Q4 2021 Dallasnews Corp Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by welcome to the Dallas News Corporation fourth quarter and full year 2021 investor call. At this time all participant lines are in a listen only mode. Later, there will be an opportunity for your questions. If you would like to ask a question you May press, one then zero.
<unk> on your telephone keypad, you will hear acknowledgment that your line has been placed in Q.
As a reminder, today's conference call is being recorded replay is available on the Companys website with that I would now like to turn the conference over to Gary Copley. Please go ahead.
Good morning, everyone.
This is Gary Cowboy controller, a Dallas News Corporation.
Welcome to our fourth quarter and full year 2021 investor call.
I'm joined by Katie Murray Executive Vice President and Chief Financial Officer.
Who will be reviewing financial results.
Robert <unk>, Chairman, President and Chief Executive Officer of Dallas News Corporation.
And grant Moise publisher and President of the Dallas morning News.
Yesterday afternoon, we issued a press release announcing fourth quarter and full year 2021 results and we filed our 2021 10-K.
Both of these are posted on our website Dallas News Corporation Dot com under the Investor Relations section.
Unless otherwise specified comparisons used on todays call metric fourth quarter 2021, and full year 2021 performance against fourth quarter 2020, and full year 2020 performance.
Our discussion today will include forward looking statements forward looking statements are subject to risks uncertainties and other factors that could cause actual results to 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 is detailed in the company's press releases and publicly available filings with the SEC.
Today's discussion will include non-GAAP financial measures, 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.
I will now turn the call over to Kate.
Hello, everyone and thank you for joining today's call.
Dallas News reported fourth quarter net income of $2 1 million or <unk> 40 per share and an operating loss of $700000.
The fourth quarter 2021, net income includes a noncash pension benefit of 1 million.
And cash proceeds of $1 3 million related to the sale of an act of IP addresses.
For the fourth quarter of 2020, the company reported a net loss of $1 7 million or 32 cents per share and an operating loss of $4 million.
For the full year 2021 on a GAAP basis, Dallas News reported a net loss of $500000 or nine cents per share and an operating loss of $10 million.
The 2021 net loss includes a noncash pension benefit of $4 2 million and a noncash tax benefit of $2 6 million related to the release of an uncertain tax reserve and.
It includes proceeds of 1.3 million related to the sale of inactive IP addresses.
For the full year 2020, the company reported a net loss of $6 9 million or $1.28 per share.
And an operating loss of $15 6 million.
Adjusted operating income, which adjusts GAAP operating income or loss to exclude severance expense depreciation amortization asset sales or disposals and impairments was $300000 for the fourth quarter a decline of 200000 when compared to adjusted operating income.
A $500000 reported in the fourth quarter of last year.
The decline is primarily due to expense increases of $600000 in newsprint.
400000 in outside services and 200000 in distribution and in operating revenue and.
The operating revenue decline of 200000, partially offset by a $1 3 million improvement in employee compensation and benefits.
For the full year 2021, adjusted operating loss was $3 8 million an improvement of $1 1 million when compared to an adjusted operating loss of $4 9 million reported for the full year 2020.
The improvement is primarily due to a decrease of $1 8 million in employee compensation and benefit expense, partially offset by an increase of 800000 in advertising and promotion expense.
Fourth quarter total GAAP revenue was $40 6 million, a decrease of 200000 or 0.5% when compared to the $40 8 million reported for the fourth quarter of last year, primarily due to a decline in commercial printing revenue.
For the quarter, both advertising and marketing services revenue and circulation revenue.
Circulation revenue remained flat year over year.
Total revenue for the year was $154 4 million a slight increase of 100000 compared to last year print advertising revenue improved by $1 2 million compared to last year, which was significantly impacted by the COVID-19 pandemic.
After normalizing full year 2020, digital advertising and marketing services revenue by excluding the protective equipment sales related to COVID-19, digital advertising and marketing services revenue grew $2 1 million or 888% year over year.
Total circulation revenue in the fourth quarter and full year was flat when compared to last year. The recent stability in total circulation revenue is the result of initiatives focused on our subscription pricing lowering attrition and print subscribers and growing digital subscriptions.
The news is total print and digital subscribers has remained relatively flat to the 150000, we reported in 2020.
Digital circulation revenue was $2 8 million in the fourth quarter of this year, an increase of 900000 or 48, 5% compared to the fourth quarter of last year.
For the year digital digital circulation revenue was $9 6 million, an increase of $3 1 million or 47, 3%.
The news ended the year with 59471 paid digital only subscriptions an increase of 10568 or 21, 6% year over year improvement and an increase of 2387 subscriptions since the third quarter.
Of 2021.
New digital subscription starts are up 19% year over year.
A summary of our digital subscriptions by quarter end year is posted on our website under the Investor Relations section.
Print circulation revenue for the fourth quarter was $13 9 million a decrease of 900000 or six 3% compared to the fourth quarter of last year.
For the year print circulation revenue was $55 3 million, a $3 1 million or five 3% decline.
The year over year decline in home delivery was $2 2 million or four 2% and single copy sales declined 900000 or 15 two 2%.
Both of these which were improvements compared to 2020, which had a home delivery decline of $3 million or five 5% and a single copy decline of $1 9 million or 24, 7%.
Other revenue reported in the fourth quarter of 2021 was $4 1 million compared to $4 3 million reported in the fourth quarter of last year.
For the year other revenue declined $1 million or five 8% to $16 2 million.
The fourth quarter and full year decline is due to a reduction in commercial printing revenue and related distribution.
As of December 31, headcount was 656, a decrease of 87 or 11, 7% from December of 2020.
The company had approximately $32 million in cash and cash equivalents and no debt cash as of Friday March 4th was $31 million and for 2022, we escape, we expect capital expenditures to be approximately $1 million.
The company recorded a tax benefit of $2 2 million for 2021 because of the reversal of the $2 6 million noncash tax benefit related to the release of an uncertain tax reserves.
We expect cash taxes to be approximately $700000 in 2022 related to the Texas margin tax.
As of December 31, 2021, the company has $33 2 million federal net operating loss carryforward.
Over our overall, our financial results and the progress we are making in growing total digital base revenue are very encouraging we continue to make progress in 2021 toward being a sustainably profitable digital news and information company and we will arrange and we remain well positioned with a strong balance sheet and are pleased with.
The early results we are seeing this year.
I will now turn the call over to Robert.
Katy Thank you and good morning, everyone I thought.
I had a few comments before grant discusses some very encouraging operating developments.
As you heard we're making good progress and membership results, both digital and print.
And grant will talk more specifically about that you also note that advertisers are gradually and that's the right adjective gradually returning to print.
Albeit not yet to pre pandemic levels, and we're not suggesting that we'll get there, but just having them back in the paper on a regular basis.
Local and national advertisers is a very encouraging sign.
Obviously expense management continues to be an imperative as we adjust to being a smaller company.
Focused on the content that we know of adverts.
Advertisers seek and readers will pay for.
The pricing aspect of this is very important and again grant will talk about that in just a second.
We're continuing to invest in the business on a multiyear basis as we've discussed with you previously.
Noting as Katie did that we feel we made good progress in 2021 in the past two years have been very uncertain for all companies, but particularly industries like ours that have more of a legacy component to them.
And we're subject to the impacts of COVID-19, everything from the absence of advertisers for a long period of time to supply chain problems that are mostly resolved in our case, but pricing on the input side now becomes an issue we talked about newsprint pricing that will be a big <unk>.
For us this year.
But we would assume like all commodities it will cycle through and.
Worked out over the long term we're.
So we're going to issue our proxy statement soon we're holding an in person annual meeting of shareholders on Thursday May 12.
The pension plans continue to be stable, thanks to the Derisking steps taken in 2020 and 2021.
Plans are holding steady at about 91% funded status and there are no mandatory contributions for the foreseeable future.
We expect to receive full payment in July of the Companys note receivable related to the sale of our former headquarters campus. The total amount due including interest is approximately $23 million.
The board as you know continues to review capital allocation scenarios. We're following this payment and we'll address those scenarios at the regular meeting of the board in late September .
With that let me ask grant to pick up on some of the operating teams and we will welcome your questions after that.
Thank you Robert over the past seven months, we've hired a new senior leadership team in our newsroom and editorial board could treat Hardie was named our executive editor of the Dallas morning News in July of 2021, and Amy hallway field was named our new managing editor just last month, we also named Rudy.
The new editorial page editor in February as well.
All three of these industry veterans are leaders, who approached their roles with a keen understanding that fair and balanced journalism is the bedrock of our relationship with our members. The three of them also bring a digital first mindset that is helping us maintain and maintain a strong digital subscription performance speak.
Speaking of digital subscriptions I'm very pleased with the consistent progress we're showing in digital subscription revenue.
This is the combination of our strong subscription strategy as well as <unk> focus on Resourcing, new newsroom positions in areas, our digital audiences value most.
She has built a breaking in trending news team and has grown our real estate in restaurant coverage in our first few months in her new role.
Medium giant also had a very good year in 2021 as Katie mentioned, we grew print advertising for the first for.
For the year after normalizing 2020 for our PPE sales. We also grew digital advertising.
Even as our pandemic comps became more challenging over the course of the year, we maintained stability throughout the fourth quarter.
This growth and overall stability is a reflection of the strong team that Eric Myers, our president of medium giant has built this success has occurred in the midst of the supply chain issues. Robert just referred to that continue to challenge our marketing partners supplied the supply chain impacted categories such as furniture.
Automotive and real estate and result in clients, either reducing or eliminating their investment with our products and services, but in spite of these logistical challenges I am extremely proud of the achievements in a strong leadership foundation, we have built and look forward to a successful 2022.
Operator, I think we will pause there and open up the line for questions.
Thank you, ladies and gentlemen, once again, if you would like to ask a question. Please press. One then zero on your telephone keypad, you will hear acknowledgment that your line has been placed in Q. Once again for any questions. Please press 101 moment. Please.
Yes.
Okay.
And we have a question from Chris Mooney with Wedbush Securities. Please go ahead.
Good morning.
Good morning.
And curious, perhaps still teed up.
Could you elaborate on the real estate content.
Part of what we've done there Chris.
Steve Brown as you know Chris for being such an avid reader is I know you are Steve has been covering real estate on his own for about three decades now and has done a wonderful job. We have added a second real estate reporter. So that we can even balance more between residential and commercial and <unk>.
You have a sense of the strategic piece of that that I mentioned is real estate and especially with the talents of Steve Brown and how strong of a real estate market.
North, Texas as it is our number one digital converting beat our real estate has been a top performer now for a couple of years and Patrice and her team even saw more opportunity there to expand so.
Steve has so much knowledge of this market that we're going to just to add a little bit more firepower alongside him.
Well I was an avid reader I'm very glad to see that.
Grant this may be for you as well I see in the K.
Yes.
The unionization process.
He was ongoing and 19% of your employees are.
Members of the proposed Union I guess is that the way to look at it and where where are those people located within the organization yes.
Yeah, Chris Chris Let me kick that to Kt Kt has been handling all of our union work. So she's she can answer that first hey, Chris Good morning, as you know.
Members of the newsroom, there's approximately 129 to 130.
Voted to form a union back in October of 2020, and it apparently right now we're still working through the collective bargaining agreement. So it has not been finalized but from a K perspective required to disclose whether there might be some potential employees, who will be covered by a union contract, but there is no contract at this time.
But it is only in the newsroom.
Okay.
And on the employment head count with the revenues I guess.
Sort of stabilize maybe is the right term.
It currently.
You expecting to have further head count reductions as you did in 2021.
Yeah, Chris I'll take that first and then I'll pass it over to grant you know right now I would say that.
We don't expect to see or foresee any further reductions in head count.
Actually we're hiring we're hiring across multiple organizations as grant mentioned and I'll, let him give a little bit more detail about where we're hiring in our sales are facing organization and news.
Revenue generating positions, Chris we are in kind of full hiring mode. Our newsroom is in growth mode, obviously with digital subscriptions being at the just.
Just at the forefront of our strategy.
As Ive mentioned <unk> been growing that team and we continue to add there.
You know its interesting as we all know we're in a unique competitive environment, where wages are going up considerably and so there's just a piece for us to wear.
We lose employees, who are leaving to go to different opportunities I think even though we're in hiring mode. This is a very unique hiring environment.
Especially here in North, Texas, and so that obviously addition of employees is obviously just offset by the competitive environment we're facing.
Okay.
Okay.
Maybe I see that the consumption of.
Newsprint is down about 14%.
Year over year is that a reflection also of the number of pages.
Part of the strategy that we've been deploying Chris is we are only taking page count down along with the advertising demand. So we have been for about two years now holding our content, which means our news hole is not being reduced because I believe that the price people are paying.
As members that they deserve as much content this year as they had last year.
So some of that newsprint cost is coming down mostly in volume.
But as you know is also Katy mentioned the price of newsprint for us to give you a sense. We're at about $720 a metric ton right now and just two years ago, we were at $520 a metric ton. So we're you know we're just keeping a very close close eye on that but trying not to reduce.
The size of the print product based on what we are charging our members.
Okay, and just one more for me and Katy the I kind of.
Ballpark at all.
Operating cash.
Utilization.
Without recognizing the million three.
Sale of the IP address would be about $3 million in the fourth quarter and it sounds like you are running about the same so far this quarter is.
That's about right Chris.
Chris that is that is correct and you are right to normalize it for the IP sales that was a onetime event.
Sure.
Just for fun, what was what were the IP addresses.
And yes, and Theres a market for IP addresses so I'm sure.
As a company as you know we've been historically a much larger company and when you think about IP addresses over the course of our history with the number of business as an operating company that we've had we have had substantially more IP addresses and the market for them is when you can sell them and ranges and we have had people come and.
Approach us about the ranges of IP addresses we sold about 30000.
As a substantial range and that's what generated the $1 3 million in IP sales I will say that that is again at one time, we did have something similar to that in 2020 in the third quarter.
We do not have any other IP addresses that we are looking to monetize but that was an operating asset that we had and we had the opportunity to monetize it and we took that opportunity in the fourth quarter.
Thank you all.
Thanks, Chris Thank you.
And ladies and gentlemen, just as a reminder, if you have a question. Please press one zero at this time.
And we have no questions you may continue.
Thank you Lee, let me actually use chris's questions to frame the calculus that we are.
Running in our strategy and just reassure everyone why the progress. We've reported is so important this is all about creating valuable content.
Journalistic and otherwise that people are willing to pay for it consistently over time and that's what we're seeing in our digital subs.
Which are fully priced compared to a lot of our peers, maybe most of our peers.
And the quality equation is how we get to the other side of this so we.
We are going to continue to invest as grant said in the people who produce the content of our journalists.
So important to this equation, we're going to continue pushing our marketing services.
Which is an approach that takes advantage of the market in which were operating and the skills that Eric Myers and his team bring to bear.
We're going to be very careful stewards of the balance sheet and the expense side of the operations because as a small company we cannot venture off of this track.
So thats the winning track, we're making progress and we look forward.
Two are telling you more about that as the year proceeds. So I think we are done and thanks, everyone for joining.
Very good ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
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