Q4 2020 Lee Enterprises Inc Earnings Call

Good day, everyone and thank you for standing by.

Welcome to the Lee enterprises, 2024th quarter webcast and conference call. The call is being recorded and will be available for replay beginning later this morning Lee Dot net.

At the close of the planned remarks, there will be an opportunity for questions purchase items accessing this call by webcast may submit written questions through the website and they will be answered during the call.

As time permits otherwise you will receive a response later a link to the line what cash can be found at www Dot Lee Dot net.

Now I will try to call over to your host Tim village, Vice President Chief Financial Officer and Treasurer. Please go ahead.

Good morning, Thank you for Jordan.

In addition to myself, Kevin Mowbray, President and Chief Executive Officer.

Speaking on this morning.

Also with us on today's call on the deal.

What's your name and Becky Vice President consumer sales and marketing.

Earlier today, we get for.

You don't need to each other.

Married results for fourth quarter.

Right.

What do you need on that.

[laughter] major coming into the guidance.

One housekeeping items. Good start we closed on the acquisition to be age for media group on the Buffalo News on works <unk> 20, Twond, our year to date periods.

Include approximately 28 weeks of operation.

For sure.

Relative to the 52 week year to date period.

Certain hurdles on trends are presented on a pro forma basis.

<unk> ownership of these acquisitions for the full year of between 20 and smoke free G.

GAAP or your thoughts on your conviction broker it's a good thing.

As a reminder, this morning's discussion moving forward looking statements that are based on our current expectations.

These statements are subject to certain risks trends and uncertainties that could cause actual results to differ materially.

Doctors on describing this morning.

And also when or how do you keep barbie.

During the call you make reference to certain non-GAAP financial measures, which are defined in our news release.

Reconciliations relative to other <unk> GAAP measure are included in the company's is really not.

Now the open for discussions, our president and Chief Executive Officer, Kevin Mowbray.

Thank you Kim good morning to everyone and thank you for joining the call we made significant progress towards our digital transformation in the Miss it depends on that we're pleased with the fourth quarter and fiscal year 2020 operating results. We have shown modest in continuous revenue trend improvement.

Certain staple in our fourth quarter advertising revenue trends were down 26.7 per cent, a 13 percentage points improvement when compared to third quarter trend the trend of improvement on the result of various sales initiatives like the lead stimulus program the supply.

Our local advertisers.

Amplify our full service digital marketing agency also off the prove our advertising revenue trends.

Amplified provides a full for me that digital marketing services, including web development, Social media management targeting and videos apps like revenue increased 29.7 per cent through the fourth quarter.

Regarding revenue trends continued looks strong in the first quarter driven in part by political advertising in certain of our markets. There's one other strong local retail performance relative to video and strong digital for for there.

Nearly 50% of our total operating revenue for fourth quarter was our current subscriptions to our print and digital products and from digital services provided by town news.

Audience revenue was down 5.8% on a pro forma basis as we've seen as we've seen better churn rates and as we drew digital only subscriber base for 244000 at the end of 2020. This is a 71.4% increase compared to prior year.

And an increased office substantial Barry.

So on new revenue on a standalone basis increased 7% in the fourth quarter continued its run of more than 40 quarters of consecutive quarter over quarter revenue growth for the last 10 years the compound annual growth rate was 10.8% Mark.

Margins in town news are expanding on and are now in the mid Fortys town news continues to gain market share in the publishing in broadcast segments.

We're also expecting to explore other segments to ensure that we know gross and accelerate revenue at town.

Well 2020 did not turn out as we expected at the beginning of the fiscal year.

We accomplished a lot on that.

Credibly proud of our news, we're on our operators and the rest of the Lee team and our transformation efforts.

In March we completed a transformational transaction with Berkshire Hathaway, then we did an acquisition and nearly doubled our audience and revenue. The transaction also included a comprehensive refinancing at low interest rate for the 25 year maturity.

The acquisition and the angelic provided the opportunity to accelerate our digital transformation.

Like to take a minute to lay on our strategy as we head into 2021.

Continued to be the leading provider of local news information on the advertising and the markets we serve we.

We have to continue to innovate and respond to the ever changing needs and desires for readers and advertisers. Our first priority is transformed the way we present local news and information and provide perspective, both in digital and print we seek to maintain our position as the leading provider of local news and then.

For nation, and a major digital and subscription platform by providing best in class digital experiences to improved consumer engagement and to grow audiences Lee.

To achieve this by delivering relevant useful and engaging content to consumers using a multimedia approach with the heavy emphasis on video and audio.

We believe that our proprietary local content displayed in best in class multimedia platforms, combined with new engaging content and video channels will grow our audience is on our audience monetization capability.

We will transform on print centric audience model to a robust digital subscription model. Our digital audiences are comprised of full access subscribers digital only subscribers and non subscribers access for our sites subject to our payroll.

We have made substantial progress on this today as demonstrated by a massive and growing digital audiences.

The third pillar of our strategy to diversify and transform the products and services we offer advertisers.

Especially for top local accounts for less than the.

Local controllable retail accounts working with our local sales for direct combat contact with advertising decision makers are the core of our business.

This revenue category represents 47% of advertising and marketing services revenue and is comprised of top local accounts net susie.

Indeed, we believe we can dramatically improve the financial performance for this revenue category as we have an unmatched audience reach in our local markets for our print and digital offerings as well as combined with our full suite of digital marketing services.

Certainly operating in an industry that's in transition, but I could not be more pleased with the execution by our team 2000 for me.

The progress we've made it wasn't renewed focus with our third pillar strategy on on.

For the Mystic will emerge for depends on like the stronger leaner organization focused on achieving our digital transformation.

Total operating revenue on a GAAP day too.

Hundred 91.8 million in the quarter on on a pro forma basis total revenue was down 16.9 per cent compared for the prior year.

In June we set out a cost reduction goal of $100 million post the acquisition.

Through September we have unbelievable you need for moving of cost reduction on track to achieve $100 million target in 2001.

In the fourth quarter total cash costs on a pro forma basis were down 14.7%.

Compensation was down 15.5% due to business transformation effort implemented throughout the quarter that would you full time equivalent.

<unk> expense decreased 35.3% in the quarter.

Due to volume and price declines.

Other cash costs were down 11% on the fourth quarter due to decline interest related costs like delivery of postage partially offset by increases in digital spend.

Our business our business transformation efforts were focused on the following areas.

Reorganization of our operating structure for the markets based on operating structure for political structure, creating significant efficiencies across all of our partner.

Evaluation and execution of our transformation initiative in certain of our markets.

Acquisition integration of back office functions, including HR Finance your 90.

Centralization of technology system and.

And business transformation initiative in the newspaper design in advertising for the time.

For the end of 2028.

84 million in production and other non she we are on track for cheaper targets.

Adjusted EBITDA totaled 25.5 million in the fourth quarter.

As a reminder, our credit agreement at a low fixed annual interest rate 25 year maturity no mandatory principal payments and does not have financial performance Covenant relief on the line habits in the default tied to leverage or other meetings ratios abroad.

The company.

The debt it would be single leader, who knows this well is committed to our success.

The principal amount of debt net of 2020 totaled 533 million or down 37.7 in the loop on the March.

Excess cash flow at the end of the quarter totaled 13.7 million is used to repay debt in the first quarter of 2021.

In the fourth quarter, we sold $11.6 million of non core assets, including the monetization of our private equity investment.

As of today, we still have your 30 million of non core assets remain available for sale.

Lastly, we expect to file our 10-K with the FCC tomorrow and as always we need additional information on our result, an expectation this.

This concludes our remarks, which he will remain on the line, but can you help.

[noise]. 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.

Participants on the phone will not have the opportunity to ask questions.

And one moment, please while we pull for questions.

Question on what would be web.

As for specifics regarding your restructuring costs and other non operating income on our.

Restructuring on 7.3 million.

Got it.

Primary items, one severance related to a business transformation effort as well as a one dollar withdraw them off.

On the Multiemployer pension plan.

The significant driver in other non non operating income through bolt on monetizing our private equity investments that resulted.

$7 million.

We have one more question on the well I'll turn it back to Kevin for any closing remarks.

I appreciate your interest in Lee and I. Appreciate you joining the call. Thank you for joining.

[noise] [noise]. Thank you ladies and gentlemen at this time, we have reached the end of our question and answer session. This concludes our call.

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