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LEE ENTERPRISES, Inc (LEE)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 total operating revenue was $144.6M, down 5.8% YoY; digital revenue grew 4.9% YoY to $73.4M and reached 51% of total revenue, while Adjusted EBITDA fell to $7.6M from $18.6M YoY as restructuring and higher non‑operating expenses weighed on results .
  • Management reaffirmed FY2025 guidance: Total Digital Revenue growth of 7–10% and Adjusted EBITDA growth in the low single digits; identified ~$40M annualized cost reductions to be executed by end of Q2 FY2025 to offset legacy print headwinds .
  • AI commercialization is the key narrative and potential catalyst in 2025: early tests show 85% adoption among engaged users; the “AI Boost” program and partnerships with AWS, Perplexity, and ProRata are expected to accelerate digital revenue through H2 FY2025 .
  • Liquidity actions continue: $5M of asset sales closed in Q1 with $25M of identified noncore assets to monetize; debt remained $446M with fixed 9% rate, no covenants, and 25‑year maturity, supporting strategic execution .

What Went Well and What Went Wrong

What Went Well

  • Digital mix and growth: Total Digital Revenue rose to $73M (+5% YoY same‑store) and reached 51% of revenue; digital‑only subscriptions grew 14% YoY to $22M; Amplified Digital Agency revenue rose 14% YoY to $24M .
  • AI traction and product pipeline: “Next‑gen AI personalization” tests achieved 85% adoption among engaged users; “AI Boost” for advertisers is launching to tap AI search/answer channels (Perplexity/ProRata) .
  • Cost discipline: Cash Costs declined 1% YoY to $138.6M, and ~$40M of annualized cost reductions are slated by end of Q2, targeting print manufacturing, distribution, and corporate efficiencies .

What Went Wrong

  • Profitability pressure: Adjusted EBITDA dropped to $7.6M from $18.6M YoY; operating income swung to a $(3.4)M loss vs $7.8M YoY, as restructuring and higher non‑operating expenses offset digital strength .
  • Legacy print declines: Print subscription revenue fell 16% YoY to $43.4M; print advertising declined 18.7% YoY to $19.9M; total print revenue dropped 14.7% YoY to $71.2M .
  • Estimate context unavailable: S&P Global EPS and revenue consensus were not available; we cannot evaluate beats/misses this quarter against Street estimates (see “Estimates Context”).

Financial Results

Core P&L and Profitability (oldest → newest)

MetricQ3 FY2024Q4 FY2024Q1 FY2025
Total Operating Revenue ($USD Millions)$150.6 $158.6 $144.6
Operating Expenses ($USD Millions)$146.8 $162.9 $149.0
Operating Income (Loss) ($USD Millions)$4.9 $(3.7) $(3.4)
Net (Loss) Income ($USD Millions)$(3.7) $(9.5) $(16.2)
Diluted EPS ($USD)$(0.73) $(1.69) $(2.80)
Adjusted EBITDA ($USD Millions)$14.8 $16.8 $7.6
Cash Costs ($USD Millions)$137.6 $143.2 $138.6

Segment and Revenue Mix (oldest → newest)

MetricQ3 FY2024Q4 FY2024Q1 FY2025
Digital Advertising & Marketing Services ($USD Millions)$49.9 $52.5 $46.7
Digital‑Only Subscription Revenue ($USD Millions)$20.7 $23.9 $21.6
Digital Services Revenue ($USD Millions)$5.2 $5.3 $5.1
Total Digital Revenue ($USD Millions)$75.8 $81.6 $73.4
Print Advertising Revenue ($USD Millions)$18.9 $19.4 $19.9
Print Subscription Revenue ($USD Millions)$47.6 $49.1 $43.4
Other Print Revenue ($USD Millions)$8.3 $8.4 $7.9
Total Print Revenue ($USD Millions)$74.8 $76.9 $71.2
Total Operating Revenue ($USD Millions)$150.6 $158.6 $144.6

KPIs and Balance Sheet (oldest → newest)

KPIQ3 FY2024Q4 FY2024Q1 FY2025
Digital Subscribers (units)748,000 771,000 774,000
Amplified Digital Agency Revenue ($USD Millions)$26 $28 $24
LTM Total Digital Revenue ($USD Millions)$290 $299 $302
Debt Principal ($USD Millions)$453 $446 $446
Cash on Balance Sheet ($USD Millions)$13 $10 $6
Net Debt ($USD Millions)$439 $436 $440

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Digital Revenue YoY GrowthFY20257%–10% 7%–10% Maintained
Adjusted EBITDA YoY GrowthFY2025Low single digits Low single digits Maintained
Capital ExpendituresFY2025~$12M Up to $12M Maintained
Cash TaxesFY2025$4M–$10M $4M–$10M Maintained
Pension ContributionsFY2025None expected (plans fully funded) None expected (fully funded) Maintained
Annualized Cost ReductionsBy end of Q2 FY2025N/A~$40M identified New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2024)Previous Mentions (Q4 FY2024)Current Period (Q1 FY2025)Trend
AI/Technology InitiativesDigital sustainability milestone; groundwork for AI; focus on owned & operated digital and Amplified Formalized partnerships with Perplexity/ProRata; AWS selection; vision to be “last mile intermediary” in AI ad/content economy AI personalization tests with 85% adoption; launch of “AI Boost,” SmartSearch, SMB AI tools; expectation to accelerate digital growth in last 3 quarters of FY25 Accelerating
Digital Subscription Growth748K units; +34% YoY digital subscription revenue; ARPU rising Achieved 771K units for FY24; 41% YoY revenue growth; target 1.2M by 2028 774K units; +14% YoY revenue; confidence in FY25 outlook tied to units and ARPU Improving
Cost Management & Print OptimizationFY24 transformation savings $75–$85M; cash costs down 8% $82M savings; cash costs up 4% in Q4; continue streamlining operations Cash Costs down 1% YoY; ~$40M annualized reductions identified for execution by Q2 Improving
Debt & Asset MonetizationDebt $453M; identified $25M noncore assets; plan to close ~$10M by FY end Debt $446M; $13M asset sales closed in FY24; $25M identified $5M asset sales closed in Q1; $25M identified; credit agreement with fixed rate, no covenants Stable/Executing
Advertising EnvironmentAmplified growth +12% YoY; improving digital ad within O&O Amplified +21% YoY; noted cyclicality and political ad potential Amplified +14% YoY; Digital ad revenue +2% YoY; pushing AI‑driven ad content creation Stable to improving

Management Commentary

  • “Our first quarter results demonstrate the continued progression of our digital transformation…over $300 million in Total Digital Revenue over the last twelve months, including over $100 million in Amplified Digital Agency® revenue.” — CEO Kevin Mowbray .
  • “We expect digital revenue growth to accelerate…achieving full year guidance of growth between 7% and 10%…approximately $40 million of annualized cost reductions…by the end of the second quarter.” — CEO Kevin Mowbray .
  • “We developed a next‑generation AI personalization system…partnerships with Perplexity and AWS…early test results are promising with adoption rates already at 85% among engaged users.” — Chief Transformation & Commercial Officer Les Ottolenghi .
  • “Digital revenue has grown more than 17% annually since FY ’21…digital margin is also an impressive 70%…we expect [AI partnerships] to accelerate digital revenue growth in the last 3 quarters of FY ’25.” — CFO Tim Millage .

Q&A Highlights

  • AI monetization roadmap: Management emphasized “AI Boost” near‑term revenue opportunity via listing advertiser content in AI answer engines (Perplexity/ProRata) and expanding to automated podcast/video content creation, minimizing upfront costs with pay‑per‑use and revenue‑sharing models .
  • Cost actions and outlook confidence: Three pillars underpin FY2025 guidance confidence: scaling Amplified and digital subscriptions (both +14% YoY in Q1), acceleration from AI, and ~$40M cost reductions by end of Q2 .
  • Units disclosure: Digital subscription units were 774,000 at quarter end, up 8% YoY on unit basis per management’s Q&A clarification .
  • Balance sheet flexibility: Berkshire‑backed credit agreement (fixed rate, long runway, no covenants) enables continued strategic investment and asset monetization to support liquidity and debt reduction .

Estimates Context

  • S&P Global consensus EPS and revenue for Q1 FY2025 were unavailable at the time of this analysis due to data retrieval limits. As a result, we cannot assess beats/misses versus Street estimates for this quarter. Values intended to be retrieved from S&P Global.*

Key Takeaways for Investors

  • Digital mix is structurally higher and rising; with digital at 51% of revenue in Q1 and LTM digital revenue at $302M, the company’s transformation continues despite print headwinds .
  • Near‑term catalysts hinge on execution of ~$40M annualized cost reductions by end of Q2 and tangible monetization from AI initiatives (“AI Boost,” SmartSearch), which management expects to accelerate digital growth in the remainder of FY2025 .
  • Profitability inflected negatively YoY (Adjusted EBITDA $7.6M vs $18.6M) due to restructuring/non‑operating items; watch for EBITDA recovery as cost actions and AI revenue contribute through H2 .
  • Amplified Digital Agency is a growth engine ($24M in Q1; +14% YoY) with industry‑leading growth rates and high margins; expanding AI‑enabled ad content should support continued share gains in local markets .
  • Liquidity levers are active: $5M Q1 asset sales closed with $25M identified; favorable debt terms (fixed 9%, no covenants) reduce execution risk on the digital strategy .
  • Watch unit/ARPU dynamics: 774K digital subscribers and management’s ARPU focus signal continued subscription monetization; trajectory toward 1.2M by 2028 remains intact .
  • Without Street estimates, trading setups should focus on narrative/catalyst path: confirmation of AI monetization in Q2–Q4, evidence of cost reduction benefits, and sustained digital mix expansion as key stock movers .