Welcome to the Lee Enterprise 2022 Third Quarter Webcast and Conference Call. The call is being recorded and will be available for replay beginning later this morning at investors.lee.net. A link to the live webcast can be found at investors.lee.net. Now, I'll turn the call over to your host Mr. Josh Rinehults, Vice President, Finance. Go ahead sir. Thank you.

Good morning and thank you for joining us. Speaking on this morning's call are Kevin Mowbray, President and Chief Executive Officer; and Tim Millage, Vice President, Chief Financial Officer, and Treasurer. Also with us on today's call and available for questions is Nathan Bekke, Vice President of Audience Strategy. Earlier today, we issued a news release with preliminary results for our third fiscal quarter of 2022. It is available at lee.net as well as at major financial websites. Please also refer to our earnings presentation found at investors.lee.net that includes supplemental information. As a reminder this morning's discussion will include forward-looking statements based on our current expectations. These statements are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially. Such factors are described in this morning's news release and also in our SEC filings. During the call we refer to certain non-GAAP financial measures including adjusted EBITDA and cash costs which are defined in our news release. Reconciliations to the relevant GAAP measures are included in tables accompanying the release. And now to open the discussion is our President and Chief Executive Officer, Kevin Mowbray. Kevin will open the conversation on Slide three of the earnings presentation for those following along.

Thank you Josh. Good morning everyone and I'm pleased you could join us. I'm really encouraged at the pace by which we're transforming Lee into a vibrant and digitally-centric company. Our third quarter results clearly demonstrate we have the right strategy, the right team, and we're moving with velocity towards Lee's digital transformation. With our third quarter results, we have exceeded many of our digital revenue metrics a whole quarter early and we are on track to achieve our full year adjusted EBITDA guidance of $95 million to $98 million. In the third quarter, we reported 49% growth in Digital subscribers, 50% growth in Digital subscription revenue, and 74% growth in Amplified Digital revenue. For all three metrics, we exceeded our year-end guidance putting us a full quarter ahead of schedule. This impressive performance is a testament to our operational efficiencies and our team's ability to execute on our strategic initiatives. Our Three Pillar Digital Growth strategy is the foundation of our investment thesis and the execution of the strategy is at the core of creating value for our shareholders. Sustainable long-term digital revenue growth, from our Three Pillar initiatives, will transform the mix of our revenue base driving margin expansion, stronger free cash flow generation, which will fuel debt reduction, and enhance our balance sheet. A stronger balance sheet and improved operating cash flow combined with multiple expansions fueled by increasing digital revenue creates a strong path to significant long-term value creation for our shareholders. Our strategy leverages key -- these key strengths our local market expertise, our industry-leading digital revenue growth, and our commitment to the highest quality news to build a larger recurring revenue base and generate long-term top line growth. This growth is expected to achieve $435 million of Digital revenue in 2026 and being driven…

Thank you, Kevin, and good morning everyone. To reiterate Kevin's sentiment, we're pleased with our third quarter results and the progressing digital transformation at Lee and are thrilled to report we have achieved our whole year targets on many of our digital revenue metrics ahead of schedule. In the third quarter, total operating revenue was $195 million, down less than 1% to the prior year, as the growth of our Digital Revenue stream almost offset the decline in our Print revenue stream. Total Digital Revenue increased 27% in the third quarter to $61 million, driven by rapid growth in Amplified Digital and in Digital-only subscription revenue. 32% of our revenue in the third quarter was Digital revenue, up from 25% a year ago. Digital-only subscription revenue increased 50% and totaled $11 million in the third quarter. We now have 501,000 paid Digital-only subscribers, up 49% and that exceeds our year-end target of 495,000. As Kevin mentioned earlier, we remain the fastest-growing digital subscription platform in media, a title we have held for the last 10 quarters. Digital-only subscription revenue over the last 12 months totaled $37 million, pacing well ahead of our full year target of $33 million. Digital Advertising and Marketing Services revenue reached the inflection point and now represents 51% of our total advertising and marketing services revenue in the third quarter. Digital Advertising revenue increased 27% and totaled $46 million in the quarter. Amplified Digital, our full service digital marketing solutions agency fueled the growth with revenue of $20 million -- $21 million in the quarter, up 74%. Amplified Digital revenue totaled $66 million over the last 12 months, exceeding our fiscal year-end estimate of $65 million. Total Print revenue was $134 million in the quarter, a 10% decline compared to the same quarter a year ago,…

Thanks Tim. Under the guidance and oversight of the Board of Directors our leadership team's continued execution of our growth strategy sets the stage for significant long-term value creation. We're very pleased with our third quarter results and the progress we're making towards the target in our Three Pillar Digital Growth strategy. The strong presence as the trusted source of information in the communities we serve, combined with cutting-edge digital capability is the foundation of our digital transformation. The success of our transformation is reflected in the continued rapid growth of our Digital subscription Digital-only audience revenue and Digital Advertising and Marketing Services results. To wrap-up, I'd like to thank the entire Lee team, for their efforts in driving our transformation. We have the right Board, the right team and the right strategy. And I believe we're better positioned than ever to create long-term value for our readers, users, advertisers and shareholders. This concludes our remarks. The team will remain on the line for any questions you may have. Operator, please open the line for questions.

Thank you. At this time, we will be conducting a question-and-answer session.

Hi. This is Mike Kupinski. I just have a couple of questions. First of all, I want to congratulate you on your quarter. I mean, you did a great job. And then, also the guide for Q4, I can't tell you, how much of a relief it is to hear someone actually beating my expectations for the quarter in this environment. A couple of questions, your guidance on Amplified is, obviously a little better than what I was looking for. It seems like and maybe correct me if I'm wrong, that you're anticipating almost 80% -- over 80% growth in Amplified in Q4. Can you talk a little bit about the progress you've had with Amplified? What you're seeing with the customers? What they're talking about? Why you're seeing such very strong growth? And just give us a little color there. And I have a couple of other follow-up questions.

Yeah, I'll start and anybody that wants to add to can too. I think the key to our success is the Vision platform we've talked a lot about on a couple of calls, really gives the local sales reps the ability to create an omnichannel marketing campaign for an advertiser really with the push of a button and in real-time generate a pretty sophisticated campaign. I know we've got the analytics to backup of that campaign that drives results for advertisers. And what we're finding is strong retention at the local and regional advertising level, because of the success of what the campaigns deliver for the advertisers.

Got you. And you obviously implemented some cost reductions in the quarter. I was just wondering, when did, those actually start like what month and when we will start cycling against those? And where did most of the cost cutting come from? If you can just give us a little color on that?

Yes. So we made a number of actions throughout the third quarter. They began in April, a lot them took place in May. So really it effectively -- really the entire organization in terms of -- in terms of departments worked for the cost structure. I think the one thing that I could say that the focus was on the Print revenue streams. Anything that supports the Print revenue streams was our focus as we continue to drive profitability as those revenue streams continue to mature. A significant area of cost reductions were looking at our real estate portfolio -- looking at the cost price to distribution of our print products and other areas like that. One area where we want to remain focused on investing is areas like local content generation, digital product development those areas those are our, sort of, the areas where we're really focused on continuing to invest, but at the same time focused on driving profitability of different products by managing costs.

Thank you. And the Digital-only subscribers you mentioned the rates were up 7%. What is the average rate now? And then can you talk a little bit about if there were any particular promotions, changes in promotions, decreases in promotions, increases in paywall, things like that that may have accounted for not only the rate growth, but the growth you saw in Digital-only?

In terms of the rates, I can comment on the range. So we're a little under $7 a month for Digital-only subscriptions. And so we're continuing to focus on using data to drive our decisions on go to market on how we market our product and it has been successful.

And then my last – I am sorry.

I wanted to say, Michael one of the great things about that is that's a very high-margin piece business for us.

Right. And I was just going to ask about the margins. And the key thing here obviously in driving your cash flow growth will be to improve Digital margins. Can you talk a little bit about your expectations of margins and expansion as you kind of go into fiscal 2023?

Yes. Yes, I can do that. So we were -- we came into 2022 with our ad revenue with respect to what we were thinking in terms of margin and the impact of making the digital investments that they would have that have a short-term temporary impact on our margins, but we do expect as we move into the latter part of 2023 and into 2024 that we will start to see some margin expansion as we get returns on those investments we're making.

Okay. Great. Well, congratulations again. Thank you. That’s all I had.

Well, that's was -- lots of questions. I really appreciate your interest in Lee and thank you for joining us on today's call.

Thank you. Ladies and gentlemen, at this time we have reached the end of our question-and-answer session. This concludes our call.