LEE - Lee Enterprises Inc. (LEE) - Digital To Drive Swing Toward Revenue Growth

Noblecon 18 highlights. Kevin Mowbray, CEO, and Tim Millage, CFO highlighted its leading digital products and services. It is differentiated from its peers with industry leading digital subscription growth, strong digital advertising revenue from its digital agency business and compelling digital reach, with 47 million unique visitors each month. To watch a full replay of the presentation, please click here.Local focus driving subscriptions. Management highlighted the company's fast growing local market-focused digital subscription business. Lee's digital subscription growth has outpaced Gannett and the New York Times for the last 9 quarters running. Lee already serves 450,000 digital-only subscribers, a 57% increase on a year-over-year basis. Three pillar strategy. The company expects to expand its digital audiences, its digital subscription base and revenue, and diversify and expand its offerings for local advertisers. This strategy is expected to increase more than $435 million in recurring revenue by 2026, with $310 million in Digital advertising revenue. Part of the strategy includes creating new channels, including apps and podcasts.Aggressive debt reduction planned. Debt leverage is currently 4.8 times cash flow, with a target to achieve 2.5 times by 2026. In Q1 alone, the company cashed out roughly $14 million in non-strategic asset sales and is expected to close sales worth a total of $20 million to $30 million in 2022. Notably, all pension liabilities are fully funded.Valuation appears compelling. The LEE shares currently trade at an attractive 6.1 times enterprise value to our 2023 Adj. EBITDA estimate, well below the peer group mean of 8.7 times. Given the favorable digital revenue trends, which appear to be growing faster than its peers, we believe the shares deserve a higher valuation more in line with its peers. The shares are rated Outperform with a $50 price target. Read More >>