SEC Form 10-Q filed by Lee Enterprises Incorporated

2/7/25 5:16:32 PM ET

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended December 29, 2024

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-6227

LEE ENTERPRISES, INCORPORATED

(Exact name of Registrant as specified in its Charter)


Delaware			42-0823980
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

4600 E. 53rd Street, Davenport, Iowa 52807

(Address of principal executive offices)

(563) 383-2100

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	LEE	The Nasdaq Global Select Market
Preferred Share Purchase Rights	LEE	The Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files. Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	x
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of January 31, 2025, 6,190,939 shares of Common Stock of the Registrant were outstanding.

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Table Of Contents			PAGE

FORWARD LOOKING STATEMENTS			1

PART I	FINANCIAL INFORMATION		2

	Item 1.	Financial Statements (Unaudited)	2

		Consolidated Balance Sheets	2

		Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income	4

		Consolidated Statements of Deficit	5

		Consolidated Statements of Cash Flows	6

		Notes to Consolidated Financial Statements	7

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13



	Item 3.	Controls and Procedures	18

PART II	OTHER INFORMATION		19

	Item 1.	Legal Proceedings	19

	Item 1.A.	Risk Factors	19

	Item 5.	Other Information	19

	Item 6.	Exhibits	20

SIGNATURES			21

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References to “we”, “our”, “us” and the like throughout this document refer to Lee Enterprises, Incorporated (the “Company”). References to “2025”, “2024" and the like refer to the fiscal years ended the last Sunday in September.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains information that may be deemed forward-looking that is based largely on our current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and other uncertainties, which in some instances are beyond our control, are:

•We may be required to indemnify the previous owners of the BH Media or Buffalo News for unknown legal and other matters that may arise;

•Our ability to manage declining print revenue and circulation subscribers;

•The impact and duration of adverse conditions in certain aspects of the economy affecting our business;

•Changes in advertising and subscription demand;

•Changes in technology that impact our ability to deliver digital advertising;

•Potential changes in newsprint, other commodities and energy costs;

•Interest rates;

•Labor costs;

•Significant cyber security breaches or failure of our information technology systems;

•Our ability to maintain employee and customer relationships;

•Our ability to manage increased capital costs;

•Our ability to maintain our listing status on NASDAQ;

•Competition; and

•Other risks detailed from time to time in our publicly filed documents.

Any statements that are not statements of historical fact (including statements containing the words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Statements regarding our plans, strategies, prospects and expectations regarding our business and industry and our responses thereto may have on our future operations, are forward-looking statements. They reflect our expectations, are not guarantees of performance and speak only as of the date the statement is made. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this report. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LEE ENTERPRISES, INCORPORATED

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
(Thousands of Dollars)	December 29, 2024	September 29, 2024

ASSETS

Current assets:
Cash and cash equivalents	6,122	9,598
Accounts receivable, net	59,539	60,648
Inventories	6,231	5,643
Prepaid and other current assets	20,409	21,884
Total current assets	92,301	97,773
Investments:
Associated companies	27,713	27,941
Other	6,090	6,042
Total investments	33,803	33,983
Property and equipment:
Land and improvements	6,377	6,420
Buildings and improvements	69,821	70,152
Equipment	191,923	196,312
Construction in process	7,165	5,625
	275,286	278,509
Less accumulated depreciation	232,454	234,137
Property and equipment, net	42,832	44,372
Operating lease right-of-use assets	31,886	34,882
Goodwill	323,858	328,040
Other intangible assets, net	66,600	70,075
Pension plan assets, net	4,962	4,663
Medical plan assets, net	23,729	23,300
Other	12,997	12,083
Total assets	632,968	649,171

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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	(Unaudited)
(Thousands of Dollars and Shares, Except Per Share Data)	December 29, 2024	September 29, 2024

LIABILITIES AND EQUITY

Current liabilities:
Current portion of lease liabilities	7,818	8,139
Current maturities of long-term debt	—	—
Accounts payable	44,795	36,290
Compensation and other accrued liabilities	36,088	39,170
Unearned revenue	30,285	31,755
Total current liabilities	118,986	115,354
Long-term debt, net of current maturities	445,943	445,943
Operating lease liabilities	26,962	29,769
Pension obligations	552	561
Postretirement and postemployment benefit obligations	7,516	7,520
Deferred income taxes	28,236	28,403
Income taxes payable	3,509	3,456
Withdrawal liabilities and other	25,441	25,499
Total liabilities	657,145	656,505
Commitments and Contingent Liabilities (Note 9)
Equity:
Stockholders' equity:
Serial convertible preferred stock, no par value; authorized 500 shares; none issued	—	—
Common Stock, $0.01 par value; authorized 12,000 shares; issued and outstanding:	62	62
December 29, 2024; 6,190 shares; $0.01 par value
September 29, 2024; 6,190 shares; $0.01 par value
Class B Common Stock, $2 par value; authorized 3,000 shares; none issued	—	—
Additional paid-in capital	262,569	262,470
Accumulated deficit	(309,089)	(292,341)
Accumulated other comprehensive income	19,805	19,920
Total Lee Enterprises, Inc. Stockholders' deficit	(26,653)	(9,889)
Non-controlling interests	2,476	2,555
Total deficit	(24,177)	(7,334)
Total liabilities and deficit	632,968	649,171

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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LEE ENTERPRISES, INCORPORATED

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three months ended
(Thousands of Dollars, Except Per Common Share Data)	December 29, 2024	December 24, 2023

Operating revenue:
Advertising and marketing services	66,590	70,887
Subscription	64,997	71,339
Other	12,975	13,452
Total operating revenue	144,562	155,678
Operating expenses:
Compensation	60,254	59,676
Newsprint and ink	3,616	4,843
Other operating expenses	74,680	74,776
Depreciation and amortization	6,265	7,295
Assets gain on sales, impairments and other, net	(929)	(1,469)
Restructuring costs and other	5,150	4,265
Total operating expenses	149,036	149,386
Equity in earnings of associated companies	1,122	1,541
Operating (loss) income	(3,352)	7,833
Non-operating (expense) income:
Interest expense	(10,282)	(10,131)
Pension and OPEB related benefit and other, net	653	186
Curtailment/Settlement gains	—	3,593
Total non-operating expense, net	(9,629)	(6,352)
(Loss) income before income taxes	(12,981)	1,481
Income tax expense	3,243	248
Net (loss) income	(16,224)	1,233
Net income attributable to non-controlling interests	(524)	(545)
(Loss) income attributable to Lee Enterprises, Incorporated	(16,748)	688
Other comprehensive loss, net of income taxes	(115)	(2,314)
Comprehensive loss attributable to Lee Enterprises, Incorporated	(16,863)	(1,626)
(Loss) earnings per common share:
Basic:	(2.80)	0.12
Diluted:	(2.80)	0.12

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF DEFICIT

(Unaudited)


(Thousands of Dollars)	Accumulated Deficit	Common Stock	Additional paid-in capital	Accumulated Other Comprehensive Income	Non-Controlling Interests:	Total

September 30, 2024	(292,341)	62	262,470	19,920	2,555	(7,334)
Shares redeemed	—	—	(331)	—	—	(331)
Loss attributable to Lee Enterprises, Incorporated	(16,748)	—	—	—	524	(16,224)
Stock compensation	—	—	430	—	—	430
Other comprehensive loss	—	—	—	(151)	—	(151)
Deferred income taxes, net	—	—	—	36	—	36
Distributions to minority owners	—	—	—	—	(603)	(603)
December 29, 2024	(309,089)	62	262,569	19,805	2,476	(24,177)


(Thousands of Dollars)	Accumulated Deficit	Common Stock	Additional paid-in capital	Accumulated Other Comprehensive Income	Non-Controlling Interests:	Total

September 25, 2023	(266,496)	61	260,832	26,843	2,466	23,706
Shares redeemed	—	—	(96)	—	—	(96)
Income attributable to Lee Enterprises, Incorporated	688	—	—	—	545	1,233
Stock compensation	—	—	214	—	—	214
Other comprehensive loss	—	—	—	(2,286)	—	(2,286)
Deferred income taxes, net	—	—	—	(28)	—	(28)
Distributions to minority owners	—	—	—	—	(553)	(553)
December 24, 2023	(265,808)	61	260,950	24,529	2,458	22,190

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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LEE ENTERPRISES, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Cash provided by (required for) operating activities:
Net (loss) income	(16,224)	1,233
Adjustments to reconcile net loss to net cash (required for) provided by operating activities:
Depreciation and amortization	6,265	7,295
Bad debt expense	3,474	3,724
Curtailment/Settlement gain	—	(3,593)

Stock compensation expense	430	214
Assets gain on sales, impairments and other, net	(929)	(1,469)
Earnings, net of distributions, deemed returns on investment of TNI and MNI	228	(59)

Deferred income taxes	(131)	(645)

Other, net	(603)	(550)
Changes in operating assets and liabilities:
Increase in receivables	(2,682)	(3,040)
Increase in inventories and other	(406)	(66)
(Decrease) increase in accounts payable and other accrued liabilities	4,197	64
Decrease in pension and other postretirement and postemployment benefit obligations	(893)	(418)
Change in income taxes payable	52	(2,105)
Other	(115)	(505)
Net cash (required for) provided by operating activities	(7,337)	80
Cash provided by investing activities:
Purchases of property and equipment	(1,553)	(1,030)
Proceeds from sales of assets	5,414	3,145
Other, net	—	(20)
Net cash provided by investing activities	3,861	2,095
Cash required for financing activities:
Principal payments on long-term debt	—	(1,580)
Common stock transactions, net	—	221
Net cash required for financing activities	—	(1,359)
Net (decrease) increase in cash and cash equivalents	(3,476)	816
Cash and cash equivalents:
Beginning of period	9,598	14,548
End of period	6,122	15,364

The accompanying Notes are an integral part of the Consolidated Financial Statements.

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LEE ENTERPRISES, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited, interim, Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports. In the opinion of management, these financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Lee Enterprises, Incorporated and its subsidiaries (the “Company”) as of December 29, 2024, and our results of operations and cash flows for the periods presented. The Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's 2024 Annual Report on Form 10-K.

The Company's fiscal year ends on the last Sunday in September. Fiscal year 2025 ends September 28, 2025, and fiscal year 2024 ended September 29, 2024. Fiscal year 2025 includes 52 weeks of operations and 2024 included 53 weeks of operations. Because of seasonal and other factors, the results of operations for the three months ended December 29, 2024, are not necessarily indicative of the results to be expected for the full year.

The Consolidated Financial Statements include our accounts and those of our wholly owned subsidiaries, as well as our 82.5% interest in INN Partners, L.C. (“BLOX Digital" formerly "TownNews”).

Our 50% interest in TNI Partners ("TNI") and our 50% interest in Madison Newspapers, Inc. ("MNI") are accounted for using the equity method and are reported at cost, plus our share of undistributed earnings since acquisition less, for TNI, amortization of intangible assets.

2 REVENUE

The following table presents our revenue disaggregated by source:


	Three months Ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Operating revenue:
Print advertising revenue	19,861	24,435
Digital advertising and marketing services revenue	46,729	46,452
Advertising and marketing services revenue	66,590	70,887
Print subscription revenue	43,432	51,872
Digital subscription revenue	21,565	19,467
Subscription revenue	64,997	71,339
Print other revenue	7,888	8,492
Digital other revenue	5,087	4,960
Other revenue	12,975	13,452
Total operating revenue	144,562	155,678

Recognition principles: Revenue is recognized when a performance obligation is satisfied by the transfer of control of the contracted goods or services to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

Contract Liabilities: The Company’s primary source of contract liabilities is unearned revenue from subscriptions paid in advance of the service provided. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next twelve months in accordance with the terms

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of the subscriptions and other contracts with customers. Revenue recognized in the three months ended December 29, 2024, that was included in the contract liability as of September 29, 2024, was $19.4 million.

Accounts receivable, excluding allowance for credit losses was $65.4 million and $67.2 million as of December 29, 2024, and September 29, 2024, respectively. Allowance for credit losses was $5.9 million and $6.5 million as of December 29, 2024, and September 29, 2024, respectively.

Valuation and qualifying account information related to the allowance for credit losses related to continuing operations is as follows:


(Thousands of Dollars)	December 29, 2024	September 29, 2024

Balance, beginning of year	6,514	5,260
Additions charged to expense	3,474	13,633
Deductions from reserves	(4,123)	(12,379)
Balance, end of year	5,865	6,514

Sales commissions are expensed as incurred as the associated contractual periods are one year or less. These costs are recorded within compensation. Most of our contracts have original expected lengths of one year or less and revenue is earned at a rate and amount that corresponds directly with the value to the customer.

3 INVESTMENTS IN ASSOCIATED COMPANIES

TNI Partners

In Tucson, Arizona, TNI, acting as agent for our subsidiary, Star Publishing Company (“Star Publishing”), and Gannett Co., Inc.'s subsidiary Citizen Publishing Company (“Citizen”), is responsible for printing, delivery, advertising, and subscription activities of the Arizona Daily Star as well as the related digital platforms and specialty publications. TNI collects all receipts and income and pays substantially all operating expenses incident to the partnership's operations and publication of the newspaper and other media.

Income or loss of TNI (before income taxes) is allocated equally to Star Publishing and Citizen.

Summarized results of TNI are as follows:


	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Operating revenue	6,533	6,991
Operating expenses	5,206	4,681
Operating income	1,327	2,310
Net income	1,250	1,155
Equity in earnings of TNI	625	578

TNI makes periodic distributions of its earnings and for the three months ended December 29, 2024, and December 24, 2023, we received $0.5 million and $1.2 million in distributions, respectively.

Madison Newspapers, Inc.

We have a 50% ownership interest in MNI, which publishes daily and Sunday newspapers, and other publications in Madison, Wisconsin, and other Wisconsin locations, and operates their related digital

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platforms. Net income or loss of MNI (after income taxes) is allocated equally to us and The Capital Times Company (“TCT”). MNI conducts its business under the trade name Capital Newspapers.

Summarized results of MNI are as follows:


	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Operating revenue	9,759	10,602
Operating expenses, excluding restructuring costs, depreciation and amortization	7,455	7,810
Restructuring costs	—	61
Depreciation and amortization	90	120
Operating income	2,214	2,611
Net income	994	772
Equity in earnings of MNI	497	386

MNI makes periodic distributions of its earnings and in the three months ended December 29, 2024 and December 24, 2023, we received $0.9 million and $0.4 million in distributions, respectively.

4 GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and identified intangible assets consist of the following:


(Thousands of Dollars)	December 29, 2024	September 29, 2024

Goodwill, beginning of period	328,040	329,504
Allocated to sold operations	(4,182)	(1,464)
Goodwill, end of period	323,858	328,040
Non-amortized intangible assets:
Mastheads	10,917	10,917
Amortizable intangible assets:
Customer and newspaper subscriber lists	262,146	262,242
Less accumulated amortization	(206,463)	(203,084)
	55,683	59,158
Total intangibles, net	390,458	398,115

The weighted average amortization period for amortizable assets is approximately ten years.

During the three months ended December 29, 2024, the Company sold certain non-core operations. Goodwill was allocated to these operations, which totaled $4.2 million.

5 DEBT

The Company has debt consisting of a single 25-year term loan with BH Finance LLC, with an aggregate principal balance of $445.9 million at a 9% annual fixed rate and maturing on March 16, 2045 (referred to herein as “Credit Agreement” and “Term Loan”). On December 29, 2024, the fair value was $383.3 million, representing a Level 2 fair value measurement, which are fair values estimated using significant other observable inputs for similar instruments.

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During the three months ended December 29, 2024, we made no principal debt payments. Future payments are contingent on the Company's ability to generate future excess cash flow, as defined in the Credit Agreement. As of December 29, 2024, $— million was recognized as current maturities of long-term debt in the Consolidated Balance Sheets due to non-core asset monetization.

6 PENSION, POSTRETIREMENT AND POSTEMPLOYMENT DEFINED BENEFIT PLANS

We have one defined benefit pension plan that covers certain employees, including plans established under collective bargaining agreements. Additionally, we provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. Through December 29, 2024, our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations.

The net periodic pension and postretirement cost (benefit) components for our plans are as follows:


PENSION PLANS	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Service cost for benefits earned during the period	1	1
Interest cost on projected benefit obligation	2,034	2,515
Expected return on plan assets	(2,319)	(2,453)
Amortization of net (gain) loss	—	(2)
Amortization of prior service benefit	212	212
Settlement gain	—	(2,409)
Net periodic pension (benefit) cost	(72)	(2,136)


POSTRETIREMENT MEDICAL PLANS	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Service cost for benefits earned during the period	1	13
Interest cost on projected benefit obligation	108	149
Expected return on plan assets	(410)	(320)
Amortization of net gain	(292)	(308)
Amortization of prior service benefit	(71)	(94)
Curtailment gain	—	(1,184)
Net periodic postretirement benefit	(664)	(1,744)

In the three months ended December 29, 2024 and December 24, 2023, we made no contributions to our pension plans. We have no required contributions to our pension plans for 2025.

Multiemployer Pension Plans

In prior periods, the Company effectuated withdrawals from several multiemployer plans. As of December 29, 2024 and September 29, 2024, we had $23.3 million and $23.6 million of accrued withdrawal liabilities. The liabilities reflect the estimated value of payments to the fund, payable over 20-years.

7 INCOME TAXES

We recorded an income tax expense of $3.2 million related to loss before taxes of $13.0 million for the three months ended December 29, 2024. We recorded an income tax expense of $0.2 million related to income before taxes of $1.5 million for the three months ended December 24, 2023. The effective

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income tax rate for the three months ended December 29, 2024, was 25.0%. The effective income tax rate for the three months ended December 24, 2023, was 16.7%.

The primary differences between these rates and the U.S. federal statutory rate of 21% are because of state taxes, non-deductible expenses, changes in valuation allowance, and adjustments to reserves for uncertain tax positions, including any related interest.

We file a consolidated federal tax return, as well as combined and separate tax returns in approximately 30 state and local jurisdictions. We do not currently have any federal or material state income tax examinations in progress. Our income tax returns have generally been audited or closed to audit through 2016.

8 (LOSS) EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted (loss) earnings per common share:


	Three months ended
(Thousands of Dollars and Shares, Except Per Share Data)	December 29, 2024	December 24, 2023

(Loss) income attributable to Lee Enterprises, Incorporated:	(16,748)	688
Weighted average common shares	6,192	6,080
Less weighted average restricted Common Stock	(204)	(170)
Basic average common shares	5,988	5,910
Dilutive restricted Common Stock	—	26
Diluted average common shares	5,988	5,936
(Loss) earnings per common share:
Basic	(2.80)	0.12
Diluted	(2.80)	0.12

For the three months ended December 29, 2024 and December 24, 2023 we had no and 128,019 weighted average shares, respectively, not considered in the computation of diluted earnings per share because the Company recorded net losses.

Rights Agreement

On March 28, 2024, our Board of Directors adopted a stockholder rights plan (the “Rights Agreement”). Pursuant to the Rights Agreement, on March 28, 2024, our Board of Directors declared a dividend of one preferred share purchase right (a “Right”), payable on April 8, 2024, for each share of our Common Stock outstanding to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Participating Convertible Preferred Stock, without par value (the “Preferred Shares”), of the Company at a price of $90.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

The Rights will initially trade with our Common Stock and will generally become exercisable only if any person or group, other than certain exempt persons, acquires beneficial ownership of 15% or more of our Common Stock outstanding. In the event the Rights become exercisable, each holder of a Right, other than the triggering person(s), will be entitled to purchase additional shares of our Common Stock at a 50% discount or the Company may exchange each Right held by such holders for one share of our Common Stock. The Rights Agreement will continue in effect until March 27, 2025, or unless earlier redeemed or terminated by the Company, as provided in the Rights Agreement. The Rights have no voting or dividend privileges, and, unless and until they become exercisable, have no dilutive effect on the earnings of the Company.

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otherwise in the best interest of our stockholders. However, the overall effect of the Rights Agreement may render it more difficult or discourage a merger, tender offer, or other business combination involving us that is not supported by our Board of Directors.

9 COMMITMENTS AND CONTINGENT LIABILITIES

Legal Proceedings

We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions except for the case described below, which amounts are recognized in "Prepaids and Other" and "Compensation and other accrued liabilities" on the Consolidated Balance Sheets, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole.

The Company was named as a defendant by a group of Plaintiffs acting on behalf of a proposed class of digital subscribers in a lawsuit in 2022. The lawsuit alleged that the Company violated the Video Privacy Protection Act (“VPPA”) by using pixels to track subscribers’ video viewing activity on Company websites and sharing it with Meta without consent.

The Company has agreed to a preliminary settlement with the Plaintiffs for $9.5 million, subject to required court approval. The entire settlement amount will be paid by the Company’s insurance carriers.

The settlement liability and insurance receivable are recorded within “Compensation and other accrued liabilities” and “Prepaids and other” on the Consolidated Balance Sheets as of December 29, 2024 and September 29, 2024, respectively.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the three months ended December 29, 2024. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2024 Annual Report on Form 10-K.

EXECUTIVE OVERVIEW

Lee Enterprises, Incorporated, together with its subsidiaries, is a digital-first subscription business providing local markets with valuable, high quality, trusted, intensely local news, information, advertising and marketing services. We inform consumers in 72 mid-sized local communities in 25 states with a rapidly growing digital subscription platform including 774,000 digital subscribers. Our core strategy aims to grow audiences and engagement through creating, collecting, and distributing trusted local news and information, continuous improvements to subscriber experience, and offering a full suite of omni-channel advertising and marketing to more than 25,000 local advertisers.

Our product portfolio includes digital subscription platforms, daily, weekly and monthly newspapers and niche products, all delivering original local news and information as well as national and international news. Our products offer digital and print editions, and our content and advertising is available in real time through our websites and mobile apps. We operate in predominately mid-sized communities with products ranging from large daily newspapers and associated digital products, such as the St. Louis Post-Dispatch and The Buffalo News, to non-daily newspapers with news websites and digital platforms serving smaller communities.

We have made investments in talent and technology to improve user experience, content, data visualization and marketing to align with the shift in spending habits by both consumers and advertisers toward digital products.

We aim to grow our business through three main categories: subscriptions to our product offerings, advertising and marketing solutions to local advertisers, and digital services to a diverse set of customers. Execution of this strategy is expected to transform Lee into a growing and sustainable local media organization.

•Our digital subscription platforms are the fastest growing digital subscription platforms in local media.

•Amplified Digital® Agency ("Amplified"), our digital marketing services agency, offers a full suite of digital marketing solutions to local advertisers.

•BLOX Digital (formerly known as TownNews), our software as a service (SaaS) content platform, is one of the largest web-hosting and content management SaaS providers in North America. BLOX Digital represents a powerful opportunity to drive additional digital revenue by providing state-of-the-art web hosting and content management services to more than 2,000 customers who rely on BLOX Digital for their web, over-the-top display, mobile, video and social media products.

We generate revenue primarily through advertising and marketing services, subscriptions to our digital and print products, and digital services, primarily through our majority-owned subsidiary, BLOX Digital.

STRATEGY

We are a major subscription and advertising platform, a trusted local news provider and innovative, digitally-focused marketing solutions company. Our focus is on the local market - including local news and information, local advertising and marketing services to top local accounts, and digital services to local content curators. To align with the core strength of our Company, our operating strategy is locally focused around three pillars:

•Grow digital audiences by transforming the way we present local news and information.

•Expand our digital subscription base and revenue through audience growth and continued conversion of our massive digital audiences.

•Diversify and expand offerings for advertisers through our vast array of rapidly growing digital products, our large digitally adept sales force, and Amplified, our full-service digital agency.

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RESULTS OF OPERATIONS

Three Months Ended December 29, 2024

Operating results are summarized below.


(Thousands of Dollars, Except Per Common Share Data)	December 29, 2024	December 24, 2023	Percent Change

Operating revenue:
Print advertising revenue	19,861	24,435	(18.7)	%
Digital advertising revenue	46,729	46,452	0.6	%
Advertising and marketing services revenue	66,590	70,887	(6.1)	%
Print subscription revenue	43,432	51,872	(16.3)	%
Digital subscription revenue	21,565	19,467	10.8	%
Subscription revenue	64,997	71,339	(8.9)	%
Print other revenue	7,888	8,492	(7.1)	%
Digital other revenue	5,087	4,960	2.6	%
Other revenue	12,975	13,452	(3.5)	%
Total operating revenue	144,562	155,678	(7.1)	%
Operating expenses:
Compensation	60,254	59,676	1.0	%
Newsprint and ink	3,616	4,843	(25.3)	%
Other operating expenses	74,680	74,776	(0.1)	%
Depreciation and amortization	6,265	7,295	(14.1)	%
Assets gain on sales, impairments and other	(929)	(1,469)	(36.8)	%
Restructuring costs and other	5,150	4,265	20.8	%
Total operating expenses	149,036	149,386	(0.2)	%
Equity in earnings of associated companies	1,122	1,541	(27.2)	%
Operating (loss) income	(3,352)	7,833	(142.8)	%
Non-operating income (expense):
Interest expense	(10,282)	(10,131)	1.5	%
Pension and OPEB related benefit and other, net	653	186	251.1	%
Curtailment/Settlement gains	—	3,593	NM
Total non-operating expense, net	(9,629)	(6,352)	51.6	%
(Loss) before income taxes	(12,981)	1,481	NM
Income tax expense	3,243	248	NM
Net (loss) income	(16,224)	1,233	NM

(Loss) earnings per common share:
Basic	(2.80)	0.12	NM
Diluted	(2.80)	0.12	NM

References to the “2025 Quarter” refer to the three months ended December 29, 2024. Similarly, references to the “2024 Quarter” refer to the three months ended December 24, 2023.

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Operating Revenue

Total operating revenue was $144.6 million in the 2025 Quarter, down $11.1 million, or 7.1%, compared to the 2024 Quarter.

Advertising and marketing services revenue totaled $66.6 million in the 2025 Quarter, down 6.1% compared to the 2024 Quarter. Print advertising revenues were $19.9 million in the 2025 Quarter, down 18.7% compared to the 2024 Quarter due to continued secular declines in demand for print advertising and a reduced product portfolio through sales and elimination of products that do not meet profitability standards. Digital advertising and marketing services totaled $46.7 million in the 2025 Quarter, up 0.6% compared to the 2024 Quarter. Digital advertising and marketing services represented 70.2% of the 2025 Quarter total advertising and marketing services revenue, compared to 65.5% in the same period last year.

Subscription revenue totaled $65.0 million in the 2025 Quarter, down 8.9% compared to the 2024 Quarter. Decline in full access volume, consistent with historical and industry trends were partially offset by selective increases on our full access subscriptions, growth in digital-only subscribers and price increases on digital subscriptions. Digital-only subscribers grew 5% since the 2024 Quarter and now total 774,000. Digital-only subscription revenue grew 10.8% compared to the 2024 Quarter.

Other revenue, which primarily consists of commercial printing revenue and digital services from BLOX Digital, decreased $0.5 million, or 3.5%, in the 2025 Quarter compared to the 2024 Quarter. Digital services revenue totaled $5.1 million in the 2025 Quarter, a 2.6% increase compared to the 2024 Quarter. Commercial printing revenue totaled $4.1 million in the 2025 Quarter, a 9.8% decrease compared to the 2024 Quarter, primarily driven by reduction in print volumes from our partners.

Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $73.4 million in the 2025 Quarter, an increase of 3.5% over the 2024 Quarter, and represented 50.8% of our total operating revenue in the 2025 Quarter.

Equity in earnings of TNI and MNI decreased $0.4 million in the 2025 Quarter.

Operating Expenses

Total operating expenses were $149.0 million in the 2025 Quarter, a 0.2% decrease compared to the 2024 Quarter. Cash Costs, a non-GAAP financial measure used to summarize certain operating expense (see reconciliation of Non-GAAP financial measures below), were down 0.5% in the 2025 Quarter.

Compensation expense increased $0.6 million in the 2025 Quarter, or 1.0%, compared to the 2024 Quarter due to investments in digital talent.

Newsprint and ink costs decreased $1.2 million in the 2025 Quarter, or 25.3%, compared to the 2024 Quarter. The decrease is attributable to declines in newsprint volumes.

Other operating expenses decreased $0.1 million in the 2025 Quarter, or 0.1%, compared to the 2024 Quarter. Other operating expenses include all operating costs not considered to be compensation, newsprint, depreciation and amortization, or restructuring costs and assets loss on sales, impairments, and other, net. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses. The decrease is primarily attributable to lower delivery and other print-related costs due to lower volumes of our print edition.

Restructuring costs and other increased $0.9 million compared to the 2024 Quarter. Restructuring costs and other include severance costs, litigation expenses, and restructuring expenses.

Depreciation and amortization expense decreased $1.0 million, or 14.1%, in the 2025 Quarter. The decrease in both is attributable to assets becoming fully depreciated or amortized.

Assets gain on sales, impairments and other, was a net gain of $0.9 million in the 2025 Quarter compared to a net gain of $1.5 million in the 2024 Quarter. Assets gain on sales, impairments and other in the 2025 Quarter were primarily due to the result of the disposition of non-core assets, including real estate.

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The factors noted above resulted in an operating loss of $3.4 million in the 2025 Quarter compared to operating income of $7.8 million in the 2024 Quarter.

Non-operating Income and Expense

Interest expense increased $0.2 million, or 1.5%, to $10.3 million in the 2025 Quarter, compared to the same Quarter last year. Our weighted average cost of debt was 9% at the end of the 2025 Quarter and 2024 Quarter.

Other non-operating income and expense consists of benefits associated with our pension and other postretirement plans and the fair value adjustment of our Warrants. We recorded $0.7 million periodic pension and other postretirement benefits in the 2025 Quarter compared to $3.9 million in the 2024 Quarter. The decrease was a result of recognizing a non-cash curtailment gain of $1.2 million in the 2024 Quarter as a result of outsourcing certain postemployment defined benefit plan functions. Additionally, during the 2024 Quarter, the Company completed a voluntary lump sum payment of future benefits to terminated vested participants. The offer was accepted by 522 participants representing $22.6 million in plan liabilities. As a result of the offer, a non-cash settlement gain of $2.4 million was recorded in Curtailment/Settlement gain on the Consolidated Statements of Income and Comprehensive Income. Both assets and liabilities of the plan were reduced by $22.6 million.

Income Tax (Benefit) Expense

We recorded an income tax expense of $3.2 million, or (25.0)% of pretax loss in the 2025 Quarter. In the 2024 Quarter, we recognized an income tax expense of $0.2 million, or 16.7% of pretax income.

Net income (loss) and Earnings (Loss) Per Share

Net loss was $16.2 million and diluted loss per share were $2.80 for the 2025 Quarter compared to net income of $1.2 million and diluted earnings per share of $0.12 for the 2024 Quarter. The change reflects the various items discussed above.

NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial performance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis.

In this report, we present Adjusted EBITDA and Cash Costs which are non-GAAP financial performance measures that exclude from our reported GAAP results the impact of certain items consisting primarily of restructuring charges and non-cash charges. We believe such expenses, charges and gains are not indicative of normal, ongoing operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies. In the future, however, we are likely to incur expenses, charges and gains similar to the items for which the applicable GAAP financial measures have been adjusted and to report non-GAAP financial measures excluding such items. Accordingly, exclusion of those or similar items in our non-GAAP presentations should not be interpreted as implying the items are non-recurring, infrequent, or unusual.

We define our non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, as follows:

Adjusted EBITDA is a non-GAAP financial performance measure that enhances financial statement users' overall understanding of the operating performance of the Company. The measure isolates unusual, infrequent, or non-cash transactions from the operating performance of the business. This allows users to easily compare operating performance among various fiscal periods and how management measures the performance of the business. This measure also provides users with a benchmark that can be used when forecasting future operating performance of the Company that excludes unusual, nonrecurring or one-time transactions. Adjusted EBITDA is also a component of the calculation used by stockholders and analysts to determine the value of our business when using the market approach, which applies a market multiple to financial metrics. It is also a measure used to calculate the leverage ratio of the Company, which is a key financial ratio monitored and used by the Company and its investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, income tax expense, depreciation and amortization, assets loss (gain) on sales, impairments and

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other, restructuring costs and other, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI.

Cash Costs represent a non-GAAP financial performance measure of operating expenses which are measured on an accrual basis and settled in cash. This measure is useful to investors in understanding the components of the Company’s cash-settled operating costs. Generally, the Company provides forward-looking guidance of Cash Costs, which can be used by financial statement users to assess the Company's ability to manage and control its operating cost structure. Cash Costs are defined as compensation, newsprint and ink and other operating expenses. Depreciation and amortization, assets loss (gain) on sales, impairments and other, other non-cash operating expenses and other expenses are excluded. Cash Costs also exclude restructuring costs and other, which are typically settled in cash.

Adjusted EBITDA and Cash Costs are reconciled to net income (loss) and operating expenses, below, the closest comparable numbers under GAAP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income, the most directly comparable GAAP measure:


	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Net (loss) income	(16,224)	1,233
Adjusted to exclude
Income tax expense	3,243	248
Non-operating expenses, net	9,629	6,352
Equity in earnings of TNI and MNI	(1,122)	(1,541)
Depreciation and amortization	6,265	7,295
Restructuring costs and other	5,150	4,265
Assets gain on sales, impairments and other, net	(929)	(1,469)
Stock compensation	430	214
Add:
Ownership share of TNI and MNI EBITDA (50%)	1,167	2,052
Adjusted EBITDA	7,609	18,649

The table below reconciles the non-GAAP financial performance measure of Cash Costs to Operating expenses, the most directly comparable GAAP measure:


	Three months ended
(Thousands of Dollars)	December 29, 2024	December 24, 2023

Operating expenses	149,036	149,386
Adjustments
Depreciation and amortization	6,265	7,295
Assets (gain) loss on sales, impairments and other, net	(929)	(1,469)
Restructuring costs and other	5,150	4,265
Cash Costs	138,550	139,295

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LIQUIDITY AND CAPITAL RESOURCES

Our operations have historically generated cash flow and are expected to provide sufficient liquidity, together with cash on hand, to meet our requirements, primarily operating expenses, interest expense and capital expenditures for at least the next twelve months. A summary of our cash flows is included in the narrative below.

Operating Activities

Cash required by operating activities totaled $7.3 million in 2025 Period compared to cash provided by operating activities of $0.1 million in 2024 Period, a decrease of $7.4 million. The decrease was driven by a decrease in operating results of $13.6 million (defined as net loss adjusted for non-working capital items) partially offset by an increase in working capital of $6.2 million, primarily related to favorable change in accounts receivable.

Investing Activities

Cash provided by investing activities totaled $3.9 million in the 2025 Period compared to cash provided by investing activities of $2.1 million in the 2024 Period. 2025 Period and 2024 Period included $5.4 million and $3.1 million, respectively, in proceeds from the sale of assets as the Company divested non-core real estate.

We anticipate that funds necessary for capital expenditures, which are expected to total approximately $10.0 million in 2025, and other requirements, will be available from internally generated funds.

Financing Activities

No cash was required for financing activities in the 2025 Period compared to $1.4 million in 2024 Period. Debt reduction accounted for nearly all the usage of funds in the prior period.

Additional Information on Liquidity

Our liquidity, consisting of cash on the balance sheet, totaled $6.1 million on December 29, 2024. This liquidity amount excludes any future cash flows from operations. We expect all interest and principal payments due in the next twelve months will be satisfied by existing cash and our cash flows, which will allow us to maintain an adequate level of liquidity.

CHANGES IN LAWS AND REGULATIONS

Wage Laws

The United States and various state and local governments are considering increasing their respective minimum wage rates. Most of our employees are paid more than the current United States or state minimum wage rates. However, until changes to such rates are enacted, the impact of the changes cannot be determined.

Item 3. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the Evaluation Date, our disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting that occurred during the 13 weeks ended December 29, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole.

Item 1A Risk Factors

Except as otherwise described herein, there have been no material changes in the risk factors previously disclosed in “Part I, Item 1A. Risk Factors” of our 2024 Form 10-K.

Item 5. Other Information

On February 3, 2025, the Company experienced a technology outage due to a cyber incident affecting certain business applications, resulting in an operational disruption. The Company is actively investigating the incident, implementing recovery measures, and assessing the potential impact on its operations, financial condition, and internal controls. As of the date of this filing, the Company has not identified any impact that is material; however, the evaluation remains ongoing.

Rights Agreement

The Rights Agreement applies equally to all current and future stockholders and is not intended to deter offers or preclude our Board of Directors from considering acquisition proposals that are fair and otherwise in the best interest of our stockholders. However, the overall effect of the Rights Agreement may render it more difficult or discourage a merger, tender offer, or other business combination involving us that is not supported by our Board of Directors.

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Item 6. Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by us with the SEC, as indicated. Exhibits marked with a plus (+) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with this Quarterly Report on Form 10-Q.


Number	Description

31.1	Rule 13a-14(a) Certification of Chief Executive Officer	Attached
31.2	Rule 13a-14(a) Certification of Chief Financial Officer	Attached
32.1	Section 1350 Certification of Chief Executive Officer	Attached
32.2	Section 1350 Certification of Chief Financial Officer	Attached
101.INS	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)	Attached
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Attached
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Attached
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Attached
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	Attached
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	Attached
104	Cover Page Interactive Data File (formatted as Inline XBRL and embedded within the Inline XBRL document)	Attached

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LEE ENTERPRISES, INCORPORATED

/s/ Timothy R. Millage

February 7, 2025

Timothy R. Millage

Vice President, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

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SEC Form 10-Q filed by Lee Enterprises Incorporated

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