Lee Enterprises, Incorporated

of 2025. 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.

Thanks, Jared, and good morning, everyone. This morning, I'll provide an update on our fiscal 2025 performance. We'll also hear from Nathan and Tim later in the call to discuss operations and an outlook on fiscal 2026. Our 2025 performance clearly demonstrates the strong foundation of Lee's future as a digital-first company. Fiscal 2025 finished with $562 million in total revenue, 53% which was digital, showing more reliance on our digital business. and our legacy print business. On the digital subscription front, we finished the fiscal year with $94 million in revenue from our 633,000 digitally-only subscribers. I'm incredibly proud of this industry-leading revenue growth of 16% year-over-year on a same-store basis. Considering the February cyber incident hampered our ability to generate digitally subscriptions, we are really encouraged to see where we finished the year on the revenue side. We see an opportunity in 2026 to grow units in combination with continued rate optimization. Our digital marketing services business, known as Amphi Digital Agency, surpassed the 100 million mark in FY25 with industry-leading 5% growth on a same-store basis. I'm very encouraged by OnSite's ability to consistently deliver steady top-line growth even as the broader digital advertising market remains competitive. Progress in these revenue categories gives us confidence in our ability to drive sustainable growth and deliver long-term value to our shareholders. As a reminder, our three-filler digital growth strategy is expected to result in $450 million in digital revenue by 2030. Our team continues to execute exceptionally well on our digital transformation strategy. In 2025, we delivered an excellent 16% growth in digital-only subscription revenue, further diversifying our revenue mix, expanding our digital margins, and leading the industry. At the same time, we maintained disciplined cost management across the organization, particularly in print production and corporate overhead. which allowed us to reinvest in high-growth digital initiatives. These efforts are driving steady momentum in adjusted EBITDA, which grew for the second consecutive quarter when adjusted for the extra week in the prior year. This level of performance is truly a testament to Nathan and his operations team, and the positions lead to achieved sustained success in the years ahead. In 2025, we continue to lay the foundation for Lee's future as a digital-first company. We're driving our digital transformation, and we're confident in our ability to drive sustainable growth and deliver long-term value to our shareholders. The strength of our core digital business is to build a solid foundation of over $298 million of digital revenue annually, putting us firmly on track to achieve $450 million of digital revenue by fiscal 2030. We have consistently outpaced our industry peers in several key measures of digital growth, both digital subscriptions and digital agency revenue growth. Digital subscription revenue growth grew 32% annually over the last three years, more than doubling the nearest industry peer. The substantial growth is a testament to the value of our hyperlocal content as well as our top-notch digital platforms and tools. Over the course of 2025, we've continued to modernize our digital platforms and expand our product ecosystem, leveraging data and marketing to maximize engagement. On the advertising side, Amphidigital agency revenue growth has significantly outpaced our nearest peer, growing 5% annually over the past three years. Again, we've demonstrated the ability to grow digital advertising revenue through innovative and scalable operations and services with our tremendously talented digitally-driven teams. Overall, Lee continues to advance our strategy by driving digital transformation across every part of the business, expanding reach through ongoing digital innovation, and investing in initiatives that support industry-leading growth. Our focus remains on strengthening our digital products, enhancing audience engagement, and building scalable capabilities that position the company for sustained performance and increasingly digital media landscape. Total digital revenue was $298 million in fiscal 25, well on our way to achieving our long-term target of $450 million, and we're confident in our ability to get there. Next, I'll pass it over to Nathan.

Thank you, Kevin. As Kevin mentioned earlier, we closed the year with solid digital momentum, delivering 2% digital revenue growth on a same-store basis, a clear indication that our digital transformation strategy is taking hold across the enterprise. Within advertising, we strengthened SMB retention throughout the year and nearly doubled the number of clients now valued at more than $1 million annually, demonstrating the rising impact of our innovative solutions and the deepening value we provide to local, and regional businesses. This improved customer performance, combined with accelerating adoption of our AI-powered tools, including AI Enablement, AI Boost, Smart Answer, and Smart Sites, directly fuels 5% same-store revenue growth in the Amplified Digital Agency, contributing $103 million to our $184 million in digital advertising revenue and reinforcing the durability of our commercial base and our first-to-market leading position. On the consumer side, digital-only subscription revenue increased 16% on a same-store basis, driven by the strength of our local journalism and targeted retention strategies. These gains reflect the quality and relevance of our local content, the stickiness of our consumer products, and our continued ability to grow high-margin recurring digital revenues. Altogether, we do over $298 million in total digital revenue, representing 53% of total company revenue, a key performance measure that underscores the shift toward a sustainable, higher-margin digital enterprise. Importantly, digital growth and product innovation are enabled by rigorous operational execution. Throughout the fiscal year, we continued optimizing our cost structure, including consolidating print operations and reducing costs. legacy complexity. These actions created the financial capacity to invest in cloud modernization, AI-driven product development, and the digital capabilities that fuel this year's digital growth. This slide highlights the fundamental shift underway in our business and the clear progress of our digital transformation. In 2020, before we launched the three pillar digital growth strategy, only 21% of our revenue came from digital. Today, digital represents 53% of total revenue, meaning we have already surpassed the critical revenue inflection point where digital leads the enterprise. This transition is the result of industry-leading digital revenue growth across advertising, subscription, and new digital products, supported by disciplined execution and consistent investment in our digital capabilities. We are also effectively optimizing print operations to maximize profitability and free up resources for digital growth. Looking ahead, our strategy positions us to achieve our long-term target of 90% digital revenue by fiscal year 2030, enabling a sustainable business model that is no longer reliant on print products as they mature. This trajectory demonstrates we are moving with purpose toward a stronger, more resilient, predominantly digital company. With that, I'll turn it over to Tim.

Thanks, Nathan. Our core digital business has driven digital revenue growth of more than 12% annually from fiscal 2021 to fiscal 2025, and that has translated to a comparable annual growth in digital gross margins. As Nathan touched on, replacing our print revenue with growing and profitable digital revenue sets us up to achieve long-term sustainability, and we're nearing the sustainability point. While the February cyber incident interrupted efforts on several key projects in 2025, we believe that 2026 will see a nice lift in digital revenue and margin due to realizing the impact of these transformational business projects. Moving over to the cost side, we have a successful track record of effective cost management and thoughtfully investing in strategies that fuel long-term growth. As a reminder, we executed approximately $40 million in annualized cost reductions in the second quarter aimed at lowering costs across the board with an emphasis on non-core print operations, while also preserving the integrity of our core operations. We also made an additional $10 million in additional reductions entering fiscal 2026. For the year, cash costs decreased 5% compared to last year and finished at $524 million. We remain steadfast in our commitment to long-term financial sustainability. By enhancing operational rigor this year without compromising quality, we've strengthened our long-term position and are poised to drive sustainable shareholder value over the long term. Next, I'll move to the balance sheet. Our credit agreement with Berkshire Hathaway includes favorable terms, including a 25 year runway, fixed interest rate, and no financial performance covenants. These better than market terms allow us to stay laser focused on executing our strategy. Also, we've recently executed a strategic termination of the company's fully funded defined benefit pension plan. This enhances balance sheet flexibility and eliminates long-term volatility while preserving the participant's benefits. Since the plan assets have grown sufficiently to cover all obligations, the company is free from any future cost uncertainty. We continue to identify opportunities to monetize our non-core assets, which improves liquidity and facilitates accelerated debt repayment. In fiscal 2025, we closed $9 million of asset sales, and we've identified an additional $25 million of non-core assets to monetize in the future. The monetization of these non-core assets provide a significant source of liquidity in 2026. In looking ahead to 2026, we expect adjusted EBITDA growth in mid-single digits. And with that, I'll turn it back to Kevin.

Thanks, Tim. I'd like to revisit our long-term outlook for digital subscriptions. The key driver of our digital revenue growth is our digital-only subscription revenue, not only for 2026, but for the next five years. This slide provides insight into the positive long-term trajectory of our digital subscriptions and associated revenue. The acceleration of digital subscription revenue growth over the past few years is driven by investments we've made in top talent and in the areas of content, branding, and consumer marketing. These investments are producing strong results through engaging local content, effective brand campaigns, and KPI-driven marketing campaigns. We expect the results continue to push our revenue forward. With these investments and actions, we expect to achieve 175 million of recurring digital subscription revenue by fiscal 2030, fueled by 1.2 million digital subscribers. Our focus on diversifying and expanding offerings for advertisers will lead to the acceleration of digital advertising revenue over the next five years. We have strong relationships with more than 20,000 local and regional advertisers across the U.S., and we partner with them to achieve their marketing goals. We sell advertising and marketing services to our customer base through both our own and operated products and our full suite of omnichannel marketing solutions through Amplify Digital Agency. With advanced data-driven ad tech, specialized category expertise, scalable custom video content, and powerful first-party data access, Amplified is a strong partner for local and regional businesses looking to drive growth. We continue to see a significant growth runway as we execute our strategy. Our 2030 goal for digital advertising revenue is over $250 million. While Amplified is the growth engine for top-line advertising revenue, Our massive owned and operated digital audience fuels high margin digital advertising revenue. These owned and operated digital products infused with valuable hyperlocal content remain a key advertising channel for our local communities. Our owned and operated properties attract massive audiences and we're offering more video inventory and branded content opportunities to boost digital advertising revenue. This category is important as it remains growth potential by expanding our audience, and this category represents our highest margin digital advertising revenue. LEAD has a strong legacy and a bright future. We're a leader in local content with core local news and strong advertising assets in place. We provide breaking news and stories that matter most to the local communities we serve. Over the past five years, We've grown our digital revenue next to 53% as of 2025, more than doubling since the launch of our three pillar digital growth strategy. Looking ahead, we're working on an important development, namely a 50 million common stock rights offering to further support our digital transformation and be leveraging over the next five years. Our sole lender, Berkshire Hathaway, is extremely supportive of our long-term future. Successful completion of the rights offering will trigger an amendment to our credit agreement reducing the interest rate on outstanding debt from 9% to 5% for five years. This will result in $18 million in annual interest savings. The combination of the $50 million infusion into the business with another $90 million in interest savings over five years gives our balance sheet and capital structure a tremendous boost. We're excited to provide an update on our next quarter's call on the recapitalization investment efforts that are underway. The upcoming rights offer sets us up even more favorably over the next stage of our evolution as a digital-first company. Our local content and presence in our local communities are as strong as they've ever been, and we look forward to the next five years being our strongest yet. And lastly, we recently announced the upcoming departure of Tim in the early part of 2026. I'd like to extend my sincere and deep gratitude to Tim for his leadership, integrity, and dedication serving as Leah's CFO for the better part of the last decade. His financial acumen and stewardship have been instrumental in advancing the company While we'll miss him as a valued team member, we fully support his decision and wish him every success in the next chapter. Tim will see the transaction and transition through and be with Lee until March. We'll share more on the next call regarding his successor. But in the meantime, I'd like to thank Tim and his team and wish him the very best in the future. This concludes our remarks, and we're open for questions.

Thank you. At this time, we will be conducting a question and answer session. As a reminder, if you are accessing this call by webcast, you may submit typed questions on your screen. Those questions will be answered during the call as time permits. One moment while we poll for questions.

We will now take our first question from the web. What was the total debt reduction in the fourth fiscal quarter and the full fiscal year?

So just as some context, since our credit agreement was launched in 2020, we have reduced debt $121 million since that time. In 2025, we have seen, as you recall, we did have, in response to the cyber incident, waivers related to interest in rent. that did increase our debt balance. If we exclude the increase related to those items, our debt was reduced roughly $3.5 million in the fiscal year as a result of the operations and asset sales. With that, we have no more questions, and I'll turn it back to Kevin for closing remarks.

I'd like to thank everyone for joining today's call. Our focus remains on transforming our business for the long-term benefit of our shareholders, our employees, our readers, and our advertisers. We appreciate your time and your interest in the league. Thank you again.

Thank you. At this time, we have reached the end of our question and answer session, and this concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.