Lee Enterprises, Incorporated (NASDAQ:LEE) Q4 2025 Earnings Call Transcript

Lee Enterprises, Incorporated (NASDAQ:LEE) Q4 2025 Earnings Call Transcript November 26, 2025

Lee Enterprises, Incorporated misses on earnings expectations. Reported EPS is $-1.06 EPS, expectations were $-0.06.

[speaker 0]: Welcome to the Lee Enterprises twenty twenty five Fourth Quarter Webcast and Conference Call. This call is being recorded and will be available for replay at investor.lee.net. At the close of the plan remarks, there will be an opportunity for questions. Participants accessing this call by webcast may submit written questions through the website, and they will be answered during the call as permitted. Otherwise, you will receive a response later. The link to the live webcast can be found at investors.lee.net. I will now turn the call over to your host, Jared Marks, vice president finance.

[speaker 1]: Good morning. Thank you for joining us. In addition to myself, speaking on this morning’s call are Kevin Mowbray, president and chief executive officer Nathan Becki, chief operating officer and Tim Milledge, Vice President, Chief Financial Officer and Treasurer. Earlier today, we issued a news release with preliminary results for our 2025. It is available at lee.net as well as major financial websites. Please also refer to our earnings presentation found at investors.lee.net, which includes supplemental information. As a reminder, this morning’s discussion will include forward looking statements based on our current expectations. These statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially.

Such factors are described in this morning’s news release and in our SEC filings. During the call, we refer to certain non GAAP financial measures. Reconciliations to the relevant GAAP measures are included in the tables accompanying the release. And now to open the discussion is our President and Chief Executive Officer, Kevin Mowbray. Thanks, Jared, and good morning, everyone.

[speaker 2]: This morning, I’ll provide an update on our fiscal twenty twenty five performance. We’ll also hear from Nathan and Tim later in the call to discuss operations and an outlook on fiscal twenty twenty six. Our 2025 performance clearly demonstrates the strong foundation of Lee’s future as a digital first company. Fiscal twenty twenty five finished with 562,000,000 in total revenue 53% which was digital, showing more reliance on our digital business. Than our legacy print business. On the digital subscription front, we finished the fiscal year with 94,000,000 in revenue, from our 633,000 digitally only subscribers, an incredibly proud of this industry leading revenue growth of 16% year over year on a same store basis.

Considering the February severance hampered our ability to generate digitally we are really encouraged to see where we finished the year on the revenue side. We see an opportunity in 2026 to grow units in combination with continued rate optimization. Our digital marketing services business, known as the Ampli Digital Agency, surpassed the 100,000,000 mark in FY ’25 with industry leading 5% growth on a same store basis. I’m very encouraged by Amplify’s ability to consistently deliver steady top line growth even as the broader digital advertising market remains competitive Progress in these revenue categories gives us confidence in our ability to drive sustainable growth deliver long term value to our shareholders. As a reminder, our three pillar digital growth strategy is to result in 450,000,000 in digital revenue.

Q&A Session

By 2030. Our team continues to execute exceptionally well on our digital transformation strategy. In 2025, we delivered an excellent 16% growth in digital only subscription revenue, further diversifying our revenue mix expanding our digital margins, and leading the industry. At the same time, we maintained disciplined cost management across the organization, particularly in print production and corporate overhead. Which allows us to reinvest in high growth digital initiatives. These efforts are driving steady momentum in adjusted EBITDA grew for the second consecutive quarter when adjusted for the extra week. The prior year. This level of performance is truly a testament to Nathan and his operations team and the positions Lee to achieve sustained success in the years ahead.

In 2025, we continue to lay the foundation for Lee’s future as a digital first company. We’re driving our digital transformation, and we’re confident To our shareholders. on our ability to drive sustainable growth and deliver long term value. The strength of our core digital business has built a solid foundation of over $298,000,000 of digital revenue annually putting us firmly on track to achieve 450,000,000 of digital revenue by fiscal twenty thirty. We have consistently outpaced our industry peers in several key measures of digital growth, both digital, and digital agency revenue growth. Digital subscription revenue growth grew 32% annually over the last three years, more than doubling the nearest industry peer. The substantial growth is a testament to the value of our hyper local content as well as our top notch digital platforms and tools Over the course of 2025, we continue to modernize our digital platforms and expand our product ecosystem leveraging data and marketing to maximize engagement.

On the advertising side, Amplify Digital agency revenue growth has significantly outpaced our nearest peer, growing 5% annually over the past three years. Again, we’ve demonstrated the ability to grow digital advertising revenue through innovative and scalable operations and services with our tremendously talented digitally driven teams. Overall, Lee continues to advance our strategy by driving digital transformation across every part of the business expanding reach through ongoing digital innovation, and investing in initiatives that support industry leading growth. Our focus remains on strengthening our digital products enhancing audience engagement, and building scalable capabilities that position the company for sustained performance increasingly digital media landscape.

Total digital revenue was 298,000,000 in fiscal twenty five, well on our way to achieving our long term target of $450,000,000 and we’re confident in our ability to get there. Next, I’ll pass it over to Nathan.

[speaker 1]: Thank you, Kevin. As Kevin mentioned earlier,

[speaker 2]: we closed the year with solid digital momentum, delivering 2% digital revenue growth on a same store basis. A clear indication that our digital transformation strategy is taking hold across the enterprise. Within advertising, we strengthened SMB retention throughout the year,

[speaker 3]: and nearly doubled the number of clients now valued at more than a million dollars annually. Demonstrating the rising impact of our innovative solutions and the deepening value we provide to local, and regional businesses. This improved customer performance, combined with accelerating adoption of our AI powered tools including AI enablement, AI boost, smart answer, and smart sites, directly fueled 5% same store revenue growth in the amplified digital agency. Contributing $103,000,000 to our $184,000,000 in digital advertising revenue and reinforcing the durability of our commercial base and our first to market leading position. On the consumer side, digital only revenue increased 16% on a same store basis. Driven by the strength of our local journalism and targeted retention strategies.

These gains reflect the quality and relevance of our local content, the stickiness of our consumer products and our continued ability to grow high margin recurring digital revenue. Altogether, we delivered $298,000,000 total digital revenue, representing 53% of total company revenue. A key performance measure that underscores the shift towards sustainable, higher margin digital enterprise. Importantly, digital growth and product innovation are enabled by rigorous operational execution. Throughout the fiscal year, we continued optimizing our cost structure including consolidating print operations and reducing legacy complexity. These actions created the financial capacity to invest in cloud modernization AI driven product development, and the digital capabilities that fuel this year’s digital growth.

This slide highlights the fundamental shift underway in our business and the clear progress of our digital transformation. In 2020, before we launched the three pillar digital growth strategy, only 21% of our revenue came from digital. Today, digital represents 53% of total revenue, meaning we have already surpassed the critical revenue inflection point where digital leaves the enterprise. This transition is the result of industry leading digital revenue growth across advertising, subscription, and new digital products. Supported by disciplined execution and consistent investment in our digital capabilities. Are also effectively optimizing print operations to maximize profitability and free up resources for digital growth. Looking ahead, our strategy positions us to achieve our long term target of 90% digital revenue by fiscal year twenty thirty.

Enabling a sustainable business model that is no longer reliant on print products as they mature. This trajectory demonstrates we are moving with purpose toward a stronger, more resilient, predominantly digital company. With that, I’ll turn it over to Tim. Thanks, Nathan.

[speaker 1]: Our core digital business has driven digital revenue growth more than 12% annually

[speaker 2]: from fiscal twenty twenty one to fiscal twenty twenty five. And that has translated to a comparable annual growth in digital growth

[speaker 3]: margins.

[speaker 1]: As Nathan touched on, replacing our print revenue

[speaker 2]: with growing and profitable digital revenue sets us up to achieve long term sustainability and we’re nearing the sustainability point.

[speaker 3]: While the February cyber incident interrupted efforts on several key projects in 2025, we believe that 2026 will see a nice lift digital revenue and margin due to realizing the impact

[speaker 2]: of these transformational business projects.

[speaker 1]: Moving over to the cost side, we have a successful track record of effective cost management, and thoughtfully investing in strategies that fuel long term growth.

[speaker 0]: As a reminder, we executed a

[speaker 2]: approximately $40,000,000 in annualized cost reductions

[speaker 3]: in the second quarter aimed at lowering costs across the board

[speaker 2]: with an emphasis on noncore print operations. While also preserving the integrity of our core operations. We also made an additional $10,000,000 in additional reductions entering fiscal twenty twenty six. For the year,

[speaker 3]: cash costs decreased 5% compared to last year

[speaker 2]: and finished at $524,000,000

[speaker 1]: We remain steadfast in our commitment

[speaker 2]: to long term financial sustainability. By enhancing operational rigor

[speaker 3]: this year without compromising quality, we strengthened

[speaker 2]: our long term position and are poised to drive sustainable shareholder value over the long term.

[speaker 1]: Next, I’ll move to the balance sheet.

[speaker 2]: Our credit agreement with Berkshire Hathaway includes favorable terms, including a twenty five year runway

[speaker 3]: fixed interest rate,

[speaker 2]: and no financial performance covenants. These better than market terms allow us to stay laser focused

[speaker 1]: on executing our strategy.

[speaker 3]: Also, we’ve recently executed a strategic termination of the company’s fully funded defined benefit pension plan.

[speaker 2]: This enhances balance sheet flexibility and eliminates long term volatility while preserving the participant benefits. Since the plan assets have grown sufficiently to cover all obligations, the company is free from any future cost uncertainty.

[speaker 3]: We continue to identify opportunities to monetize

[speaker 1]: our noncore assets

[speaker 3]: which improve liquidity and facilitate accelerated debt repayment. In fiscal twenty twenty five, we closed $9,000,000 of assets

[speaker 1]: sales.

[speaker 2]: And we’ve identified an additional $25,000,000 of noncore assets to monetize in the future.

[speaker 3]: The monetization of these noncore assets provide a significant source of liquidity

[speaker 2]: in 2026.

[speaker 1]: And looking ahead to 2026, we expect adjusted EBITDA growth

[speaker 2]: in mid single digits,

[speaker 3]: And with that, I’ll turn it back to Kevin.

[speaker 2]: Thanks, Tim. I’d like to revisit our long term outlook for digital subscription. Key driver of our digital revenue growth is our digital only subscription revenue. Not only for 2026, for the next five years. This slide provides insight into the positive long term trajectory our digital subscriptions and associated revenue.

[speaker 3]: The acceleration in digital subscription revenue growth

[speaker 2]: over the past few years is driven by investments we’ve made top talent and in the areas of content, branding, and consumer marketing. These investments are pro producing strong results through engaging local content, effective brand campaigns, and KPI driven marketing campaigns. We expect the results continue to push our revenue forward. With these investments and actions, we expect to achieve a 175,000,000 of recurring digital subscription revenue by fiscal twenty thirty fueled by 1,200,000 digital subscribers. Our focus on diversifying expanding offerings for advertisers will lead to the acceleration of digital advertising revenue over the next five years. Have strong relationships with more than 20,000 local and regional advertising advertisers across The US, we partner with them to achieve their marketing goals.

We sell advertising and marketing services to our customer base through both our own and operated products and our full suite of omnichannel marketing solutions through Amplify Digital Agency. With advanced data driven ad tech, specialized category expertise, scalable custom video content, and powerful first party data access amplified is a strong partner for local and regional businesses looking to drive growth. We continue to see a significant growth runway we execute our strategy. Our 2030 goal for digital advertising revenue is over 250,000,000. While Amplified is the growth engine for top line advertising revenue, our massive owned and operated digital audience fuels high margin digital advertising revenue We’ve owned and operated digital products infused valuable hyper local content remain a key advertising channel for our local communities.

Our owned and operated properties attract massive audiences, we’re offering more video inventory and branded content opportunities to boost digital advertising revenue This category is important as there remains growth potential by expanding our audience, and this category represents our highest margin digital advertising revenue. We have a strong legacy and a bright future. We’re a leader in local content with core local news and advertising assets in place. serve. We provide breaking news and stories that matter most to the local communities we Over the past five years, have grown our digital revenue mix to 53% as of 2025 more than doubling since the launch of our three pillar digital growth strategy. Looking ahead, we’re working on an important development namely a 50,000,000 common stock rights offering further support our digital transformation and deleveraging over the next five years.

Our sole lender, Berkshire Hathaway, is extremely supportive of our long term future. Successful completion of the rights offering will trigger an amendment to our credit agreement, reducing the interest rate on outstanding debt from 9% to 5% for five years. This will result in 18,000,000 annual interest savings. The combination of the 15,000,000 infusion into the business with another 90,000,000 in interest savings over five years is our balance sheet and capital structure a tremendous boost. Excited to provide an update on our next quarter’s call on the recapitalization of S efforts that are underway. The upcoming rights offer sets us up even more favorably over the next stage of our evolution as a digital first company. Our local content and presence in our local communities are as strong as they’ve ever been, and we look forward to the next five years.

Being our strongest yet. And lastly, we recently announced the upcoming departure of Tim the 2026. I’d like to extend my sincere and deep gratitude to Tim for his leadership, integrity, and dedication serving as Lee as CFO the better part of the last decade decade. His financial acumen and stewardship has been instrumental in advancing the company. While Omissen is a valued team member, we fully support his decision and wish every success in the next chapter. Tim will see the transaction and transition through and be with Lee until March. We’ll share more on the next call regarding his successor. But in the meantime, I’d like to thank Tim and his team and wish him the very best in the future. This concludes our remarks. And we’re open for questions.

[speaker 0]: Thank you. At this time, we will we will be conducting a question and answer session. As a reminder, if you are accessing this call by webcast, you may submit typed questions on your screen. Those questions will be answered during the call as time permits. One moment while we poll for questions.

[speaker 1]: We will now take our first question from the web. Was the total debt reduction in the fourth fiscal quarter and the full fiscal year? Yeah. So just as some context since our credit agreement, was launched in 2020, we have reduced debt $121,000,000 since that time. In 2025, we have seen, as you recall, we did have, in response to the cyber incident, waivers related to interest in rent.

[speaker 3]: That did increase our debt balance. If we exclude the increase related to those items, our debt was reduced roughly 3 and a half million dollars in the fiscal year as a result of the operations and assets. Sales.

[speaker 1]: With that, we have no more questions, and I’ll turn it back to Kevin for closing remarks.

[speaker 0]: I’d like to thank everyone for joining today’s call.

[speaker 2]: Our focus remains on transforming our business for the long term benefit of our shareholders, our employees, our readers and our advertisers. We appreciate your time and your interest in Lee, Thank you again.

[speaker 0]: Thank you. At this time, we have reached the end of our question and answer session, and this concludes today’s conference call. Thank you for participating, and you may now all disconnect. Everyone, have a great day.