• Digital Revenue: 51% of total revenue, a 7-point improvement over the prior year quarter.
• Digital Subscription Revenue Growth: 41% growth on a same-store basis for the year.
• Amplified Digital Agency Revenue Growth: 21% growth in the quarter on a same-store basis, approaching $100 million annually.
• Total Digital Revenue: Approaching $300 million for the fiscal year, representing a 70% growth rate annually over the last three years.
• Cost Savings: $82 million in cost savings from business transformation efforts in 2024.
• Asset Sales: Over $13 million closed this year, with an additional $25 million identified for monetization.
• Digital Gross Margin: 72%, with digital revenue growing more than 17% annually since 2021.
• Digital Subscription Unit Target: Achieved 771,000 digital-only subscribers in 2024.
• Expected Digital Revenue Growth for 2025: 7% to 10% growth.
• Expected Adjusted EBITDA Growth for 2025: Low-single digits.

• Warning! GuruFocus has detected 10 Warning Signs with LEE.

Release Date: December 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lee Enterprises Inc (NASDAQ:LEE) achieved a significant milestone by having digital revenue surpass print revenue, with digital revenue now representing 51% of total revenue.
• The digital subscription business grew revenue by 41% on a same-store basis, marking it as the fastest-growing digital subscription revenue platform in local media.
• The Amplified Digital Agency saw a 21% growth in the quarter and is approaching $100 million annually, significantly outpacing competitors.
• LEE has successfully achieved its digital subscription unit target of 771,000 and is on track to reach 1.2 million digital-only subscribers by 2028.
• Strategic AI partnerships are expected to enhance ad creative and deliver hyper-targeted campaigns, positioning LEE as a leader in AI-driven content and advertising.

Negative Points

• The print revenue is on a declining trend due to secular trends, impacting overall profitability.
• Despite the growth in digital revenue, the adjusted EBITDA is only expected to grow in the low-single digits next year.
• The transition to digital has required significant investment in talent and technology, which may strain resources.
• The AI partnerships are in early stages, and their impact on long-term digital goals remains uncertain.
• The company is still in the process of monetizing noncore assets to facilitate debt repayment, indicating ongoing financial restructuring.

Q & A Highlights

Q: How should we look at future investment in AI partnerships, and will these impact your fiscal 2028 digital goals? A: Timothy Millage, CFO, stated that the partnerships don't change the level of investment but provide access to AI technology. These partnerships increase confidence in achieving long-term growth targets and offer early economics in the AI ad model. Les Ottolenghi, Chief Transformation and Commercial Officer, added that these partnerships minimize upfront costs through pay-per-use models and revenue-sharing agreements.

Q: What is the current digital subscriber count? A: Timothy Millage confirmed that the digital subscription count reached 771,000.

Q: Is print revenue profitable on an operating basis? A: Timothy Millage explained that the print business remains profitable, as indicated by the difference between digital and overall margins. However, it is on a declining trend due to secular changes.

Q: Can you elaborate on the impact of AI partnerships on operational costs? A: Les Ottolenghi mentioned that the partnerships allow Lee to scale technology while keeping spending tied to revenue growth, leveraging pay-per-use models and revenue-sharing agreements to minimize upfront costs.

Q: What are the expectations for digital revenue and adjusted EBITDA growth in 2025? A: Timothy Millage stated that total digital revenue is expected to grow between 7% to 10%, with adjusted EBITDA anticipated to grow in the low-single digits.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.