Davenport-based newspaper publisher Lee Enterprises has hit a financial milestone for the company – its digital revenues now are outpacing print revenues.
Digital revenues are growing and now represent more than 50% of the company’s total revenues, Lee announced. In its latest earnings report, Lee’s total operating revenues are listed at about $151 million with digital now representing $76 million of that total.
Also, its print revenues continue to decline as print advertising and subscriptions hit double-digital losses in the third quarter, according to Lee’s preliminary third quarter financial results that were released today, Aug. 1. (That financial report can be seen here.)
Lee Enterprises owns 77 daily newspapers in the U.S., including the Quad-City Times, The Dispatch-Argus and the Muscatine Journal.
“We made tremendous progress on our digital transformation in the third quarter, and we are pleased to announce we have achieved the inflection point where more than 50% of our revenue is digital,” said Kevin Mowbray, Lee’s president and chief executive officer, in a news release on Thursday. “The revenue inflection point is important as it stabilizes our operating performance, making us less impacted by the print business going forward.”
“Nearly two-thirds of our total company gross margin was derived from digital sources, positioning us close to our goal of being sustainable from our digital products only,” he said. “This positions us well to be vibrant and growing in the medium and long-term with the rapid growth of our digital revenue streams.”
Mr. Mowbray added: “Our investment thesis is grounded in this transformation as we replace print revenue and margin with digital revenue and margin that are growing at a rapid clip. Total digital revenue has grown 17% annually over the last three years, and we expect this strong growth to continue.”
Some of the third quarter report highlights include:
- Total operating revenue was $151 million. Operating revenue was affected by accelerated declines of print revenue streams and eliminated certain print products, partially offset by growth in digital revenue.
- Total digital revenue was $76 million, a 9% increase over the prior year, and represented more than 50% of the total operating revenue.
- Revenue from digital-only subscribers totaled $21 million, up 34% over the prior year.
- Digital advertising and marketing services revenue represented 72% of total advertising revenue and totaled $50 million.
- Digital services revenue, which is predominantly from BLOX Digital, totaled $5 million in the quarter.
- Operating expenses totaled $147 million and cash costs totaled $138 million, a 8% and 8% decrease compared to the prior year, respectively.
“Our third quarter performance was highlighted by a marked improvement in revenue trends alongside effective management of operating expenses,” Mr. Mowbray said in the release. “As a result of our engaging hyper-local content, improved brand awareness, and sophisticated marketing campaigns, we now have 748,000 digital subscribers, a 23% increase over the prior year.”
But Lee’s quarterly report also shows the company’s falling print revenues. Print advertising and subscription revenues continue double-digit declines. According to the report, in the three-month period that ended on June 23, print advertising revenues were down 35% compared to the same time in 2023. Print subscription money was down 23% for that period, and total operating revenues were down about 12%.
Lee’s total print revenues were down almost 26% for the three-month period that ended June 23, compared to the same period in 2023.
“With only one-third of the company’s gross margin tied to print products in the third quarter, changes in the print business will be less impactful on our operating results in the future,” Mr. Mowbray added. “Given the strong performance of our digital revenue streams, we are reaffirming our total digital revenue outlook of between $310 million and $330 million. … The print business will be less impactful on future operating results due to the digital revenue inflection point and margin transformation.”
