Lee Enterprises (LEE) Sidoti Micro-Cap Virtual Conference summary

Digital transformation and strategy

• Digital revenue surpassed 50% of total operating revenue, marking a key inflection point in the business model shift from print to digital.

• Digital subscriptions have grown 41% annually over the last three years, with 748,000 digital subscribers, expected to reach 771,000 by end of 2024 and 1.2 million by 2028.

• Amplify Digital, the digital marketing agency, achieved a 30% annual growth rate over three years, with annualized revenue exceeding $100 million.

• The three-pillar digital growth strategy focuses on expanding digital audiences, growing digital subscribers, and diversifying digital advertising offerings.

• The company aims for $450 million in recurring digital revenue by 2028, with sustainability based solely on digital cash flow.

Financial performance and outlook

• Digital revenue grew 9% year-over-year in Q3, with total digital revenue at $290 million over the last 12 months and a 17% annual growth rate since 2021.

• Digital gross margins are 72%, and digital margin growth has translated to 14% growth in digital gross margins since 2021.

• By 2026, digital gross margin is expected to exceed remaining SG&A costs, making the digital business self-sustaining.

• Cost savings of $75–80 million are projected in 2024, mainly from business transformation efforts.

• The company expects to end 2024 with at least $310 million in digital revenue, representing a 13% growth over 2023.

Capital structure and asset management

• Maintains a favorable long-term credit agreement with Berkshire Hathaway, featuring a fixed 9% interest rate, no fixed amortization, and no financial performance covenants, maturing in 2045.

• Over $13 million in non-core asset sales closed this year, with an additional $25 million identified for future monetization to accelerate debt reduction.

• The company regularly reviews and expects the pool of non-core assets for sale to grow as digital transformation progresses.