UPDATE: Lee Enterprises (LEE) Reports Q2 Loss of $0.09 on Revenues of $121.37M; Offers 3Q Revenue Outlook
Lee Enterprises (NYSE: LEE) reported Q2 EPS of ($0.09), versus ($0.05) reported last year. Revenue for the quarter came in at $121.37 million, versus $122.7 million reported last year.
Second Quarter Operating Results
- Operating revenue totaled $121.4 million, a decrease of 1.1%, as a result of continuing decline of print trends and the negative impact from the COVID-19 pandemic, partially offset by revenue from BHMG and Buffalo, which totaled $14.6 million of revenue in the quarter. Total operating revenue on a pro forma basis decreased 10.0% in the quarter.
- Subscription revenue increased 3.0% including the impact of acquisitions. Pro forma subscription revenue totaled $86.0 million, a decline of 2.8% compared to the prior year. Pro forma subscription revenue represented 41.4% of our total operating revenue.
- TownNews revenue increased 11.1% on a standalone basis and totaled more than $24 million over the last twelve months.
- Advertising revenue declined 3.2% including the impact of acquisitions. Pro forma advertising revenue totaled $102.0 million, a decline of 15.5%, largely consistent with the first quarter pro forma trends.
- Pro forma digital advertising and marketing services revenue totaled $32.8 million, or 32.2% of total advertising revenue. Legacy Lee digital advertising represents 43.0% of total advertising revenue.
- Pro forma total digital revenue was $46.0 million, representing 22.2% of operating revenue.
- Digital only subscribers totaled nearly 200,000, with a 91.7% increase over the prior year at Legacy Lee, and page views were up 8.6%, excluding acquisitions and including MNI and TNI(4).
- Operating expenses decreased 2.6% due to continued business transformation efforts, partially offset by expenses associated with BHMG and Buffalo. Pro forma Cash Costs(3) declined 9.8%.
- Adjusted EBITDA totaled $17.4 million, despite the immediate negative revenue impact from COVID-19. Pro forma Adjusted EBITDA totaled $24.0 million.
“We are pleased to announce our solid second quarter financial results,” said Kevin Mowbray, President and Chief Executive Officer. “Revenue and Adjusted EBITDA performance were strong, despite the immediate disruption in the last two weeks of the quarter due to the COVID-19 pandemic. Strong performance in our audience revenue and continued top line growth at TownNews, which have historically been stable revenue streams, drove results in the second quarter. Importantly, we closed on the transaction with Berkshire Hathaway, a strategic acquisition and financing that nearly doubled the size of our operations and eliminated our looming debt maturities, at highly attractive terms,” said Mowbray.
“The impact on our business from COVID-19 was significant and immediate. Our main priorities in the response to the pandemic were to ensure the safety and well-being of our employees, our advertisers and our consumers, while also continuing to deliver vital news and information to customers in our local markets.” Mowbray said. “Our newsrooms play a crucial role in providing intensely local coverage of critical issues, and we are incredibly proud of our employees across the company during this challenging time,” said Mowbray.
“We took swift and decisive action in response to the headwinds,” added Mowbray. “We immediately implemented both temporary and permanent cost actions, solidified our relationship with our local advertisers through a marketing grant program, enhanced our liquidity through the refinancing, and continued the acquisition integration. The combination of short-term and long-term actions taken now strengthens our local market position, and now more than ever, we believe that our compelling local content, strong audiences and audience engagement, and best-in-class operators, will allow us to emerge from this crisis stronger than ever.” Mowbray added.
Tim Millage, Vice President, Chief Financial Officer and Treasurer, said, “As we focus on driving top-line growth across our markets, we remain vigilant on costs. As we evaluate the post-pandemic operating environment and integration of BHMG and Buffalo, we expect to realize more than $100 million of cost synergies by the end of fiscal year 2021.”
“The comprehensive refinancing closed in March solves our looming maturities, and provides several important benefits,” said Millage. “We lowered our cost of capital at a fixed rate and have no fixed mandatory principal payments. Further, the lack of financial performance covenants and a 25-year maturity provide a runway to drive shareholder value over the long term. We are thrilled to have completed our financing at highly attractive terms, and to strengthen our relationship with Berkshire Hathaway,” Millage added.
GUIDANCE:
Lee Enterprises sees Q3 2019 revenue of $177-180 million.
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