Newspaper Chain Lee Enterprises Reports 33% Digital Growth In Q2

The embattled newspaper chain Lee Enterprises on Thursday reported overall revenue for the first quarter of 2022 -- its second fiscal quarter -- of $190 million, a decline of 1.2% from the same period last year, reflecting a declining print-media business. But it also reported solid growth in digital revenue for both advertising and subscriptions.

The chain, which operates newspaper brands in 77 markets and is based in Davenport Iowa, has been battling a hostile takeover bid by Alden Global Capital. And Axios reported earlier this week that Lee has been laying off staff in an ongoing process that could produce an overall workforce reduction of 10%.

Total digital revenue for the quarter, combining both advertising and subscriptions, was $58.1 million, a 33% increase compared to the same period last year, the company reported. Digital-only subscription revenue increased by 44.7%, to $10.1 million, in the quarter compared to the same quarter last year, with actual digital subscribers now totaling 492,000, a 59.2% jump.

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On the digital advertising side, revenue increased by 36% for the quarter, hitting $43.4 million. Year to date digital advertising revenue hit $86.1 million, a 26.9% increase.

“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 CEO Kevin Mowbray said. “I'm particularly pleased our strong growth in digital advertising revenue more than offset the decline in print."

He added, "Lee is the fastest growing digital subscription platform in local media and has been for the last nine quarters.”

But Lee’s strong digital performance was offset by substantial declines in the company’s print media business — still the lion’s share of revenue. Print advertising declined by 16.7% for the quarter, falling to $44.2 million from $53.6 million in the same period last year. And print circulation declined by 6.7%, dropping from $82.8 million to $77.2 million.

The company reported that operating expenses were up by 5% due to investments in digital talent and technology, and in a reference to the layoffs Axios reported, Lee said those digital increases were partially offset by reductions in costs tied to print revenue streams.

“We continue to drive efficiencies in our legacy cost structure and are pulling additional levers [interpretation: layoffs] to better align our legacy costs with the associated revenues,” CFO Tim Millage said. “These cost reduction actions taken early in the third quarter have an annualized benefit of $45 million.”

The company reported a net loss of $6.7 million and adjusted EBITDA of $16.9 million, or 8.9% of overall revenue for the quarter, which by at least one standard is about average for the newspaper industry.

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