Lee Enterprises continued to highlight its “industry-leading” digital revenue growth and said it reset its print publication cost structure due to a soft print advertising environment, in its second quarter earnings report released today, May 4.
While celebrating those digital gains, the Davenport-based media company’s leaders also did not rule out reducing the number of print editions it publishes in 2023 in response to declining print subscriptions among its 77 print publications.
Among the newspapers Lee owns are the Quad-City Times, Muscatine Journal and The Dispatch-Argus.
For the quarter, ended March 26, the company reported total operating revenue at $171 million, total operating expenses at $168.5 million and an operating income loss of $2.85 million.
According to Investing.com those numbers were below Wall Street’s consensus estimate of $192.8 million in revenue.
As Lee did in its Q1 report, the newspaper and internet publisher focused on its Three Pillar Digital Growth Strategy, which the company defines as “driving digital revenue growth, transforming the mix of our top line revenue, and positioning us towards a vibrant, sustainable, and profitable digital model.”
“We are encouraged by the solid pace of digital revenue growth in the second fiscal quarter,” Lee’s President and CEO Kevin Mowbray said in the company’s news release. And he credited that strategy for “transforming the mix of our top line revenue, and positioning us towards a vibrant, sustainable, and profitable digital model.”
Highlights of Lee’s Q2 report include:
- Total Digital Revenue – which makes up 38% of the company’s total operating revenue – was $65 million, up 12% over the previous year.
- Digital-only subscription revenue increased 39% year over year due to a 21% increase in digital-only subscribers and increases in average rates. Digital-only subscribers stood at 596,000 at the end of the March quarter, the report said.
- Digital advertising and marketing services revenue, which represents 60% of total advertising revenue, was $46 million, a 7% increase over the prior year. And digital marketing services revenue at Amplified Digital “fueled the growth, with quarterly revenue of $22 million, a 20% increase compared to the prior year.”
- Digital services revenue, primarily through BLOX Digital (formerly TownNews), was $5 million in the quarter. On a standalone basis, revenue at BLOX Digital totaled $8 million, a 10% increase over the prior year.
- Net loss totaled $5 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $14 million, a significant improvement from the first quarter year over year trends.
“The strong performance in the quarter has us on track to achieve all of our fiscal year guidance including digital subscriptions, digital revenue and Adjusted EBITDA, and has us well positioned to drive value for our stakeholders,” Mr. Mowbray said.
He added, however, that print-related challenges continued in Q2 and “due to the soft advertising environment, particularly on the print side, we reset our print cost structure, providing an additional $76 million of cost benefit.”
The company also acknowledged during the investors’ call today that it is looking at cutting back on its publication dates, and appeared to reference a report by The Daily Montanan that said Lee was planning to reduce most of its newspapers’ printing dates.
In response to an investor’s question, Lee Enterprises Vice President & CFO Timothy Millage said that for several years the company had been able to retain more of its print subscribers than others in the industry. But in 2023, he said Lee newspapers have been seeing revenue declines in line with others in the industry “and as you may have seen announced in one of our markets the move to produce a robust, high-quality print product three days a week.”
He declined to identify other markets where that might happen.
“We’re evaluating our print products with the goal of continuing to provide local communities with robust, high-quality local news and the best possible print production for the local markets at the same time as managing the cash flow on these revenues,” he said.
