10-K: Lee Enterprises Reports FY25 Loss Amid Cyberattack Impact

Lee Enterprises reported a net loss of $35.7 million for fiscal year 2025, significantly impacted by a $10.5 million cybersecurity incident, despite growth in digital-only subscriptions and marketing services.

Summary

• Total operating revenue was $562.3 million in 2025, down 8.0% from $611.4 million in 2024.
• Total Digital Revenue was $298.1 million, flat to the prior year, representing 53.0% of total operating revenue (up from 48.9% in 2024).
• Digital-only subscription revenue grew 12% year-over-year, nearing $100 million.
• Amplified Digital agency revenue surpassed $100 million, growing 4%.
• Total Print Revenue was $264 million, a 15% decrease from the prior year.
• Operating expenses totaled $571.3 million, a 6.6% decrease from 2024.
• Cash Costs (non-GAAP) totaled $523.6 million, a 5.4% decrease from 2024.
• Net loss was $35.7 million in 2025, compared to a net loss of $23.6 million in 2024.
• Adjusted EBITDA (non-GAAP) was $45.4 million, down from $65.3 million in 2024.
• A cybersecurity incident on February 3, 2025, resulted in a $10.5 million loss of cash flows, including $3.7 million in recognized expenses and $6.8 million in insurance claims filed.
• Debt, net of cash, totaled $445 million as of September 28, 2025.
• The company is considering a proposed rights offering of up to $50.0 million, which, if successful, could reduce the annual interest rate on its term loan from 9% to 5% for five years, saving approximately $18 million annually.
• Timothy R. Millage, Vice President, Chief Financial Officer, and Treasurer, will resign effective February 28, 2026, to pursue church ministry.

Sentiment

Score: 3

Explanation: The company reported a significant net loss and a decline in operating income and EBITDA, primarily due to a major cybersecurity incident and ongoing secular declines in print revenue. While digital growth is a positive, it was not enough to offset these negatives. The proposed rights offering and CFO resignation add elements of uncertainty.

Positives

• Digital-only subscription revenue increased by nearly 12% year-over-year, nearing $100 million.
• Amplified Digital agency revenue surpassed $100 million, growing 4% compared to the prior year.
• Total Digital Revenue remained flat despite challenges, now representing 53.0% of total operating revenue, up from 48.9% in 2024.
• Operating expenses decreased by 6.6% to $571.3 million, and Cash Costs decreased by 5.4% to $523.6 million, reflecting cost-reduction efforts.
• Newsprint and ink costs decreased by 22.9% due to declines in newsprint volumes.
• Depreciation and amortization expenses decreased by 31.8% and 34.9% respectively, due to assets becoming fully depreciated or amortized.
• The company has satisfied all principal and interest payments since May 2025 through organic free cash flow generation.
• An agreement in-principle with the term loan lender could reduce the annual interest rate from 9% to 5% for five years if a $50.0 million rights offering is successful, resulting in approximately $18 million in annual interest savings.
• The company is in compliance with its debt covenants as of September 28, 2025.
• The Audit and Risk Management Committee has four independent directors, with two designated as financial experts.
• The class action settlement for the Stoudemire et al. v. Lee Enterprises (Video Privacy Claim) of $9.5 million will be entirely paid by the company's insurance carriers.
• A tentative settlement has been reached for the Fetes et al. v. Lee Enterprises (Cyber Incident) class action, with the entire amount expected to be paid by the company's insurance carriers.

Negatives

• Net loss increased to $35.7 million in 2025 from $23.6 million in 2024.
• Operating (loss) income was $(4.7) million in 2025, a significant decline from $4.5 million operating income in 2024.
• Total operating revenue decreased by 8.0% to $562.3 million in 2025.
• Print Revenue decreased by 15% to $264 million.
• Print advertising revenue declined by 15.1% to $69.2 million due to secular declines and the Cyber Incident.
• Digital advertising revenue declined by 5.3% to $183.8 million, attributed to traditional classifieds, programmatic, digital advertising tied to legacy print campaigns, and the cyber incident.
• Subscription revenue decreased by 8.3% to $258.4 million, driven by secular reductions in print subscriptions.
• Other revenue decreased by 5.3% to $50.9 million, with commercial printing revenue down 7.4%.
• Adjusted EBITDA decreased significantly to $45.4 million in 2025 from $65.3 million in 2024.
• The cybersecurity incident on February 3, 2025, had a significant negative impact on 2025 operating results, causing a $10.5 million loss of cash flows, impacting revenue lines, increasing operating expenses, and delaying projects.
• Restructuring costs and other increased by 34.3% to $25.9 million, primarily due to cyber restoration costs, closing outsourced production facilities, business transformation, and severance.
• Masthead impairment charges were $7.0 million in 2025.
• Cash used in operating activities was $5.5 million in 2025, compared to cash provided of $1.1 million in 2024.
• Liquidity was negatively affected by lower cash generation, transformation-related investments, and the temporary disruption from the cyber incident.
• The company has no current plans to pay cash dividends on its common stock.
• The proposed rights offering and Charter Amendments could dilute equity ownership for non-participating stockholders.
• The company has substantial long-term debt of $455.5 million with a fixed interest rate of 9.0%.
• Timothy R. Millage, CFO, is resigning, which could create a leadership gap.
• The company is undergoing a New York Franchise Tax audit for fiscal years 2019-2021.
• A lawsuit from Lineup Systems Corporation claims $7 million in damages for breach of contract related to accounting software.

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.
• Interest rates.
• Labor costs.
• Significant cybersecurity 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 and digital companies, including national media providers, amateur content creators, and AI-powered solutions.
• Requirement to indemnify previous owners of BH Media Group, Inc. and The Buffalo News, Inc. for unknown legal and other matters.
• Liquidity position, any need to obtain additional capital, and ability to obtain additional financing.
• Decline in advertising revenues due to weakness in the retail sector, increased competition from online retailers, and shifts in advertiser spending priorities.
• Sensitivity of revenue generation to the strength of local economies and demographics.
• Uncertainty and adverse changes in general economic conditions (high inflation, rising interest rates, recession, geopolitical events, public health events) affecting sales, bad debts, financing costs, and publishing/distribution costs.
• Failure to maintain an effective system of internal control over financial reporting, potentially harming business and stock price.
• Deterioration in collectability of accounts receivable under adverse economic conditions.
• Further impairment of intangible assets (goodwill, mastheads) due to future operating results, market pressures, or volatile equity markets.
• Difficulty and cost in attracting and retaining highly qualified personnel, especially digital talent, exacerbated by labor constraints, increasing turnover, and inflationary wage pressures.
• Natural disasters, extreme weather conditions, public health emergencies, or other catastrophic events negatively affecting business, financial condition, and results of operations.
• No current plans to pay cash dividends on common stock, meaning investors may only receive a return through stock price appreciation.
• Provisions of certificate of incorporation and by-laws (e.g., restrictions on special meetings, authorized preferred stock, Section 203 of DGCL) may delay or prevent a takeover.
• Equity ownership dilution if the proposed rights offering or another equity financing transaction is consummated and existing common stockholders do not participate.
• Stockholder rights plan ("poison pill") could discourage takeovers not approved by the board, even if beneficial to some stockholders.
• Operating revenue may be materially adversely affected if the company does not successfully respond to the shift from traditional print media to digital media, requiring significant capital investments.
• Competition from a large number of companies in the local media industry, including digital media businesses (e.g., Alphabet, Amazon, Meta, X, TikTok), streaming services, podcasts; and traditional media platforms.
• Loss of classified advertising and subscribers to free internet sites.
• Subscription fatigue due to the growth of free content, negatively affecting circulation, subscription, and advertising revenue, and increasing subscriber acquisition/retention costs.
• Generative AI technology's continued growth, development, and evolution is shifting the landscape among competitors to adopt AI technology as a tool to create and deliver content to customers as well as act as a stand-alone competitor and such evolutions of AI technology may negatively impact the ability to attract, engage, and retain audience and subscribers, maintain and grow other revenue streams, and other risks.
• Generative Artificial Intelligence (AI), as a rapidly developing technology, subjects the company to risks involving security, protection of intellectual property, ethical concerns, brand trust, reputational harm, legal liability, and the maintenance and growth of revenue streams.
• Indebtedness could materially and adversely affect business or financial condition, making it difficult to satisfy debt obligations and meet operational goals.
• Inability to maintain sufficient cash flow to pay principal and interest on debt, potentially forcing reductions in investments, asset sales, or refinancing.
• Restrictions imposed by the 2020 Refinancing terms (e.g., on incurring additional indebtedness, liens, investments, dividends, share repurchases, capital transactions) limit flexibility.
• Failure to satisfy debt service obligations on the Term Loan could lead to default and acceleration of indebtedness.
• Need for lender consent for certain actions (e.g., additional indebtedness, proposed rights offering) could limit future opportunities.
• Cybersecurity incidents (like the February 2025 event) can negatively impact business, operating results, and reputation, leading to legal/regulatory claims, significant remediation costs, lost revenues, disruption of critical systems, adverse media coverage, and legal proceedings.
• Possession and use of personal information and payment cards by customers present risks of unauthorized access, disclosure, or manipulation, leading to liabilities, costly litigation, and reputational damage.
• Inability to anticipate or implement adequate preventative measures against evolving cyberattack techniques.
• Insurance coverage for security breaches may not be adequate.
• Failure to comply with evolving state laws on data breach notification and consumer privacy.
• Uncertainty regarding the ultimate amount or timing of cash settlements with taxing authorities for income tax matters.
• Involvement in a variety of legal actions that arise in the normal course of business, with outcomes that cannot be predicted with certainty.

Future Outlook

The company expects to meet its primary cash requirements for working capital, debt service, and capital expenditures through cash generated from operations and existing cash balances. It believes its liquidity will be sufficient to fund operations and meet debt service requirements for at least the next twelve months. Management is actively evaluating additional strategic initiatives and financing/capital markets transactions to ensure adequate cash flow and capital resources. A proposed rights offering of up to $50.0 million is being considered for general corporate purposes, including technology investments, which could lead to a reduction in the annual interest rate on its term loan from 9% to 5% for five years, saving approximately $18 million annually. The company plans to terminate its defined benefit pension plan on December 28, 2025, through lump-sum payouts and annuity purchases, aiming to eliminate pension cost uncertainty.

Management Comments

• "Our core strategy is to expand audiences and deepen engagement by delivering robust, hyper-local content that informs and connects our communities."
• "We are committed to creating, collecting, and distributing trusted local news and information across platforms designed to meet audiences wherever they are – print, web, mobile, social, and emerging channels."
• "We are investing in world-class digital products that elevate the subscriber experience through personalization, seamless access, and continuous innovation."
• "We believe the foundation of our business is the people and employees who support our business strategy. We invest in top digital talent to carry out our digital growth strategy and position us to achieve our long-term growth targets."
• "We are committed to creating an equitable and inclusive workplace that also reflects the diversity of our local readers and communities we serve."
• "We continued to deliver positive performance in our digital-only subscription business, driving year-over-year revenue growth of 12%."
• "Through yield management, expanded rates and disciplined subscriber acquisition, we are nearing $100 million in digital-only subscription revenue."
• "Another key piece of our digital business, Amplified Digital agency, surpassed $100 million in revenue during the year, with growth of 4%."
• "Since May 2025, we have satisfied all principal and interest payments through organic free cash flow generation."
• "We continue to take proactive steps to reduce our cost structure and preserve liquidity. Recent actions include targeted cost-reduction and cash-management initiatives such as lowering discretionary and capital spending, tightening control of print-related operating costs, and enhancing collection efforts to improve working capital."
• "Management is actively evaluating additional strategic initiatives and financing and capital markets transactions designed to ensure adequate cash flow and capital resources to support ongoing operations and meet debt obligations."
• "Based on current projections, we believe our liquidity will be sufficient to fund operations and meet debt service requirements for at least the next twelve months."
• "We evaluate the impact of inflation on our cost base and, when appropriate, implement price changes for our products and services. In parallel, we pursue productivity improvements, sourcing efficiencies, and targeted cost reductions to help offset inflationary pressure."

Industry Context

The media publishing industry is undergoing rapid evolution, with a significant shift in consumer demand and advertising expenditures from traditional print to digital media. Lee Enterprises is actively responding to this trend by focusing on a "digital-first" strategy, investing in digital products, and expanding digital-only subscriptions and marketing services (Amplified Digital). The growth in digital revenue streams, despite overall revenue decline, indicates alignment with broader industry shifts. However, the company faces intense competition from national digital media providers (Alphabet, Amazon, Meta, X, TikTok), streaming services, podcasts, and even generative AI technology, which is rapidly altering content creation and delivery. The challenge of "subscription fatigue" in a market with abundant free content is also a key industry trend impacting demand and pricing for paid products. The company's efforts to differentiate its brands and content, alongside managing declining print revenues, are critical in this evolving landscape.

Comparison to Industry Standards

• The filing does not provide specific comparisons to global benchmarks or comparable companies/projects. It mentions competing with "other media and digital companies" and that "some of our competitors enjoy competitive advantages such as greater name recognition, longer histories as well as greater financial resources." It also notes that "the market for local digital marketing solutions is highly competitive and evolving allowing opportunities for new competitors to enter the market."

Management Changes

Corporate Governance

Legal Proceedings

• Stoudemire et al. v. Lee Enterprises, Incorporated (Video Privacy Claim): Class action lawsuit alleging violation of the Video Privacy Protection Act by disclosing user video-watching habits via Facebook Pixel. A $9.5 million settlement was granted final court approval on August 14, 2025, to be paid entirely by the company's insurance carriers.
• Fetes et al. v. Lee Enterprises, Incorporated (Cyber Incident): Class action lawsuit filed on June 12, 2025, alleging failure to properly secure and safeguard personally identifiable information following the February 2025 cybersecurity incident. A tentative settlement has been reached, with the entire amount expected to be paid by the company's insurance carriers, pending court approval by August 2026.
• Lineup Systems Corporation v. Lee Enterprises, Incorporated: Lawsuit filed in July 2025 for breach of contract, breach of good faith and fair dealing, and quantum meruit related to accounting software, claiming $7 million in damages, attorneys' fees, and interest. The company filed a counterclaim. Trial is set for October 18, 2027, and losses are not reasonably estimable.

Related Party Transactions

• Term Loan with BH Finance LLC: The company's entire outstanding indebtedness is a 25-year term loan with BH Finance LLC, an affiliate of Berkshire Hathaway, Inc. The loan has an aggregate principal outstanding amount of $455.5 million as of September 28, 2025, with a 9% annual interest rate, collateralized by all company assets.
• BH Lease with BH Media Group, Inc.: A lease agreement for approximately 70 properties and related fixtures used in the BH Media Newspaper Business, commenced March 16, 2020. Annual rent is $8.0 million, subject to rent credits. As of September 28, 2025, current annual rent is $4.7 million due to $0.3 million monthly rent credits.
• Waiver of Interest and Lease Payments: In February 2025, BH Finance LLC waived interest expense payments and BH Media Group, Inc. waived lease payments due March 1, 2025, April 1, 2025, and May 1, 2025, as part of the cyber-recovery plan. These waivers increased outstanding debt by $11.3 million.
• Agreement in-principle for interest rate reduction: If the proposed rights offering of $50.0 million is successful, BH Finance LLC has agreed in-principle to reduce the annual interest rate from 9% to 5% for five years.
• TNI Partners and Madison Newspapers, Inc. (MNI): The company holds a 50% interest in both, accounted for under the equity method. TNI provides editorial services to the company ($3.7 million in 2025), and the company provides editorial services to MNI ($5.3 million in 2025).
• Lee Foundation: An affiliate that matches charitable contributions made by NEOs up to $5,000 annually.

Stakeholder Impact

• Shareholders: Experienced a net loss of $35.7 million and a loss per common share of $6.20. Potential for dilution if they do not participate in the proposed rights offering. The stockholder rights plan could deter takeovers not approved by the board. No current plans for cash dividends.
• Employees: Approximately 2,500 employees as of September 28, 2025, with 250 represented by unions. The company is investing in digital talent but also undergoing business transformation efforts leading to reductions in full-time employees and severance costs. The cybersecurity incident potentially accessed personal information of past and present employees, leading to a class action lawsuit and a tentative settlement. The CFO is resigning. The company plans to terminate its pension plan, offering lump-sum payouts or annuity contracts.
• Customers/Subscribers: Digital-only subscription revenue is growing, indicating successful engagement with digital content. However, print subscription demand is declining. The cybersecurity incident disrupted IT systems and could impact customer trust, though identity-protection services were offered.
• Advertisers: Advertising and marketing services revenue declined, particularly print advertising, due to secular trends and the cyber incident. Digital advertising also saw a decline in certain categories. The company aims to strengthen relationships through data-driven, omni-channel sales.
• Creditors (BH Finance LLC): The company has substantial debt ($455.5 million) with BH Finance. While in compliance with covenants, the company's ability to meet debt obligations is critical. The proposed rights offering could lead to a significant interest rate reduction, benefiting the company's ability to service debt.
• Suppliers: Newsprint and ink costs decreased due to lower volumes, indicating reduced demand for print materials. Commercial printing revenue also declined due to reduced print volumes from partners.

Next Steps

• Commence the proposed rights offering following the effectiveness of the registration statement.
• Enter into definitive documentation with the term loan lender regarding the interest rate reduction, contingent on the success of the rights offering.
• Continue to implement security enhancements following the cybersecurity incident.
• Identify a new Chief Financial Officer to replace Timothy R. Millage.
• Timothy R. Millage will provide consulting services to the Company through May 31, 2026.
• Terminate the Lee Enterprises, Incorporated Pension Plan on December 28, 2025, through lump-sum payouts and group annuity contracts.
• Await final court approval for the Fetes et al. v. Lee Enterprises (Cyber Incident) settlement, anticipated by August 2026.
• Proceed with the trial for Lineup Systems Corporation v. Lee Enterprises, Incorporated, set for October 18, 2027.
• Continue to evaluate the future impact of the One Big Beautiful Bill Act (OBBBA) for provisions effective after fiscal year 2025.
• Evaluate the provisions of ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures) for impact on financial statements.
• Evaluate the provisions of ASU 2025-03 (Business Combinations) and ASU 2025-05 (Credit Losses for Accounts Receivable) for impact on financial statements.

Key Dates

Recommendation

Lee Enterprises is in a challenging transition, marked by declining legacy print revenues and a significant net loss in FY25, exacerbated by a major cybersecurity incident. While digital growth in subscriptions and marketing services is a positive signal of strategic adaptation, it has not yet offset the overall revenue and profitability declines. The proposed rights offering, if successful, could significantly reduce interest expenses, which is a crucial positive given the high debt load. However, the resignation of the CFO, ongoing legal proceedings, and intense competition in the evolving media landscape introduce considerable uncertainty. Investors should hold, monitoring the success of the digital transformation, the outcome of the rights offering and debt restructuring, and the company's ability to navigate competitive and operational challenges, particularly in cybersecurity. The stock is speculative given the industry headwinds and high debt.

Keywords

Digital Media, Local News, Subscriptions, Advertising, Marketing Services, SEC Filing, 10-K, Cybersecurity, Debt Refinancing, Print Media, Corporate Governance, Risk Factors, Financial Performance, Lee Enterprises