Welcome to the Lee Enterprises 2019 Third Quarter Webcast and Conference Call. The call is been recorded and will be available for replay beginning the later this morning at lee.net. [Operator Instructions]. A link to the live webcast can be found at www.lee.net. Now I will turn the call over to your host, Jamie Seratt, Corporate Controller.

Good morning, thank you for joining us. Speaking on this morning's call will be Kevin Mowbray, President and Chief Executive Officer; and Tim Millage, Vice President and Chief Financial Officer. Also with us on today's call and available for questions are Nathan Bekke, Vice President, Consumer Sales and Marketing; and James Green, Vice President, Digital. Earlier today, we issued a news release with preliminary results for our third fiscal quarter of 2019. It is available at lee.net as well as at major financial websites. One housekeeping item to start. We acquired certain properties in fiscal year 2019 and disposed of one property in 2018, and these trends are affecting quarter- and year-to-date trends. We discuss certain revenue and operating expense trends on a same-property basis, which excludes the impact of revenue and operating expenses associated with these properties. As a reminder, this morning's discussion will include forward-looking statements that are based on our current expectations. These statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially. Such factors are described in this morning's news release and also in our SEC filings. During the call, we make reference to certain non-GAAP financial measures, which are defined in our news release. Reconciliations to the relevant GAAP measures are included in tables accompanying the release. And now to open the discussion is our President and Chief Executive Officer, Kevin Mowbray.

Thank you, Jamie, good morning, and thank you, all, for joining the call. Overall, we're pleased with third quarter operating results. While total revenue was down 4% in the third quarter, a similar trend to last quarter, we delivered solid digital advertising performance, spectacular growth at TownNews and best-in-class execution at BH Media. We continue to successfully execute on our strategy to drive digital growth by leveraging our position as a leading source of news, information and advertising in attractive midsize markets across the country with huge local audiences and strength across all age groups. At the same time, we remain sharply focused on operating efficiency and maintaining our industry-leading margins and strong cash flow. The addition of digital media expert, Megan Liberman, to our Board in June further enhances our expertise in the digital space. Megan brings a wealth of digital news experience, having held senior executive positions at SiriusXM, Yahoo's -- Yahoo News Group and The New York Times. For the third quarter, total digital revenue, which includes digital advertising and digital services revenue, was up 6.9% and totaled nearly $120 million over the last 12 months. This was fueled by a substantial growth in TownNews, which we'll talk about more in a moment. Programmatic revenue had its best quarterly trend performance in a year, up 6.2% on a same-property basis. Despite soft print advertising trends, which continued into the third quarter, we saw nice growth from digital advertising, marking nearly a decade of quarter-over-quarter digital advertising revenue grow. Much of the success in digital advertising is coming from our local controllable retail accounts, which are the core of our business and represent 50% of advertising revenue making us much less reliant on national retail advertising. Our local sales teams have direct contact and strong relationships with key…

Thank you, Kevin. And good morning, everyone. We continue to transform our business models, drive efficiencies across our company and reduce our legacy cost structure. Cash costs in the same property basis were down 7.6% in the third quarter and are down 5.2% in the year-to-date period. In our third quarter, compensation costs were down 6.6% due to an 8% reduction in FTEs. Much of the headcount reductions are due to ongoing business transformation initiatives, including centralizing many back-office functions and outsourcing production operations. Currently, nearly 70% of our daily newspapers are printed off-site, with the majority of those printed by other Lee markets. We also offered early retirement programs in our second quarter, which is helping reduce our FTE numbers in our compensation costs. Newsprint and ink expense decreased 18.8% in the quarter, driven by declines in print circulation volumes as well as lower prices for newsprint. We have now cycled the significant increase in prices that we saw throughout much of 2018 and are starting to see supply-demand dynamics come back in our favor. Newsprint prices look to be stable or down modestly for the remainder of the fiscal year. Other operating expenses decreased 2% in the quarter primarily driven by lower delivery costs. Cash costs on a same-property basis were down 7.6% in the quarter, and for fiscal year 2019, we expect cash costs to decline between 4.75% and 5.5% on a same-property basis. That's an improvement from our previously announced guidance. As Kevin mentioned, total revenue trends in the third quarter were consistent with trends in our second quarter, and our cost reductions accelerated. This produced strong adjusted EBITDA of $30.7 million in the quarter or down 1.3% from the prior year. Over the last 12 months, adjusted EBITDA totaled $125.5 million. Also in our third…

[Operator Instructions]. And it does appear we have no questions on the phone lines. I'll now turn the call back over to our host, Jamie Seratt, to discuss questions from the webcast.

Our first question from the Web: How does New Media's $1.8 billion, 11.5% coupon affect the efforts for Lee to refinance debt?

I don't think it's a one-to-one connection between their situation and ours. As you know, Lee leads the industry in most financial metrics, most notably, double the margin compared to the industry. And I think we're going to be in a good position as we continue to delever the company and drive top line performance to pursue an opportunistic financing that Tim mentioned earlier on our call. Anything you'd like to add?

Yes. The only thing I'd like to add, this was a single-lender transaction, so private negotiation outside of typical credit markets. So I don't think it will have a significant factor. I think what's favorable is that the -- someone in the industry was able to obtain a significant amount of financing, and that's good news for us.

Our next question: Did you repurchase the notes in the open market at a discount?

I will answer that. This is Tim. The notes that we've repurchased were just shy of the current call price. So they were discounted to the call price, but still above par.

Our next question: At what date do you estimate that the crossover will occur wherein digital revenue exceeds prints revenue?

Well, we don't give guidance. I can say we're hyperfocused on driving our digital transformation where digital revenue exceeds print revenue. As I mentioned on the call, we plan to do that by focusing on the great contacts and relationships we have with local retail accounts, and then further monetizing our huge audiences and maximizing the potential in TownNews. All of those efforts combined get to a digital inflection point where digital outpaces print.

Our next question: Since the Board authorization, what actions have been taken to buy back Lee stock?

So as a reminder, our Board has authorized us to buy back up to $10 million of Lee stock over two years. And to date, we have not repurchased any shares. And so there's a number of factors that we consider when we're evaluating our decision to buy back stock. And a number of those factors would include the current stock price. Big factors that we're considering now are alternate uses of our cash flows as well as our leverage ratio. And so one thing is that we're looking at is we look to opportunistically refinance our debt, our focus has been to reduce our leverage as quickly as possible to get the best execution. So that's the big reason as to why we have not to date bought back any stock.

We have no more question from our Web participants. I will now turn back the call to Kevin for closing remarks.

Thank you. Thank you for joining the call today. We appreciate your time and your interest in Lee. Thanks for joining the call.

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