LEE ENTERPRISES, Inc: Form 10-K for the period ended Sep 29, 2024

Lee Enterprises, Incorporated is a leading digital-first subscription business dedicated to delivering high-quality, trusted, and intensely local news, information, advertising, and marketing services. We serve 73 mid-sized communities across 26 states, engaging over 771,000 digital subscribers through our rapidly growing digital platform. Our mission is to enrich communities by providing engaging local content, enhancing subscriber experiences, and empowering more than 25,000 local advertisers with a comprehensive suite of omni-channel advertising and marketing solutions.

Our diverse portfolio includes digital subscription platforms, daily, weekly, and monthly newspapers, and niche products, all tailored to deliver original local content alongside national and international news. These products are accessible in both digital and print formats, with real-time updates available through our websites and mobile apps.

Operating predominantly in mid-sized communities, our offerings range from prominent daily newspapers and their digital counterparts—such as the St. Louis Post-Dispatch and *The Buffalo News—*to non-daily newspapers and digital platforms serving smaller towns. By combining deep local insights with innovative digital solutions, Lee Enterprises is transforming the way communities stay informed and connected.

Technology, media, and consumer behavior are experiencing a seismic shift driven by the rise of generative AI. This groundbreaking innovation is transforming how information is created, shared, and consumed, offering an unprecedented opportunity for media companies to adapt, innovate, and solidify their role as trusted providers of news and information.

As a local news organization operating across 26 states, Lee is uniquely positioned to succeed in this evolving landscape. Our communities depend on us not only for unbiased reporting but also as the vital connection that brings together neighbors, leaders, and businesses. Leveraging the transformative potential of generative AI, we are enhancing our commitment to truth, transparency, and service—ensuring we remain a cornerstone of the communities we serve in this dynamic new era.

While monetization opportunities of our content and data continue to grow, we generate revenue today primarily through advertising and marketing services, subscriptions to our digital and print products, and digital services, primarily through our majority-owned subsidiary, BLOX Digital, our software as a service content platform.

Advertising and Marketing Services Lee provides comprehensive advertising and marketing services tailored to local, regional, and national businesses. Our advertising revenue streams are categorized as follows:

• Digital Advertising: Display and targeted advertising on our owned and operated digital platforms.
• Digital Marketing Services: Offered through Amplified, our suite includes targeted display, video, OTT (over-the-top), hyper targeted AI advertising, custom content, web development, social media management, search engine marketing, events, email campaigns, and other advanced marketing strategies.
• Print Advertising: Display advertising featured in our daily and non-daily print publications.
• Preprinted Inserts: Advertising distributed within our daily and non-daily print products.

Digital advertising and marketing services remain a cornerstone of our strategic priorities for 2025. Our advertising teams utilize an omni-channel sales approach, integrating the reach of our owned and operated platforms with the capabilities of Amplified. This approach enables us to provide a full suite of digital marketing solutions.

Leveraging a nationally scaled sales force, proprietary ad technology, and robust analytics, we deliver data-driven, customized advertising solutions. Using AI-powered media planning, we craft targeted, integrated campaigns to help advertisers connect with their intended audiences effectively.

Subscription Business

Lee offers a range of subscription options, including digital-only subscriptions, full-access subscriptions, and single-copy sales.

• Digital-Only Subscriptions: This rapidly growing segment offers access to our content exclusively through digital platforms. Expanding our digital-only subscriber base and revenue remains a top strategic priority for 2025.
• Full-Access Subscriptions: Provide comprehensive access to our content across multiple platforms, including print editions (delivered or available for pickup), websites, smartphone and tablet apps, and e-editions. Pricing varies significantly by market and delivery frequency. Like broader industry trends, print subscription volumes declined in 2024.

To drive digital-only subscription growth, we employ several key strategies:

• Investing in relevant, trusted, and hyper-local news and information that deeply connects with our communities.
• Launching brand marketing campaigns to highlight the value and appeal of our content.
• Continuously enhancing the subscriber experience to improve engagement and satisfaction.
• Converting organic website traffic into subscribers through on-platform promotions, paywalls, and dynamic metering systems.

We also implement a variety of pricing strategies, such as discounted introductory offers, to encourage trial usage and build habituation before transitioning subscribers to standard rates.

This multi-faceted approach ensures we remain a trusted source of information while capitalizing on the opportunities of the digital-first era.

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.

Digital advertising and marketing services remain a key strategic priority for us in 2025. 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 in our first fiscal quarter.

Digital Services Revenue – In 2024, 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 modern integrated digital publishing and content management solutions for creating, distributing, and monetizing multimedia content.

• BLOX Digital services more than 2,000 daily customers, including media publications, universities, television stations and niche publishers, including Lee.
• Including intercompany revenue generated from our markets, revenue at BLOX Digital grew 10.4% in 2024 and totaled $38.6 million.
• We made significant investments in BLOX Digital in 2024 including enhancing its product capabilities that include an AI driven digital platform that offers a personalized mobile news app, a smart paywall, and an AI assistant tool.

Other Revenue - Excluding digital services revenue, other revenue is comprised mainly of commercial printing and delivery of third-party products.

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

Our strategy emphasizes technology leadership through partnerships, products, and operational excellence. There are three pillars to our strategy:

1. Expand Our Audience with Compelling Local Content

Lee is committed to maintaining its leadership position as a trusted provider of local news and information by delivering best-in-class digital experiences. We focus on enhancing consumer engagement and growing audiences by offering relevant, useful, and engaging content through a multi-media approach that leverages AI and includes video, audio, and written content.

In 2025, we plan to make targeted investments to improve the user experience of our digital products, particularly on mobile platforms, and aim to personalize news and content that amplifies and extends our audiences. By recruiting top talent and leveraging data to enhance subscriber retention, we aim to provide our local consumers with trusted, high-quality content that drives digital audience growth and subscription conversions.

Our proprietary local content, presented on best-in-class multimedia platforms and augmented by new and engaging video channels, is designed to not only grow audiences but also increase monetization opportunities.

2. Accelerate Digital Subscription Growth

As the fastest-growing local media digital subscription business, Media Company continues to achieve significant growth in digital-only subscribers. In 2024, digital-only subscriptions increased by 7%, reaching over 771,000 subscribers and offsetting declines in traditional full-access subscriptions. More than 53% of our full-access subscribers have also activated their digital access.

Our strategy includes leveraging data and analytics to target our extensive addressable market of 26 million unique visitors, converting them into digital subscribers. With these efforts, we aim to achieve substantial growth in digital-only subscribers, targeting over 1.2 million by 2028.

This digital transformation is not only a strategic imperative but also an environmentally sustainable one. By shifting to digital platforms, we reduce energy consumption at production hubs, newsprint usage, and the environmental impact of fossil-fuel-driven distribution channels.

3. Diversify and Expand Offerings for Local Advertisers

Our advertising and marketing solutions provide a robust platform for local advertisers to achieve scale both within and beyond our markets.

• Amplified Digital Solutions: Through Amplified, our full-service digital agency, we create sophisticated campaigns on both our owned-and-operated sites and third-party platforms. These campaigns use auction-based ad buying and are tailored to meet the specific needs and scale of each advertiser.
• Omni-Channel Sales Approach: Our highly skilled and digitally adept salesforce—the largest and most proficient in our markets—works closely with local businesses to provide tailored advertising solutions.
• Advanced Metrics and Collaboration: Collaborating with Google and other ad tech providers, we deliver advanced metrics and analytics to ensure campaign effectiveness and ROI.

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:

(1) Owned by MNI

(2) Owned by Star Publishing and published through TNI

(3) Source: Company statistics.

(4) Digital & Print Subscribers represents the subscriber volumes as of September 29, 2024.

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.

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 2024 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 29, 2024, we had 3,047 employees, including 373 part-time employees, exclusive of TNI and MNI. Full-time equivalent employees in 2024 totaled approximately 2,897 of which 366 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 remain deeply committed to fostering diversity within our organization by continuously evaluating and enhancing our hiring practices, broadening our recruitment efforts, offering skill-building opportunities focused on diverse storytelling, and crafting business strategies that engage historically underserved communities. These initiatives position us to build a more representative workforce at every level, strengthening our company’s culture and driving long-term success.

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 and Risk Management Committee approves all services to be provided by our independent registered public accounting firm and its affiliates.

At www.lee.net (http://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 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;
• 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 maintain employee and customer relationships;
• Our ability to manage increased capital costs;
• Our ability to maintain our listing 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. They reflect our expectations, are not guarantees of performance and speak only as of the date the statement is made. 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.

The risks described below could materially and adversely affect our business, financial condition and results of operations. We could also be affected by additional risks that apply to all companies operating in the U.S., as well as other risks that are not presently known to us or that we currently consider to be immaterial. These Risk Factors should be carefully reviewed in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and our Financial Statements and Supplementary Data in Item 8 of this Report. For ease of review, the risk factors generally have been grouped into categories, but many of the risks described in a given category relate to multiple categories.

Risks Related to our Business and Operations

Our advertising revenues may decline due to weakness in the retail sector.

A significant portion of our revenue is derived from advertising and a decline in the financial or economic conditions of our advertisers could alter discretionary spending by those advertisers. Our publications' and websites' advertisers are primarily retail businesses, which have been challenged in recent years by increased competition from online retailers. This trend has reduced and may continue to reduce advertising revenue from the brick-and-mortar retail sector. Specifically, advertising revenues may worsen if advertisers reduce their budgets, shift their spending priorities, are forced to consolidate, or cease operations.

Our ability to generate revenue is highly sensitive to the strength of the economies in which we operate and the demographics of the local communities that we serve.

Our advertising and marketing services revenues and subscription revenues depend upon a number of factors, including the size and demographic characteristics of the local population; the general local economic conditions; and the economic condition of the retail segments in the communities that our publications serve. In the case of an economic downturn in a market, our publications, revenues, and profitability in that market could be adversely affected. Our advertising and marketing services revenues could also be affected by negative trends in the general economy that affect consumer spending. The advertisers in our newspapers, other publications, and related websites are primarily retail businesses that can be significantly affected by regional or national economic downturns and other developments. Declines in the U.S. economy could also significantly affect key advertising revenue categories, such as help wanted, real estate, and automotive.

Uncertainty and adverse changes in the general economic conditions of markets in which we participate and increases in costs of raw materials, energy, labor and other factors may negatively affect our business.

Our business and the companies with which we do business are subject to risks and uncertainties caused by factors beyond our control. Such factors include economic pressures related to high inflation, rising interest rates, economic weakness or recession, as well as geopolitical and public health events such as the wars in Ukraine and Israel, pandemics, and workforce expectations.

In the past, these and other similar conditions and events have resulted in, and could lead to, a tightening of credit and capital markets, lower levels of liquidity, lower consumer and business spending, unemployment, declines in real estate values, increases in employee-related costs, and other adverse economic conditions. These changes may negatively affect the sales of our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, or increase costs associated with publishing and distributing our publications. In addition, printing and distribution costs, including the costs of paper and ink, are a significant expense for the Company. We expect increases in these costs in the near-term from various factors, including increases in the cost of raw materials, energy, labor, transportation, and distribution, due to inflation and other adverse factors on the economy.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm the business and trading price of our common stock.

As a public company, we are required to maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, Section 404 of the Sarbanes-Oxley Act requires us to perform system and process evaluations and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting. Compliance with Section 404 may require us to incur substantial accounting expenses and expend significant management efforts. In the past, our testing has revealed and in the future may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price of our stock could decline if investors and others lose confidence in the reliability of our financial statements and we could be subject to sanctions or investigations by the SEC, Nasdaq, or other applicable regulatory authorities.

The collectability of accounts receivable under adverse economic conditions could deteriorate to a greater extent than provided for in our financial statements and in our projections of future results.

Adverse economic conditions in the U.S. may increase our exposure to losses resulting from financial distress, insolvency, and the potential bankruptcy of our advertising and marketing services customers. Our accounts receivable is stated at net estimated realizable value, and our allowance for credit losses has been determined based on several factors, including receivable agings, significant individual credit risk accounts, and historical experience. If such collectability estimates prove inaccurate, adjustments to future operating results could occur.

The value of our intangible assets may become further impaired, depending upon future operating results.

At September 29, 2024, the carrying value of our goodwill was $328.0 million, the carrying value of mastheads was $10.9 million, and the carrying value of our amortizable intangible assets was $59.2 million. The indefinite-lived assets (goodwill and mastheads) are subject to annual impairment testing and more frequent testing upon the occurrence of certain events or significant changes in our circumstances that indicate all or a portion of their carrying values may no longer be recoverable, in which case a non-cash charge to earnings may be necessary in the relevant period. We may subsequently experience market pressures which could cause future cash flows to decline below our current expectations, or volatile equity markets could negatively impact market factors used in the impairment analysis, including earnings multiples, discount rates, and long-term growth rates. Any future evaluations requiring an asset impairment charge for goodwill or other intangible assets would adversely affect future reported results of operations and stockholders’ equity.

For further information on goodwill and intangible assets, see Note 4 — Goodwill and other intangible assets.

Attracting and retaining highly qualified personnel is difficult and costly, but the failure to do so could negatively affect our operations.

Our businesses depend on the efforts, abilities, and talents of our executive team and other highly qualified employees who possess substantial business, information technology, and operational knowledge. The market for such personnel, including technology-related, product and software development, data science, and digital marketing and sales roles is very competitive, and we cannot ensure success in retaining these employees or hiring and training replacement employees in a timely and cost-effective manner, particularly as we continue to focus on our digital products and services. These risks have been exacerbated by recent labor constraints, a trend of increasing employee turnover, and inflationary pressures on employee wages and benefits.

Natural disasters, extreme weather conditions, public health emergencies or other catastrophic events could negatively affect our business, financial condition, and results of operations.

Natural disasters and extreme weather conditions, such as hurricanes, derecho windstorms, floods, earthquakes, wildfires; acts of terrorism or violence, including active-shooter situations; and public health issues, including pandemics and quarantines, could negatively affect our operations and financial performance. Such events could result in physical damage to our properties, disruptions to our IT systems, temporary or long-term disruption in the supply of products from our suppliers, and delays in the delivery of goods to our printing facilities. Public health issues, whether occurring in the U.S. or Canada, could disrupt our operations, the operations of suppliers, or have an adverse impact on consumer spending and confidence levels.

Generative Artificial Intelligence (AI), as a new and emerging technology, subjects us to risks involving security, protection of intellectual property, ethical concerns, brand trust, reputational harm, legal liability, and the maintenance and growth of revenue streams.

The safe and responsible integration of AI functionality as it rapidly evolves presents emerging ethical and legal challenges, and the use of such technologies may result in diminished brand trust and reputational harm. Our competitors are integrating AI into their business practices which may result in competitive harm and the need to allocate significant resources to protect intellectual property. To responsibly remain competitive, we must develop and maintain our digital platform and ethically integrate new AI functionality in accordance with evolving compliance requirements. Developments in the AI field will simultaneously increase both competition and liability risks while also altering the market for our services. In addition, the use of AI by bad actors presents increasingly complex and sophisticated security threats to our confidential subscriber, employee, and Company data, and we must make additional efforts to maintain network security.

Risk Related to Competition from Digital Media

Our operating revenue may be materially adversely affected if we do not successfully respond to the shift in newspaper readership and advertising expenditures away from traditional print media and towards digital media. Significant capital investments may be needed to respond to this shift.

Currently, a primary source of revenue is from advertising and marketing services, which accounts for 45% of our revenue. Subscription revenue accounts for 46% of our revenue. The media publishing industry has experienced rapid evolution in consumer demands and expectations due to advances in technology, which have led to a proliferation of delivery methods for news and information. The number of consumers who access online services through devices other than personal computers, such as tablets and mobile devices, has increased dramatically in recent years and likely will continue to increase. The media publishing industry also continues to be affected by demographic shifts, with older generations preferring more traditional print newspaper delivery and younger generations consuming news through digital media. Also, the revenues generated by media publishing companies have been affected significantly by the shift in advertising expenditures towards digital media.

The future revenue performance of our digital business depends to a significant degree upon the growth, development, and management of our subscriber and advertising audiences. The growth of our digital business over the long term depends on various factors, including, among other things, the ability to:

• Continue to increase digital audiences;
• Attract advertisers to our digital platforms;
• Tailor our products to efficiently and effectively deliver content and advertising on mobile devices;
• Maintain or increase the advertising rates on our digital platforms;
• Exploit new and existing technologies to distinguish our products and services from those of competitors and develop new content, products and services;
• Invest funds and resources in digital opportunities;
• Partner with, or use services from, providers that can assist us in effectively growing our digital business; and
• Create digital content and platforms that attract and engage audiences in our markets.

If we are unable to grow our digital audience, distinguish our products and services from those of our competitors or develop compelling new products and services that engage users across multiple platforms, then our business, financial condition, and results of operations may be adversely affected. Responding to the changes described above may require us to make significant capital investments and incur significant research and development costs related to building, maintaining, and evolving our technology infrastructure, and our ability to make the level of investments required may be limited.

See “Strategic Initiatives” in Item 1, included herein, for additional information on about our print and digital audiences.

We compete with a large number of companies in the local media industry, including digital media businesses and, if we are unable to compete effectively, our advertising and subscription revenues may decline.

We compete for audiences and advertising revenue with newspapers and other media such as web-based digital platforms (e.g., Alphabet, Amazon, Meta, TikTok etc.), magazines, broadcast, cable and satellite television, radio, direct mail, and billboards. As the use of the internet and mobile devices has increased, we have lost some classified advertising and subscribers to online advertising businesses and free Internet sites that contain abbreviated versions of our publications. Some of our current and potential competitors have greater financial and other resources than we have. If we fail to compete effectively with competing newspapers and other media, our results of operations may be materially adversely affected.

Risks Related to Our Indebtedness

Our indebtedness could materially and adversely affect our business or financial condition.

Our current indebtedness, and any future debt incurred, could have significant consequences on our future operations, including making it more difficult to satisfy our debt obligations and meet our operational goals. Our entire outstanding indebtedness is encompassed in a 25-year term loan ("Term Loan") with BH Finance LLC, a Nebraska limited liability company affiliated with Berkshire Hathaway, Inc. ("BH Finance"), which was part of a broader comprehensive refinancing of all of our then-outstanding debt, including a Credit Agreement, dated January 29, 2020 (collectively, the "2020 Refinancing").

At its inception, the aggregate principal amount and applicable interest rate of the Term Loan was $576.0 million and 9% annual rate, respectively, the proceeds of which were used to refinance our then-outstanding debt and fund the acquisition of BH Media and Buffalo News. The Term Loan is collateralized by all Company assets. Currently, the Term Note has an aggregate principal outstanding amount of $445.9 million. Our ability to make scheduled payments depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, competitive, legislative, regulatory, and other factors beyond our control. We may be unable to maintain a level of cash flow sufficient to permit us to pay the principal and interest on our debt.

If our cash flow and capital resources are insufficient to fund our debt obligations, we could face liquidity issues and be forced to reduce or delay investments, acquisitions, and capital expenditures or sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure investors we would be able to take any of these alternative actions, such actions would be permitted under the terms of the Credit Agreement, and, even if successful, that such actions would permit us to meet our scheduled debt service obligations.

In addition, the 2020 Refinancing terms impose operating and financial restrictions, including restrictions on incurring additional indebtedness, creating certain liens, making certain investments or acquisitions, issuing dividends, repurchasing shares of Company stock, and engaging in other capital transactions. A failure to satisfy out debt service obligations on the Term Loan could give rise to default. Moreover, these restrictions limit our flexibility in planning for or reacting to changes in our business, the economy, in general, and the economies in which we operate, which, in turn increases our vulnerability to adverse financial consequences related to such changes.

A failure to satisfy our debt service obligations on the Term Loan could give rise to default and, in turn, the right of our lender to accelerate our indebtedness, making all principal and interest becoming due and payable.

Certain actions, including our ability to incur additional indebtedness, require the consent of our lender which, if not provided, would limit our ability to take advantage of future opportunities.

The terms of the 2020 Refinancing, limit our ability to take certain actions without requisite lender approval and modification of the loan agreements. These limitations include restrictions on incurring additional indebtedness, creating certain liens, making certain investments or acquisitions, issuing dividends, repurchasing shares of Company stock, and engaging in other capital transactions. While we have an established relationship with BH Finance, whose priorities and interests are familiar to us, there is no assurance BH Finance will approve or consent to our activities, even if the activities are in the best interests of our stockholders. If we are unable to secure the required consent of BH Finance, our ability to take advantage of future opportunities, including acquisition or financing opportunities, could be restricted.

Risks Related to Cybersecurity

Our business, operating results, and reputation may be negatively impacted, and we may be subject to legal and regulatory claims if there is a loss, destruction, disclosure, misappropriation, or alteration of or unauthorized access to data owned or maintained by us, or if we are the subject of a significant data breach or cyberattack.

We rely on our information technology and communications systems to manage our business data, including communications, news and advertising content, digital products, order entry, fulfillment and other business processes. These technologies and systems also help us manage many of our internal controls over financial reporting, disclosure controls and procedures and financial systems. Attempts to compromise information technology and communications systems occur regularly across many industries and sectors, and we may be vulnerable to security breaches resulting from accidental events (such as human error) or deliberate attacks. Moreover, the techniques used to attempt attacks and the perpetrators of such attacks are constantly expanding. We face threats both from use of malicious code (such as malware, viruses, and ransomware), employee theft or misuse, advanced persistent threats, and phishing and denial-of-service attacks. The Company has complied with all applicable legal requirements relating to this activity. As cyberattacks become increasingly sophisticated, and as tools and resources become more readily available to malicious third parties, the Company will incur increased costs to secure its technology environment and there can be no guarantee that the Company’s and our third-party vendors’ actions, security measures and controls designed to prevent, detect or respond to security breaches, to limit access to data, to prevent destruction, alteration, or exfiltration of data, or to limit the negative impact from such attacks, can provide absolute security against compromise. As a result, our business data, communications, news and advertising content, digital products, order entry, fulfillment and other business processes may be lost, destroyed, disclosed, misappropriated, altered or accessed without consent and various controls, automated procedures and financial systems could be compromised.

A significant security breach or other successful attack could result in significant remediation costs, including repairing system damage, engaging third-party experts, deploying additional personnel or vendor support, training employees, and compensation or incentives offered to third parties whose data has been compromised. These incidents may also lead to lost revenues resulting from a loss in competitive advantage due to the unauthorized disclosure, alteration, destruction or use of business data, the failure to retain or attract customers, the disruption of critical business processes or systems, and the diversion of management’s attention and resources. Moreover, such incidents may result in adverse media coverage, which may harm our reputation. These incidents may also lead to legal claims or proceedings, including regulatory investigations and actions and private lawsuits, and related legal fees, as well as potential settlements, judgments and fines. We maintain insurance, but the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

Our possession and use of personal information and the use of payment cards by our customers present risks and expenses that could harm our business. Unauthorized access to or disclosure or manipulation of such data, whether through breach of our network security or otherwise, could expose us to liabilities and costly litigation and damage our reputation.

Our online systems store and process confidential subscriber and other sensitive data, such as names, email addresses, addresses, and other personal information. Therefore, maintaining our network security is critical. Additionally, we depend on the security of our third-party service providers. Unauthorized use of or inappropriate access to our, or our third-party service providers’ networks, computer systems and services could potentially jeopardize the security of confidential information, including payment card (credit or debit) information, of our customers. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we or our third-party service providers may be unable to anticipate these techniques or to implement adequate preventative measures. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our customers or users, cause interruption in our operations, or damage our computers or those of our customers or users. As a result of any such breaches, customers or users may assert claims of liability against us and these activities may subject us to legal claims, adversely impact our reputation, and interfere with our ability to provide our products and services, all of which may have an adverse effect on our business, financial condition and results of operations. The coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

A significant number of our customers authorize us to bill their payment card accounts directly for all amounts charged by us. These customers provide payment card information and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card transactions. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card industry data security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our customers the option of using payment cards. If we were unable to accept payment cards, our business would be seriously harmed.

There can be no assurance that any security measures we, or our third-party service providers, take will be effective in preventing a data breach. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose customers or users. Failure to protect confidential customer data or to provide customers with adequate notice of our privacy policies could also subject us to liabilities imposed by United States federal and state regulatory agencies or courts. We could also be subject to evolving state laws that impose data breach notification requirements, specific data security obligations, or other consumer privacy-related requirements. Our failure to comply with any of these laws or regulations may have an adverse effect on our business, financial condition and results of operations.

Risks Related to Pension Liabilities

Sustained increases in funding requirements of our pension and postretirement obligations may reduce the cash available for our business.

Our pension and postretirement plans invest in a variety of equity and fixed income securities. Future volatility and disruption in the securities markets could cause declines in the asset values of our pension and postretirement plans. In addition, a decrease in the discount rates or changes to mortality estimates and other assumptions used to determine the liability could increase the benefit obligation of the plans. Unfavorable changes to the plan assets and/or the benefit obligations could increase the level of required contributions above what is currently estimated, which could reduce the cash available for our business and debt service.

(a) Definitions (extracted from 17 CFR 229.106)

The Company has adopted the definitions present in 17 CFR 229.106 for the following cybersecurity terms:

• Cybersecurity Incident: An unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through information systems that jeopardizes the confidentiality, integrity, or availability of information systems or any information residing therein.
• Cybersecurity Threat: A cybersecurity threat as any potential unauthorized occurrence on or conducted through its information systems that may adversely affect the confidentiality, integrity, or availability of information systems or any information residing therein.
• Information Systems: Electronic information resources owned or used by the organization, including physical or virtual infrastructure controlled by such information resources, or components thereof, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of information to maintain or support its operations.

(b) Risk Management and Strategy

(1) Processes for Assessing, Identifying, and Managing Cybersecurity Risks:

The Company has established processes to assess, identify, and manage material risks arising from cybersecurity threats. These processes are integrated into the Company's' overall risk management system. Specifically:

• The addition of an experienced Chief Information Security Officer ("CISO") with over 25 years of experience to lead the IT Cybersecurity and Compliance team.
• Yearly risk assessment designed to help identify material cybersecurity risks to our Information Systems and Data.
• A security incident response team that is responsible for managing our cybersecurity risk, security controls, response, and reporting cybersecurity incidents.
• A cyber and data security incident response plan with policies and procedures for identifying, managing, and recovering from cybersecurity incidents, including escalating tiers of notification and reporting depending on an incident's nature and severity.
• The use of third-party service providers, where appropriate, to manage, assess, test, and assist with aspects of our security controls, such as:
• 24/7 Security Operations Center Managed Services ("SOC") to monitor our cyber environment, correlate logs from all technology assets to identify potential signs of compromise and perform threat hunt exercises.
• Enterprise-grade email security system managed services.
• Perform penetration tests, vulnerability assessments, and vulnerability scans of our customer-facing sites, among others.
• Prevention of denial-of-service attacks
• Cybersecurity insurance designed to reduce the risk of loss resulting from cybersecurity incidents.
• Policies and procedures related to cybersecurity matters, including but not limited to Acceptable Standards of Use of Technology Systems, Confidential/Sensitive Information and Credit Card Handling Policy, encryption standards, antivirus protection, wireless and remote access, multi-factor authentication, access and change control, and physical security.
• Employee cybersecurity awareness by performing ongoing phishing exercises, and mandatory privacy and cybersecurity training (including spear phishing and other awareness training) for employees.

(2) Material Effects of Cybersecurity Threats:

The Company consistently identifies and evaluates cybersecurity threats that could significantly impact our business strategy, financial condition, and operational results. As of fiscal 2024 year-end, no significant cybersecurity threats or incidents have materially impacted our strategy or operational results.

For a description of the risks related to cybersecurity that may materially affect us and how they may do so, see the “Risk Factors—Risks Related to Cybersecurity” section of this Report.

(c) Governance

(1) Board of Directors Oversight:

The Board of Directors plays a crucial role in overseeing the Company's management of cybersecurity risks. The Audit and Risk Management Committee is specifically tasked with this responsibility, and it regularly reports to our Board regarding its activities, including those related to cybersecurity risk management. Our Board also receives periodic briefings from management on our cybersecurity risk management program, including presentations on cybersecurity topics from our Chief Transformation Officer, Chief Information Officer, internal information security team, and third-party experts.

These briefings cover the current threat landscape, ongoing cybersecurity initiatives, and the Company's response to significant incidents.

(2) Management’s Role in Cybersecurity Risk Management:

Management is actively involved in assessing and managing material risks from cybersecurity threats. The following processes are in place:

• Responsible Positions/Committees: The Chief Transformation Officer, Chief Information Officer, and Chief Information Security Officer are responsible for assessing and managing cybersecurity risks. The individuals in these roles possess extensive expertise in cybersecurity. Specifically, the Chief Transformation Officer has over 30 years of experience in extensive technology and executive leadership experience across diverse industries, the Chief Information Officer has over 25 years in Information Technology across multiple industries, and the Chief Information Security Officer has over 25 years in Security, Risk, Audit, and Compliance across various sectors, including both public and private.
• Monitoring and Response Processes: We have established processes to inform and monitor cybersecurity incidents for prevention, detection, and resolution using a 24/7 third-party SOC Managed Service. The SOC is responsible for providing alerts, updates, and remediation services as needed by monitoring all technology assets for potential signs of compromise and conducting threat hunt exercises.
• Reporting to the Board: Information about cybersecurity risks is regularly reported to the Board of Directors or its relevant committee. This reporting includes updates on the Company's cybersecurity risk profile, significant incidents, and the effectiveness of mitigation strategies.

Our executive offices are located in leased facilities at 4600 E. 53rd Street, Davenport, Iowa. The initial lease term expires August 1, 2029.

We have 17 print sites which print most of our dailies with the exception of 11 that are printed at third-party printers.

Our newspapers and other publications have formal or informal backup arrangements for printing in the event of a disruption in production capability.

We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole.

The Company was named as a defendant by a group of Plaintiffs acting on behalf of a proposed class of digital subscribers in a lawsuit in 2022. The lawsuit alleged that the Company violated the Video Privacy Protection Act (“VPPA”) by using pixels to track subscribers’ video viewing activity on Company websites and sharing it with Meta without consent.

The Company has agreed to a preliminary settlement with the Plaintiffs for $9.5 million, subject to required court approval. The Company expects the court approvals to be completed within the next 6 months. The entire settlement amount will be paid by the Company’s insurance carriers.

The settlement liability and insurance receivable are recorded within “Compensation and other accrued liabilities” and “Prepaids and other” on the Consolidated Balance Sheets, respectively.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the year ended September 29, 2024, and for fiscal years 2023 and 2022. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe the following discussion addresses our most critical accounting estimates, which are those that are important to the presentation of our financial condition and results of operations and require management's most subjective and complex judgments.

Intangible Assets, Other Than Goodwill

Local mastheads (e.g., publishing periodical titles, web site domain names, and trade names) are not subject to amortization. Non-amortized intangible assets are tested for impairment annually on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances suggest the asset might be impaired.

The quantitative impairment test consists of comparing the fair value of each masthead with its carrying amount. We use a relief from royalty approach which utilizes a discounted cash flow model to determine the fair value of each masthead. Management's judgments and estimates of future operating results in determining the intangibles fair values are consistently applied to each underlying business in determining the fair value of each intangible asset. In 2024, 2023, and 2022, we recognized impairment charges of $7.8 million, $7.7 million, and $14.2 million, respectively. As of September 29, 2024 the masthead carrying value is $10.9 million.

Our amortizable intangible assets consist mainly of customer relationships including subscriber lists and advertiser relationships. These asset values are amortized systematically over their estimated useful lives. Intangible assets subject to amortization are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of each asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of such asset group. There were no indicators of impairment on intangible assets subject to amortization in 2024, 2023 or 2022.

Our quantitative impairment analysis includes several inputs that are considered estimates, these include royalty rates, discount rates, five-year revenue forecast, and long term growth rates. All of these estimates are subject to uncertainty as future results may or may not be achieved. In 2024, the royalty rates utilized a range from 0% to 1.0%; a 50-basis point decrease in royalty rates would result in an additional $4.6 million of impairment. The Company’s discount rate utilized in the analysis has ranged from 11.0% in 2022 to 12.5% in 2024, depending on market conditions. Increasing the discount rate by 100 basis points would result in an additional $0.1 million of impairment. The Company has had various revenue forecasts utilized in the analysis over different years.

Future decreases in our market value, or significant differences in revenue, expenses or cash flows from estimates used to determine fair value, could result in additional intangible asset impairment charges in the future.

For information related to the Company's Goodwill impairment analysis, refer to Note 4 to the Consolidated Financial Statements.

Pension, Postretirement and Postemployment Benefit Plans

We, along with our subsidiaries, have various defined benefit retirement plans, postretirement plans and postemployment plans, under which substantially all of the benefits have been frozen in previous years.

We account for our pension, postretirement and postemployment plans in accordance with the applicable accounting guidance, which requires us to include the funded status of our pension plans in our balance sheets and to recognize, as a component of other comprehensive income (loss), the gains or losses that arise during the period but are not recognized in pension expense. The service cost component of net period benefit cost is reported on the Consolidated Statements of Income and Comprehensive Income and included in Compensation while all other components are included in other non-operating income/expense.

The determination of pension and postretirement plan obligations and expense is based on a number of actuarial assumptions. Two critical assumptions are the discount rates applied to pension and postretirement plan obligations and the expected long-term rate of return on plan assets.

The discount rate assumption is based on investment yields available at year-end on corporate bonds rated AA and above with a maturity to match the expected benefit payment stream. To determine the expected long-term rate of return of assets, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets, input from the actuaries and investment consultants and long- term inflation assumptions. In 2024, we used an expected return of assets assumption of 5.0% for our pension plan assets and 6.0% for our postretirement and postemployment benefit plan assets.

A 50-basis point decrease in discount rates would result in an increase of $9.5 million to pension and $0.5 million to postretirement and postemployment benefits liabilities. A 50-basis point decrease in expected rate of return of assets results would result in an increase of $0.9 million to pension and $0.1 million postretirement and postemployment benefits expense.

Income Taxes

We are subject to income taxes in the U.S. and record our tax provision for the anticipated tax consequences in our reported results of operations. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, and the valuation allowance recorded against our net deferred tax assets, if any.

Our current and deferred income tax provisions are calculated based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. These estimates are reviewed and adjusted, if needed, throughout the year. Adjustments between our estimates and the actual results of filed returns are recorded when identified.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using currently enacted tax rates. Deferred income tax assets are recognized for deductible temporary differences and loss carryforwards and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred income tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits as a component of income tax expense.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 1 to the Consolidated Financial Statements for a description of new accounting standards issued and/or adopted in the year ended September 29, 2024.

OPERATIONS

Operating results, as reported in the Consolidated Financial Statements, are summarized below:

We disposed of certain properties in each of 2024, 2023 and 2022.

Discussions of the year ended September 25, 2022 and comparison of the years ended September 24, 2023 and September 25, 2022 can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended September 24, 2023, filed on December 8, 2023, which section is incorporated by reference herein.

To facilitate a comparison of our results without the impact of the 53rd week of revenues and expenses, certain revenue and expense trends, as described below, are presented on a comparative basis which is calculated by removing the 53rd week of revenue or expense in 2024.

OPERATING REVENUE

Revenue Comparison 2024-2023

Total operating revenue totaled $611.4 million in 2024, down $79.8 million, or 11.5%, compared to 2023. On a comparative basis total operating revenue declined 13.0%.

Advertising and marketing services revenue totaled $275.7 million in 2024, down $43.3 million, or 13.6% compared to 2023. On a comparative basis, Advertising and marketing services revenue declines 14.9%.

Digital advertising and marketing services revenue totaled $194.2 million in 2024, up 0.5% compared to 2023. On a comparative basis, revenue declined 0.9%. Digital advertising and marketing services revenue represented 70.4% of 2024 total advertising and marketing services revenue compared to 60.6% in 2023.

Print advertising revenues were $81.5 million in 2024, down $44.3 million, or 35.2% compared to 2023. On a comparative basis, print advertising revenue was down 36.5%. The decline is due to continued secular declines in demand for print advertising and a reduced product portfolio through sales and elimination of products that do not meet profitability standards.

Subscription revenue totaled $281.9 million in 2024, or down 10.0%, compared to 2023. Decline in full access volume, consistent with historical and industry trends were partially offset by selective increases on our full access subscriptions, growth in digital-only subscribers and price increases on digital subscriptions. Digital-only subscribers grew 7.1% since 2023 and now total more than 771,000. Digital-only subscription revenue grew 38.9% compared to 2023. On a comparative basis, digital-only revenue grew 36.2%.

Other revenue, which primarily consists of commercial printing revenue and digital services from BLOX Digital, totaled $53.8 million, a 8.7% decrease compared to 2023. On a comparative basis other revenue decreased 9.7%. Digital services revenue totaled $20.5 million in 2024, a 5.9% increase compared to 2023. On a comparative basis digital services revenue increased 5.3%. Commercial printing revenue totaled $17.5 million in 2024, a 13.0% decline compared to 2023, primarily driven by reduction in print volumes from our partners. On a comparative basis, commercial printing revenue was down 14.6%.

Total digital revenue including digital advertising revenue, digital-only subscription revenue and digital services revenue totaled $299.1 million in 2024, a 9.4% increase over 2023, and represented 48.9% of our total operating revenue in 2024, compared to 39.5% in 2023.

OPERATING EXPENSES

Operating Expense Comparison 2024-2023

Total operating expenses were $611.4 million, a 7.4% decrease compared to 2023. Cash Costs (a non-GAAP financial measure discussed below) were $553.3 million, a 10.1% decrease compared to 2023.

Compensation expense decreased $32.3 million in 2024, or a 12.1% decrease compared to 2023. The decrease is attributable to reductions in full time employees ("FTEs") due to continued business transformation efforts, partially offset by investments in digital talent.

Newsprint and ink costs decreased $8.5 million in 2024, or a 33.7% decrease compared to 2023. This decrease was attributable to declines in newsprint volumes.

Other operating expenses decreased $21.1 million in 2024, or a 6.5% decrease compared to 2023. Other operating expenses include all operating costs not considered to be compensation, newsprint, depreciation and amortization, or restructuring costs and assets loss on sales, impairments, and other, net. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses. The decrease is primarily attributable to lower delivery and other print-related costs due to lower volumes of our print edition.

Restructuring costs and other totaled $19.3 million and $12.7 million in 2024 and 2023, respectively. Restructuring costs and other include severance costs, litigation expenses, and restructuring expenses. The increase is attributable to one-time costs to outsource certain operations.

Depreciation expense decreased $1.2 million, or 10.1%, in 2024. Amortization expense decreased $1.8 million, or 9.6%, in 2024. The decrease in both is attributable to assets becoming fully depreciated or amortized.

Assets loss (gain) on sales, impairments and other was a net loss of $11.2 million in 2024 compared to a net loss of $1.9 million in 2023. Impairment losses in 2024 and 2023 totaled $7.8 million and $7.7 million for mastheads. Additionally, $1.3 million and $1.3 million of goodwill was allocated to the sale of certain non-core operations in 2024 and 2023, respectively. Assets loss (gain) on sales are part the Company's ongoing real estate and non-core asset monetization. They totaled a net loss of $2.2 million in 2024 and a net gain of $6.0 million in 2023.

Equity In Equity Investments

Equity in earnings of TNI and MNI decreased $2.0 million in 2024, or 30.0%, compared to 2023.

NON-OPERATING INCOME AND EXPENSES

Non-operating Income and Expense Comparison 2024-2023

Interest expense decreased $0.2 million, or 0.6%, to $41.2 million in 2024 due to lower debt balances. Our weighted average cost of debt was 9.0% in 2024 and 2023.

Other non-operating income and expense consists of benefits associated with our pension and other postretirement plans. We recorded $5.1 million of periodic pension and other postretirement benefits in 2024 compared to $1.2 million in 2023. The increase was attributable due to the Company recognizing a non-cash curtailment gain of $1.2 million in 2024 as a result of outsourcing certain postemployment defined benefit plan functions. Additionally, in 2024, the Company completed a voluntary lump sum payment of future benefits to terminated vested participants. The offer was accepted by 522 participants, representing a $22.6 million pension plan liability. As a result of the offer, a non-cash settlement gain of $2.4 million was recorded in Curtailment/Settlement gain on the Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income. Both assets and liabilities of the plan were reduced by $22.6 million.

INCOME TAX BENEFIT

In 2024, we recorded income tax benefit of $7.6 million, or 24.4% of pretax loss and in 2023, we recorded an income tax benefit of $0.3 million, or 11.3% of pretax loss. See Note 12 of the Notes to the Consolidated Financial Statements, included herein, for a discussion of the difference between the expected federal income tax rate and the actual tax rates.

NET INCOME AND EARNINGS PER SHARE

Net loss was $23.6 million in 2024 compared to net loss of $2.7 million in 2023.

Losses per share was $4.35 in 2024 compared to losses per share of $0.90 in 2023.

NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial performance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis.

In this report, we present Adjusted EBITDA and cash costs, which are non-GAAP financial performance measures that exclude from our reported GAAP results the impact of certain items consisting primarily of restructuring charges and non-cash charges. We believe such expenses, charges, and gains are not indicative of normal, ongoing operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies. In the future, however, we are likely to incur expenses, charges, and gains similar to the items for which the applicable GAAP financial measures have been adjusted and to report non-GAAP financial measures excluding such items. Accordingly, exclusion of those or similar items in our non-GAAP presentations should not be interpreted as implying the items are non-recurring, infrequent, or unusual.

We define our non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, as follows:

Adjusted EBITDA is a non-GAAP financial performance measure that enhances financial statement users' overall understanding of the operating performance of the Company. The measure isolates unusual, infrequent, or non-cash transactions from the operating performance of the business. This allows users to easily compare operating performance among various fiscal periods and how management measures the performance of the business. This measure also provides users with a benchmark that can be used when forecasting future operating performance of the Company that excludes unusual, nonrecurring or one-time transactions. Adjusted EBITDA is also a component of the calculation used by stockholders and analysts to determine the value of our business when using the market approach, which applies a market multiple to financial metrics. It is also a measure used to calculate the leverage ratio of the Company, which is a key financial ratio monitored and used by the Company and its investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, income tax expense, depreciation and amortization, assets loss (gain) on sales, impairments and other, restructuring costs and other, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI.

Cash Costs represent a non-GAAP financial performance measure of operating expenses which are measured on an accrual basis and settled in cash. This measure is useful to investors in understanding the components of the Company’s cash-settled operating costs. Cash Costs can be used by financial statement users to assess the Company's ability to manage and control its operating structure. Cash Costs are defined as compensation, newsprint and ink and other operating expenses. Depreciation and amortization, assets loss (gain) on sales, impairments and other, restructuring costs and other non-cash operating expenses and other non-operating expenses are excluded.

Tables reconciling Adjusted EBITDA to net income and Cash Costs to operating expenses, the most directly comparable measure under GAAP, are set forth below under the caption "Reconciliation of Non-GAAP Financial Measures".

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income, the most directly comparable GAAP measure:

22

The table below reconciles the non-GAAP financial performance measure of Cash Costs to Operating expenses, the most directly comparable GAAP measure:

23

LIQUIDITY AND CAPITAL RESOURCES

Our operations have historically generated positive cash flow and are expected to provide sufficient liquidity, together with cash on hand, to meet our requirements, primarily operating expenses, interest expense and capital expenditures for at least the next twelve months. A summary of our cash flows is included in the narrative below.

Operating Activities

Cash provided from operating activities totaled $1.1 million in 2024 compared to cash required by operating activities of $3.2 million in 2023, an increase of $4.3 million. The increase was driven by an increase in working capital of $19.7 million, primarily related to favorable changes in accounts payable and unearned revenue partially offset by a decrease in operating results of $15.4 million (defined as net loss adjusted for non-working capital items).

Investing Activities

Cash provided by investing activities totaled $3.7 million in 2024 and $8.6 million in 2023. Capital spending totaled $9.2 million and $5.1 million in 2024 and 2023, respectively. Proceeds from sales of assets totaled $13.5 million and $12.0 million in 2024 and 2023, respectively.

Financing Activities

Cash required for financing activities totaled $9.8 million in 2024 and $7.1 million in 2023. Debt reduction accounted for the majority of the usage of funds in 2024 and 2023, respectively.

Liquidity

Our liquidity, consisting of cash on the balance sheet, totaled $9.6 million at September 29, 2024. This liquidity amount excludes any future cash flows from operations. We expect all interest and principal payments due in the next twelve months will be satisfied by existing cash and our cash flows, which will allow us to maintain an adequate level of liquidity.

SEASONALITY

Our largest source of advertising and marketing services revenue, retail advertising, is seasonal and tends to fluctuate with retail sales in markets served. Historically, retail advertising is higher in the December and June quarters. Advertising and marketing services revenue is lowest in the March quarter.

INFLATION

Price increases (or decreases) for our products are implemented when deemed appropriate by us. We continuously evaluate price increases, productivity improvements, sourcing efficiencies and other cost reductions to mitigate the impact of inflation.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we concluded an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of the September 29, 2024 (the "Evaluation Date"), using the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the Evaluation Date, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

BDO USA, P.C., our independent registered public accounting firm, has issued a report on our internal control over financial reporting as of September 29, 2024, which is included herein.

Remediation of Previously Reported Material Weaknesses

As previously reported in Item 9A of our Annual Report on Form 10-K for the fiscal year ended September 24, 2023, management had concluded the Company had a material weakness in internal control over financial reporting, specific to a) the Company's controls to assess the reliability of certain internally generated information, or evaluate information received from certain third-party service providers. To address the material weakness, during the fiscal year ended September 29, 2024 we:

• Established a project team to review, evaluate and remediate the material weakness in internal controls over financial reporting.
• Invested in new technology and human capital in the development of new internal controls.
• Expanded Corporate Compliance function to lead management's efforts related to effective control design, documentation and implementation, as well as remediate ineffective controls.
• Implemented a new revenue IT system through collaboration among finance, accounting, sales, and IT with the focus on centralizing our products fulfillment process.
• Coordinated the flow of data with many of our third-party fulfillment vendors to improve processes surrounding customer acceptance and evidence of fulfillment.
• Retained Deloitte & Touche LLP to validate the design of these new controls.
• Implemented six additional internal controls focused on addressing the material weakness in internal controls over financial reporting.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Other than those implemented to address the material weakness as described above, there have been no changes in our internal control over financial reporting that occurred during the 14 weeks ended September 29, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Lee Enterprises, Incorporated

Davenport, Iowa

Opinion on Internal Control over Financial Reporting

We have audited Lee Enterprises, Incorporated’s (the “Company's”) internal control over financial reporting as of September 29, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 29, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of September 29, 2024 and September 24, 2023, the related consolidated statements of (loss) income and comprehensive (loss) income, (deficit) equity, and cash flows for each of the three fiscal years in the period ended September 29, 2024, and the related notes and our report dated December 13, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, P.C.

Chicago, Illinois

December 13, 2024