Lee Enterprises, Incorporated · NASDAQ:LEE
Lee Enterprises — Q1 FY2022 Earnings Presentation
31 slides from Lee Enterprises's earnings presentation, Feb 3, 2022
Slide 1: Update on Lee's Digital Transformation: First Quarter FY2022 Earnings
UPDATE ON LEE’S DIGITAL TRANSFORMATION FIRST QUARTER FY2022 EARNINGS | FEBRUARY 2022
Slide 2: Safe Harbor
2 SAFE HARBOR The information provided in this presentation may include forward-looking statements relating to future events or the future financial performance of the Company. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed o
Slide 3: Key Highlights/Agenda
3 KEY HIGHLIGHTS/AGENDA Lee Enterprises Investment Thesis and Digital Transformation Progress 1 Lee’s Strategy for Digital Transformation: Three Pillar Digital Growth Strategy 2 First Quarter 2022 Results and 2022 Outlook 3 Five Year Outlook and Introduction to New Metrics To Track Lee’s Digital Tra
Slide 4: Lee Is Strongly Positioned for the Future
4 LEE IS STRONGLY POSITIONED FOR THE FUTURE (NASDAQ: LEE) 1 Digital audience represents average monthly UV’s on Lee’s owned and operated websites in the three months ended December 2021. Leading provider of digital products and services and high quality, trusted, local news and information • Deep re
Slide 5: Lee's Strategy for Digital Transformation: The Three Pillars
5 LEE’S STRATEGY FOR DIGITAL TRANSFORMATION: THE THREE PILLARS LEE IS RAPIDLY TRANSFORMING FROM A PRINT-CENTRIC TO A DIGITAL-CENTRIC COMPANY PILLAR 1 Expand digital audiences by transforming the presentation of local news and information PILLAR 2 Expand digital subscription base and revenue PILLAR 3
Slide 6: Digital Transformation: Market Leading Growth
6 Digital Subscriber Growth Leads Industry Digital Agency Revenue Growth Leads Industry Total Digital Revenue Growing Significantly 450K Current Digital-only Subscribers $47M Amplified LTM Revenue $197M of LTM Total Digital Revenue 9 quarters of leading digital subscriber growth FY2021 YOY Growth 43
Slide 7: Lee Investment Thesis
7 LEE INVESTMENT THESIS WE BELIEVE OUR THREE PILLAR DIGITAL GROWTH STRATEGY WILL CREATE SUBSTANTIAL VALUE: Increased Shareholder Value Operating cash flow and profits are enhanced Debt reduction drives shareholder value Multiple expansion fueled by increased recurring, high-margin digital revenue Co
Slide 8: Lee's Strategy for Digital Transformation: Three Pillar Digital Growth Strategy
8 LEE’S STRATEGY FOR DIGITAL TRANSFORMATION: THREE PILLAR DIGITAL GROWTH STRATEGY
Slide 9: Lee's Strategy for Digital Transformation: The Three Pillars
9 LEE’S STRATEGY FOR DIGITAL TRANSFORMATION: THE THREE PILLARS PILLAR 1 Expand digital audiences by transforming the presentation of local news and information PILLAR 2 Expand digital subscription base and revenue PILLAR 3 Diversify and expand offerings for local advertisers Lee expects the Three Pi
Slide 10: Digital Transformation: Expand Digital Audiences
10 DIGITAL TRANSFORMATION: EXPAND DIGITAL AUDIENCES ENHANCING DIGITAL PRESENTATIONS TO PROVIDE BEST-IN-CLASS USER EXPERIENCE OF LOCAL NEWS, WITH MULTIFORMAT, RICH CONTENT • Creating cohesive digital experience across all platforms by investing in user-experience design talent • Improving multimedia
Slide 11: Digital Transformation: Expand Digital Subscriber Base
11 DIGITAL TRANSFORMATION: EXPAND DIGITAL SUBSCRIBER BASE GROWING DIGITAL-ONLY SUBSCRIPTIONS AND REVENUE • Key initiatives… ‒ Optimize subscription model for digital-only growth ‒ Monetize content through new digital niche products ‒ Maximize subscription rates by leveraging first-party data ‒ Caref
Slide 12: Digital Transformation: Strategies to Drive Subscription Revenue
12 DIGITAL TRANSFORMATION: STRATEGIES TO DRIVE SUBSCRIPTION REVENUE ENHANCING CONVERSION WITHIN LEE’S ADDRESSABLE MARKET • Convert more of our addressable market to digital content subscribers ‒ Leverage embedded position in 77 attractive markets to grow audiences and share of total addressable mark
Slide 13: Digital Transformation: Lee Digital Subscription Growth Leads the Industry
13 DIGITAL TRANSFORMATION: LEE DIGITAL SUBSCRIPTION GROWTH LEADS THE INDUSTRY Digital subscriber growth has outpaced industry peers for 9 quarters 85% 92% 73% 67% 69% 58% 51% 65% 25% 29% 31% 31% 29% 37% 41% 46% 35% 48% 69% 50% 52% 40% 26% 25% 19% Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY
Slide 14: Digital Transformation: Five-Year Subscription Growth Outlook
14 DIGITAL TRANSFORMATION: FIVE-YEAR SUBSCRIPTION GROWTH OUTLOOK We expect significant growth in digital subscribers: • Convert more visitors to our core digital products • Launch new digital niche subscription products • Continued conversion of audiences to digital subscribers • Expect 900,000 digi
Slide 15: Key Takeaways for Subscription Revenue
15 1 Lee is the fastest growing digital subscription platform with a strong track record of accelerating digital subscription growth. 2 Lee is halfway to the goal of reaching 900,000 paid digital only subscribers assuming a modest penetration of the total addressable market. 3 Lee’s digital transfor
Slide 16: Digital Transformation: Expand Digital Advertising Services
16 DIGITAL TRANSFORMATION: EXPAND DIGITAL ADVERTISING SERVICES LEVERAGE “FIRST TO MARKET” POSITION WITH ARRAY OF DIGITAL PRODUCT OFFERINGS, SERVICES AND MARKETING SOLUTIONS Amplified: Lee’s Omnichannel Marketing Solution Amplified offers omnichannel digital marketing solutions for local advertisers
Slide 17: Digital Transformation: Amplified Is Growing Rapidly
17 DIGITAL TRANSFORMATION: AMPLIFIED IS GROWING RAPIDLY AMPLIFIED – LEE’S FULL-SERVICE DIGITAL AGENCY IS EXPECTED TO CONTINUE TO GROW SIGNIFICANTLY • Overview of Amplified: ‒ Provides full suite of digital services such as omnichannel marketing solutions, audience targeted display, SEM, social audie
Slide 18: Digital Transformation: Five-Year Digital Advertising Outlook
18 DIGITAL TRANSFORMATION: FIVE-YEAR DIGITAL ADVERTISING OUTLOOK DIGITAL ADVERTISING GROWTH IS FUELED BY AMPLIFIED • Amplified will drive digital marketing services revenue growth. ‒ Rapidly growing digital marketing services provider with $47M of revenue over the last twelve months, up 59% ‒ Levera
Slide 19: Key Takeaways for Advertising Revenue Growth
19 1 Amplified is a major growth engine for Lee’s digital advertising transformation. 2 Lee’s sophisticated Vision platform uniquely positions us to capitalize on the double-digit growth in omnichannel digital advertising. 3 Lee’s strategy is expected to generate recurring sustainable digital revenu
Slide 20: First Quarter 2022 Results and 2022 Outlook
20 FIRST QUARTER 2022 RESULTS AND 2022 OUTLOOK Solid revenue performance, strong in digital growth categories Continued excellent cost control of legacy business Investments to drive digital transformation On track to achieve full year targets for digital revenue and adjusted EBITDA
Slide 21: First Quarter 2022 Financial Highlights & 2022 Outlook
21 FIRST QUARTER 2022 FINANCIAL HIGHLIGHTS & 2022 OUTLOOK Q1 FY2022 FINANCIAL PERFORMANCE • Total Operating Revenue was $202 million in the first quarter, a 4.5% YOY decline ‒ Total Digital Revenue was $55 million, up 17% YOY • Digital-only subscription revenue increased 26% YOY and totaled $8 milli
Slide 22: Strong Track Record of Sustainable Cost Management
22 STRONG TRACK RECORD OF SUSTAINABLE COST MANAGEMENT • Proficient in driving efficiencies ‒ Acquisition synergies and business transformation initiatives expected to drive $114M in cost reductions since 2019 (proforma for the acquisition), net of investments ‒ Current base of +$300M of direct costs
Slide 23: Digital Transformation: Required Investments
23 DIGITAL TRANSFORMATION: REQUIRED INVESTMENTS $15M of incremental investments expected in FY22 LEE IS MAKING VALUE-ADDED INVESTMENTS TO DRIVE ITS DIGITAL TRANSFORMATION TALENT AND TEAM • Data and technology team with AI expertise • Brand development and strategic marketing experts • User experienc
Slide 24: Five Year Outlook: Strengthened Balance Sheet
24 DIGITAL TRANSFORMATION FIVE YEAR OUTLOOK: STRENGTHENED BALANCE SHEET • $20M in debt reduction in Q1 2022 and $113M since refinancing in March 2020 • Favorable credit agreement with Berkshire Hathaway ‒ 25-year runway w/ no breakage costs or prepayment penalties ‒ Fixed annual interest rate, no fi
Slide 25: Five Year Outlook and Metrics to Track Lee's Digital Transformation
25 FIVE YEAR OUTLOOK AND METRICS TO TRACK LEE’S DIGITAL TRANSFORMATION
Slide 26: Digital Transformation: Five-Year Outlook
26 DIGITAL TRANSFORMATION: FIVE-YEAR OUTLOOK 2021 2022 2026 Digital Only Subscribers 402,000 495,000 900,000 YoY 65% 23% 5 YEAR CAGR 17% Digital Only Subscription Revenue $28M $33M $100M YoY 46% 18% 5 YEAR CAGR 29% Digital Advertising and Marketing Services Revenue $141M $175M $310M YoY 7% 24% 5 YEA
Slide 27: Lee Investment Thesis
27 LEE INVESTMENT THESIS WE BELIEVE OUR THREE PILLAR DIGITAL GROWTH STRATEGY WILL CREATE SUBSTANTIAL VALUE: Increased Shareholder Value Operating cash flow and profits are enhanced Debt reduction drives shareholder value Multiple expansion fueled by increased recurring, high-margin digital revenue C
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Slide 29: Reconciliation of Non-GAAP Financial Measures
29 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Adjusted EBITDA is a non-GAAP financial performance measure that enhances financial statement users overall understanding of the operating performance of the Company. The measure isolates unusual, infrequent or non-cash transactions from the operating
Slide 30: Reconciliation of Non-GAAP Financial Measures
30 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Cash Costs is a non-GAAP financial performance measure represent a non-GAAP financial performance measure of operating expenses which are measured on an accrual basis and settled in cash. This measure is useful to investors in understanding the compon
Slide 31: Important Additional Information
31 Important Additional information The Company has filed a definitive proxy statement and form of WHITE proxy card with the SEC with respect to the Company’s 2022 Annual Meeting of Shareholders. The Company’s shareholders are strongly encouraged to read the Definitive Proxy Statement, the accompany