Newspaper publisher Lee Enterprises’ third quarter fiscal report is showing “strong results” as the company is making significant progress in its transformation strategy, the Davenport-based company’s leader said.
But other financial experts say the company is facing challenging times, including a possible ownership change.
In an earnings news release today, Aug. 7, Lee Enterprises reported its preliminary third quarter fiscal 2025 financial results, for the period ended June 29.
In the Quad Cities region, Lee is the publisher of the Quad-City Times, The Dispatch and Rock Island Argus, and Muscatine Journal newspapers. It publishes more than 70 daily papers and 350 weekly and specialty publications serving 73 markets in 26 U.S. states.
The quarterly report states that digital subscription revenue continues to grow, up 16% in the quarter, as Lee yields higher average digital subscription rates for its 670,000 digital-only subscribers.
“Our third quarter results mark significant progress in our transformation strategy,” Kevin Mowbray, Lee’s president and CEO, said in the news release. “By rigorously managing our operating expenses and continuing to grow our digital business, we are driving sustainable improvements in profitability.”
Mr. Mowbray added: “During the quarter, Lee achieved meaningful reductions in print-related expenses and corporate overhead, while reinvesting in high-growth digital areas. These efforts enabled Adjusted EBITDA expansion and continued progress toward the company’s long-term digital goals. We are pleased with our industry-leading digital subscription and digital agency revenue growth. … The quarter’s strong results put us on pace to achieve our second half’s guidance of year-over-year growth in total digital revenue.”
Some of Lee’s third quarter highlights include:
- Total operating revenue was $141 million.
- Total digital revenue was $78 million, a 3% increase over the prior year, or 4% on a same-store basis. It represented 55% of Lee’s total operating revenue.
- Revenue from digital-only subscribers totaled $23 million, up 13% over the prior year, or up 16% on a same-store basis. Digital-only subscribers totaled 670,000 at the end of the quarter.
- Digital advertising and marketing services revenue represented 74% of total advertising revenue and totaled $49 million.
- Digital services revenue, which is predominantly from BLOX Digital, totaled $5 million.
- Operating expenses totaled $137 million.
- The quarter’s operating expenses included $1 million of cyber restoration expenses.
The earnings report also shows the continuing fall of print advertising and print subscription revenues.
The company’s total revenue for the period fell 6.2% to $141.29 million from $150.58 million for the same period last year.
The financial world appears to be taking notice of the falling revenues at the company. Lee Enterprises shares have lost about 67% since the beginning of the year versus the S&P 500’s gain of 7.9%. Lee’s stock was listed at $4.85 this morning. That’s down about 22% in the past month and down about 58% in the past six months, according to Google Finance.
The investment website, InvestingPro, scores Lee’s financial health as a “weak performance.”
In addition, a Florida-based family equity company has continued to express interest in taking over Lee. David Hoffmann, the billionaire chairman of the Hoffmann Family of Companies, said in March that combining Lee’s newspapers with the publications his company owns would create the second-largest newspaper company in the U.S behind Gannett.
Recently, the Hoffmann Family of Companies announced it submitted a letter to Lee Enterprises’ Board of Directors expressing interest in supporting a potential recapitalization of Lee.
The proposal outlines a $25 million investment in the newly issued common equity at a price of $2 per share, alongside a $25 million fully backstopped rights offering to existing shareholders at the same price. This structure implies a pre-money enterprise valuation of about $462 million, based on Lee’s current debt obligations and outstanding shares.
“HF Companies believes this proposal offers a fair, transparent and constructive path toward recapitalizing Lee Enterprises – enhancing long-term financial stability and supporting continued investment in the company’s digital transformation strategy,” according to an earlier statement from Hoffmann.
The recapitalization plan is the latest move by Hoffmann centering on Lee Enterprises. Last December, the company announced it had increased its ownership of Lee’s stock.
“We have and will continue to purchase shares in the company as market conditions present themselves,” Mr. Hoffmann said in a news release issued Dec. 13.
Facing interest from Hoffmann seeking to acquire majority ownership, the Lee Enterprises Board of Directors voted in March to extend a previous shareholders rights plan, the media company announced one day before that plan was set to expire.
Also, Lee faced a February cybersecurity incident, incurring $2 million in restoration costs and impacting advertising revenue.
