Lee Enterprises, Incorporated

Good day and welcome to the Lee Enterprises 2024 third quarter webcast and conference call. The call is being recorded and will be available for replay at investors.lee.net. At the close of the plan remarks, there will be an opportunity for questions. Participants accessing this call by webcast may submit written questions through the website and they'll be answered during the call as time permits. Otherwise, you will receive a response later. A link to the live webcast can be found at investors.lee.net. Now I will turn the call over to your host, Jared Marks, Vice President of Finance.

Good morning. Thank you for joining us. In addition to myself, speaking on this morning's call are Kevin Mowbray, President and Chief Executive Officer, and Tim Millage, Vice President, Chief Financial Officer, and Treasurer. Earlier today, we issued a news release with preliminary results for our third fiscal quarter of 2024. It is available at lee.net, as well as major financial websites. Please also refer to our earnings presentation found at investors.lee.net, which includes supplemental information. As a reminder, this morning's discussion will include forward-looking statements based on our current expectations. These statements are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially. Such factors are described in this morning's news release and in our SEC filings. During the call, we refer to certain non-GAAP financial measures. Reconciliations to the relevant GAAP measures are included in the tables accompanying the release. And now to open the discussion is our President and Chief Executive Officer, Kevin Mowbray.

Thank you, Jared. Good morning, everyone, and thanks for joining our call this morning. I'm delighted to share that we've made significant progress in our digital transformation. In the third quarter, each of our digital revenue streams grew year over year, and we effectively managed costs. In our last call, we told you digital revenue would surpass print revenue in the third quarter. I'm happy to share that our third quarter operating results achieved this digital revenue inflection point. This marks an important milestone in our digital transformation as it reduces our reliance on print. It's also important as the volatility of the print business is the driving force behind the updates and our adjusted EBITDA guidance that Tim will share more on in a few minutes. Another reason the inflection point is important is with nearly two-thirds of the company's gross margin derived from our digital businesses, we're approaching our goal of being sustainable from our digital products only. Nearing digital sustainability is a testament of the progress we've made on our three-pillar digital growth strategy. We remain an industry leader in several key digital categories. We're the fastest growing digital subscription platform in local media from both a revenue and subscriber perspective. Our digital subscription unit growth has outpaced industry peers since we first implemented our digital transformation strategy four years ago. We now have more than 748,000 digital subscribers, which is up a significant 23% compared to the prior year. We've also generated consistent and significant revenue growth from digital subscribers. This revenue category has grown 43% annually over the last three years, nearly doubling the nearest industry competitor. Simply put, we're growing digital subscribers faster than anyone else, while demonstrating higher value to our readers and executing price increases to our digital subscribers. This clearly demonstrates our distinguished presence in local markets as well as the strong demand for the valuable content we provide. We've expanded the amount of local news content delivered to our readers ultimately to give them more opportunities to engage and subscribe. We've strengthened our community connections and recommitted to the meeting conversations throughout the communities we serve. Publishing local news content reflects the people and the work they do to uplift their communities is the driving force behind our digital subscription business. Our hyperlocal content is a key driver to our digital transformation as our content provides the most robust monetization opportunities through subscriptions, advertising, potential content licensing agreements, and other opportunities. Our digital agency, Amplify Digital, grew 12% in the third quarter, and annualized revenue at Amplify Digital is more than $100 million. This represents an outstanding 37% annual growth rate over the last three years, far outpacing others within the industry. The industry-leading growth rates in these revenue streams are driving our digital transformation. Total digital revenue has grown to $290 million over the last 12 months, a 70% growth rate annually over the last three years. This digital growth has driven rapid change in our revenue composition, helping us to achieve the revenue inflection points I mentioned earlier. Our commitment to digital transformation yielded strong digital results this quarter, seen most clearly by each digital revenue stream growing year-over-year. Digital advertising revenue reached 50 million and achieved year-over-year growth at healthy margins. Anti-digital agency, which is the subset of our digital advertising revenue, totaled 26 million and grew 12% year-over-year. Digital subscriptions revenue totaled 21 million and grew 34% year-over-year at the highest margins in our digital portfolio. Our digital revenue is diverse, growing, and highly profitable. Of note, we're not reliant on any one stream of digital revenue, but rather a collection of profitable and growing revenue streams. We're excited to surpass the revenue inflection point this quarter. This important milestone demonstrates the success of our strategy thus far through the growth of our digital revenue streams and reduces our lines on print. We've made great progress on our digital transformation over the last few years. Digital revenue has grown more than 17% annually since FY21, and that's translated to a 14% annual growth rate in digital growth margins, or the same three-year time span. Our digital margin is also impressed at 72%, meaning our digital businesses are highly profitable. Replacing print revenue with growing and profitable digital revenue will help us achieve our long-term digital sustainability. We expect by 2026, the gross margin from our digital products will exceed the company's remaining SG&A costs. Said differently, within two years, we expect revenue from our digital businesses to cover all of these cash costs, excluding print. The growth in our digital businesses is expected to accelerate as we're still scratching the surface of the addressable digital subscription and digital services marketplace. It's quite exciting to see how close we are to being sustainable from our digital revenue streams. I'll share more updates in the coming quarters regarding our progress towards this digital milestone. But for now, I'll pass it over to Tim to talk more about our quarter results.