8-K: Lee Enterprises Q4 FY25: Digital Growth Amid Print Decline

Lee Enterprises reports strong digital subscription revenue growth and positive Adjusted EBITDA on a comparable basis for Q4 FY25, continuing its digital transformation.

Summary

• Total Revenue for FY25 was $562M, down 8.0% year-over-year, or -5.4% on a same-store basis.
• Total Operating Revenue for Q4 FY25 was $139M, a 12% decrease year-over-year, or -5% on a same-store basis.
• Digital revenue constituted 53% of total operating revenue in FY25, reaching $298M.
• Adjusted EBITDA for FY25 was $45M, materially impacted by a cyber incident (approx. $8M impact).
• Adjusted EBITDA for Q4 FY25 was $15M, an increase of 14% on a comparable basis year-over-year.
• Digital subscribers totaled 633,000 as of September 2025.
• Digital-only subscription revenue grew 16% year-over-year on a same-store basis in FY25, reaching $94M.
• Amplified Digital Agency revenue grew 5% year-over-year on a same-store basis in FY25, totaling $103M.
• Net loss for FY25 was $36M, and for Q4 FY25 was $6M.
• Total Cash Costs for FY25 were $524M, a 5% decrease compared to the prior year.
• The company has $455M of debt outstanding under its Credit Agreement with BH Finance.
• A cyber incident in February 2025 materially impacted FY25 revenue by approximately $12M and Adjusted EBITDA by approximately $8M.

Sentiment

Score: 7

Explanation: While overall revenue and net income are down, the company shows strong progress in its digital transformation, particularly in digital subscriptions and Adjusted EBITDA growth on a comparable basis. The strategic debt management and pension plan termination are also positive. However, the cyber incident and continued print decline remain challenges.

Positives

• Q4 Adjusted EBITDA increased by $2M on a comparable basis, marking the second consecutive quarter of growth.
• Digital-only subscription revenue increased 16% year-over-year on a same-store basis in Q4 FY25, marking five consecutive years of industry-leading performance.
• Digital-only subscribers reached 633,000, demonstrating strong audience engagement.
• Total Digital Revenue was 53% of total operating revenue in Q4 FY25, indicating significant progress in digital transformation.
• Achieved significant debt reduction of $121M since refinancing in March 2020.
• Maintained a favorable credit agreement with Berkshire Hathaway, featuring a 25-year runway, fixed 9.0% annual interest rate, no financial performance covenants, and no fixed amortization.
• Executing a strategic termination of the fully funded defined benefit pension plan, which eliminates long-term volatility and improves balance sheet flexibility.
• Identified approximately $25M of noncore assets for monetization.
• Berkshire Hathaway will provide an $18M annual interest rate reduction for 5 years (up to $90M total value) upon the closing of the common stock rights offering.
• Executed approximately $40 million of annualized cost reductions in Q2 FY25, with an additional $10 million entering FY26.

Negatives

• Total operating revenue decreased by 12% year-over-year in Q4 FY25 to $139M, or -5% on a same-store basis.
• Total Digital Revenue decreased by 3% year-over-year in Q4 FY25 to $74M on a same-store basis.
• Digital Advertising revenue decreased by 11% year-over-year in Q4 FY25 to $44M on a same-store basis.
• Amplified Digital agency revenue decreased by 9% year-over-year in Q4 FY25 to $25M on a same-store basis.
• Total Print Revenue decreased by 8% year-over-year in Q4 FY25 to $65M on a same-store basis.
• Reported a net loss of $6M for Q4 FY25 and $36M for FY25.
• FY25 revenue and Adjusted EBITDA were materially impacted by a cyber incident in February 2025, with an approximate $12M impact on revenue and $8M on Adjusted EBITDA.
• Waived interest and basic rent payments for March, April, and May 2025 were added to the principal amount of debt due to the cyber event and short-term liquidity needs.
• Market demand for omni-channel digital display advertising has put pressure on current owned and operated products.
• 18% of digital advertising revenue is currently tied to digital and print bundles, which the company aims to eliminate over time, indicating a current drag on digital-only growth.

Risks

• Ability to manage declining print revenue and circulation subscribers.
• Impact and duration of adverse conditions in certain aspects of the economy affecting the business.
• Changes in advertising and subscription demand.
• Changes in technology that impact the ability to deliver digital advertising.
• Potential changes in newsprint, other commodities, and energy costs.
• Fluctuations in interest rates.
• Labor costs.
• Significant cyber security breaches or failure of information technology systems.
• Ability to achieve planned expense reductions and realize the expected benefit of acquisitions.
• Ability to maintain employee and customer relationships.
• Ability to manage increased capital costs.
• Ability to maintain listing status on NASDAQ.
• Competition from other media outlets.
• May be required to indemnify previous owners of BH Media or The Buffalo News for unknown legal and other matters that may arise.

Future Outlook

Lee expects its Three Pillar Digital Growth Strategy to drive more than $450 million of digital revenue by 2030 and surpass 1.2 million digital subscribers by the same year, with digital subscription revenue reaching $175 million. The company anticipates achieving digital sustainability, with digital gross margin expected to surpass SG&A costs, by FY27. For FY26, Adjusted EBITDA is projected to show mid-single digit year-over-year growth. Capital expenditures are expected to be up to $10 million in FY26, and cash paid for income taxes is estimated between $1 million and $6 million.

Management Comments

• "We are pleased with our fourth quarter results as we continued to outperform the industry."
• "Digital subscription revenue increased 16% on a same-store basis, marking five consecutive years of industry-leading performance. This consistent strength reflects the effectiveness of our Three Pillar Digital Growth Strategy and the exceptional execution of our team."
• "Lee also delivered its second consecutive quarter of Adjusted EBITDA growth, underscoring the sustainability of our transformation. Solid top-line performance combined with disciplined cost actions drove our profitability gains."
• "Two consecutive quarters of Adjusted EBITDA growth, coupled with our continued leadership in digital subscriptions and Amplified Digital Agency's strong track record, demonstrate the strong momentum we're building across the company. We expect the momentum to continue, delivering strong Adjusted EBITDA growth in fiscal 2026."
• "This progress strengthens our position as a growing, sustainable, and digitally focused organization—one that is well positioned to capture long-term value and lead the next chapter of our digital transformation."

Industry Context

The filing highlights Lee's rapid transformation to a digital-centric company, a common trend in the traditional media industry facing declining print revenues. Lee's focus on digital subscriptions and agency services aligns with broader industry efforts to diversify revenue streams and leverage digital platforms. The explicit comparison to competitors like Gannett, NY Times, and TownSquare indicates a competitive landscape where digital growth is paramount. The cyber incident underscores the increasing digital risks faced by media companies in this evolving environment.

Comparison to Industry Standards

• Lee's LTM Digital Subscription Revenue growth of 16% YoY is presented as industry-leading, compared to Gannett (8%) and NY Times (15%).
• Lee's LTM Amplified Digital Agency growth of 5% YoY is presented as industry-leading, compared to Gannett (-1%) and TownSquare (-7%).
• Lee's total digital revenue grew 32% (CAGR) from FY22 to FY25, indicating strong performance relative to the broader trend of digital transformation in the media sector.

Corporate Governance

Related Party Transactions

• Credit Agreement with BH Finance (Berkshire Hathaway) for $455M debt outstanding.
• BH Finance waived March, April, and May 2025 interest and basic rent payments, adding them to the principal amount due to a cyber event and short-term liquidity needs.
• Berkshire Hathaway to provide an $18M annual interest rate reduction for 5 years (up to $90M in total value) upon the closing of the common stock rights offering.

Stakeholder Impact

• Shareholders: Potential dilution from the $50M common stock rights offering, but also benefits from debt reduction, improved balance sheet flexibility, and the long-term digital growth strategy.
• Employees: Ongoing initiatives aimed at optimizing manufacturing, distribution, and corporate services, and cost reductions may impact some roles, but there are also investments in talent and expertise for digital growth.
• Customers (Subscribers): Focus on expanding and engaging the audience through rich, credible local content and personalized consumer news experience.
• Customers (Advertisers): Acceleration of Amplified Digital Agency Services and expansion of AI-powered tools for local businesses.
• Creditors: Significant debt reduction and favorable credit terms with BH Finance improve creditworthiness and reduce risk.

Next Steps

• Continue execution of the Three Pillar Digital Growth Strategy to drive digital revenue and subscriber growth.
• Manage legacy revenue streams and associated direct costs.
• Optimize manufacturing, distribution, and corporate services.
• Make incremental investments in marketing & branding to drive Digital Subscription revenue growth.
• Invest in Digital COGS to support revenue growth at BLOX Digital and Amplified Digital Agency.
• Execute strategic termination of the fully funded defined benefit pension plan.
• Monetize approximately $25M of noncore assets.
• Close the $50M common stock rights offering.
• Leverage Berkshire Hathaway's $18M annual interest rate reduction for 5 years upon closing of the rights offering.
• Invest in journalism, public and derivative content.
• Invest in digital products, systems modernization, and infrastructure.

Key Dates

Recommendation

The company is undergoing a significant digital transformation, showing strong growth in digital subscriptions and positive Adjusted EBITDA on a comparable basis. Strategic debt management and pension plan termination are also favorable. However, overall revenue continues to decline due to print erosion, and the cyber incident had a material impact. The planned common stock rights offering could lead to short-term dilution. Given the mixed results and ongoing transition, a 'hold' recommendation is appropriate, awaiting further evidence of sustained digital revenue growth offsetting print declines and successful execution of the capital raise and deleveraging strategy.

Keywords

Lee Enterprises, digital transformation, local news, digital subscriptions, Adjusted EBITDA, print revenue decline, cyber incident, debt reduction, pension plan, media industry, advertising revenue, financial results, Q4 FY25, FY25