Lee Enterprises, Incorporated (LEE) Earnings

Management highlights

- Strategic Partnership Update • Lee entered into a long-term management agreement with Hoffman Media Group, marking the company's first capital-light growth opportunity beyond its owned portfolio. • The agreement generates recurring management fee revenue, creates performance-based upside tied to Hoffman Media Group's future portfolio expansion, and requires no major capital deployment or ownership-related balance sheet risk. • The partnership validates the scalability of Lee's transformed operating platform and leverages existing investments in digital capabilities and management expertise to expand reach and create shareholder value. - Core Operational Performance • Q3 2026 delivered net income of $5.2 million, the first positive net income quarter since 2024 and the largest net income quarter since fiscal 2022. • Q3 2026 adjusted EBITDA grew 23% year-over-year to $18 million, marking the fifth consecutive quarter of comparable adjusted EBITDA growth; excluding $560,000 in cyber event-related business interruption insurance proceeds, adjusted EBITDA still grew 19% year-over-year. • Fiscal 2026 year-to-date adjusted EBITDA increased 51% ($15 million) year-over-year; excluding insurance proceeds, growth is 30% ($9 million). Cash costs declined 15% ($19 million) in Q3 and 14% ($55 million) year-to-date, driven by reductions in SG&A and legacy print costs, leading to a 400 basis point improvement in adjusted EBITDA margin. • Ended Q3 with $59 million in cash, up from $14 million year-over-year, providing strong financial flexibility for strategic investments. The company has reduced total outstanding debt by $121 million since March 2020 refinancing, and the recent strategic investment cut the average interest rate from 9% to 5%, generating ~$18 million in annual interest savings. - Revenue & Growth Strategy • Advertising strategy prioritizes high-margin, recurring revenue over low-quality transactional growth; Amplify Digital Agency offers full-funnel integrated digital marketing solutions as a key competitive differentiator. New content and product initiatives (including the Huddle sports technology partnership, Community Center, America's 250th, VidMax, and All Access) create premium, brand-safe advertising inventory and deepen client relationships. • Subscription strategy focuses on expanding the digital subscriber base, improving conversion, engagement, and retention to increase customer lifetime value. Intensely local, trusted journalism remains Lee's core competitive advantage in subscriber growth. - Digital Transformation Milestone • Digital now accounts for a majority of total revenue, confirming the success of the company's multi-year transformation from a print-dependent business to a digital-first local media provider. Management expects digital gross margin will fully cover SG&A costs within the next three years, marking a key inflection point for long-term sustainable profitability.

Guidance

- Management upwardly revised full-year 2026 adjusted EBITDA growth guidance to a range of 22% to 28%, driven by stronger than expected year-to-date operational performance and disciplined execution. - Management confirmed ongoing commitment to disciplined cost management and targeted strategic investment in high-return digital initiatives to support long-term growth. - Management reaffirmed expectation that digital gross margin will fully cover total SG&A costs within the next three years, as digital transformation continues to deliver on its projected targets.

Segment performance

1. Digital Segment: Over the last 12 months, digital revenue totaled $284 million, accounting for 57% of total company revenue, with digital advertising representing 76% of total advertising revenue. Digital-only subscription revenue reached $22 million in Q3 2026, and the company had 584,000 digital-only subscribers as of quarter end. Digital subscription revenue has grown at a 20% compound annual rate over the past three years, while Amplify Digital Agency revenue has grown 3% annually. Core digital revenue has grown at a 9% compound annual rate since fiscal 2021, with digital gross margin expanding faster than revenue. 2. Print Segment: Print revenue is a declining legacy segment, with print-related cash costs declining 15% year-over-year in Q3 2026, and year-to-date print costs down $20 million year-over-year. Print advertising saw 1% sequential revenue growth in Q3 2026, marking early signs of stabilization, but print still accounts for less than half of total company revenue and is a lower-margin legacy business.

Risks & headwinds

No explicit discussion of new material business risks, operational failures, or unanticipated headwinds was included in this earnings call. Management referenced standard general uncertainty for forward-looking statements in line with SEC disclosures, but did not outline new risks beyond the company's already reported risk factors.

Analyst Q&A

• Q: How much debt did Lee pay down in the third quarter of 2026, and how much has been paid down year-to-date? /

  A: Lee paid down $1 million of debt in Q3 2026, matching the year-to-date total as of quarter end. An additional $2 million in debt was paid down shortly after quarter end, bringing the total year-to-date debt pay down to $3 million. This aligns with the company's ongoing strategy of gradual deleveraging supported by improved operating cash flow.

• Q: What is Lee's long-term plan for continued debt pay down? /

  A: All proceeds from the monetization of non-core assets will be dedicated to debt reduction. Additionally, the company's debt agreement requires excess cash above a $64 million balance to be used for debt pay down. As Lee continues to generate positive operating cash flow from operations, growing excess cash will accelerate the pace of deleveraging over time.