webcast A

will the Officer. I Vice Now, turn President Tim your and Millage, host, Chief Financial call over to

Tim Millage

Good you morning. for us. Thank joining

Sales fiscal and myself, Nathan to President, Executive questions a available Officer. and President are available Junck, XXXX. as Also Kevin be Consumer and us financial well Digital; on addition we morning’s preliminary Vice today’s call speaking Vice at In Chairman; It Chief and for Vice Paul will President as Earlier Farrell, Bekke, James issued websites. Marketing. President, news results Sales, today, Mowbray, with for quarter is Green, with Mary release lee.net major our this Executive at third and on call of

results As and morning’s SEC this based certain our news current statements filings. will subject in in this that These forward-looking uncertainties release. risks, factors could differ on morning’s And our include to a reminder, also are actual materially. statements Such to expectations. are trends described that are discussion cause

relevant the measures tables we And During – is to certain Mary defined the Chairman, in included Junck. reference non-GAAP are our open call, news to discussion accompanying to Reconciliations the which of our measures, in release. financial make release. the are now GAAP our Executive

Mary Junck

all you this call our and morning. joining Tim, for you, thank Thank

who Treasurer. was earlier Before we week get CFO wanted started, this I Millage, our Tim Vice acknowledge named to President, and

with Group. June a update to you congratulations to quick Media quarter, discussing Tim. agreement I our big Also, wanted our So before on give BH

per into July Media in agreed-upon Hathaway’s newspapers on fixed over in exchange managing X. our percentage in will million June digital a fees year BH entered agreement manage to Berkshire beginning profits discussed XX Lee $X the As of In benchmarks. for earn operations Group, investor call, we we

calls, public While our filings agreement. of we $XX million over our the in five-year Media BH conference or we results will anticipate financial on Group not earning disclose

underway. We our are in early relationship well the transition is and

the Hathaway We partner team optimistic Berkshire to Media. at are about with extremely the opportunity and BH

quarter. line. strong turning financial quarter top in retail quarter. were Now Lee’s June driven Revenue the of to for and quarter in another continued trends momentum advertising, well positive The subscription revenues, June on perform national by performance TownNews marked digital performance including programmatic. the local also to the

while business XX.X% to As adjusted we’ve the Debt strong mentioned Lee content debt the Also, source for revenue the rapidly the owns in revenue TownNews.com management of contributed margins, with in of by has company, $XXX reduced to aggressive another growing growth was which the quarter, industry-leading experienced our advertising reduction. XX.X% expanding quickly past, this is of quarter. has at XXXX quarter digital primary is $XX.X reduced $XX.X led continued than been million. and since more million refinancing, million EBITDA and we debt

quarter the over discuss turn to operating our Mowbray Kevin more performance CEO, I’ll Now detail. in June the to call in our

Kevin Mowbray

improved trends June categories. many Mary. in Revenue you, quarter key Thank the in

our comprised in and program our segment XX% revenue top category. and ad improvement of of accounts. our local representing with We’re local is to Edison especially that retail businesses the encouraged favorably responded midsized This have small nearly

revenue contract contracts we group. amongst revenue We and the digital advertisers revenue more the And X.X% a an and of combination than length, XX.X% increased programmatic through just this quarter increased or the digital to advertising in ago and transform XX%. more improved XX.X% number for a TownNews.com. revenue represented performance increase years. increased the we’ve third segment X.X% the realized for of way was driven substantially This the year category. to contracts of a this Project the Our being advertising Digital gains quarterly June SMB advertising quarter. prior the market, and that. to in the the expand we done quarter. X.X% includes print length quarter This advertiser’s from the audience by digital June the exactly Edison two results Edison increased XXXX. this XX.X% increase entire grew XX.X% of Digital to in in category services total best in with in the revenue X.X% in revenue go Retail launched local the and In and retail quarter advertising. at increase quarter, largest our which of compared declined Total in over in fiscal extend is digital from advertising We digital than third

increased programmatic maximum and advertising coupled periods. with peak audience earlier, the during digital advertising quarter smart these drives engagement the than program noted last the months. to totaled XX.X% We national pricing $XX and revenue or implementation million attribute June Sweeps national XX in our strategic gains company-wide which over of more As periodic

pleased company. pricing available local a premium content subscription performer, the Through relative value especially acquisitions, revenue of sound the below in in the opportunity retail and from digital We’re to revenue our X.X% an advertising and for particularly audiences quarter. competitors. and fold local an with be believe and Subscription We generic and power, of to segments. affirmation is pricing June strong continues national our stable increased the the models, efficacy the the this sites and

total Over the XX.X% the of last for represents months, company. XX revenue revenue subscription

revenue strong expect remain to We subscription and stable. XXXX

quarter, XX.X% engagement increased of session the monthly grew in Our Pages digital visits Average the audience and were quarter. engagement. totaled indicator and audience significantly up key XX.X% per audiences million. a in increased XX.X

same FY between do operating down X% cash were to to to property basis, restructuring the excluding expect be X.X%. cost business cost drive we cost efficiencies. way down and and continue cash On X.X%, we We change a XXXX

with some financial Tim here’s highlights. Now additional

Tim Millage

you. Thank

business decreased X.X% we same a Year-to-date, are Compensation In property on cost X.X% are restructuring Kevin June on a business basis. a our primarily associated current cost in are with higher by basis, affected down The decreased quarter were year as same excluding our with of As staffing outsourcing. transform basis. cost quarter reduced adversely property the the fiscal cost plans, decreases staffing medical to cash increased on which of our ongoing transformation XX.X%. in property to Compensations the associated a X.X% and mentioned, cost same result self-insured level. total majority continuing cash XXXX.

tariffs X.X% price having newsprint and expense on of on our basis primarily same the a in expenses Canadian impact to for limited driven lower is volume quarter. significant on newsprint impact business. lower effect increased delivery from Newsprints the including ink same property basis weighted a increases, from the unit cost. impact increases. decreased of a by on The a property quarter, X.X% reductions the price basis change Other and operating Lower

of this from reclassification business overall, in we third outsourcing our As the affected of have transformation the certain yield and outsourced adversely while the functions, outsourcing efforts cost part expense efforts, favorable result a quarter. have category

We we guidance. quarter. one-time our significant made believe are also in to to drove in cash reaffirming will We these investments items, increases which revenue to distribution and future continue the channels distribution third XXXX, significant be prices, investments cost advertising in Despite quarters. newsprint significant investments channels our in our fruitful

X.X%. We expect and to FY cash between cost in X% XXXX decrease

at last million. second-lien million reduced the during amount expense This reduced down $XXX.X and mentioned, XX last $X.X of June The June the In debt end or been payments. made has quarter, decreased debt quarter and the $X.X at $X.X principal quarter, the from to Mary quarter paid the due over the was months. $XX.X fallen was X.X% over payment million has was substantial we the flow. million of par. million As Pulitzer the in by term cash our Interest months $XX.X XX million quarterly excess debt loan

strong second-lien leverage With million down adjusted now cash of in the pay an September term to last at EBITDA. the months by on debt $X.X flow Pulitzer EBITDA, expect the company’s lower XX adjusted is par. excess loan net X.XXx We quarter cash additional and

in to continue actively engaged our refinancing. an We opportunistic advisers evaluating be with

at has is be due expected in its debt $XX.X loan, four June XXXX. quickly term before balance to to quarter first-lien amortizing repaid and five for March another The beginning our of of remainder of a is the is which years. The million of the maturity not

no economics we estate assurance refinancing, any law. real our that of new based our closed. of an cost our ability the total under be or debt the timing million and tax interest although of debt Currently, and we is opportunistic approximately maximize on listed contract, the for all to have transactions capital, of evaluate $X.X can there million deductibility of majorities were decision we under these reduce the As the of which extend $XX of sale,

a used fiscal and of XX%, expected to our of change the event we use As taxes a the In XX% we XXXX, a at expect property rate remaining become from to those sold, to the to Pulitzer taxpayer. statutory our owe. reducing is be the one proceeds term losses federal the subsidiaries tax tax par. second-lien reduce federal law, cash will reminder, all by is also in owned repay to year income The federal net total operating recent loan

impact we anticipate taxes [indiscernible]. $X reviewing payment law make In and and of in changes to on million, XXXX, We are total pension tax our capital expect to the and to income its to the XXXX still beyond. up expenditures contributions

on And our on also as will any may SEC always, questions file and remain results today. expectations. Pulitzer to with will expect Lee In our The concludes for the information we later you it remarks. we will supplemental Lastly, our filed line Legacy today. additional data financial XX-Q and have. the This X-K include team with later

telephone, the answer submitted please Following webcast. the the any for open by questions line questions. Operator, asked we during will

Operator

you. line And now [Operator open. your is Instructions]. caller, Thank

with proceed You your may question.

Andrew Gadlin

Gadlin Andrew morning. from good Capital Hi, Odeon Group. It’s

Tim Millage

morning. Good

Kevin Mowbray

morning. Good

Andrew Gadlin

I the where wanted Tim, And from us, expenses follow-up understanding help new to as as fall contract? the what is, any if ask revenues will you model will quarter forward, this the the going Berkshire – reflected fall? in where well within could you expenses question if

Tim Millage

significant the we expenses had there at respect with to increases Berkshire as agreement. of no the talked the about So in in quarter, expenses were announcement

going revenue with generate agreement significant again, the of revenue from into other the our that income In terms do a associated the agreement the increases revenue management expect expenses line not and of we we any as any roll in forward, result statement. will agreement. cost And in

Andrew Gadlin

think it you so almost being TownNews all that to Does then is so about and make venture? that part help that a be there to that larger think the it. that – a sense newspaper that growth? partner independent your Got as out is sense there. Enterprises, or hurt a in And opportunities of partners completely there spinning growth can growth no Lee about this gets Would

Kevin Mowbray

TownNews as I’ll in for jump the they we’re to we as, like James they that who over James, to Green, work with there relationship, for What is, because I’ll we I turn first And TownNews say us. develop then pretty run other by the begin Well, would benefit add that? papers. and programs CMS is tools anything with. you’d as to and advertising for independently manages us to them

James Green

is only thing I’ll Lee add and that relationship between the is No. strong. the TownNews pretty

As Kevin up and comes mentioned, TownNews [indiscernible]. Lee testing with comes that programs the with on up

we completely really run line, them now may at that is we relationship the address down now we that to but this do that’s change and point. no independently the relationship really strong need So, be see something

Andrew Gadlin

it. Got

right, guys. All much. Thanks helpful. very very Okay,

James Green

Thank you.

Operator

callers. no questions from are further There

will back the to your to I call from So discuss host webcast. questions turn Tim over Millage now the

Tim Millage

Great.

status an call provide we’re Our that for of advisers to you compared discussions the we’re to we first web five remarks, paying have four at terms that loan, again, refinancing, question opportunistic the update continue down looking not the considering premiums currently and years. ongoing And their and to substantial as majorities refinancing? can we we’ll we the on have. And first-lien on rapidly our have term with another in an as the to discussed is,

expense expected question all next last turn our what debt. about So at will that wraps on think we pension we we’re – things as that year? the Can $X.X that they Yesterday, our – what quarter expect price considered Lee’s newsprint what may to was as third some for to The And closing saw evaluate be effect and are those contributions this due web. for operating question increases. contributions. announcements to our have refinancing the effect total we’re to have the contributions you is the looking tariffs but And there questions it to you relates – some largely The future. we newsprint on that, considering pension FY we’re we see on was back in pension significant Mary results? pull that results, And million And up X.X%, that going in back for XXXX. continue up remarks. of I’ll to there expense

Mary Junck

Well, Great. everyone thank interest Lee. continued your in for you,

the and a industry performing high in As we you on level. are at focused And financial leader steadfastly know, we digital are performance.

we We’re confident have to our and manage strategies including and operations. agreement digital sound recent Berkshire tactics that in Hathaway’s place, newspaper

expect debt. to produce EBITDA make We total significant continue strong our to and in reductions continue adjusted to

noted for your debt you in maturities us Tim the during to the portion reduce The be interest based new we extend capital, ability our Q&A, all joining Board are our and regarding discussions appreciate law. As will the time our interest the or on of we and total under of in and we tax the timing and Again, and decision our Lee, economics as maximize and of discussed advisers cost debt. thank deductibility a refinancing of with of of today. our Directors debt your

Operator

you. Thank session. the this call. we and of time, our gentlemen, end concludes This Ladies at our reached have question-and-answer

Lee Enterprises (LEE) 4 Aug 182018 Q3 Earnings call transcript