LEE - Lee Enterprises Inc. (LEE) - Favorable Digital Momentum Raising Estimates

A strong start. On February 3, 2022, the company reported strong fiscal first quarter end December results with revenues and Adj. EBITDA slightly better than expectations. Revenues were $202 million, above our estimate of $200 million, boosted by strong Digital revenues up 17% from the year earlier quarter. Adj. EBITDA for the quarter was $26.1 million, 10% above our forecast of $23.7 million.Strong Digital revenues. Digital advertising and marketing services revenue grew 30% to $43 million, excluding digital political revenue from the prior year. Notably, revenue from Amplified was up 69% to $15 million, beating our estimate of $14 million. The company provided compelling Digital revenue guidance of $230 million for the fiscal full year 2022, above our original estimate of $192 million. Favorable fiscal year guidance, raising estimates. Fiscal year end adjusted EBITDA was guided to be $95 million to $98 million, nicely above our original $88 million estimate. We are adjusting revenue and adj. EBITDA estimates higher, while being somewhat more conservative than guidance.Improving financial leverage. As of December 26, 2021, the company had total debt of $462.6 million and cash of $18.6 million, for leverage of 4.84 times. Debt was lowered by $20 million in the quarter. Management closed $14 million in real estate sales in the quarter and anticipates full year real estate sales to be between $20 million and $30 million, all proceeds to be used for debt reduction. Rating Outperform. Near current levels, the LEE shares trade at 6.9 times EV to our estimated 2022 EBITDA, compared to a peer group mean of 9.4 times. Our price target of $50 represents a target EV/2022 EBITDA multiple of 7.9 times. In our view, the LEE shares are deserving of a enhanced multiple given its attractive, growth oriented digital businesses, which appear to be growing faster than many of its peers. Read More >>