Lee Enterprises, Incorporated Q3 FY2025 earnings call

Digital Transformation Update - Launched first-to-market AI-powered suite in Q2, with Amplified Agency launching expanded AI-powered packages like Smart Answer, Smart Team and Smart Suite HQ. - Nathan Bekke named Chief Operating Officer to drive digital growth and innovation. ### Operating Results - Third quarter had significant growth in adjusted EBITDA over Q2. - Local advertising revenue trends improved with year-over-year favorable 7 points due to 20,000 local advertisers. - Digital subscription same-store revenue grew 16% driven by 28% ARPU growth. - Cash costs decreased 7% in third quarter compared to same quarter last year, expected to finish fiscal year with cash costs between $522 million and $532 million, a 3%-5% decline over prior year. - Credit agreement with Berkshire Hathaway has favorable terms, and $9 million of asset sales closed year-to-date with $20 million of additional noncore assets identified for monetization.

In the third quarter, digital subscription revenue showed same-store growth of 16% year-over-year, driven by a 28% growth in ARPU. We ended June with 670,000 digitally-only subscribers. Amplified Digital Agency saw a nice pickup in revenue trends, returning to double-digit growth year-over-year. Total digital revenue in the third quarter was $78 million, representing 55% of the overall $141 million total operating revenue.

- Expected $450 million of digital revenue by 2028. ### - Third quarter results put us on pace to achieve digital revenue and adjusted EBITDA growth in the second half. ### - Fourth quarter expected to have core digital business led by digital subscriptions continue to grow, with new AI revenue streams helping finish fiscal year strong.

- Cyber event in prior quarter had residual impact on subscription units. ### - Risks associated with cost containment and monetization of noncore assets.

Q: Recent trends suggest readers are spending less time per visit on news websites. How is Lee addressing this shift in how readers consume news?

A: One of the competitive advantages that Lee has over national media is our asset portfolio. We have seen strong metrics from our loyal reader base in terms of engagement. Additionally, we are hyper-focused on enhancing our digital user experience by providing state-of-the-art digital products. We're also focused on expanding the depth and breadth of local content and growing subscribers and driving subscription revenue.