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LEE ENTERPRISES, Inc (LEE)·Q4 2024 Earnings Summary

Executive Summary

  • Mixed Q4: Total operating revenue was $158.6M (-3% YoY), but digital revenue rose 13% YoY to $81.6M and reached 51% of mix; diluted EPS was -$1.69 and Adjusted EBITDA was $16.8M .
  • Digital engine strengthened: digital-only subs revenue +30% YoY to $23.9M; Amplified Digital Agency grew 21% YoY to $28M, and digital services (BLOX) was $5.3M .
  • FY24 ended with Adjusted EBITDA $65.3M vs updated guidance of $73–$78M (shortfall tied to print headwinds), while cash costs fell 10% YoY to $553M and total digital revenue hit $299M (+11% YoY) .
  • FY25 outlook: Total digital revenue growth of 7–10% and Adjusted EBITDA growth in low single digits; capex ~$12M; cash taxes $4–10M; debt at $446M with favorable 25-year, 9% fixed facility and no financial covenants .
  • Catalysts: AI partnerships (Perplexity, ProRata.ai, AWS) to enable new ad models and personalization; management expects “early economics” within FY25 and remains confident in long-term digital targets despite FY24 EBITDA shortfall .

What Went Well and What Went Wrong

  • What Went Well

    • Digital mix and growth: Digital reached 51% of revenue (up 7 pts YoY), with digital-only subscription revenue +30% YoY to $23.9M and Amplified +21% YoY to $28M in Q4 .
    • Strategic AI partnerships: Perplexity, ProRata.ai and AWS agreements aim to drive new ad economics, hyper-personalized content, and faster GenAI development—“We expect to generate early economics this fiscal year” .
    • Cost discipline and balance sheet: FY24 cash costs down 10% to $553M; debt reduced to $446M; identified ~$25M of non-core assets to monetize .
    • Management quote: “We successfully met our digital subscription unit target and laid a robust foundation… through talent investments in AI, technology expertise, and complex IT infrastructure” .

  • What Went Wrong

    • EBITDA miss: “We are not satisfied… we fell short of our Adjusted EBITDA target,” finishing FY24 at $65.3M vs updated guide $73–$78M, reflecting print weakness and restructuring/impairment charges .
    • Print headwinds persist: Q4 print revenue -14% YoY on same-store basis; operating income swung to a loss of -$3.7M in Q4 including restructuring and impairments .
    • Sequential cost pressure: Q4 cash costs rose 4% YoY to $143.2M and operating expenses increased to $162.9M, limiting quarterly margin expansion despite digital growth .

Financial Results

Headline financials (USD Millions, except per-share)

MetricQ2 FY24 (Mar 24)Q3 FY24 (Jun 23)Q4 FY24 (Sep 29)Consensus (S&P Global)
Total Operating Revenue$146.55 $150.58 $158.57 N/A (unavailable)
Operating Income (Loss)$(4.55) $4.93 $(3.66) N/A
Diluted EPS$(2.06) $(0.73) $(1.69) N/A
Adjusted EBITDA$15.06 $14.82 $16.76 N/A
Adjusted EBITDA Margin % (calc)10.3% (from $15.06/$146.55) 9.8% (from $14.82/$150.58) 10.6% (from $16.76/$158.57) N/A

Notes: S&P Global consensus data was unavailable during this session; comparison to estimates could not be performed.

Segment revenue composition (USD Millions)

SegmentQ2 FY24Q3 FY24Q4 FY24
Digital Advertising & Marketing Services$45.39 $49.90 $52.47
Digital-Only Subscription$20.26 $20.70 $23.90
Digital Services (BLOX, etc.)$5.12 $5.15 $5.28
Total Digital Revenue$70.77 $75.75 $81.64
Print Advertising$18.74 $18.94 $19.37
Print Subscription$48.97 $47.61 $49.14
Other Print$8.07 $8.28 $8.42
Total Print Revenue$75.78 $74.82 $76.93
Total Operating Revenue$146.55 $150.58 $158.57

KPIs and mix

KPIQ2 FY24Q3 FY24Q4 FY24
Digital Revenue as % of Total48% 50% 51%
Digital-Only Subscribers (units)745,000 748,000 771,000
Amplified Digital Agency Revenue (quarter)$23M $26M $28M
Digital Services Revenue (quarter)$5.12M $5.15M $5.28M
Cash Costs (quarter)$133.26M $137.55M $143.24M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Digital RevenueFY24$310–$330M (unchanged at Q2) Reaffirmed at Q3 ($310–$330M) Maintained
Adjusted EBITDAFY24$83–$90M (Q2) $73–$78M (Q3 update) Lowered
Total Cash CostsFY24$570–$590M (Q2 slide) $550–$560M (Q3 update) Lowered (better)
Total Digital Revenue YoY GrowthFY25—+7% to +10% New
Adjusted EBITDA YoY GrowthFY25—Low single digits New
Capital ExpendituresFY25—~$12M New
Cash TaxesFY25—$4–$10M New
Debt/Facility CommentaryOngoing25-yr, 9% fixed, no covenants Reiterated, debt $446M Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY24)Previous Mentions (Q3 FY24)Current Period (Q4 FY24)Trend
AI/Technology InitiativesHired Chief Transformation & Commercial Officer; focus on AI, IT modernization, data monetization Reinforced digital margin strength and transformation plan Announced Perplexity, ProRata.ai, AWS; expect early economics and new AI ad models Accelerating
Digital Subscriber Growth745k subs; digital-only revenue +48% YoY 748k subs; +34% subs revenue YoY Hit 771k target by year-end; +30% digital-only revenue YoY in Q4 Positive
Print Headwinds & Cost ActionsCash costs -16% YoY; portfolio pruning and frequency changes Print -22% YoY; cash costs -8% YoY Same-store print -14% YoY; cash costs +4% YoY in Q4; FY cash costs -10% Structural decline; cost control mixed in Q4
Balance Sheet & Asset SalesDebt $454M; identified $25M of assets to monetize Debt $453M; $25M pipeline; expect closings into FY25 Debt $446M; $13M asset sales in FY24; $25M identified Improving
Digital Sustainability“Within 5 years” and gross margin coverage message By 2026 digital gross margin to exceed SG&A Reiterated 2026 crossover; digital margin 72% On track

Management Commentary

  • Strategy and execution: “We successfully met our digital subscription unit target and laid a robust foundation… through talent investments in AI, technology expertise, and complex IT infrastructure” .
  • AI opportunity: “We expect to generate early economics this fiscal year… Partnerships between content providers and large language models are driving the next wave of innovation and revenue” .
  • Financial posture: “These better-than-market terms [credit agreement] allow us to stay laser-focused on executing our strategy… Monetization of noncore assets will propel debt reduction” .
  • Candid on EBITDA: “We are not satisfied with the overall operating metrics, as we fell short of our Adjusted EBITDA target” .

Q&A Highlights

  • Investment needs for AI partnerships: Partnerships minimize upfront costs via pay-per-use and revenue-sharing; they don’t change the level of forward investment but provide access to AI tech and “early economics” as models shift from traditional search .
  • Long-term targets: AI partnerships “increase our confidence” in achieving long-term digital targets (digital revenue, subscribers) .
  • Digital subs count clarification: Year-end digital-only subscribers were 771,000 .
  • Profitability of print: Management affirmed print is profitable at the operating level, though on a declining trend; digital gross margin vs total margin visuals indicate print contributes to the gap .

Estimates Context

  • Attempts to retrieve S&P Global consensus for quarterly EPS and revenue were unsuccessful due to data access limits during this session. As a result, we cannot present numerical “vs. consensus” comparisons for Q4 FY24, Q3 FY24, or Q2 FY24 at this time. Monitor for post-call estimate revisions and any updated consensus to assess beat/miss dynamics (S&P Global data unavailable in this session).

Key Takeaways for Investors

  • Digital flywheel is working: digital revenue mix crossed 50% and accelerated to 51% in Q4; digital-only subs revenue and Amplified both posted strong double-digit growth .
  • FY24 EBITDA miss vs guidance underscores residual print drag and restructuring/impairment impacts; however, cost actions yielded a 10% YoY cash cost reduction for the year .
  • AI partnerships (Perplexity, ProRata.ai, AWS) are a new potential monetization vector with management pointing to early FY25 economics; watch for tangible KPIs and revenue attribution disclosures in coming quarters .
  • FY25 guide is conservative: +7–10% digital revenue growth and low single-digit EBITDA growth signal discipline amid print headwinds and macro ad uncertainty .
  • Balance sheet runway is solid (25-year, 9% fixed, no covenants) and asset sales pipeline supports continued deleveraging; year-end debt at $446M .
  • Trading setup: Near-term narrative likely centers on execution against AI initiatives, sustained digital subs ARPU/units, Amplified growth durability, and visibility on EBITDA inflection as print declines moderate .
  • Risk checks: Persistent print revenue declines, restructuring needs, and ad cyclicality remain key watch items; management reaffirmed focus on costs and portfolio optimization .

Appendix: Additional FY24 Data Points

  • FY24 total operating revenue: $611.4M; total digital revenue: $299.1M (+11% YoY); total print revenue: $312.3M (-21% YoY); Adjusted EBITDA: $65.3M; cash costs: $553.3M (-10% YoY) .
  • Year-end debt: $446M; cash: $10M; FY24 capex: $9M; FY24 cash taxes: $7M .