Results

Lee Enterprises Incorporated

02/11/2026 | Press release | Distributed by Public on 02/11/2026 08:02

Quarterly Report for Quarter Ending December 28, 2025 (Form 10-Q)

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 28, 2025. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2025 Annual Report on Form 10-K.
RECENT DEVELOPMENTS
PRIVATE PLACEMENT FINANCING AND RELATED AGREEMENTS
Private Placement Agreement
At the closing of the private placement on February 5, 2026, we issued an aggregate of 16,000,000 shares of Common Stock, consisting of 15,384,615 shares of Common Stock to certain investors and 615,385 shares of Common Stock to service providers as reimbursement for certain expenses incurred by certain investors, at a price of $3.25 per share through the private placement. The aggregate gross proceeds from the private placement were approximately $50.0 million, before deducting offering expenses. We expect to use the net proceeds for working capital and for other general corporate purposes. Further, in connection with the closing, we amended our Certificate of Incorporation, increasing the number of authorized shares from 12,000,000 to 40,000,000.
Registration Rights Agreement
At the closing, in connection with the private placement agreement, we entered into a registration rights agreement pursuant to which we will agree to provide certain customary registration rights, including the registration of the Shares for resale. We are required to use commercially reasonable efforts to file a registration statement with the Securities and Exchange Commission covering the resale by the investors of their shares within 60 days following the closing.
Credit Agreement Amendment
Additionally, concurrently with the execution of the private placement agreement, we entered into the Second Amendment to Credit Agreement. The amendments became operative concurrently with the closing. The amendments include among other things, a reduction of the applicable margin on our 25-year term loan from 9.00% to 5.00% for a period of five years following the closing and amending the definition of "Excess Cash Flow" such that the minimum amount of cash-on-hand held by us before being deemed Excess Cash Flow would be equal to $64.0 million for a period of five years.
Rights Agreement Amendment
On February 4, 2026, in connection with the closing of the private placement, the Board of Directors amended the termination date of the Rights Agreement to February 4, 2026, causing each Right to expire and to be extinguished and for the Rights Agreement to be terminated. See Note 12 of the unaudited condensed consolidated financial statements for additional discussion.
PRESIDENT AND CHIEF EXECUTIVE OFFICER TRANSITION
As discussed in Note 12, in connection and concurrently with the closing of the private placement, Kevin Mowbray, our President and Chief Executive Officer, entered into an agreement to voluntarily retire from his positions at the Company and its subsidiaries and affiliates. Pursuant to this agreement, we have agreed to pay (i) a severance payment to Mr. Mowbray of $1,500,000 payable in thirty-six installments and (ii) COBRA medical premiums for a period of 18 months for Mr. Mowbray and his spouse. In addition, Mr. Mowbray agreed to provide consultation, advice and assistance in the transition and operation of our business as reasonably requested by us through May 31, 2026. In connection with the closing and the planned retirement of the Chief Executive Officer, Nathan Bekke, our current Chief Operating Officer, assumed the role of Interim Chief Executive Officer.
VICE PRESIDENT, CHIEF FINANCIAL OFFICER TRANSITION
On November 17, 2025, Timothy R. Millage, Vice President, Chief Financial Officer informed us of his decision to resign from his positions with us to pursue an opportunity in church ministry. His resignation became effective February 3, 2026, and he has agreed to provide consulting services to the Company through May 31, 2026. In connection with Mr. Millage's resignation, we and Mr. Millage entered into a separation agreement, dated November 20, 2025 (the "Separation Agreement"). Under the terms of the Separation Agreement, Mr. Millage will receive (a) his full compensation through the end of his consulting role, (b) a severance payment equaling twenty-six weeks of his base salary, (c) the vesting of all unvested stock awards on February 3, 2026, and (d) survival of the indemnification terms under his employment agreement and indemnity agreement. The Separation Agreement also includes customary non-compete, non-solicitation, and release of claims provisions. We have initiated a search process to identify a new Chief Financial Officer. Josh Rinehults, the Company's current Vice President of Operations and Finance, has been appointed as Vice President, Interim Chief Financial Officer, and Treasurer, effective as of February 3, 2026.
EXECUTIVE OVERVIEW
RESULTS OF OPERATIONS
For the three months ended December 28, 2025, our total operating revenue was $130.1 million, down 10.0% from the three months ended December 29, 2024. Total Digital Revenue was $70.3 million and represented 54.1% of our total operating revenue. Total Print Revenue was $59.7 million, a 16.1% decrease to the three months ended December 29, 2024. We continued to deliver positive performance in our digital-only subscription business totaling $22.7 million, driving year-over-year revenue growth of 5.3%. Another key piece of our digital business, Amplified Digital® agency revenue totaled $23.6 million in the quarter.
Operating expenses totaled $125.9 million and Cash Costs (a non-GAAP financial measure) totaled $121.2 million, a 15.5% decrease and a 12.5% decrease, respectively, compared to the three months ended December 29, 2024 due to continued strong cost management, particularly in legacy revenue streams. Operating expenses during the quarter included $2.0 million in business interruption insurance reimbursements related to the Cyber claim. The remaining business-interruption claims remain under review. See Note 10 for further discussion.
Net loss totaled $5.1 million and Adjusted EBITDA (a non-GAAP financial measure) totaled $12.3 million, a 68% and 61% increase, respectively, due primarily to the cost reduction actions noted above. Net loss for the quarter included $2.0 million in insurance reimbursements discussed above.
Cash on the balance sheet totaled $12.6 million. Debt, net of cash on the balance sheet, totaled $443 million. Since May 2025, we have satisfied all principal and interest payments through organic free cash flow generation.
STRATEGY
We are a leading digital-first subscription and marketing services company committed to delivering high-quality, trusted, and deeply local news and information. Our mission is to strengthen and enrich the communities we serve by providing compelling local content, superior subscriber experiences, and innovative, data-driven advertising and marketing solutions. Through a premium, high-margin portfolio of digital products and marketing services - including owned-and-operated platforms, branded content, over-the-top advertising, AI-powered solutions, and targeted print - we enable more than 15,000 local advertisers to meaningfully engage customers, strengthen their brands, and accelerate growth.
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. At the same time, we are investing in world-class digital products that elevate the subscriber experience through personalization, seamless access, and continuous innovation.
RESULTS OF OPERATIONS
Three Months Ended December 28, 2025
Operating results are summarized below.
(Thousands of Dollars, Except Per Common Share Data) December 28, 2025 December 29, 2024 Percent
Change
Operating revenue:
Print advertising revenue 17,191 19,861 (13.4) %
Digital advertising revenue 42,795 46,729 (8.4) %
Advertising and marketing services revenue 59,986 66,590 (9.9) %
Print subscription revenue 34,996 43,432 (19.4) %
Digital subscription revenue 22,706 21,565 5.3 %
Subscription revenue 57,702 64,997 (11.2) %
Print other revenue 7,546 7,888 (4.3) %
Digital other revenue 4,828 5,087 (5.1) %
Other revenue 12,374 12,975 (4.6) %
Total operating revenue 130,062 144,562 (10.0) %
Operating expenses:
Compensation 49,433 60,254 (18.0) %
Newsprint and ink 2,963 3,616 (18.1) %
Insurance proceeds (2,000) - 100.0 %
Other operating expenses 68,814 74,680 (7.9) %
Depreciation and amortization 3,579 6,265 (42.9) %
Assets gain on sales, impairments and other (3) (929) (99.7) %
Restructuring costs and other 3,148 5,150 (38.9) %
Total operating expenses 125,934 149,036 (15.5) %
Equity in earnings of associated companies 1,080 1,122 (3.7) %
Operating income 5,208 (3,352) ***
Non-operating income (expense):
Interest expense (10,248) (10,282) (0.3) %
Pension and other post employment benefits ("OPEB") related and other, net 845 653 29.4 %
Total non-operating expense, net (9,403) (9,629) (2.3) %
Loss before income taxes (4,195) (12,981) (67.7) %
Income tax benefit 931 3,243 (71.3) %
Net loss (5,126) (16,224) (68.4) %
Loss per common share:
Basic (0.92) (2.80) (67.2) %
Diluted (0.92) (2.80) (67.2) %
*** Indicates an absolute value percentage change greater than 100.
Operating Revenue
Total operating revenue was $130.1 million in the three months ended December 28, 2025, down $14.5 million, or 10.0%, compared to the the three months ended December 29, 2024.
Advertising and marketing services revenue totaled $60.0 million in the three months ended December 28, 2025, down 9.9% compared to the three months ended December 29, 2024. Print advertising revenues were $17.2 million in the three months ended December 28, 2025, down 13.4% compared to the three months ended December 29, 2024 related to continued secular declines in demand for print advertising. Digital advertising and marketing services totaled $42.8 million in the three months ended December 28, 2025, down 8.4% compared to the three months ended December 29, 2024. Digital advertising and marketing services represented 71.3% of the three months ended December 28, 2025 total advertising and marketing services revenue, compared to 70.2% in the same period last year.
Subscription revenue totaled $57.7 million in the three months ended December 28, 2025, down 11.2% compared to the three months ended December 29, 2024. Declines in volumes, consistent with historical and industry trends were partially offset by strategic rate increases. Digital-only subscribers now total 609,000 as December 28, 2025. Digital-only subscription revenue grew 5.3% compared to the the three months ended December 29, 2024.
Other revenue, which primarily consists of commercial printing revenue and digital services from BLOX Digital, decreased $0.6 million, or 4.6%, in the three months ended December 28, 2025 compared to the three months ended December 29, 2024. Digital services revenue totaled $4.8 million in the three months ended December 28, 2025, a 5.1% decrease compared to the three months ended December 29, 2024. Commercial printing revenue totaled $3.9 million in the three months ended December 28, 2025, a 5.7% decrease compared to the three months ended December 29, 2024, primarily driven by lower print volumes from our partners.
Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $70.3 million in the three months ended December 28, 2025, a decrease of 4.2% over the three months ended December 29, 2024, and represented 54.1% of our total operating revenue in the the three months ended December 28, 2025
Equity in earnings of TNI and MNI in the three months ended December 28, 2025 is essentially flat to the three months ended December 29, 2024.
Operating Expenses
Total operating expenses were $125.9 million in the three months ended December 28, 2025, a 15.5% decrease compared to the three months ended December 29, 2024. Cash Costs, a non-GAAP financial measure used to summarize certain operating expense (see reconciliation of Non-GAAP financial measures below), were down 12.5% in the three months ended December 28, 2025. These decreases were primarily due to cost reduction actions put in place in year ended September 28, 2025.
Compensation expense decreased $10.8 million in the three months ended December 28, 2025, or 18.0%, compared to the three months ended December 29, 2024 from reductions in full time employees due to continued business transformation efforts.
Newsprint and ink costs decreased $0.7 million in the three months ended December 28, 2025, or 18.1%, compared to the three months ended December 29, 2024. The decrease is attributable to declines in newsprint volumes and delivery costs.
Other operating expenses decreased $5.9 million in the three months ended December 28, 2025, or 7.9%, compared to the three months ended December 29, 2024. 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.
Restructuring costs and other decreased $2.0 million, or 38.9% in the three months ended December 28, 2025, compared to the three months ended December 29, 2024. The prior year quarter included significant costs associated with the shutdown of one of our production facilities.
Depreciation and amortization expense decreased $2.7 million, or 42.9%, in the three months ended December 28, 2025. The decrease in both is attributable to assets being fully depreciated or amortized.
Assets gain on sales, impairments and other, was de minimis in the three months ended December 28, 2025 (a net gain of $0.0 million) compared to a net gain of $0.9 million in the the three months ended December 29, 2024.
Total operating expenses during the quarter included $2.0 million in business interruption reimbursements.
The factors noted above resulted in an operating income of $5.2 million in the three months ended December 28, 2025 compared to an operating loss of $3.4 million in the three months ended December 29, 2024.
Non-operating Income and Expense
Non-operating income and expense decreased by $0.2 million, or 2.3%. The decrease is primarily driven by an increase in Pension and OPEB related benefits. Our weighted average cost of debt was 9% at the end of both the three months ended December 28, 2025 and the three months ended December 29, 2024.
Income Tax Benefit
We recorded an income tax expense of $0.9 million, or (21.4)% of pretax loss in the three months ended December 28, 2025. In the three months ended December 29, 2024, we recorded an income tax expense of $3.2 million, or (25.0)% of pretax loss.
Net loss and Loss Per Share
Net loss was $5.1 million and diluted loss per share were $0.92 for the three months ended December 28, 2025 compared to net loss of $16.2 million and diluted losses per share of $2.80 for the the three months ended December 29, 2024. 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, on-going 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 our operating performance. 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 our future operating performance 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 our leverage ratio, which is a key financial ratio monitored and used by us and our investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, net, income tax expense (benefit), depreciation and amortization, assets loss (gain) on sales, impairments and 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 our cash-settled operating costs. Generally, we provide forward-looking guidance of Cash Costs, which can be used by financial statement users to assess our ability to manage and control its operating cost structure. Cash Costs are defined as compensation, newsprint and ink and other operating expenses and 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 28, 2025 December 29, 2024
Net loss (5,126) (16,224)
Adjusted to exclude
Income tax expense 931 3,243
Non-operating expenses, net 9,403 9,629
Equity in earnings of TNI and MNI (1,080) (1,122)
Depreciation and amortization 3,579 6,265
Restructuring costs and other 3,148 5,150
Assets gain on sales, impairments and other, net (3) (929)
Stock compensation 328 430
Add:
Ownership share of TNI and MNI EBITDA (50%) 1,101 1,167
Adjusted EBITDA 12,281 7,609
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 28, 2025 December 29, 2024
Operating expenses 125,934 149,036
Adjustments
Depreciation and amortization 3,579 6,265
Assets gain on sales, impairments and other, net (3) (929)
Restructuring costs and other 3,148 5,150
Insurance proceeds (2,000) -
Cash Costs 121,210 138,550
LIQUIDITY AND CAPITAL RESOURCES
A summary of our cash flows is included in the narrative below.
Operating Activities
Cash provided by operating activities totaled $4.5 million in the three months ended December 28, 2025 compared to cash used by operating activities of $7.3 million in the three months ended December 29, 2024, an increase of $11.8 million. The increase was primarily driven by an increase in operating results of $8.3 million (defined as net loss adjusted for non-working capital items) and an increase in working capital of $3.5 million. The increase in working capital is primarily related to elevated prepaid offering costs and accrued liabilities related to the private offering transaction.
Investing Activities
Cash used in investing activities totaled $0.8 million in the three months ended December 28, 2025 compared to cash provided by investing activities of $3.9 million in the in the three months ended December 29, 2024. The three months ended December 29, 2024 included $5.4 million in proceeds from the sale of assets as we divested non-core real estate.
Financing Activities
Cash required for financing activities was $1.1 million for the three months ended December 28, 2025 due to offering costs that will offset the proceeds from the private placement.
Additional Information on Liquidity
PRIVATE PLACEMENT FINANCING AND RELATED AGREEMENTS
As discussed in Note 12, on December 30, 2025, we entered into an agreement pursuant to which we agreed to issue and sell an aggregate of 15,384,615 shares of our common stock at a purchase price of $3.25 per share in a private placement. The aggregate gross proceeds from the private placement are expected to be approximately $50.0 million, before deducting offering expenses. We expect to use the net proceeds for working capital and for other general corporate purposes. Our liquidity, consisting of cash on the balance sheet, totaled $12.6 million on December 28, 2025. This liquidity amount excludes any future cash flows from operations. For the three months ending December 28, 2025, cash provided by operating activities totaled $4.5 million. The current operating environment, business transformation spending, and impacts from the Cyber Incident have reduced net cash flows and put pressure on our liquidity. In response to the current challenges, we have implemented specific plans to maintain sufficient liquidity for the foreseeable future, including for at least the next 12 months.
Our plan includes reducing operating and capital spending and reducing outstanding accounts receivable. Reductions in operating expenses and capital spending largely impact our print businesses and future products that are not generating revenue today.
We executed our plan in the quarter ended December 28, 2025, resulting in an improvement in operating results (defined as net loss adjusted for non-working capital items). This improvement marked a significant milestone in the cyber recovery, as all mandatory and principal payments were funded through cash from operations since May 2025. We anticipate the improvement to continue into future quarters.
Please see "Recent Developments" for discussion of the Credit Agreement Amendment, which became operative upon the closing of the private placement.
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.
Lee Enterprises Incorporated published this content on February 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 11, 2026 at 14:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]