Release Date: December 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lee Enterprises Inc (LEE, Financial) achieved a significant milestone by having digital revenue surpass print revenue, with digital revenue now representing 51% of total revenue.
- The digital subscription business grew revenue by 41% on a same-store basis, marking it as the fastest-growing digital subscription revenue platform in local media.
- The Amplified Digital Agency saw a 21% growth in the quarter and is approaching $100 million annually, significantly outpacing competitors.
- LEE has successfully achieved its digital subscription unit target of 771,000 and is on track to reach 1.2 million digital-only subscribers by 2028.
- Strategic AI partnerships are expected to enhance ad creative and deliver hyper-targeted campaigns, positioning LEE as a leader in AI-driven content and advertising.
Negative Points
- The print revenue is on a declining trend due to secular trends, impacting overall profitability.
- Despite the growth in digital revenue, the adjusted EBITDA is only expected to grow in the low-single digits next year.
- The transition to digital has required significant investment in talent and technology, which may strain resources.
- The AI partnerships are in early stages, and their impact on long-term digital goals remains uncertain.
- The company is still in the process of monetizing noncore assets to facilitate debt repayment, indicating ongoing financial restructuring.
Q & A Highlights
Q: How should we look at future investment in AI partnerships, and will these impact your fiscal 2028 digital goals?
A: Timothy Millage, CFO, stated that the partnerships don't change the level of investment but provide access to AI technology. These partnerships increase confidence in achieving long-term growth targets and offer early economics in the AI ad model. Les Ottolenghi, Chief Transformation and Commercial Officer, added that these partnerships minimize upfront costs through pay-per-use models and revenue-sharing agreements.
Q: What is the current digital subscriber count?
A: Timothy Millage confirmed that the digital subscription count reached 771,000.
Q: Is print revenue profitable on an operating basis?
A: Timothy Millage explained that the print business remains profitable, as indicated by the difference between digital and overall margins. However, it is on a declining trend due to secular changes.
Q: Can you elaborate on the impact of AI partnerships on operational costs?
A: Les Ottolenghi mentioned that the partnerships allow Lee to scale technology while keeping spending tied to revenue growth, leveraging pay-per-use models and revenue-sharing agreements to minimize upfront costs.
Q: What are the expectations for digital revenue and adjusted EBITDA growth in 2025?
A: Timothy Millage stated that total digital revenue is expected to grow between 7% to 10%, with adjusted EBITDA anticipated to grow in the low-single digits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
