Davenport-based publisher Lee Enterprises, Inc. Friday reported growth in digital advertising and subscription revenue in the third quarter.
Lee, the parent company of the Quad-City Times and Muscatine Journal, reported earnings of $4.8 million, or 8 cents per diluted common share, for the quarter ended June 24. That compares to $6.3 million, or 11 cents per diluted common share, for the same quarter a year ago. Last year’s earnings came on the heels of Lee’s acquisition of the Moline Dispatch and Rock Island Argus.
Total revenue dropped 4.8 percent compared to the same quarter last year.
“We are pleased that the positive momentum on the revenue side continued into the third quarter," President and CEO Kevin Mowbray said in a news release. "Revenue trends were driven by strong performance from local advertisers — including digital, a 14.4 percent increase in programmatic advertising, subscription revenue growth and revenue gains from TownNews.com.”
On a conference call with analysts Friday, Mowbray said Lee saw strong subscription revenue in the third quarter.
He said digital advertising revenue increased 4.7 percent, representing 33.7 percent of total advertising revenue for the quarter. Subscription revenue increased 1.6 percent in the quarter, through premium content offerings and acquisitions in the prior year, Mowbray said.
The earnings report came a little more than one month after Lee announced it will manage Warren Buffett’s Berkshire Hathaway Inc.’s newspaper and digital operations in 30 markets. The deal did not result in any significant increase in expenses for the quarter, Lee officials said. Mary Junck, Lee’s executive chairman, said the company expects to earn around $50 million in fees over the initial five-year agreement.
Mowbray noted these highlights of the quarter:
- Digital retail advertising, which represented 63 percent of total digital advertising in the June quarter, grew 8.6 percent, the best performance over the last four quarters. He said it was driven by an increase in local retailer advertising.
- Monthly visits to Lee mobile, tablet, desktop and app sites averaged 73.7 million, an increase of 14.7 percent over the same quarter last year.
- Revenue at TownNews.com, excluding intercompany revenue, rose 13.7 percent. Over the last year, revenue totaled $17.8 million.
- On a same property basis, total revenue decreased 6.6 percent.
In addition, Lee reported that operating revenue decreased 4.8 percent to $132.6 million. Advertising and marketing services revenue combined decreased 9.5 percent to $73.5 million.
Operating expenses decreased 5.9 percent. Lee’s new vice president and CFO Tim Millage reported cash costs, excluding restructuring costs, were down 2.6 percent compared to the prior year quarter. Compensation decreased 8.5 percent primarily because of a reduction in staffing levels.
Millage also noted the “significant impact” of tariffs imposed on Canadian newsprint, as newsprint and ink expense rose 5.3 percent. Officials said they will continue to evaluate as more announcements regarding the tariffs are made in the future.
Lee’s principal debt was $499.8 million and totaled $483.8 million net of cash, Millage said. Lee reduced debt by $16.5 million in the June quarter and $68.7 million over the last year. In the June quarter, interest expense decreased 9.9 percent, or $1.4 million, due to lower debt balances, according to the report.
On the conference call, Junck said Lee is in discussions with advisers regarding the timing and economics of refinancing all or a portion of its debt.
Lee operates newspapers, specialty publications and digital products in 49 markets in 21 states.