Lee Enterprises report Q1 earnings, total revenue and income fall slightly, digital revenue up sharply
While print ad revenue fell 7.9 percent, total digital revenue totaled $27.2 million in the quarter, up 25.6 percent from a year ago
DAVENPORT, Iowa – February 5, 2015 — Lee Enterprises, Incorporated, a major provider of local news, information and advertising in 50 markets, today reported preliminary earnings of 18 cents per diluted common share for its first fiscal quarter ended December 28, 2014, compared with earnings of 22 cents a year ago. Excluding unusual matters, adjusted earnings per diluted common share totaled 22 cents, compared with earnings of 24 cents a year ago.
“Lee’s full-access subscription model helped produce quarter-over-quarter subscription revenue growth, exceeding previously announced guidance. And through our business transformation efforts we exceeded our cash cost reduction goal for the quarter.”
Mary Junck, chairman and chief executive officer, said: “We’re off to a strong start in FY2015 with total digital revenue continuing to grow at an impressive pace — up 25.6% in the quarter. Our audiences remain massive as mobile, tablet, desktop and app page views increased 7.7% to 226 million and unique visitors in the month of December 2014 increased 7.8% to 28 million. Our latest independent research shows that over the course of one week our newspapers and digital products reach almost 80% of all adults and almost three-quarters of adults ages 18-29 in our larger markets.”
“Also of significant note, we continued our now more than six year run of strong and stable cash flow with unlevered free cash flow totaling $154.9 million for the last twelve months ended December 28, 2014. And we aim to keep the string going.”
She added: “Lee’s full-access subscription model helped produce quarter-over-quarter subscription revenue growth, exceeding previously announced guidance. And through our business transformation efforts we exceeded our cash cost reduction goal for the quarter.”
She also noted the following financial highlights for the quarter:
- Total digital revenue increased 25.6% from the same quarter a year ago, our fifth consecutive quarter of double digit growth;
- Digital advertising and marketing services revenue increased 7.1% and mobile advertising revenue, which is included in digital advertising, increased 32.4%;
- Subscription revenue, excluding the subscription-related expense reclassification discussed more fully below, increased 0.3% and we expect full year 2015 subscription revenue, excluding the subscription-related expense reclassification, to increase 2.5%-3.0%;
- Total cash costs(2), excluding the subscription-related expense reclassification, decreased 2.1%. Our ongoing cost control will continue and we anticipate full year cash costs, excluding the subscription-related expense reclassification, to decrease 0.5%-1.0% in 2015; and
- Debt was reduced $20.3 million in the quarter and another $12.3 million since then.
FIRST QUARTER OPERATING RESULTS
Operating revenue for the 13 weeks ended December 28, 2014 totaled $176.2 million, a decrease of 0.7% compared with a year ago. Excluding the impact of a subscription-related expense reclassification as a result of moving to fee-for-service delivery contracts at several of our newspapers, operating revenue decreased 3.4%. This reclassification increases both print subscription revenue and operating expenses, with no impact on operating cash flow(2) or operating income. Certain delivery expenses were previously reported as a reduction of revenue. A table later in this release details the impact of the reclassification on revenue and cash costs.
Combined print and digital advertising and marketing services revenue decreased 5.6% to $115.5 million, with retail advertising down 6.6%, classified down 3.4% and national down 4.9%. Retail preprint advertising decreased 8.1%. Combined print and digital classified employment revenue increased 3.0%, while automotive decreased 9.9%, real estate decreased 7.8% and other classified decreased 0.9%. Digital advertising and marketing services revenue on a stand-alone basis increased 7.1% to $19.9 million and now totals 17.3% of total advertising and marketing services revenue. Mobile advertising revenue increased 32.4%. Print advertising and marketing services revenue on a stand-alone basis decreased 7.9%.
Subscription revenue increased 10.9%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 0.3%. Our average daily newspaper circulation, including TNI, MNI and digital subscribers, totaled 1.1 million in the 2015 Quarter. Sunday circulation totaled 1.5 million. Amounts are not comparable to the prior year period due to changes in measurements by the Alliance for Audited Media.
Total digital revenue, including advertising, marketing services, subscriptions and digital businesses, totaled $27.2 million in the quarter, up 25.6%.