Total operating revenue increased (+8%) over the prior year
Digital revenue totaled $66 million (+48%), more than one-third of total operating revenue
Adjusted EBITDA(1) totaled $27 million, up over the prior year for second straight quarter
Digital-only subscribers grew 51% to 337,000
DAVENPORT, Iowa, Aug. 05, 2021 (GLOBE NEWSWIRE) -- Lee Enterprises, Incorporated (NASDAQ: LEE), a leading provider of high quality, trusted, local news, information and a major platform for advertising in 77 markets, today reported third quarter fiscal 2021 financial results(2) for the period ended June 27, 2021. On a GAAP basis, total operating revenue was $196.5 million and net income totaled $3.7 million in the third quarter.
“We have made significant progress on our Three Pillar Digital Growth Strategy and our third quarter results clearly demonstrate that we are on a strong path forward to driving more recurring, sustainable revenue.” said Kevin Mowbray, President and Chief Executive Officer. “I am extremely proud to report that we posted 7.6% growth in total operating revenue, 48.3% growth in total digital revenue, 90.3% growth in Amplified revenue, 36.4% growth in digital-only audience revenue, and our second straight quarter of Adjusted EBITDA growth.”
"Almost 55% of our total operating revenue, representing $108 million, is subscription-based recurring revenue and, includes subscription revenue, revenue at TownNews and Amplified revenue. Subscription revenue was flat with the prior year as growth in our digital subscription platforms and improvement in full access attrition rates posted total audience growth for each month in the quarter. Digital subscriptions grew 50.5% and now total 337,000 at the end of the quarter as we remain the fastest growing digital subscription platform in local media,” Mowbray added.
“Total advertising and marketing services revenue increased 17.2% in the quarter, and I am very proud of the focus and determination our sales organization has shown in achieving these strong results,” Mowbray added. “Total digital revenue increased 48.3% in the quarter fueled by a 90.3% growth at Amplified, our full service digital marketing services agency, as we continue to expand our in-house capabilities on sophisticated campaigns. We have also expanded our suite of products for SMBs as well as large regional and national accounts, including our recently announced partnership with Amazon Advertising. We are also seeing exciting growth in video revenue, which totaled $2.5 million in the quarter, as we better monetize our sponsorship and branded content,” Mowbray added.
“While we are investing in our digital transformation, we continue to strengthen our balance sheet,” said Tim Millage, Vice President, Chief Financial Officer and Treasurer. “The principal amount of debt at the end of the third quarter totaled $485.2 million, down $13.7 million in the third quarter and down $90.8 million since the refinancing last March 2020. Pension and post-retirement benefit plans continue to be over funded in total, further improving our balance sheet profile.”
Total Cash Costs(1) were $171.9 million, or down 3.3% after adjusting for the significant temporary cost actions taken last year as a result of the pandemic. Since the acquisition of BH Media and Buffalo News(3) in March 2020, we have realized $110 million in cost synergies, remaining ahead of our 2021 cost target of $100 million,” Millage added.
THIRD QUARTER HIGHLIGHTS
YEAR TO DATE HIGHLIGHTS
DEBT AND FREE CASH FLOW
On March 16, 2020, the Company closed on the comprehensive refinancing of all of its outstanding debt(4). The $576 million in financing has a 25-year maturity, a fixed annual interest rate of 9.0%, mandatory payments based on the Company’s Excess Cash Flow(4), and no financial performance covenants.
As of and for the 13 weeks ended June 27, 2021:
CONFERENCE CALL INFORMATION
As previously announced, we will hold an earnings conference call and audio webcast today at 9 a.m. Central Time. The live webcast will be accessible at www.lee.net and will be available for replay two hours later. Several analysts have been invited to ask questions on the call. Questions from other participants may be submitted by participating in the webcast. The call also may be monitored on a listen-only conference line by dialing (toll free) 800-357-9083 and entering a conference passcode of 412575 at least five minutes before the scheduled start. Participants on the listen-only line will not have the opportunity to ask questions.
ABOUT LEE
Lee Enterprises is a major subscription and advertising platform and a leading provider of local news and information, with daily newspapers, rapidly growing digital products and over 350 weekly and specialty publications serving 77 markets in 26 states. Year to date, Lee's newspapers have average daily circulation of 1.0 million, and our legacy websites, including acquisitions, reach more than 47 million digital unique visitors. Lee's markets include St. Louis, MO; Buffalo, NY; Omaha, NE; Richmond, VA; Lincoln, NE; Madison, WI; Davenport, IA; and Tucson, AZ. Lee Common Stock is traded on NASDAQ under the symbol LEE. For more information about Lee, please visit www.lee.net.
FORWARD-LOOKING STATEMENTS — The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release contains information that may be deemed forward-looking that is based largely on our current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and other uncertainties, which in some instances are beyond our control, are:
Any statements that are not statements of historical fact (including statements containing the words "aim", “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Statements regarding our plans, strategies, prospects and expectations regarding our business and industry, including statements regarding the impacts that the COVID-19 pandemic and our responses thereto may have on our future operations, are forward-looking statements. They reflect our expectations, are not guarantees of performance and speak only as of the date the statement is made. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this release. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.
Contact:
[email protected]
(563) 383-2100
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
13 Weeks Ended | 39 Weeks Ended | |||||||||||
(Thousands of Dollars, Except Per Share Data) | June 27, 2021 | June 28, 2020 | Percent Change | June 27, 2021 | June 28, 2020 | Percent Change | ||||||
Advertising and marketing services | 91,122 | 77,754 | 17.2 | 279,326 | 204,426 | 36.6 | ||||||
Subscription | 88,792 | 89,115 | (0.4 | ) | 269,905 | 178,234 | 51.4 | |||||
Other | 16,576 | 15,659 | 5.9 | 51,505 | 43,578 | 18.2 | ||||||
Total operating revenue | 196,490 | 182,528 | 7.6 | 600,736 | 426,238 | 40.9 | ||||||
Operating expenses: | ||||||||||||
Compensation | 82,731 | 72,396 | 14.3 | 250,048 | 164,330 | 52.2 | ||||||
Newsprint and ink | 7,051 | 7,572 | (6.9 | ) | 22,222 | 16,629 | 33.6 | |||||
Other operating expenses | 82,117 | 77,440 | 6.0 | 243,749 | 178,744 | 36.4 | ||||||
Cash costs | 171,899 | 157,408 | 9.2 | 516,019 | 359,703 | 43.5 | ||||||
Total operating revenue less cash costs | 24,591 | 25,120 | (2.1 | ) | 84,717 | 66,535 | 27.3 | |||||
Depreciation and amortization | 10,836 | 11,201 | (3.3 | ) | 33,794 | 25,196 | 34.1 | |||||
Assets loss (gain) on sales, impairments and other, net | 242 | 147 | 64.6 | 6,938 | (5,153 | ) | NM | |||||
Restructuring costs and other | 1,419 | 2,865 | (50.5 | ) | 5,880 | 6,422 | (8.4 | ) | ||||
Operating expenses | 184,396 | 171,621 | 7.4 | 562,631 | 386,168 | 45.7 | ||||||
Equity in earnings of associated companies | 1,689 | 842 | NM | 4,902 | 3,773 | 29.9 | ||||||
Operating income | 13,783 | 11,749 | 17.3 | 43,007 | 43,843 | (1.9 | ) | |||||
Non-operating income (expense): | ||||||||||||
Interest expense | (11,010 | ) | (13,135 | ) | (16.2 | ) | (34,129 | ) | (35,377 | ) | (3.5 | ) |
Debt financing and administrative costs | — | — | - | — | (11,865 | ) | NM | |||||
Curtailment Gain | — | — | - | 23,830 | — | NM | ||||||
Pension withdrawal cost | — | — | - | (12,310 | ) | — | NM | |||||
Other, net | 2,330 | 1027 | (28.3 | ) | 6,240 | 3,309 | 88.6 | |||||
Non-operating expenses, net | (8,680 | ) | (12,108 | ) | (28.3 | ) | (16,369 | ) | (43,933 | ) | (62.7 | ) |
Income before income taxes | 5,103 | (359 | ) | NM | 26,638 | (90 | ) | NM | ||||
Income tax expense (benefit) | 1,366 | 368 | NM | 7,106 | (92 | ) | NM | |||||
Net income (loss) | 3,737 | (727 | ) | NM | 19,532 | 2 | NM | |||||
Net income (loss) attributable to non-controlling interests | (510 | ) | (548 | ) | (6.9 | ) | (1,537 | ) | (1,322 | ) | 16.3 | |
Income (loss) attributable to Lee Enterprises, Incorporated | 3,227 | (1,275 | ) | NM | 17,995 | (1,320 | ) | NM | ||||
Earnings per common share: | ||||||||||||
Basic | 0.56 | (0.23 | ) | NM | 3.15 | (0.23 | ) | NM | ||||
Diluted | 0.55 | (0.23 | ) | NM | 3.10 | (0.23 | ) | NM | ||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income, its most directly comparable GAAP measure:
13 Weeks Ended | 39 Weeks Ended | |||||||
(Thousands of Dollars) | June 27, 2021 | June 28, 2020 | June 27, 2021 | June 28, 2020 | ||||
Net income (loss) | 3,737 | (727 | ) | 19,532 | 2 | |||
Adjusted to exclude | ||||||||
Income tax expense (benefit) | 1,366 | 368 | 7,106 | (92 | ) | |||
Non-operating expenses, net | 8,680 | 12,108 | 16,369 | 43,933 | ||||
Equity in earnings of TNI and MNI | (1,689 | ) | (842 | ) | (4,902 | ) | (3,773 | ) |
Loss (gain) on sale of assets and other, net | 242 | 147 | 6,938 | (5,153 | ) | |||
Depreciation and amortization | 10,836 | 11,201 | 33,794 | 25,196 | ||||
Restructuring costs and other | 1,419 | 2,865 | 5,880 | 6,422 | ||||
Stock compensation | 205 | 228 | 639 | 799 | ||||
Add: | ||||||||
Ownership share of TNI and MNI EBITDA (50%) | 1,923 | 955 | 5,421 | 4,464 | ||||
Adjusted EBITDA | 26,719 | 26,303 | 90,777 | 71,798 | ||||
NOTES
(1) The following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant GAAP measures are included in tables accompanying this release:
(2) This earnings release is a preliminary report of results for the periods included. The reader should refer to the Company's most recent reports on Form 10-Q and on Form 10-K for definitive information.
(3) On March 16, 2020 (the "Closing Date"), the Company closed the acquisition of the newspaper assets of BH Media Group, Inc. ("BH Media") and the stock of The Buffalo News, Inc. ("Buffalo News").
(4) The Company's debt is the $576 million term loan under a credit agreement with BH Finance LLC dated January 29, 2020 (the "Credit Agreement"). Excess Cash Flow is defined under the Credit Agreement as any cash greater than $20,000,000 on the balance sheet in accordance with GAAP at the end of each fiscal quarter, beginning with the quarter ending June 28, 2020.
(5) Due to the BH Media acquisition, our basis of presentation includes (i) our actual GAAP results, which reflect a full quarter of Legacy Lee, BH Media and Buffalo News and year-to-date period of Legacy Lee and 28 weeks of results of BH Media and Buffalo News, (ii) pro forma results, which reflect the consolidated operations, adjusted as if Lee had owned BH Media and Buffalo News for the entire period presented, and (iii) Adjusted EBITDA, which is our non-GAAP measure of operating results, calculated based on actual results (with 28 weeks included in the 52 weeks ended September 27, 2020) and on a pro forma basis (assuming BH Media and Buffalo News were owned for the entire period). Legacy Lee refers to the operating assets and results of operations of the Company prior to the Closing Date, and is synonymous with same store results.
(6) TNI refers to TNI Partners publishing operations in Tucson, AZ. MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI.
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