LEE - Earnings call transcript Q2 2019 | Lee Enterprises, Incorporated

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Operator

Good day, everyone, and welcome to the Lee Enterprises 2019 Second 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]. A link to the live webcast can be found at www.lee.net. And now I will turn the call over to your host, Jamie Seratt, Corporate Controller. ahead. go Please

Jamie Seratt

you Thank us. Good for morning. joining

today's on and available Chief morning's and Bekke, Financial us Vice will are: Sales for Millage, call President Mowbray, Chief on with Also Kevin President, be Officer. and Executive Nathan President available questions Speaking Vice this call and today, Officer; Consumer Tim and for Farrell, news is release a Vice James lee.net our Marketing; XXXX. issued fiscal at Sales; Paul of Green, Vice as financial preliminary results well we and President, President, second quarter Digital. at Earlier websites. as with It major

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

to are President included measures, our now the Executive news certain non-GAAP release. our the the During financial to Kevin Mowbray. Reconciliations Officer, GAAP Chief reference to And open we discussion defined in call, tables accompanying relevant is which and measures make release. in are

Kevin Mowbray

quarter Overall, thank Thank joining results. call. for morning, the we're operating second you, pleased and you the with Jamie, good and all

includes BH was more advertising $XXX fueled TownNews, This Our saw which from revenue Group, in more digital XX.X% and second growth our due TownNews a markets, publishing is the growth, with new to our in was and which earned and revenue, digital and digital last revenue quarter X% product digital best at which increased Total with stand-alone on from includes total advertising substantial to solid the content development. continued the XX million second than from performance massive TownNews, services FTEs quarterly due businesses. in new totaled digital substantial digital in than trend on legacy growth solutions Revenue local Media TownNews. provider by up accounts over and at the months. basis, integrated leading nearly revenue several management digital agreement in revenue, management services revenue was digital performance of growth We four years especially seven incremental strong the revenue retail dedicated to quarter.

second Over acquired technology of digital WordPress $XX.X invested in the in investments revenue revenue In last XX These totaled And with video million strategic the customers. is best management This growth come which top radio third, dominating TownNews' line and technology, the diversification among and revenue first, existing widely user areas: combined with in investments per revenue. our the our million XXXX first technology. solution. continued second, content drive additional X of in will EBITDA attributed market will months, operations; months broadcast-quality customers, future other in customer and services local XX.X% regarded substantial investments TownNews share who quarter, to a market; made broadcast $X we average XXXX, adjusted digital broadcast system, increase we streaming as we strategic giving base sought-after and in class, the in year in increasing market margins XXXX, from believe We drove a print XX%. revenue and fiscal growth. of X

revenue the is revenue core category the business. accounts. of to advertising SMBs our top local and approximately accounts our of Moving side are of advertising retail controllable comprised X% Local of and represents This business.

retail from has accounts Our less allowed with today. key have local revenue reliant decision-makers, direct trends. which outperform strong on teams and overall advertising to we're category contact This this relationships sales means national

to of frequency businesses. print controllable almost particular over the The the go-to-market local sales provide X digital and our for know of retail is XXX is months at as We and approach solutions. basis small- trend. revenue growing total unmatched tactics is revenue. working first revenue Edison, trend advertisers is reach through better aimed our local local Edison XXXX for number is One We which than advertising turnkey and mid-sized in Edison have objective of points a

into is Amplified approach custom growing tactic centralized campaigns. advertising to agency, Digital Another a local selling revenue retail digital marketing and our

local Our Amplified print events these and believe advertisers agency media Digital with reasons, including suite we many advantages creative, approach and partner of We agency preferred Google. the a custom digital partner best with is has anchored complete our the in appropriate. promotions, by agency-level when and competitive and with names digital for

largest markets of team opportunities. the for Furthermore, we marketing more local online the sophisticated experts the staff We organization media of we digital marketing dedicated serve. in sales are a pursuit

advertisers. have is up analytics second that audience, Amplified enable us at the natural environment Xx. the XX% advantage Revenue engagement owning largest We exchange-based and drive for level sophisticated local agency our the results of outperforms from least provide where customer the of refine in customers quarter. our We by with the optimal campaigns to

We to FY continue expect 'XX. that trend throughout

the On first improvement X.X% the quarter subscription the a second XXX-basis-point quarter, trend. down revenue side, in from was

As customers last March to launched April. markets News+, we was our mentioned most in quarter, program and called which in a we're membership of our transitioning

is volatility fromNews+ the the timing. as expect revenue primarily our Over impact to months, subscription to X quarter-over-quarter next realized we due some trends

expect The strong the XXXX. downs access to in do more we model subscription membership performance content factored, digital News+ revenue content in for subscribers. once program ups rewards and However, offers and combines and are premium

that tiers improve tiers retention as We has benefits provide and price as membership include rewards, the points, for and having News+ well are pricing for benefits strategic will opportunities model of access, rewards that continuing and and tiers different full access print News+ digital X of digital-only. actions. X and different tiers of believe the

markets. reaching audiences adults of nearly massive, larger Our all are XX% the in our of

a the management increased agreement. of XX.X%. continue a our the area million of While Media in increase quarter base audience be key digital digital-only experience Group we half focus. reads consumption. our to second subscription to revenue $X.X we product, In In printed growing quarter, continue subscriber nearly XXXX, earned Therefore, our of digital-only content from of our significant BH will second

was agreement, we Over last X X% the Hathaway. with and earned with to no the pleased costs down totaled partnership totaled Berkshire very and Total cash first $XXX.X fees in months months. for X.X%. and added the in cost down quarter we million variable fixed the million the quarter were have Lee. $X.X revenue Adjusted We're million of EBITDA over with $XX.X XX

revenue, held are right than for are decade industry audiences, to more margin digital huge strategy And growth, margins we there key have in here's we're mid-sized in continue a Tim we the our challenges, and to include industry the because operate our and with additional we’ve metrics optimistic twice will now the to while outperform we with continue pleased Those believe financial about core While revenue. nearly performance that produce our markets metrics. Overall, remain quarter industry-leading add we highlights. average future. performance revenue some industry second operating and financial the subscription and results total

Timothy Millage

Thank you, Kevin.

second compensation a in the staffing managed and through We business our costs of In FTEs to a regionalization, high-quality, FTE and have were were news and local partially through associated long 'XX, managing quarter, associated transformation advertising. structure responsibly as quarter primarily cash down held and ongoing increases reductions outsourcing. of cost down information engaging with decreases compensation our second the unfavorable offset centralization, X.X% due with transformation outsourcing for the costs than plan. cost decade. flat well X.X%. We've structure claims for X.X% down would our our have business were track margin self-insured medical down our constant quarter. X.X% compensation more maintaining with as costs medical were while our been record experience cost second by If

in the Newsprint as impact and X.X% realized of increases print the of impact volume increases. we XXXX. the price ink price the expense limited increased throughout Lower newsprint quarter

far XXXX, driven Year-to-date, X% which prices expenses XXXX. operating the results on the newsprint remainder primarily a decreased will from have X.X% costs So cash of quarter, X.X%. fiscal for Other by down impact year lower costs. their delivery operating peak, have are in favorable in declined

For fiscal through benefits voluntary the following: costs. the Adjusted legacy predominantly XXXX. cost the in and costs the continued centralization; buyouts and basis the reduction attribute fiscal quarter; million million between EBITDA expect on and print We a last late offered transformation reductions over quarter business to outsourcing totaled in and months. comparable to $XXX.X cash in year second lower in compensation $XX.X newsprint reductions pricing; decline and to X% XXXX, due we to X% year XX

As we with conversations our having past we and the are have discussed lenders. productive several advisers refinancing our months, over

as less which consideration we stock market debt, cost our totaled maturities refinancing restrictive a of of have is than for will and such the today million of Also things remain have breakage of covenants extend terms, dictate in current to our Although debt. cost final $X goals to our today. the buybacks reduce conditions capital,

As quarter, the the totaled end amount of of of debt principal million. the $XXX.X second

of the the X/X% bond quarter the the flow XXX to June can our to will be Pulitzer million, second-lien excess paid our buy which flow the use price is or Pulitzer on in flow repay to market. in repayment the a open first-lien at we in cash loan term loan can repay free expected cash The Also term term full use March November, in With in can second-lien we bonds payment of from cash our at we loan from quarter. excess $X.X par. be back

of is and that of mandatory at Over last our And working have debt time, cash have With our adjusted excess par, to assets, Currently, revolving of equity have adjusted to have nearest maturity our cash highest capital XX estate. million are investments. our real lower outside $XX March us monetize. of investment of real And on debt to months' worth is allows excess non-core net identified flow estate X.Xx cost Excluding that Pulitzer private including and EBITDA, our XXXX. approximately monetize $XX facility, principal sweep payments. leverage EBITDA. repay assets excess approximately million we we an worked strong we a the we no we

owned million in our proceeds the of we one taxes. sold, also term the in remaining $X.X in will by As at second taxpayer become In a a loans used In quarter second-lien used -- year tax federal we we we'll Pulitzer is all state be reminder, those and our XXXX, repay subsidiaries NOLs fiscal year, event XXXX. federal of income to of and par. paid assets this repaid the

for line any $XX XXXX and remarks. the with Pulitzer you pay by and between And supplemental The taxes. always, be fiscal expect to Legacy asked data will also expect results webcast. for year, will with file X-K may include will income on on submitted to $X entire financial later as XX-Q SEC have. and Lee questions the For our today. And questions million information our we the million will line the in please it our federal additional concludes An we we phone, expectations. this answer team Operator, the questions. following any And during remain open filed. Last,

Operator

[Operator Instructions]

Andrew Gadlin

from It's Odeon Andrew Capital Gadlin Group.

the the you for TownNews, reported is of TownNews? how about revenue a you us addressable of the $XX.X million million, $XX sense Looking market months. give XX at Could over big last

Timothy Millage

Yes.

the you're over revenue XX right, revenue So a we substantial and at of months growth. TownNews, had million $XX.X last

of think of majority As on there. substantial few talked and revenue TownNews we about of grow amount core The bit side ARPU we customers, little are a different from of see customers increasing areas. existing one the TownNews Kevin CMS One, in products. area growth to their a a there's

ROI product as those well. We room CMS a other additional do the grow there's have significant in product to higher-value The that broadcast does think customers. is space to

do substantial think we there's for growth So TownNews.

Kevin Mowbray

I Yes. agree. would

Andrew Gadlin

sense I'm understand mean to in just way, can a question have advertising a really big is? understand. backdrop. share difficult I'm the different business growing the your a to very this how asking for I get. Maybe is do market what trying nicely trying

Kevin Mowbray

more and sophisticated significant it Yes. an maybe To just sell share Well, has as a management to print, a mentioned, we upside. system. have bit you it total think in help them, market is pretty Tim opportunity little lot we of our assess further

we've pursuing However, radio room based that lot And growth. for we've of and movement pursuit into a hot made track broadcast television as plug-in record well that we’re we've direction. in we've as good a our of beginning the earlier had broadcast in And move that technology on as industries. stations and video investments lot I WordPress has streaming in had success and mentioned want, those that

Andrew Gadlin

latest if -- Okay. thinking about then on you've it you And But the about of I missed talk your in could in your was debt wondering talked the in terms I it refinancing. that. prepared past remarks. was if

Timothy Millage

Yes.

So thanks for the question, Andrew.

continued and We potential a lenders lot refinancing. with a advisers on talked conversations about have our our our

our sure objectives productive we've is term cost how today; as the X through than of a feedback a information to X have trust our a any walk thinking the had. grows are provide we -- do third, under and again first-lien lot we one, I'll today for at of can extend that an in our beyond that situation repay we larger on $XXmillion we to: the the fourth, respect is in conversations more to I process, lower paid have this I'm you currently. allow that have can't us And notes as part Right that we because leverage our that refinancing we're to payment of today, this basket We details call but want that where flow we're But our that so perspective. have cash we're restricted improves; given capital; certainly the basket now, are have par. approaching loan of objectives years' off runway about protection. -- our refinancing, from well to debt we allow years our immediately use runway opportunistic a --

sweep. term cash second-lien has loan flow Our an excess

So we And don't clean structure. to up at capital have last, any want debt payable that's our par. we

have work split collateral baskets to want Legacy then one So the and and have that to up right Pulitzer. basket. we between clean now, Lee collateral We

we're framework as that how thinking hopefully, gives So you it. about some to

Andrew Gadlin

a just the thing type Or press wake think where you have time there'll release? is all to X up and head? a day we'll of you a it frame be comes particular And this where do Yes.

Timothy Millage

that that the out. there's Yes. And Well, laid I announce execute that meets can our on objectives based certainly comes. time and if think certainly the we're we'll on, we evaluating it objectives we when something

Operator

Seratt questions no from Instructions]. the questions host, And [Operator to webcast. the further will I there to now over are our from the Jamie back it turn appears callers. call discuss

Unidentified Company Representative

you. Thank

from quarterly first webcast: pay a Our the question will When investors Lee dividend?

Kevin Mowbray

it to additional over I'll Tim feedback. go turn and I'll for first,

As we've down to print acquisitions cash flow recently, make other strategic of TownNews be have debt, to and done. as said our done many that times, tuck-ins going pay all we using smart, additional we're for we've and

would so, And those priorities. fall dividend below

Timothy Millage

our I for that. we're I think and mean Right talked was the capital dividends last this And would just our allocation leverage I X.Xx. add stock relatively now, now, thing of in leverage quarter, only right decisions as we've our buybacks, about consistent excess it target of remained from where quarter.

be can focus have And being we webcast, That have Board if million so, to continue to conditions of going the our would stock the until authorization over leverage from point. years market Kevin. weigh back to from to continue broader target buy $XX X that If deploy on stock. we to to back and more out up said, deleverage there our closer is get questions our X.Xx to to we do that no

Kevin Mowbray

in a in while digital Lee, your for our you continued optimism Lee. local on as digital our to EBITDA accounts, believe continuing subscriptions, aim your strong future produce our you We transformation top keen value. business focus combined interest joining and Thank steadfast services, with and structure shareholder your about you. our debt, increase We interest will thank to our appreciate us cost remain time through which our We in will total line and continue grow to Well, today. continues. for execution, thank we adjusted reduce retail

Operator

of we gentlemen. have At you, this the session. our And concludes end our call. question-and-answer ladies reached This and time, thank

You may now disconnect.

Lee Enterprises (LEE) 10 May 192019 Q2 Earnings call transcript