With eyes on leading the media industry in digital transformation, Lee Enterprises aims to grow its digital audience and revenue, company executives told shareholders Wednesday.
“We have a great track record of past performance and a bright path to the future,” said Mary Junck, Lee's executive chairman, during the annual shareholders meeting at the publisher's downtown Davenport headquarters. “And others have noticed, as was evidenced by Berkshire Hathaway’s decision to choose our management team to oversee the operations of BH Media Group.”
Junck, 71, elected as executive chairman in 2016, is slated to transition out of her position, but continue as chairman of the board of directors. The change will complete a transition plan that included the advancement of Kevin Mowbray to president and chief executive officer in 2016.
On Wednesday, Junck, Mowbray and Herb Moloney were re-elected to the board of directors.
Lee is the parent company of the Quad-City Times, Moline Dispatch/Rock Island Argus and the Muscatine Journal.
Speaking to a group of shareholders and employees, Junck said strong local digital performance and the development of new revenue streams has resulted in an 8.2 percent compound annual growth rate in total digital revenue since 2011.
"Our audiences are massive, reaching nearly 80 percent of all adults in our larger markets," said Mowbray, president and CEO. "And our research shows that one of the most significant audience trends is a rapid shift to digital content consumption. Therefore, growing our digital-only subscriber base will continue to be a key area of focus."
In the first quarter of 2019, Mowbray said digital-only subscribers jumped 55.9 percent. He said Lee aims to double its number of digital-only subscribers.
As the media industry focuses more on its digital reach, Junck said Lee's audience now includes 50 percent print readers, with the other 50 percent of readers accessing digital products — up from 35 percent last year.
In the most recent quarter, average monthly digital visits were up 3.9 percent, totaling 75.4 million, she said. Page views per visit jumped 12.9 percent.
Mowbray said Lee has goals to grow business through local accounts, audience and digital services.
Local retail advertising, he said, makes up around 50 percent of Lee's advertising revenue. In the first quarter, print and digital advertising revenue from local retail accounts was down 2.6 percent, with digital up 8.9 percent. The revenue trend is better than overall results, Mowbray said.
He said Lee is transitioning its full-access and digital-only consumers to a membership program, News+. The membership model, which combines access to premium content and rewards programs, will be launched in all of Lee's markets in the coming months.
CFO Tim Millage said Lee is aggressively working to reduce its debt. Since its 2014 refinancing, Lee has reduced its debt by $367 million. The company is in discussions with advisers and lenders about opportunities for refinancing.
"Although market conditions will dictate final terms, our goals in refinancing are to reduce the cost of capital, have less restrictive covenants than we have today for such things as stock buybacks, and to extend the maturities of our debt," Millage said. "Also of consideration is the breakage cost of our current debt, which totals more than $21 million today. That amount reduces to $9 million in less than two months."
Lee Enterprises announced Wednesday the company has authorized a repurchase of up to $10 million in stock over the next two years.
In the first quarter, Lee repaid the remaining balance of its First Lien Term Loan, almost five months ahead of its maturity.
Carol Alexander, of Taylorville, Ill., a Lee retiree and shareholder, raised questions about declining profits and circulation, plus whether the company is putting too much emphasis on digital without supporting revenue-generating print products.
"(Over the last 10 years), our audience is basically the same size it always has been. But what has happened is it has shifted from a very print-centric focus to a very mixed focus ... And we think this is going to continue," Junck said in response. "We have not given up on print. We have a huge focus on print ... because print drives a lot of revenue for us. But at the same time, we know that it's important to drive digital revenue and digital subscribers."