Lee Enterprises (LEE) Q4 2025: Digital Revenue Hits 53% Mix, Pushing Toward 90% Target
Lee Enterprises crossed the critical digital tipping point this quarter, with digital revenue now comprising more than half of total sales, signaling a fundamental reshaping of its business model away from legacy print. Cost actions, asset sales, and a pending rights offering are set to accelerate the digital pivot, even as print declines and cyber disruption underscore ongoing transition risks. The company’s 2030 ambition for a 90% digital mix and sharply lower debt costs now looks more credible, but execution and leadership continuity will be under scrutiny in the next phase.
Summary
- Digital Inflection Achieved: Digital revenue now drives 53% of the business, cementing the shift away from print.
- Margin Expansion via Cost Actions: Print cost cuts and asset monetization are freeing capital for digital investment and debt reduction.
- Next Phase Hinges on Execution: Rights offering and leadership transition will define Lee’s ability to sustain digital growth momentum.
Performance Analysis
Lee’s fiscal 2025 results mark a structural milestone, with digital revenue reaching $298 million, or 53% of total revenue, up sharply from 21% just five years ago. The digital-only subscription business, at $94 million, grew 16% on a same-store basis despite a February cyber incident that temporarily hampered subscriber acquisition. The digital advertising segment, anchored by the Amplified Digital Agency, delivered $103 million and 5% same-store growth, outpacing broader market trends and demonstrating resilience in a competitive ad environment.
Cost discipline remained a defining theme. The company executed $40 million in annualized cost reductions in print and legacy operations, and an additional $10 million in cuts are planned for fiscal 2026. These moves contributed to a 5% decrease in cash costs for the year, supporting reinvestment in digital platforms and AI-driven product development. Asset sales added $9 million in liquidity, with another $25 million targeted for 2026. Debt reduction was modest at $3.5 million for the year, reflecting temporary increases due to cyber-related waivers but continuing a multi-year deleveraging trend.
- Digital-First Revenue Mix: Digital now outpaces print, fundamentally shifting the company’s risk and growth profile.
- Operational Leverage from Cost Out: Print consolidation and overhead reduction are funding digital innovation and margin expansion.
- Steady Commercial Base: SMB retention and a doubling of $1M+ ad clients signal durability in local markets.
Lee’s digital transformation is translating into both top-line growth and improved adjusted EBITDA, now up for the second consecutive quarter when normalized for calendar effects. However, the business remains exposed to execution risks as it accelerates the digital transition.
Executive Commentary
"In 2025, we delivered an excellent 16% growth in digital-only subscription revenue, further diversifying our revenue mix, expanding our digital margins, and leading the industry. At the same time, we maintained disciplined cost management across the organization, particularly in print production and corporate overhead, which allowed us to reinvest in high-growth digital initiatives."
Kevin Mowbray, President and Chief Executive Officer
"For the year, cash costs decreased 5% compared to last year and finished at $524 million. We remain steadfast in our commitment to long-term financial sustainability. By enhancing operational rigor this year without compromising quality, we've strengthened our long-term position and are poised to drive sustainable shareholder value over the long term."
Tim, Chief Financial Officer
Strategic Positioning
1. Digital Revenue Model Now Dominant
Lee’s business model is now digital-first, with over half of revenue from digital subscriptions and advertising. The company’s three-pillar digital growth strategy—anchored in digital subscriptions, agency services, and owned-and-operated ad platforms—has driven a 32% annualized digital subscription revenue CAGR over the past three years, more than double the nearest peer. The long-term target is $450 million in digital revenue by 2030, with a 90% digital revenue mix, a goal now within reach given current momentum.
2. Cost Structure Realignment Fuels Investment
Disciplined cost management is central to Lee’s ability to fund its digital ambitions. Aggressive reductions in print production and corporate overhead have freed capital for cloud modernization, AI-enabled product innovation, and digital marketing. The company’s successful pension plan termination and ongoing asset monetization efforts are further enhancing balance sheet flexibility and reducing long-term volatility.
3. Commercial Resilience and Product Innovation
Growth in SMB client retention and AI-powered ad solutions have strengthened Lee’s commercial base. The Amplified Digital Agency is driving durable growth in digital advertising, while investments in hyperlocal content and audience engagement are boosting digital subscription stickiness. The company’s owned-and-operated properties offer high-margin ad inventory, and the focus on video and branded content is expected to unlock additional growth.
4. Capital Structure Reset and Rights Offering
The planned $50 million rights offering and credit agreement amendment with Berkshire Hathaway will reduce interest rates from 9% to 5% for five years, saving $18 million annually. This capital infusion and interest savings provide a significant boost to Lee’s financial flexibility, supporting further digital investment and accelerating debt reduction.
5. Leadership Transition and Execution Continuity
The announced departure of CFO Tim in early 2026 introduces near-term execution risk, as the company navigates the critical next phase of its transformation. Management has signaled a smooth transition, but investors will be watching for continuity in financial stewardship and strategic delivery.
Key Considerations
Lee’s fiscal 2025 marks a decisive pivot toward a scalable, digital-centric model, but the path forward is not without complexity. The interplay between digital growth, cost discipline, and capital structure evolution will be central to the next chapter.
Key Considerations:
- Digital Revenue Scale-Up: Sustaining double-digit digital subscription and advertising growth is essential for offsetting ongoing print declines.
- Cost Out Execution: Continued print rationalization and overhead reduction are critical levers for margin expansion and funding digital initiatives.
- Capital Flexibility: Rights offering and asset sales are enhancing liquidity, but successful execution is needed to realize lower debt costs and fund transformation.
- Leadership Transition: CFO succession and management continuity will be closely watched as Lee executes its multi-year digital roadmap.
Risks
Lee’s transformation exposes it to operational and strategic risks, including execution missteps in digital migration, potential setbacks from cyber incidents, and the risk of digital revenue growth stalling as competition intensifies. The upcoming CFO transition and reliance on a successful rights offering heighten near-term uncertainty, while the print business continues to decline and could drag on overall performance if digital momentum falters.
Forward Outlook
For fiscal 2026, Lee guided to:
- Adjusted EBITDA growth in the mid-single digits
- Continued digital revenue and margin expansion as transformational projects mature
For full-year 2026, management reiterated its focus on:
- Achieving 90% digital revenue mix by 2030
- Completing the $50 million rights offering and credit agreement amendment
Management highlighted several factors that will shape results:
- Impact of digital investments and AI product launches on subscriber and advertising growth
- Execution of cost reductions and asset monetization to support capital structure reset
Takeaways
Lee’s digital transformation is gaining traction, but the next phase will test the company’s ability to scale digital revenues and manage transition risk.
- Digital Tipping Point Achieved: Lee is now a majority-digital business, fundamentally altering its risk and growth profile.
- Execution and Capital Structure in Focus: Rights offering, debt reduction, and leadership change will drive the narrative in 2026.
- Path to 90% Digital Mix: Investors should watch for sustained digital growth and margin expansion as key markers of long-term success.
Conclusion
Lee has crossed a pivotal threshold, with digital now at the center of its business model and strategy. The company’s ability to sustain digital growth, execute on cost and capital actions, and manage leadership transition will determine whether it can deliver on its 2030 vision of a 90% digital enterprise.
Industry Read-Through
Lee’s results underscore the accelerating digital pivot in local media, with digital subscriptions and agency services now driving growth and margin. The company’s success in growing digital revenue faster than peers highlights the importance of hyperlocal content, AI-powered ad solutions, and disciplined cost management for legacy publishers. The shift to a digital-first model, coupled with aggressive capital structure management, sets a new benchmark for media companies navigating print decline and digital disruption. Competitors and investors across the publishing and local media landscape should monitor Lee’s digital execution and capital actions as a bellwether for industry transformation.