Lee Enterprises reports digital growth in second quarter | Business – Local News

Digital advertising and marketing services revenue totaled $43 million in the quarter and $160 million over the last 12 months, “pacing well towards our goal of $175 million of digital advertising and marketing services revenue” for the year, company President and CEO Kevin Mowbray announced Thursday during Lee’s latest quarterly earnings call.

“Amplified Digital, our full-service digital marketing solutions agency, fueled the digital growth with revenue of $19 million in the quarter, up 108%,” Mowbray said.

Overall, total digital revenue stood at $58 million for the quarter, a 33% increase over the prior year. Digital revenue accounted for 31% of Lee’s total operating revenue, up from 23% a year ago.

Print revenue, however, declined and the company reported a $6.7 million net loss in the second quarter and diminished quarterly earnings of $1.26 per share. Lee shares were down 92 cents a share to $23 during midday trading Thursday. Shares this year peaked in January, when they hit $43.21 apiece.

The company reported $190 million in revenue for the quarter, close to analysts’ expectations of $191.2 million.

Inflation, supply-chain issues, hiring new digital-centric talent, severance payments related to workforce decreases and lawsuit costs have added considerably to operating costs, among other factors, company officials said.

“Operating expenses were up 5% due to investments in digital talent and technology to drive our digital revenue growth and increases in input costs, partially offset by reductions in costs tied to print revenue streams,” company Chief Financial Officer Tim Millage said. “We continue to drive efficiencies in our legacy cost structure and are pulling additional levers to better align our legacy costs with the associated revenues.

“These cost-reduction actions taken early in the third quarter have an annualized benefit of $45 million.”

Lee’s $462.6 million in principal debt has been reduced by $20.1 million for the fiscal year, so far, and company officials said they expect “a slow down in debt reduction” as their emphasis on digital growth continues.

“Digital-only subscription revenue increased 45% to $10 million in the quarter and totaled $33 million over the last 12 months, nearly achieving our year-end guidance six months early,” Mowbray said. “Our second-quarter results have us on track to achieve all of our fiscal year 2022 digital revenue targets. These early returns on our digital investments give us confidence we have the right strategy, the right team and we are executing with velocity.”

Lee now has nearly a half-million digital-only subscribers, making it the fastest-growing digital subscription platform in local media for the ninth quarter, company officials announced.

Digital-only subscriber growth continued at a rapid clip in the second quarter — up 59% over the prior year.

Lee executives said the long-term goal is to achieve 900,000 subscribers by 2026, which means the company is about halfway to its goal.

The growth in digital-advertising revenue offset the decline in print revenue, Mowbray said, with a 2% increase in total advertising and marketing services revenue for the quarter. In that period, digital advertising increased by 36%.

“We’re incredibly proud of our second-quarter results,” Mowbray said.

Highlights of Lee’s second quarter:

• Total operating revenue of $190 million.
• Total digital revenue was $58 million, a 33% increase compared to the same period last year.
• Total print revenue, which includes print advertising, print subscription revenue and other print-related revenue, totaled nearly $132 million in the second quarter, an 11.3% decline compared to the same quarter a year ago due to continued declines of print revenue, particularly print advertising revenue.
• Digital-only subscription revenue increased 44.7% in the second quarter compared to the same quarter last year and totaled $32.9 million over the last 12 months. Digital-only subscribers increased 59.2% and now total 492,000.
• Digital advertising and marketing services revenue increased 36% in the quarter and totaled $43.4 million.
• Digital services revenue, which is predominantly TownNews, totaled $4.7 million in the quarter. On a standalone basis, revenue at TownNews increased 12.5% in the second quarter totaling $7.5 million.
• Monthly average page views totaled 376 million and monthly average unique visitors totaled 44 million.
• Operating expenses totaled $194.6 million and cash costs were up 3%. Increases costs were attributed, in part, to increased investments in digital talent and technology tied to the company’s digital growth strategy, inflation, and an increase in restructuring costs. Partially offsetting the increases were declines in cash costs that support print revenue streams.
• Net loss totaled $6.7 million and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $16.9 million.