Item 1. Business
ITEM 1. BUSINESS
Lee Enterprises, Incorporated, together with its subsidiaries (“Lee”, “the Company”, “we”, “our” or “us”), 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 75 mid-sized local communities in 26 states with a rapidly growing digital subscription platform including 721,000 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 30,000 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. In 2023, total digital revenues, which include digital advertising and marketing services revenues, digital-only subscription revenues, and digital services revenues, were $273.2 million, or 39.5% of our total revenues.
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. At the end of 2023, we had 721,000 subscribers to our digital platforms, up 35.6% over 2022. Revenue from digital-only subscribers totaled more than $60 million in 2023, up 51% over 2022.
• Amplified Digital ® ("Amplified"), our digital marketing services agency, offers a full suite of digital marketing solutions to local advertisers. Revenue at Amplified totaled more than $91.2 million in 2023 up 20% over 2022.
• 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. Revenue at BLOX Digital, including intercompany revenue, totaled $35 million in 2023, and has achieved a compound annual growth rate of 11.0% over the last ten years.
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.
On March 16, 2020, we completed the acquisition of BH Media Group, Inc. ("BH Media") and The Buffalo News, Inc. ("Buffalo News"), adding 31 local media operations and nearly doubling our audience size and total operating revenue. See Note 1 — Significant Accounting Policies, in the Consolidated Financial Statements for more information on the acquisition.
Advertising and Marketing Services - In 2023, advertising and marketing services revenue of $319.0 million comprised 46.2% of total operating revenue. Advertising and marketing services are primarily sold to local, regional, and nationwide businesses. There are four categories of advertising revenue:
• Advertising on our owned and operated digital products;
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• Digital marketing services through Amplified, including targeted display, video, OTT, custom content, web development, social media management, search, events, email marketing and other tactics;
• Display advertising in daily and non-daily print publications; and
• Preprinted advertising inserted in our daily and non-daily print publications.
Digital advertising and marketing services remain a key strategic priority for us in 2024. Our advertising teams deploy an omni-channel sales approach that leverages our owned and operated products with Amplified to offer a full suite of digital advertising and marketing services. Through our nationally scaled sales force, proprietary ad tech, and sophisticated reporting and analytics, we believe we are well positioned to solve advertising solutions for our advertisers. Through our AI-driven media planning process, we present our advertisers with targeted, integrated solutions that help them reach their intended audiences.
Advertising and marketing services revenues are subject to moderate seasonality primarily due to fluctuations in advertising volumes tied to holidays and seasonal advertising. Our advertising and marketing services revenues are typically highest during the first quarter due to holiday and seasonal advertising and lowest in the second quarter following the holiday season.
Subscription Revenue - In 2023, subscription revenue of $313.3 million comprised 45.3% of our total operating revenue. Subscription revenue is earned primarily from selling subscriptions to our content through our full access subscriptions, digital-only subscriptions and single copy sales.
Our full access subscriptions include access to all of our content on multiple platforms; including our print products delivered or made available to consumers, websites, smartphone and tablet applications, and e-editions with pricing varying significantly by market and by frequency. Consistent with general publishing industry trends, print subscription volumes declined in 2023.
We experienced rapid growth of our digital-only subscriptions. Digital-only subscriptions include access to our content on our digital platforms. At the end of the fiscal year, we had over 721,000 digital-only subscribers, up 35.6% compared to 2022, with revenue totaling $60 million, or up 51% compared to 2022. Growing our digital-only subscribers and digital-only revenue remains a top strategic priority in 2024. Our primary digital-only subscriber acquisition tactics include:
• Investing in relevant, trusted, and intensely local news and information that connects and engages our local communities;
• Brand marketing campaigns to raise awareness to the desirability of our content;
• Continuously improving our subscriber experience; and
• Converting our significant organic traffic through on-platform promotion, paywalls, and dynamic meters.
A variety of pricing strategies are also used, including discounted introductory periods and sales, to encourage trial and habituation before transitioning to the full price rate.
Digital Services Revenue – In 2023, digital services revenue of $19.4 million comprised 2.8% of our total operating revenue. In 2023, almost all of our digital services revenue is from BLOX Digital. BLOX Digital, operated through our 82.5% owned subsidiary INN Partners, L.C., is one of the largest web-hosting and content management SaaS providers in North America and offers state-of-the-art integrated digital publishing and content management solutions for creating, distributing, and monetizing multimedia content.
• BLOX Digital is the engine that powers our digital products. In addition, BLOX Digital services nearly 2,000 daily customers, including legacy media publications, universities, television stations and niche publications.
• Including intercompany revenue generated from our markets, revenue at BLOX Digital grew 13.2% in 2023 and totaled $35 million.
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• With strong product offerings, investments in video and streaming technology and diversifying the customer base into broadcast, BLOX Digital is positioned to continue to be a key component of our growth strategy.
Other Revenue - In 2023, Other Revenue of $58.9 million comprised 8.5% of total operating revenue. Excluding digital services revenue, other revenue is comprised mainly of commercial printing and delivery of third-party products. In 2023, other revenue excluding digital services of $19.4 million, comprised 5.7% of our total operating revenue, compared to $18.0 million and 5.5% in 2022.
We compete with other media and digital companies for advertising and marketing spend. Our print and digital products competed with other forms of media including national media providers and amateur content creators, as well as other news and information outlets for subscription spend. The market for local digital marketing solutions is highly competitive and evolving allowing opportunities for new competitors to enter the market.
Amplified competes with other digital marketing solutions agencies as well as other media companies which have a similar strategy for digital marketing solutions. While some of our competitors enjoy competitive advantages such as greater name recognition, longer histories as well as greater financial resources, we believe we compete favorably and our product capabilities meet customer requirements due to our data-driven, omni-channel sales approach, our experienced digital sales force and our overall customer satisfaction.
The number of competitors in any given market varies; however all of the forms of competition noted above exist to some degree in all of our markets.
STRATEGIC INITIATIVES
We are committed to a strategy that transforms Lee into a sustainable and growing digital business. Aligning with that commitment, our Three Pillar Digital Growth Strategy is focused on the following:
Expand digital audiences by transforming the presentation of local news and information. We seek to maintain our dominant market position as the leading provider of news and information by providing best-in-class digital experiences to improve consumer engagement and grow our audiences. We aim to achieve this by delivering relevant, useful, and engaging content to the consumer using a multi-media approach, including video and audio.
In 2024, we plan to continuously improve the user experience with our digital products through targeted investments in top talent aimed at improving the mobile version of our digital products and leveraging the information we have to improve subscriber retention. Providing our local consumers with more and more high quality, trusted, engaging content is important to growing our digital audiences and driving subscription conversions.
We believe that our proprietary local content displayed in best-in-class multimedia platforms combined with new and engaging content and video channels will grow our audiences and increase our audience monetization capabilities.
Expand digital subscription base and revenue. We are the fastest growing local media digital subscription business. Digital-only subscriber growth continued at a rapid pace in 2023, offsetting the declines in our traditional full access (print and digital) subscribers. Our digital audiences are comprised of full access subscribers, digital-only subscribers and non-subscribers who access our sites subject to our paywalls. More than 53% of our full access subscribers have activated their digital access, and digital-only subscribers increased 35.6% in 2023, reaching over 721,000 digital-only subscribers.
Our acquisition and retention tactics are focused on growing our digital subscription base by using data and analytics to direct our huge addressable market of 31 million unique visitors toward obtaining a digital subscription.
Using these techniques, we expect digital-only subscribers to continue to grow substantially, reaching more than 1.2 million digital-only subscribers by 2028.
We believe our digital transformation will have a favorable impact on the environment. A key component of our digital growth strategy is to accelerate the pace of digital subscriber growth. Growing our digital revenue
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streams as the print revenues mature will have a favorable impact on the environment as our production hubs will consume less energy, we will consume less newsprint, and there will be less environmental impact from our distribution channels that largely operate on fossil-fuel powered transportation.
Diversify and expand offerings for local advertisers. According to eMarketer, local advertising spending is expected to reach nearly $150 billion in 2024. Our vast array of rapidly growing digital products, our large, digitally-adept salesforce and Amplified, our full service digital agency, create a powerful opportunity to gain scale both in and outside of our local markets.
• Our local sales forces are larger than any local competitor, and we believe they are the most highly trained and proficient sales force in our markets.
• We have strong relationships with businesses in our markets and offer a wide array of products to deliver our advertisers' message.
Through Amplified we create sophisticated digital campaigns on our owned and operated sites and on third-party sites that give advertisers the ability to target their message to reach their desired audiences. Our sales force deploys an omni-channel sales approach that leverages the auction-based ad buying that is widely adopted by all major digital advertising channels, and tailors advertising and marketing solutions based on the size, scale, and needs of the advertiser. We collaborate with Google and other ad tech companies to provide key metrics and analytics to measure campaign effectiveness.
BLOX Digitals represents a powerful opportunity for us to drive additional digital revenue through their SaaS content platform. In 2023, revenue at BLOX Digital, including intracompany revenue, totaled $35 million and since 2013 the compounded annual growth rate of BLOX Digital revenue has been 11.0%. Through continuous investment in product development and gaining essential technology, like world-class video and streaming technology, BLOX Digital is the leading CMS provider in the publishing CMS segment and is growing its market share in the broadcast CMS segment. In 2024, we believe we can grow revenue at BLOX Digital through modest market share gains in our core markets, increasing our average revenue per customer.
DAILY NEWSPAPERS AND MARKETS
The Company, including our investments in TNI Partners ("TNI") in Tucson, AZ and Madison Newspapers, Inc. ("MNI") in Madison, WI, publish the following daily newspapers and maintain the following primary digital sites:
Average Units (5)
2023 Monthly Average ('000s) (6)(7)
Newspaper Primary Website Location Daily (3)
Sunday (3)
Unique Visitors Page Views
St. Louis Post-Dispatch (1)
stltoday.com St. Louis, MO 99,618 109,407 3,614 30,232
Buffalo News (2)
buffalonews.com Buffalo, NY 69,842 89,694 2,325 21,830
Omaha World Herald (1)
omaha.com Omaha, NE 58,514 63,319 1,520 19,512
Wisconsin State Journal (1)(4)
madison.com Madison, WI 49,140 51,450 1,698 19,380
Richmond Times-Dispatch (1)
richmond.com Richmond, VA 48,807 52,218 1,305 14,151
The Times (1)
nwitimes.com Munster, Valparaiso, and Crown Point, IN 42,413 43,416 1,100 17,262
Arizona Daily Star (5) (1)
azstarnet.com Tucson, AZ 39,500 45,848 1,368 13,339
Tulsa World (1)
tulsaworld.com Tulsa, OK 33,565 36,484 1,210 9,965
Billings Gazette billingsgazette.com Billings, MT 26,418 28,541 862 8,624
Lincoln Journal Star (1)
journalstar.com Lincoln, NE 24,985 36,977 1,108 12,566
Quad-City Times qctimes.com Davenport, IA 22,116 23,685 657 5,634
The Bismarck Tribune bismarcktribune.com Bismarck, ND 22,006 408 4,990
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Average Units (5)
2023 Monthly Average ('000s) (6)(7)
Newspaper Primary Website Location Daily (3)
Sunday (3)
Unique Visitors Page Views
Winston Salem Journal (1)
journalnow.com Winston-Salem, NC 19,674 20,548 693 6,081
Roanoke Times roanoke.com Roanoke, VA 19,657 22,103 679 5,409
La Crosse Tribune lacrossetribune.com La Crosse, WI 18,837 — 443 4,362
The Press of Atlantic City pressofatlanticcity.com Atlantic City, NJ 18,294 — 726 6,631
The Pantagraph pantagraph.com Bloomington, IL 16,930 17,870 526 7,038
Missoulian missoulian.com Missoula, MT 16,652 — 413 4,647
The Post-Star poststar.com Glens Falls, NY 15,866 — 434 4,606
Rapid City Journal rapidcityjournal.com Rapid City, SD 15,557 — 321 3,618
Greensboro News-Record greensboro.com Greensboro, NC 15,151 16,725 578 3,741
The Journal Times journaltimes.com Racine, WI 14,749 15,915 405 4,274
Freelance-Star fredericksburg.com Fredericksburg, VA 14,362 15,376 398 3,844
Independent Record helenair.com Helena, MT 14,083 — 316 4,063
Napa Valley Register napavalleyregister.com Napa, CA 13,561 — 343 3,094
Dispatch-Argus qconline.com Moline, IL 13,039 13,618 226 3,131
Kenosha News kenoshanews.com Kenosha, WI 12,907 13,684 656 4,878
Waco Tribune-Herald wacotrib.com Waco, TX 11,566 — 442 3,245
The Citizen auburnpub.com Auburn, NY 10,498 — 389 2,955
The Courier wcfcourier.com Waterloo and Cedar Falls, IA 10,342 — 386 3,510
Charlottesville Daily Progress dailyprogress.com Charlottesville, VA 10,326 — 435 2,886
Sioux City Journal siouxcityjournal.com Sioux City, IA 10,208 — 346 2,962
Montana Standard mtstandard.com Butte, MT 9,837 — 216 2,794
The Times-News magicvalley.com Twin Falls, ID 9,270 — 200 1,743
The Daily News tdn.com Longview, WA 9,141 — 206 1,851
Herald & Review herald-review.com Decatur, IL 9,128 — 284 3,074
Lynchburg News & Advance newsadvance.com Lynchburg, VA 9,085 — 299 2,317
The Times and Democrat thetandd.com Orangeburg, SC 8,551 — 290 1,889
Hickory Daily Record hickoryrecord.com Hickory, NC 8,237 — 285 2,110
Grand Island Independent theindependent.com Grand Island, NE 8,063 — 228 2,497
Dothan Eagle dothaneagle.com Dothan, AL 7,667 — 198 1,243
Bristol Herald Courier heraldcourier.com Bristol,VA 7,385 — 222 1,798
Casper Star-Tribune trib.com Casper, WY 7,213 9,149 299 2,360
Corvallis Gazette-Times gazettetimes.com Corvallis, OR 7,020 — 143 1,697
Elko Daily Free Press elkodaily.com Elko, NV 6,776 — 171 1,552
Bryan-College Station Eagle theeagle.com Bryan, TX 6,682 — 262 1,851
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Average Units (5)
2023 Monthly Average ('000s) (6)(7)
Newspaper Primary Website Location Daily (3)
Sunday (3)
Unique Visitors Page Views
The Sentinel cumberlink.com Carlisle, PA 6,477 — 189 1,578
Globe Gazette globegazette.com Mason City, IA 6,382 — 218 1,978
The Southern Illinoisan thesouthern.com Carbondale, IL 6,289 — 190 1,253
Albany Democrat-Herald democratherald.com Albany, OR 6,243 — 160 1,318
Scottsbluff Star-Herald starherald.com Scottsbluff, NE 5,690 — 134 947
Daily Citizen wiscnews.com/bdc Beaver Dam, WI 5,372 — — —
Opelika Auburn News oanow.com Opelika, AL 5,202 — 217 1,765
The News Herald morganton.com Morganton, NC 4,800 — 165 1,061
Florence Morning News scnow.com Florence, SC 4,787 — 195 1,263
Kearney Hub kearneyhub.com Kearney, NE 4,718 — — —
Martinsville Bulletin martinsvillebulletin.com Martinsville, VA 4,704 — 130 966
Portage Daily Register wiscnews.com/pdr Portage, WI 4,437 — — —
Baraboo News Republic wiscnews.com/bnr Baraboo, WI 4,435 — — —
Statesville Record & Landmark statesville.com Statesville, NC 3,999 — 201 993
The Daily Nonpareil nonpareilonline.com Council Bluffs, IA 3,944 — 126 875
Journal Gazette & Times-Courier jg-tc.com Mattoon/Charleston, IL 3,849 — 302 2,023
Danville Register & Bee godanriver.com Danville, VA 3,659 — 125 945
North Platte Telegraph nptelegraph.com North Platte, NE 3,355 — 105 747
Columbus Telegram columbustelegram.com Columbus, NE 3,068 — 126 919
Fremont Tribune fremonttribune.com Fremont, NE 2,984 — 155 934
The News Virginian newsvirginian.com Waynesboro, VA 2,875 — 90 433
Culpeper Star-Exponent starexponent.com Culpeper, VA 2,738 — 120 559
York News-Times yorknewstimes.com York, NE 2,700 — 74 514
Beatrice Daily Sun beatricedailysun.com Beatrice, NE 2,455 — 72 541
The McDowell News mcdowellnews.com Marion, NC 2,214 — 112 468
The Chippewa Herald chippewa.com Chippewa Falls, WI 2,009 — 100 673
Winona Daily News winonadailynews.com Winona, MN 1,927 — 81 690
Muscatine Journal muscatinejournal.com Muscatine, IA 1833 — 228 1020
Ravalli Republic ravallinews.com Hamilton, MT 707 — 64 353
(1) Source: AAM: September 2023 Quarterly Executive Summary Data Report, unaudited
(2) Source: AAM: March 2023 Quarterly Executive Summary Data Report, unaudited More recent data is not available
(3) Not all newspapers are published Monday through Saturday or have a Sunday edition
(4) Owned by MNI
(5) Owned by Star Publishing and published through TNI
(6) Source: Company statistics.
(7) Excludes Agri-Media sites
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NEWSPRINT
The raw material of newspapers, and our other print publications, is newsprint. We purchase newsprint from U.S. and Canadian producers. We believe we will continue to receive a supply of newsprint adequate for our needs and consider our relationships with newsprint producers to be good. Newsprint purchase prices can be volatile and fluctuate based upon factors that include foreign currency exchange rates, tariffs and both foreign and domestic production capacity and consumption. Price fluctuations can affect our results of operations. We have not entered into derivative contracts for newsprint. For the quantitative impacts of these fluctuations, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk”, included herein.
EMPLOYEES AND HUMAN CAPITAL RESOURCES
We believe the foundation of our business is the people and employees who support our business strategy. A major focus in 2023 was investing in top digital talent to carry out our Three Pillar Digital Growth Strategy and position us to achieve our long-term growth targets
At September 24, 2023, we had 3,342 employees, including 510 part-time employees, exclusive of TNI and MNI. Full-time equivalent employees in 2023 totaled approximately 3,171 of which 527 are represented by unions. We consider our relationships with our employees to be good. We are committed to creating an equitable and inclusive workplace that also reflects the diversity of our local readers and communities in which we serve.
We continue to demonstrate our commitment to diversity, equity and inclusion by assessing our hiring practices, extending our hiring reach, providing skill-building opportunities on diverse storytelling, and developing business strategies that include historically marginalized communities. These efforts and initiatives will help us reach our goal of a more diverse workforce at all levels of our company.
CORPORATE GOVERNANCE AND PUBLIC INFORMATION
We have a long history of sound corporate governance practices. Currently, our Board of Directors has affirmatively determined that eight of its nine members are independent, including all members of the Board's Audit, Executive Compensation, and Nominating and Corporate Governance committees. The Audit Committee approves all services to be provided by our independent registered public accounting firm and its affiliates.
At www.lee.net, one may access a wide variety of information, including news releases, SEC filings, financial statistics, annual reports, investor presentations, governance documents, newspaper profiles and digital links. We make available via our website all filings made by the Company under the Securities Exchange Act of 1934 ("Exchange Act"), including Forms 10-K, 10-Q and 8-K, and related amendments, as soon as reasonably practicable after they are filed with, or furnished to, the SEC. All such filings are available free of charge. The content of any website referred to in this Annual Report on Form 10-K ("Annual Report") is not incorporated by reference unless expressly noted.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Annual 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 Newspaper Business or Buffalo News for unknown legal and other matters that may arise;
• Our ability to manage declining print revenue;
• The impact and duration of adverse conditions in certain aspects of the economy affecting our business;
• Change in advertising and subscription demand;
• Changes in technology that impact our ability to deliver digital advertising;
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• 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 achieve planned expense reductions and realize the expected benefit of our acquisitions;
• Our ability to maintain employee and customer relationships;
• Our ability to manage increased capital costs;
• Our ability to maintain our listing status on the Nasdaq Global Select Market ("NASDAQ");
• Competition; and
• Other risks detailed from time to time in our publicly filed documents, including this Annual Report and particularly in "Risk Factors", Part I, Item 1A herein.
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. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this Annual Report. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.
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