LEE - Earnings call transcript Q2 2022 | Lee Enterprises, Incorporated

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Operator

Welcome to the Lee Enterprises 2022 Second Quarter Webcast and Conference Call. [Operator Instructions] Now I will turn the call over to your host, Josh Rinehults, Vice President, Finance.

Josh Rinehults

Good morning. Thank you for joining us. To begin this morning's call are Kevin Mowbray, President, Chief Executive Officer; and Timothy Millage, Vice President, Chief Financial Officer and Treasurer. a quarter with of issued our results we fiscal second XXXX. today, news preliminary release for Earlier It is available major financial at www.lee.net as well websites. as at www.investors.lee.net Please include refer to earnings found also our supplemental at information. presentation that

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

During Mowbray. open are discussion certain adjusted accompanying conversation and now are the to non-GAAP the financial EBITDA and our measures we the refer And tables call, on Slide to to release. our X Reconciliations measures, the presentation along. the cash defined will release. following Kevin for of GAAP those in including costs, open news relevant Officer, is which Kevin earnings President the included Chief Executive in

Kevin Mowbray

of that right incredibly join in digital of the revenue putting all has team, gives and digital Good a morning, revenue and value are in subscribers, sustainable us growth to for reduction achieve long-term mix by and expansion base, of and a to recurring executing revenue, continued our core targets. Lee Growth ahead balance Sustainable drive our strategy, a which and everyone. Digital growth reported We're digital our digital of driving potential our flow, strengthened we're multiple us the our thesis, creates operating speed. high-margin It results, growth the solid cash have great significant the fuel from recurring to drive our flow plans value X a sheet fiscal free paying at stronger the believe foundation revenue I'm of profits, X is We our value fueled and strategy could and aside right Enhanced XXX% off will investments increasing will significant growth. our revenue initiative the 'XX future path confidence and with we transform XX% pleased long-term margin us. stakeholders, quarter shareholders. and our as expansion, digital shareholders. this for our total creation second investment for our Pillar growth proud digital enhancements. of debt digital in creating strong our Strategies, revenue cash XX% Pillar you execution sheet, revenue We of balance

strengths. key strategy Lee's Our leverages

local growth the expertise, our industry-leading by line driven revenue Our growth. generate a advertising subscriptions top revenue million and revenue digital to being local market XXXX, revenue. digital highest of commitment and build $XXX and larger it's digital in expected is digital revenue and to digital achieve growth our quality increased news increased recurring This to base

X our with audiences Our fiber offerings to trusted capabilities. investments user positions, market strong revenue, on base transformation local expanding our Pillar our growing subscription expanding diversifying guiding and digital and audiences, for a focused and Digital company. centric and digital is We're Growth and Strategy digitally We're formats, engagement, brands, rich and content. Pillar and in in-house high-value traffic focused digital our higher leveraging X multimedia advertisers. outsized expanding monetization, and experience, regional on presentation driving

the Lee's in selling second which niche has positions. media. we the expanding first average on have in goal We're topics digital-only tactics XXX,XXX to expertise content compared market vast achieving Extra! expansion examples. revenue digital-only and time, to the and in drive an for Hits are XX% an where data because were driving increase subscribers, continue At our and X at fastest-growing quarter. the Extra! the and quarter our offerings platform paid paying in leveraging off of These growth digital Pinch and are technology driving good digital-only cutting-edge the total digital converting our unique X subscribers to digital-only rapid are We as pace XXX,XXX subscriber our digital ahead continued in positions of over year-end We XXX,XXX subscription end our increase subscription the base they us months local nearly goals value-added goal of same is of second digital-only rates of increasing subscription-based make subscriptions, fiscal the the we XXXX. increase digital prior Pillar subscribers and year. are to quarter, and average digital schedule. growth. a we're up Reaching to up X XX% subscribers, reaching our achieve more additional subscribers important Digital-only by rates now of for investments it's by of in base revenue. transformation

third our pillar focuses in diversifying Our and for doing offerings and we're on expanding ways. X advertisers, that

consulting, full-service digital marketing and custom Digital, analytics. including provides Amplified omnichannel our regional media through and buying, sophisticated First, solutions, agency advertisers with that local

the advertisers Vision is Lee's to local tool transformed more Lee's category are by growth opportunity and properties continue X We're Second, video next to double-digit platform the and the platforms, to omnichannel The on Vision sales allows platform. revenue. growth our years. audiences. of software capture Both execution this Lee. us in drive digital a for revenue opportunities operated Vision Amplified and by content significant expected ad Digital. more supported powered platform Vision for advertising proprietary massive branded in is advertising maximizing owned Industry-wide attract by and its enablement offering has digital local inventory the initiatives these

The we're digitally $XXX Lee Pillar sustainable digital expected of to recurring our Our nearly our second as achieve quarter Pillar vibrant centric aimed and revenue XXXX. are Strategy with by XXXX at X results, We early million there. Digital Growth execution launched advancing company. in strategy and halfway Strategies X a

XXXX, see As growth industry-leading Slide in year can X, subscribers agency fiscal progress tremendous made digital throughout you and on revenue. digital we including

to For million. total digital XXXX, $XXX fiscal year grew revenue

up paid increased momentum digital off as We're Total growth. XXXX. Total with will and investments they and advertising solutions we've the very revenue the and as fueled full-service rapid Amplified over XXXX. Tim digital the $XX XX XX% second of XXX%. subscribers, comprised growth $XX in increased and long-term quarter. Digital subscription is up the our by advertising Digital Digital subscribers in marketing Digital with the detail, the and the million morning, revenue this digital-only speak local digital our that totaled growth services $XX in to target target subscription quarters. you nearly media, Growth revenue Digital revenue, XXX,XXX in to months results quarter XXX,XXX the driven accelerating have now progress. Digital, year-end XX% months Amplified fiscal our including agency $XX revenue by the the of revenue digital more in million revenue total million. revenue metrics Digital-only quarter, transformation half million. pleased a tremendous in to title are demonstrate quarter fiscal marketing target in quarter of advertising the Amplified nearly Amplified of marketing reaching was Digital $XX clarity XX.X%. X million the XX services revenue revenue last digital marketing XX% revenue and in at and totaled quarter, represents $XX on several X on results represents We last over of our as digital-only and totaled last transparency revenue mentioned saw our second is year-end Strategy more subscription X subscription in early. you revenue. one give services for held to you in As million, our increased our revenue second Pillar this and revenue marketing months, in growth of of at digital pace subscription remains $XX.X XX% provide half Growth digital earlier, with digital-only million. digital-only paying Lee the which Lee our achieve total to I advertising services And we better than platform and digital over fastest-growing

on our confidence. year These revenue Our us all fiscal XXXX achieve investments returns our give great track of have us quarter second digital on digital to targets. early results

the in the detail. And I'll our right and discuss right with team, have executing it turn we're more Tim strategy, to second performance We financial over to now speed. quarter

Timothy Millage

revenue the quarter. Thank second operating was in you, $XXX million Total Kevin.

sold, ago digital secular in to second Amplified and environment. million growth due chain the incredible driven digital total prices in XX% with increased pace, revenue Total a technology up Kevin and continued up digital cycled quarter costs revenue. revenue Operating quarter, supply general cash costs growth mentioned, compared investments due increase by tied strategy, prior XX%, a overall revenue expenses in cash and an we cost XXX% the attributed constraints. our strategic revenue in subscription inflationary Digital XX% totaled of continued were to was the year, in digital at Also, cost the same received year goods decline Increases benefits and growth X%. one-time to declines Medical. As growth million $XXX digital and print in talent to to digital Princeton in $XXX a were an

legacy We which we costs, continued next efforts business more go in into transformation our the detail reducing print by page. will on

of million Lastly, with quarter adjusted in of loss the a $XX.X we net EBITDA $X.X had million.

the metrics digital each Kevin achieve to cost we quarter, third quarter we taken achieve digital revenues earlier, expect of also target. us full-year for early mentioned As outlined. EBITDA additional revenue XXXX the growth has 'XX subscriber in our in outlook digital-only our actions adjusted second pace our on have to With FY and

associated managing long manage history with the our our cost aim revenue costs We we and responsibly streams. directly have to of a structure,

structure our drive our end, services. to a national On evaluated our streams. all done our legacy with This well optimizing align was other process to and cost we capital our corporate the reduce external cost cost organization, of the margin side, marketing, deep manufacturing, we as content, completed long-term as strategy. print recently spending to structure dive aspects and into finance, print our better continue human attributed To XX-week distribution, structure and IT, that revenue to

a identified, As quarter, to a 'XX. the costs cash fiscal achieve $XX early the we an our expect reduction in reduction more year million expect than $XX cash and annualized to quarters various actions of on third million basis. actions the began last in of result X in we the Executing costs

local areas business priority is our on our remain to we end, business focused future in high-quality continue will tied cash in drive The and our commitment to profits, cost invest and to reducing sustainable growth. drive digital impact digital our targeted costs digital drilling will maximizing main talent and efficiencies our future in technology that structure our our To of long-term news that print to remains the steadfast. of revenue fiscal 'XX. and we investments While

approximately by are investments digital the million new total cost talent and in technology year-over-year. of increase expect goods making increased to cost we $XX We sold cash the

we're With adjusted structure, making to million. the investments, achieve digital investments the print expect full our are cost year to with returns transformation, taken EBITDA seeing to on these optimize actions we combined $XX early cost in our million $XX the of guidance our we

We million, continue debt was million quarter refinancing to our the of principal end our and million amount strengthen $XX the of since year-to-date at $XXX sheet of 'XX. in and balance the March $XXX down

year reminder, terms revenue our important growth. fiscal favorable our has Berkshire agreement 'XX, do us no plans the the contributions are and contributions execute our it and technology and a funded credit As the expect with pension Hathaway, pension material as any made investments incredibly sustainable that in make in we in to recurring lender, sole as ability for fuel the our we necessary not aggregate. strategy quarter, us in are allows second that talent fully We our

in with We proceeds our targeting of continue repayment. $XX million $XX additional monetize million the Finally, $XX closed to over we million estate, debt X opportunities from million real 'XX to generated asset the and of of sales year. are facilitates last identify $XX which half asset to the years first sales an accelerated fiscal

our a our goal to by is 'XX. the As achieve of target leverage X.Xx long-term reminder, end of under

found be This the metrics and to sharing clarity first 'XX beyond. transparency Slide outlook are quarter table providing better digital and we're transformation, our which we on on give fiscal can XX. our summarizes call, As

As our to transformation digital over you expect can progress see, make significant the we next continued several on years.

record for planned We growth. have of track reach with our digital-only And on investments, to goal are we the XXX,XXX subscribers a strong track subscription by XXXX. already digital accelerating incremental established

growth outlook. strategy is advertising sustainable digital our exceeding recurring of to that trajectory million. execution generate revenue X-year Digital's Continued dramatic subscription $XXX fueling expected is Amplified digital

Amplified quarter content, as digital expertise, and Vision to first-party access, advanced powerful ad in double-digit video to uniquely for Our We're our XXX% new positions regional platform data a capitalize Amplified's solutions growth. building our including second offer us on growth looking technology, advertising. year-over-year. businesses omnichannel custom partners. With 'XX local scalable specialized strong data-driven category expand partner to our In e-commerce ad to capabilities, drive and grew continuing Amplified's revenue of

to year and runway execute we growth continue significant We're fiscal $XXX revenue in a our projecting We XXXX. this million in $XX as see strategy. Amplified's million

to reach $XXX digital $XXX of XXXX, with from Amplified. million revenue expect We by annual advertising million about

digital that, to will in Kevin by I revenue up. results of it $XXX XXXX. total that million back With of to All turn wrap approximately

Kevin Mowbray

progress Strategy growth Thanks, Tim. oversight quarter We're long-term stage with our Pillar it team's continued sets and our very Under Board on the our Directors Growth pleased guidance the strategy, the making we're for our and Digital our targets. of and of value leadership on X significant execution results creation. second

with the as entire our and advertising information digital transformation. the transformation. our marketing in digital audience digital as continued transformation is capabilities team services. in for of thank reflected The is rapid and communities effort combined the Lee success subscriptions to and their have growth I'd well as digital-only foundation like news the serve, of the wrap in We revenue, presence we driving up, of for digital source our cutting-edge trusted strong To

team, have and for our questions. have. line long-term advertisers, line We the shareholders. you open and than positioned remain on the right will please value any the for our concludes remarks, and users, we're right This may the board, better for readers, and to Operator, ever strategy, I create questions Tim believe right the

Operator

[Operator Instructions]

Michael Kupinski

I a first have of Kupinski. growth. couple the Congratulations, of a digital is couple digital total up questions It on seems of from at quarter. first Michael questions. like quick just your is This have now XX% I on of revenues, in all, digital. XX%

the provide expectations, the was particularly that. paywalls you you're can digital-only beat on group also, which digital you driving could quarter, some just going wondering promotions, successes there? I on rate. changes I Your in in color like subscription revenue. on seems it you did on comment and if businesses there your And if my discount had decreasing was Were wondering is

Kevin Mowbray

dynamic time. Tim, jump and digital-only to remarks a after same the doing obviously sure were moved up digital-only I'll in me. right subscription to welcome meter mid-XX%. in We've over as we're noted have jump used adjusted the technology data Yes, you're targeting subscribers, time, drive and At really our make in and the rates to our we meter to and in

things it's really So, attributed all are of those that to that growth.

Michael Kupinski

some Amplified from or businesses is us really you on other growing Got Why of to you. they obviously having And winning well. coming new Can customers digital these are Are customers you're you? types give with? to marketing digital are that the color agencies? success you

Kevin Mowbray

and we customer to digital on much customers and into our can a year. we've game winning presentation making investments the agencies, over higher hire count other We're talent from company that really that the digital in calling our coming prior upped drive on noted

Michael Kupinski

little then than What Got hearing you just chain are point? it this from expected. print advertising, a typical secular than if area, was any looking that you I side challenges so in print concerns affecting more are inflation bit was for? the of or what a wondering recession but little that's of that customers issues I prospect the supplying And on I was weaker the about know at I kind and mentioned you you. hearing

Kevin Mowbray

say various has talent would it's a market impact things. of bit chain and hear combination more typically inflation to it. supply a issues it's businesses. X I an Well, We of though, these on Certainly, hiring

Michael Kupinski

$XX should $XX think about we basis And this you're an and cost Because, about planning savings? investing with half on said, on well. the the as you How million of million in as mentioned annualized year. those second cutting of then you savings

the So, the can you cost us aggregate quarters? on kind savings of give in that thoughts some expect you upcoming

Timothy Millage

Yes.

investments, So $XX to reference have be 'XX as this annualized impact actions impact as making gives digital for And be. million in structure something we of Amplified. increase of FY million well $XX goods walk the to on cost on around gives mentioned, investments, of some done of approximately to $XX growth as you we the That we you the Certainly, digital terms the from sold of year. of where expect to That we're time the we rates an expect fiscal as the committed our cost basis. million. cost to

Michael Kupinski

have some Great. And other the biggest you of pressures Tim, that estimate was line in looking at expenses, that in you talk the cost variance about item? the my Can category. in the

Timothy Millage

we're Yes. I'd have to also revenue, to the goods Amplified tied of cost it. our main to example, are outperformance impacts the biggest the does from say driver. the distribution biggest the is Amplified that is piece the category running sold going costs, be going through which on on the some be going see impacts but That's to there inflationary where environment, there, for

Michael Kupinski

All right. Congratulations.

Timothy Millage

the to from Now move questions we'll web.

Josh Rinehults

first web is Our the what driving question the decreases to visitors? from unique is

Kevin Mowbray

give I'll that It's quarter-over-quarter. quarter-over-quarter seeing we're down purchase. funnel really have in That declined people because, for average remarks, driven subscription doesn't we've mentioned my digital jump us really really pause increase noted, and onetime rates. meter visitors in our we've the a as as And tightened much our Yes, I in.

have continue subscribers the on the we right feel to market, So, we're vast digital-only to addressable forward. track industry we going still and lead in a driving

Josh Rinehults

what Our second is, costs? provide more in restructuring is can question included you information on

Timothy Millage

Yes.

costs number had, assist a we as legal in through exiting of costs unsolicited lawsuits evaluating board things a facilities, of restructuring that as defense with our well cost to run there's our associated that So offer. severance to of costs from advisor our of couple the

running are that that things line. So there's a through number of

Josh Rinehults

fiscal do to Next much debt question achieve reduction year? is this expect you how

Timothy Millage

we small increase and reduction an FY a cash flow anticipated 'XX, With debt in 'XX. a reduction. our And in payments result, expected slowdown tax in investments in as a free income fiscal temporary in committed digital

taken the our keeping deleveraging of our growth with cost our track on achieve our target the ratio XXXX. revenue actions we've with us combined reduce achieve structure, our digital to full-year to we by EBITDA that With to adjusted of expect plan in guidance streams, do leverage X.Xx

Josh Rinehults

no the questions have web. more We from

Kevin Mowbray

Well, and and you in our continued I today. interest appreciate for call you Lee, your thank joining commitment

Operator

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

Lee Enterprises (LEE) 7 May 222022 Q2 Earnings call transcript