Kevin Mowbray, president and chief executive officer of Lee Enterprises, talks about content management services TownNews during Lee Enterprises Annual Meeting of Stockholders in Davenport on Feb. 20.

Davenport-based publisher Lee Enterprises on Friday reported lower revenue for the second quarter, but company officials said the 4% drop was the best quarterly trend in about four years. 

Lee — the parent company of the Quad-City Times, Moline Dispatch/Rock Island Argus and the Muscatine Journal — reported a second-quarter loss of $2.7 million, or 5 cents per share. That's compared with a profit of $2.2 million, or 4 cents a share, the same quarter last year. 

"While there are industry challenges, we believe we have the right core strategy and will continue to have an industry-leading performance," said Kevin Mowbray, president and CEO, in a Friday morning call with analysts. "We operate in mid-sized markets with huge audiences and have held our margins for more than a decade." 

Total revenue dropped 4% in the quarter, totaling $122.7 million, compared with a year ago. Lee's stock rose to $2.65 a share at the close of trading Friday.

"The total revenue trend in the second quarter is the best quarterly trend in nearly four years,"  Mowbray said in the report. "This performance was driven by significant revenue growth at TownNews, incremental management agreement revenue and strong digital performance across our legacy businesses."

Advertising and marketing services revenue dropped 12% to $62.9 million for the quarter. Officials said that's primarily due to softness in print advertising demand resulting in lower advertising volume from large retail stores and classifieds. 

Partially offsetting print declines, digital advertising revenue rose 5.3% to $24.1 million, representing 38.2% of total advertising revenue. Subscription revenue decreased 1.9% for the quarter. 

The number of digital-only subscribers jumped 55.5%. 

"We remain steadfast in our optimism about our future as our digital transformation continues," said Mowbray on a Friday morning call with analysts. "We need to grow our business through subscriptions, local retail accounts and digital services." 

Total digital revenue, including digital advertising and services, was up 8% compared with a year ago, totaling $28.8 million. 

Mowbray reported revenue at Moline-based digital company TownNews.com increased 24.3% due to increased market share, including an increase in broadcast customers and gains in video revenue. TownNews revenue over the last 12 months totaled $20.9 million, a 20.9% jump over the prior year. 

"We earned $3.9 million of revenue in the quarter from the management agreement with BH Media Group, and since its inception in July 2018 we have earned $7.8 million in revenue," Mowbray said in the report. "Due to strong financial performance, we expect to earn more than $10 million in the first year of the agreement, exceeding initial expectations."

Lee announced last June it will manage Warren Buffett's Berkshire Hathaway Inc.'s newspaper and digital operations in 30 markets. 

Chief Financial Officer Tim Millage, the company's corporate controller, told analysts Lee is continuing talks about refinancing all or a portion of its long-term debt. 

As of March 31, the company's principal amount of debt was $476.5 million. 

Millage told analysts Lee looks to refinance its debt to "reduce cost of capital, have less restrictive covenants than we have today for such things as stock buybacks and to extend our maturity of debt."

He also highlighted compensation costs were down 3.2% for the quarter, mostly due to staffing decreases and outsourcing. 

Restructuring costs totaled $2.8 million in the quarter, compared with $1.8 million in the same quarter in 2018. 

Newsprint and ink expenses increased 3.3% in the quarter, Millage said, which was partially offset by lower print volume. 

Other second quarter highlights:

• Digital retail advertising, which represented 61.8% of total digital advertising in the second quarter, grew 4.9%. It was driven by an increase in advertising from local retailers.

• Monthly visits to Lee mobile, tablet, desktop and app sites averaged 76.9 million, and page views per visit, one metric used to monitor engagement, increased 14.3%.