LEE ENTERPRISES, Inc Q2 FY2025 earnings call

• In February, the company faced a malicious cyber event that disrupted all operations. The dedicated team worked around the clock to restore operations, and the company is now fully recovered from the incident. • The company remains committed to its digital transformation strategy, with a three-pillar digital growth strategy aiming for $450 million in digital revenue by 2028. • In March, Lee launched a suite of AI products from Amplified Digital Agency, including A.I. Enablement, AI Social, and SmartSites.AI, designed to assist local businesses. • In the second quarter, the company executed approximately $40 million in annualized cost reductions, focusing on print costs. • Year-to-date, over $6 million of non-core assets were sold, with an additional $25 million set to be monetized, including $8 million slated for closure in fiscal year 2025.

Total digital revenue on a trailing 12-month basis was $303 million, with $103 million coming from Amplified Digital Agency. In the second quarter, digital revenue grew 4% year-over-year on a same store basis. Digital subscription revenue saw a 20% year-over-year growth on the same store basis, and Amplified Digital revenue increased by 9%.

• The company expects free cash flow to be positive in the second half of fiscal year 2025. • There is an expectation of improved total digital revenue growth trends in the second half of the fiscal year. • The new AI revenue stream is anticipated to gain momentum as the fiscal year progresses.

• A malicious cyber event in February impacted operations and significantly affected the company's financial performance in the quarter. • The claims process for restoration costs related to the cyber incident is ongoing, and there were lingering impacts on the balance sheet from the incident.

Q: Net loss totaled $12 million in the quarter and free cash flow was minimal. Does that include the interest deferral? When does Lee expect to be free cash flow positive?

A: It's a good question. With respect to the net loss in the quarter, that certainly includes the expenses associated with our debt, even though the payments were waived. With respect to free cash flow, the company has made significant changes in our cost structure, both from an operating expense standpoint as well as capital and restructuring. As a result of those changes and the total digital revenue outlook that we provided, we do expect free cash flow to be positive in the second half of fiscal year 2025.