Q1 2021 Lee Enterprises Inc Earnings Call

Welcome to the Lee Enterprises, 2021, first quarter webcast and conference call. The call is being recorded and will be available for replay beginning later this morning at Lee Dot net.

The close of the planned remarks, there will be and opportunity for questions participants 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 live webcast will be found at Www Dot Dot net now I will turn on.

Call over to your host Josh Reinhold, Vice President Finance S. P. M D.

Goodbye and thank you for joining us speaking on this morning's call for Kevin Mowbray, President and Chief Executive Officer, and Tim Millage, Vice President and Chief Financial Officer, and Treasurer and also.

On today's call and available for questions and Nathan and Becky Vice President and CFO.

Okay.

Earlier today, because you didn't use for people with preliminary results for our first fiscal quarter and 2021 and it is available on SEDAR.

Well with that major financial websites, one housekeeping item.

And once all the acquisition and BH media group and the Buffalo.

On March 16 2020.

Certain results and trains are presented on a pro forma basis.

Which is b ownership of these acquisitions for the entirety of the periods for a minute.

As a reminder, this morning's discussion and forward looking statements and better based on our current expectations. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially.

Such factors are described in this morning's news release and also on Earth.

During the call and your peak volume for.

Certain non-GAAP financial measures, which are defined and earnings.

Reconciliation to GAAP measures.

Cable companies.

And now to open the discussion and our president and.

Chief Executive Officer, Kevin.

Thank you Josh good morning, and thank you all for joining the call what's your great and start in fiscal year 2021, and it would be.

Dramatically with our operating results, helping to mitigate the effects of the pandemic with easier for revenues for the improvement and strong cost management.

We're excited and optimistic about on postpaid net net strategy.

Well under way.

We remain keenly focused on our local operations and emphasis to drive local audience and advertising revenue and the result.

Are paying off we achieved significant revenue credit improvement in the first quarter with total operating revenue down 10, 8% on a pro forma sales.

Compared to the third and fourth quarter and fiscal year 2020 trends they were down 64, 9% and 44, 7% respectively.

And with strong cost management, adjusted EBITDA totaled 40 million and the first quarter.

We've made significant progress on our digital transformation strategy already total.

Digital revenue and the quarter totaled $62 5 million or 29, and 5% of our total operating revenue for me.

6% improvement to prior year.

Digital only subscriptions continue to grow at a rapid rate up 69% to the prior year and we grew digital only subscription revenue 60, and 90% as well.

Industry, leading metrics, we now have 286000 paid digital only subscriptions, which is helping drive audience revenue performance the growth and digital only subscriptions and digital only revenue contributed to the one 9% quarter over quarter growth and subscription revenue again, and we knew that.

And the industry consistent with the overall revenue trends advertising revenue significantly improved and the stores in Florida.

And Kimberly advertising revenue trend improvement.

Trough and depends on with last year and posted strong growth over quarter comparisons.

And our core advertising revenue trends improved 690 basis points compared to the for fourth quarter and trends.

And advertising and top local accounts and F&B or our focus and revenue from these advertisers comprises and 50% of our total advertising revenue in the quarter and we believe this segment of our revenue will continue to true and grow our strategy to drive advertising revenue from the local retailer.

Segment, leveraging the 70 per cent audience reach and our markets and contributed to the city and.

And 90 basis.

When children and improve from.

For the fourth quarter advertising revenue trend.

Fiscal 2020.

Additionally, we've made significant investments to diversify the product and services and we offer local advertisers and we're seeing significant relative and play digital agency. Our floats are this low market agency and we also work with significant growth and video revenue in the quarter revenue from these categories increased 16 from.

And 5% and this quarter compared to the prior year and we believe these categories will continue to improve and growth.

Leveraging on our strong relationships and our local markets, we're and $3 million from our company wide focus to capture political advertising from the state and local campaigns and nearly all of it and digital revenue. While this revenue is tied to total campaigns and demonstrates the power and our local market relationships that can be leveraged.

And your opportunities channel.

Yes.

Digital backbone of our operation and that of all of our 2000 and other and media partners and it continues to perform well with revenue up eight 5%.

On a standalone basis revenue channel.

Total 25 26 million over the last 12 months.

With growth and revenue account and do this combined with our audience revenue streams and 45 per cent of our revenue is reoccurring revenue or subscription based and that's a powerful metric is return on orange and digitally centric business.

And Louisiana and his focus on executing on our post pandemic strategies and drive new revenues for the company.

Also significantly transform our company on the cost side exceeding our annual target nearly nine months early and now I'll turn it over to him and give you more details on the cost side.

Thank you Kevin and good morning every day.

In June 'twenty, and 'twenty, we laid out a target to achieve 100 million and cost synergies and the end of fiscal year 'twenty and 'twenty one.

We established a plan and execute them quickly and we are excited to report that at the end of the first quarter 2021, we have realized 103 million and cost synergies exceeding our goal of nine months ahead of schedule.

Total cash costs were down 10, 1% and the first quarter compared to the same quarter last year.

Compensation was down five 9% due 12 for the group transformation and acquisition integration initiatives.

Newsprint was down 34% due to the reduction of our print volume as well as pricing.

Other cash costs and includes print related costs, and outsource and he's done and been deliberate expenses and also on the digital cost of goods sold.

Cash costs were down 11% and quarter due to a reduction.

And as price related costs, partially offset by incremental digital investments.

As a result for the revenue performance and Kevin walked through combined with a strong profit management adjusted EBITDA totaled $40 million from the first quarter.

The principal amount of debt at the end of the first quarter total 523, one and 6 million were down $52 4 million and three.

Financing last March.

Excess cash flow and the water totaled $17, one and and.

And he used to repay debt and our second quarter worked out for us.

As a reminder, the credit agreement for the low fixed annual interest rate of two.

Five year maturity.

No mandatory principal payments and does not have a financial performance and Kevin.

Maybe we do not have a lead against and default levels rather than maintenance ratios.

And the windows and doors as well and have committed to us.

Additionally, we have several non core real estate assets that we're looking to monetize as of today, we have $30 million that remain available for sale that window for you to further reduce debt.

Lastly, we expect to file our 10-Q with the SEC Tomorrow and.

And as always it will include additional information on our results and expectations.

This concludes our plan and the team will remain on the line three questions you may have.

Operator, please open along with your question.

Thank you at this time, we will be conducting a question and answer session and.

A reminder, if youre 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. One moment. Please while we poll for questions.

Okay, and our first question from a lot of it.

Are there other opportunities for cost synergies and the second quarter.

I'll go ahead and and answer that.

Certainly you talked about achieving our $100 million cost synergy target and.

And managing our cost structure is something that the management team has.

And proven track record of doing over the last several years Oh over a day.

Decade, and has to work and committed to continuing to manage our cost structure drive efficiencies.

Reduce our print legacy cost structure at the same time and making the required investments to.

And to grow revenue, especially transform our business and growth digital growth.

Our next question.

The company presentation for digital revenue growth well, obviously that's.

Important metric for us and as we mentioned in our opening remarks on three pillars and others on our agenda at all.

Growth company and a tripling of our digital only subscriptions of the true now and 25 and key metric for us, but were well on the way to achieving and then.

Revenue from trading and that's related to video it's L E Commerce, and first party data state and apart.

Hum and categories as far as there's more growth as a lager Tyson and digital revenue for the company.

Yeah.

Okay.

Our next question is.

What is the debt reduction target for them.

Your line.

And we haven't provided any guidance as to where we think we will go on forever.

Considerable debt reduction since the refinancing in March of last year of $52 million average.

And the incremental free cash flow and information in a week.

To help bridge the gap from adjusted EBITDA to free cash flow and we do have outstanding pension obligations with required pension contributions.

And given some guidance as to what we expect for Capex.

Our income taxes, as well, perhaps bridged the gap and we do expect to use.

Essentially all of our cash flow and excess cash flow to repay our debt.

Okay.

Okay.

We have no more questions from or what participants and I'll turn the call back to Kevin and for any closing remarks, well. Thank you for joining the call and thank you for your interest.

I have a great day.

Thank you ladies and gentlemen at this time, we have reached the and if our question and answer session. This concludes our call.