Executive Summary

Q2 FY25 revenue was $137.4M (-6% YoY) with Total Digital Revenue of $73.0M (53% mix), as a February cyber incident curtailed ad products and slowed digital subscriber activations; GAAP net loss was $12.0M and Adjusted EBITDA was $7.8M .
Digital-only subscription revenue rose 17% YoY to $23.8M (same‑store +20%) on 728k digital‑only subscribers; Amplified Digital Agency delivered $25M (+9% YoY), while digital advertising/marketing services totaled $44M .
Management executed ~$40M of annualized cost reductions in Q2 and trimmed capex, now guiding to low‑single‑digit YoY growth in Total Digital Revenue and Adjusted EBITDA for 2H FY25; capex outlook reduced to “up to $7M” for FY25 from ~$12M prior .
Liquidity/debt: BH Finance (Berkshire affiliate) waived March–April interest/basic rent (added to principal); quarter-end debt was $453M and cash $5M. CFO said Berkshire waived March–May on the call; discrepancy vs release noted as a clarification point .
Near-term stock narrative catalysts: recovery from the cyber incident, initial monetization from new AI products at Amplified, and governance backdrop following a shareholder rights plan extension amid Hoffmann’s unsolicited interest .

What Went Well and What Went Wrong

What Went Well

Digital subscription engine remained robust: digital-only revenue +17% YoY (same‑store +20%) to $23.8M on 728k subs; management emphasized “rapid” growth and higher ARPU .
Amplified Digital Agency growth: $25M revenue (+9% YoY), contributing to Total Digital Revenue +3–4% YoY same‑store, reinforcing the mix shift to 53% digital .
Cost actions and FY25 outlook: ~$40M annualized cost reductions executed; updated 2H FY25 outlook calls for low‑single‑digit YoY growth in Total Digital Revenue and Adjusted EBITDA; management expects positive free cash flow in 2H FY25. “We executed $40 million in annualized cost reductions… now expect… year‑over‑year growth in Adjusted EBITDA.” .

What Went Wrong

Cyber incident materially impacted the quarter: $2M restoration costs; ad product portfolio constrained and digital subscriber activations hampered, weighing on revenue and units .
EBITDA compression versus last year’s Q2: Adjusted EBITDA $7.8M vs $15.1M in Q2 FY24, reflecting flow-through from top-line pressure and one‑time costs .
Working capital friction and temporary principal increase: billing/collections and vendor payments were affected; BH waived interest/basic rent (added to principal), lifting reported gross debt to $453M at quarter‑end .

Financial Results

Consolidated metrics vs prior periods

Metric	Q2 FY2024	Q1 FY2025	Q2 FY2025
Total Operating Revenue ($M)	$146.6	$144.6	$137.4
GAAP Net Loss ($M)	$(11.6)	$(16.2)	$(12.0)
GAAP Diluted EPS	$(2.06)	$(2.80)	$(2.07)
Operating (Loss) Income ($M)	$(4.6)	$(3.4)	$(4.5)
Adjusted EBITDA ($M, non‑GAAP)	$15.1	$7.6	$7.8
Net Loss Margin (%)	(7.9%) (calc from $(11.6)/$146.6)	(11.2%) (calc from $(16.2)/$144.6)	(8.7%) (calc from $(12.0)/$137.4)
Adjusted EBITDA Margin (%)	10.3% (calc from $15.1/$146.6)	5.3% (calc from $7.6/$144.6)	5.6% (calc from $7.8/$137.4)

Notes: Net loss and Adjusted EBITDA margins are calculated from reported figures (citations embedded in each cell).

Revenue composition and segment-like detail

Revenue Component ($M)	Q2 FY2024	Q1 FY2025	Q2 FY2025
Digital Advertising & Marketing Services	$45.4	$46.7	$43.9
Digital‑Only Subscription	$20.3	$21.6	$23.8
Digital Services (BLOX etc.)	$5.1	$5.1	$4.8
Total Digital Revenue	$70.8	$73.4	$72.6
Print Advertising	$18.7	$19.9	$16.5
Print Subscription	$49.0	$43.4	$41.1
Other Print	$8.1	$7.9	$7.2
Total Print Revenue	$75.8	$71.2	$64.8
Total Operating Revenue	$146.6	$144.6	$137.4

KPIs and cost metrics

KPI / Cost	Q1 FY2025	Q2 FY2025
Digital‑only subscribers (units)	774k (Q&A)	728k
Digital revenue mix (%)	51%	53%
Amplified Digital Agency revenue ($M)	$24	$25
Cash Costs ($M, non‑GAAP)	$138.6	$131.2
Capex ($M)	$2 (quarter)	$1 (quarter)
Debt (principal, $M)	$446	$453
Cash ($M)	$6	$5

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Digital Revenue growth	FY2025	+7% to +10% YoY	Shifted to 2H FY25: low‑single‑digit YoY growth	Lowered scope/tone to 2H, implies reduced full‑year ambition
Adjusted EBITDA growth	FY2025	Low‑single‑digit YoY growth	2H FY25: low‑single‑digit YoY growth	Shifted to 2H framing
Capex	FY2025	~ $12M	Up to $7M	Lowered
Free Cash Flow	2H FY2025	Not explicitly guided	Expect positive FCF in 2H FY25 (CFO)	New qualitative guide
Taxes (cash paid)	FY2025	$4–$10M	$3–$9M	Narrowed/lowered
Digital revenue mix	FY2025	Narrative: digital >50% achieved FY24	Expect improving YoY Total Digital Revenue trends in Q3–Q4	Reinforced trajectory

Earnings Call Themes & Trends

Topic	Q4 FY2024 (Q-2)	Q1 FY2025 (Q-1)	Q2 FY2025 (Current)	Trend
AI/Technology initiatives	Announced partnerships with Perplexity, ProRata.ai, AWS to drive AI ad/content economics	Detailed AI personalization, AI Boost/SmartSites launches; plan to accelerate digital rev growth	Amplified launched AI Enablement; management expects near‑term AI revenue momentum	Building from pilots to monetization
Digital subscription growth	Digital-only +30% YoY in Q4; 771k units achieved FY24	+14% YoY revenue; 774k units; ARPU expansion focus	+17% YoY revenue; 728k units post‑incident; recovery focus	Strong growth with temporary unit headwind
Cost management	$82M FY24 savings; ongoing optimization	Identified $40M annualized reductions to execute by Q2	Executed ~$40M annualized reductions; Cash Costs down 2% YoY	Delivering on plan
Debt/liquidity	$446M principal; noncore assets to monetize	$446M; $25M asset sales pipeline	$453M principal after waived interest; $6M asset sales closed YTD; $25M pipeline	Temporary increase; asset sales continuing
Cybersecurity/IT resilience	Not discussed	Not discussed	February cyber incident impacted Q2 ops, $2M costs; technical recovery complete	One‑time headwind, recovery underway
Governance/M&A backdrop	—	—	Rights plan extended to Mar‑2026 after Hoffmann’s 9.8% stake and public interest	Potential strategic optionality

Management Commentary

CEO: “Our company experienced a cyber security incident in February… We incurred $2 million in restoration costs… advertising revenue was impacted… [and] activating new digital subscribers was hampered… we are now recovered… focused on executing our strategy.”
CEO: “In March, we launched an AI solution… The first offering… AI Enablement… aimed to prepare local businesses for the AI transformation of the advertising model.”
CFO: “We executed approximately $40 million in annualized cost reductions in the second quarter… Operating expenses… included $2 million of restoration costs [subject to insurance].”
CFO: “In response to the cyber incident… Berkshire waived payment of the company’s interest and basic rent… The waived payments were added to the principal… Despite the temporary addition… we remain committed to reducing debt.”
CFO (FCF): “We do expect free cash flow to be positive in the second half of fiscal year 2025.”

Q&A Highlights

Free cash flow trajectory: CFO reiterated expectation for positive FCF in 2H FY25, citing cost actions and improved digital revenue trends .
Interest waiver accounting: CFO confirmed net loss includes debt expense even though payments were waived; waived interest/basic rent added to principal (call referenced March–May; the press release references March–April) .
Prior quarter (Q1) AI monetization plan: Management outlined AI Boost/Enablement and tools to capture emerging AI search/answer channels for advertisers, positioning AI as an incremental revenue driver .
Prior quarter (Q1) digital subscriber units: 774k units, +8% YoY units, supporting confidence in FY25 outlook before the cyber event .

Estimates Context

Wall Street consensus: S&P Global consensus estimates for Q2 FY25 EPS and revenue were not available for LEE; we therefore cannot present a beat/miss versus consensus for this quarter. Values retrieved from S&P Global.*

Guidance Changes – Implications

The shift from full‑year targets (FY25 +7–10% digital revenue, low‑single‑digit EBITDA growth) to a 2H‑only low‑single‑digit growth frame suggests management is resetting near‑term expectations following the cyber incident while preserving the long‑term digital sustainability narrative .
Reduced capex to “up to $7M” (from ~$12M) and operating cost reductions support the 2H positive FCF goal despite temporarily higher principal from waived interest .

Key Takeaways for Investors

Digital flywheel intact: Despite the incident, digital‑only revenue grew +17% YoY and Amplified +9% YoY, pushing digital mix to 53%—a structural positive for margin quality over time .
One‑time disruption, near‑term reset: Cyber incident depressed Q2 and led to a half‑year guidance frame; watch for sequential improvement in Q3–Q4 digital growth and EBITDA per management’s updated outlook .
Execution focus on cash: ~$40M annualized cost‑outs executed and capex trimmed underpin management’s call for positive 2H FCF; monitor Cash Costs and working capital recovery (AR/AP normalization post‑incident) .
Balance sheet: BH Finance support (waived payments) evidences lender alignment; asset monetization ($6M closed YTD; $25M identified; $8M slated FY25) provides additional liquidity levers .
AI commercialization: New AI Enablement product and broader suite at Amplified create incremental revenue channels; look for adoption/ARR metrics and contribution to digital ad/agency lines in 2H .
Governance optionality: Rights plan extension amid Hoffmann’s public interest could keep strategic alternatives on the table; any credible proposal would be evaluated by the Board .
Risk checks: Persistent print declines, ad cyclicality, and execution risk on AI/monetization remain key watch‑items alongside interest expense and working capital normalization .

Appendix: Additional Q2 Quarter Details

Operating expenses $143.0M (‑6% YoY); Cash Costs $131.2M (‑2% YoY). Adjusted EBITDA reconciliation provided in the 8‑K .
Digital services revenue (BLOX) of $4.8M; digital ads/marketing services made up 73% of total advertising .
Debt/cash/taxes/pension: $453M principal; cash $5M; FY25 cash taxes $3–9M; no material pension contributions expected .

Footnote: *Estimates/consensus availability sourced via S&P Global; consensus values for EPS and revenue were unavailable for Q2 FY25 at time of retrieval. Values retrieved from S&P Global.

LEE ENTERPRISES, Inc (LEE)·Q2 2025 Earnings Summary