Q2 2020 A. H. Belo Corp Earnings Call

Ladies and gentlemen, thank you stand by and working to the second quarter 2020 financial results Conference call. At this time all participants on the listen only mode. Later, we will conduct a question answer session and instructions will be given at that time it'd be should require often assistance you made the fresh start in euro as a reminder to.

Today's call Spring recorded I'll now turn the call over to Chief Financial Officer, Katy Murray. Please go ahead.

Thank you Kevin Good morning, everyone and welcome to our second quarter 2020 conference call.

I'm joined by Robert Dechert, <unk>, Chairman, President and Chief Executive Officer of A.H., Belo Corporation, and grant Luis publisher in President of the Dallas morning News, who are available for Q1 day.

We hope all with you and your families are well and thanks.

Yesterday afternoon, we issued a press release announcing A.H. Belo second quarter 2020 result.

We have posted this release on our website under the Investor Relations section.

Unless otherwise specified comparisons views on today's call measure second quarter 2020 performance against second quarter 2019 performance.

Our discussion today will include forward looking statement.

Forward looking statements are subject to risks uncertainties and other factors that could cause actual results.

Could differ materially from those statements. The company assumes no obligation to update the information in this communication, except as otherwise required by law.

Additional information about these factors as detailed in the company's press releases and publicly available filings with the FCC.

Today's discussion will include non-GAAP financial measure, we believe that non-GAAP financial measures provide useful supplemental information to assist investors in determining performance comparisons to our peers.

A reconciliation of GAAP to non-GAAP financial measures is included with our press release.

As a reminder, we are reporting as a single operating segment and had added details concerning total print and digital revenue, which is generated as part of advertising and marketing services revenue in circulation revenue.

We believe this provides visibility into our digital growth strategy.

[noise] A.H. Belo reported second quarter 2020, net loss of 3.4 million or 16 cents per share.

And the second quarter of 2019, the company reported net income of 16.5 million or 70 777 cents per fully diluted share.

And the second quarter last year the company sold its former headquarters at five await Young Street.

Generating a tax free operating gain of 25.9 million.

Our tax purposes, the operating gain was offset with net operating losses.

For the second quarter of 2020 total GAAP revenue was 35.4 million a decrease of 11.7 million or 24, 8% when compared to the 47.1 million reported for the second quarter up 2019.

Approximately 9.7 million of the year over year revenue decline relates to advertising and marketing services revenue.

And the second quarter of 2020, we recorded digital advertising and marketing services revenue was 6.7 million.

A decrease of 2.3 million or 25.9% from the 9 million related reported and the second quarter of last year.

Approximately 2 million of this decline is attributable to the termination of the Dallas morning News affiliate relationship with cars Dot Com in September 2019.

Digital circulation revenue was 1.5 million in the second quarter of this year and increase <unk>, 0.3, 300000, or 24.1% compared to the second quarter of last year.

As previously stated one of our highest priorities is to grow the number of the news is paid digital subscribers.

We ended the second quarter of 2020 with 43590 paid digital only subscriptions and increase of 12000, a 19 for 38.1% when compared to the second quarter of last year.

We have posted a summary of digital subscriptions by quarter end year on our website on our Investor Relations page.

Print advertising revenue was eight point.

9 million for the second quarter of 2020, a decrease of 7.4 million or 45.3% when compared to the 16.3 million reported for the same period last year.

The decrease is due to revenue declines in all display and classified advertising categories. In addition to general trends adversely impacting the publishing industry. The cobot 19 pandemic significantly impacted the companys print advertising revenue.

Print circulation revenue for the second quarter of 2020 was 14.2 million, a decrease of 1.6 million or 10% compared to the prior year.

This decrease is the result of declines in home delivery subscriptions and single copy sales offset by price increases.

Other revenue reported in the second quarter of 2020 was 4.1 million compared to the 4.8 million in the second quarter of 2019.

This decline is due to a 700000 dollar decrease in our commercial printing revenue.

Second quarter of 2020 total GAAP operating expense was 39.8 million, an increase of 15.5 million or 64% compared to the second quarter of last year.

Excluding the 25.9 million gain from the sale of the company's former headquarters in Q2 of last year operating expense in the second quarter of this year improved 10.4 million.

The improvement is primarily due to reductions of 2.8 million, an employee compensation and benefit expense.

2.7 million and outside services expense.

1.8 million in newsprint expense and 1.4 million and distribution expense.

Adjusted operating expense, which adjust total operating expense for the revenue standard severance expense depreciation amortization asset disposals and impairment was 38.9 million for the second quarter of 2020.

This compares to adjusted operating expense in the second quarter of last year, a 50.1 million and improvement at 11.2 million or 22.4%.

The significant year over year improvement.

In adjusted operating expense as a result of continued management of discretionary spending newsprint savings a decrease in headcount and approximately 1.9 million incurred last year for management consulting engagement.

Adjusted operating loss for the second quarter of this year with 2.5 million a decline of 2.7 million from the adjusted operating income of 200000 reported in the second quarter of last year, primarily the result of a decrease in advertising and marketing services revenue.

As of June Thirtyth head Count was 769, a decrease of 110 or 12.5% from June Thirtyth of last year.

As of June Thirtyth, the company had approximately $42.3 million of cash and cash equivalents and no debt.

As of July 24th the company had approximately 42 million in cash and cash equivalents.

With regard to the company's pension plans, we do not have a mandatory contribution this year at this time, we do not expect to have any mandatory contributions next year, however that could be impacted by market conditions.

The company record of tax expense of 400000 in the second quarter of 2020, and we expect cash taxes to be approximately 700000 in 2020 related to the Texas margin tax.

On April six of this year due to the uncertainty of the impact of Cobot 19 on company operations, we announced an across the board compensation reduction of between three and 17% depending on an individual employees then current pay level.

Our hope was that as economic conditions improved we will be able to restore part or all of the compensation reductions.

Based on financial performance in the first half of this year versus plan and our visibility for the second half of 2020, we will restore based compensation effective August 10th for employees, who had base salaries of $60000 or less prior to the reductions made in late April.

Well. This year has presented challenges that everyone is facing we're pleased with the Companys financial performance and the momentum we are seeing in our digital revenue growth strategy.

This momentum as a result upon work in focus of all of our employees.

Ill now turn the call over to Robert.

Okay Katie thank you.

And good morning, everyone.

I just want to call out a few important.

Matters as we go towards Q1 day.

This has been a very challenging environment for everyone in every business in the United States.

I said in our press release.

Last evening.

More than held our own we've made fast paced smart adjustments in very unpredictable circumstances.

Grant Katy and our entire team.

Provided.

Exemplary leadership during this period of time.

Equally important as our journalists covered the pandemic and more recently.

The protests around the Black Lodge matter.

Efforts.

Thanks, just an exceptional work and under duress.

Great journalist do their best work, that's been the case for us and I'm very grateful to them and the entire company salutes them.

It takes hundreds of people to come together everyday to produce a newspaper, even so called normal circumstances, but in these conditions, it's been quite remarkable and it's helped our communities hold strong.

We also recently announced very important promotion, we own the Allen who's been with our company a quarter of the century.

Played a variety of roles throughout our news organization and really throughout the company.

It's become deputy publisher, she will report directly to grant and be a member of his management Committee.

Her work with the entire company is to improve both internal and external commitments to diversity and inclusion.

No we own a long time, she is going to do a terrific job in this role which begins next week.

You mentioned in her remarks, the growth in our digital circulation.

Continuing to see very positive trends, which grant in addressing the Q1 day and we've also seen encouraging trends on the print circulation side.

There's a time when people are thirsting for news and information that can rely on this is probably the most intense such time in my career and we're benefiting from that which we believe can result in building long term relationships with these leaders and subscribers or our members as we've now called them.

We also are very pleased as our pension plans have held up strongly despite the dip in March and April.

You will recall that we have invested those assets very conservatively.

And that is enabled us to keep our funded ratios high and as we said so many times. This is a commitment the board is determined to fulfill over the long term.

As we look to the second half of the year, we think we could see the continuation of current operating trends, which improved and that would result in our 2020 investment in the business being on plan.

At the same time, we all know that projecting even 30 or 60 days ahead. In this environment is extremely difficult to do and it may call on us to make more that's a earlier said smart fast paced adjustments as the year plays out overall, however, we feel good about where we've arrived at the end of the second quarter and heading into this.

Second half and look forward to your questions.

Kevin we're now ready for questions.

Thank you, ladies and gentlemen, if you wish to ask your question. Please press one than zero. Your telephone keypad you may withdraw your question anytime by repeating the one zero command if you're using a speakerphone. Please pick up the handset before question. The numbers. Once again, please press one than zero questions at any time.

At this time, we have no questions in queue.

Let's wait just a minute kevan will.

This month.

And once again.

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Alright, well, Kevin Thank you and thanks to everyone for joining us. This morning, we look forward to being up to speed in October after what we hope will be a successful third quarter. Thank you.

Thank you, ladies and gentlemen that does conclude your conference. We do thank you joining you may now disconnect have good day.

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