Q1 2022 Dallasnews Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Dallas News Corporation Q1, 2022 Investor call. At this point all the participants are in a listen only mode. However, there will be an opportunity for your questions instructions will be given at that time, if you should require any assistance during.
The call. Please press star Zero, and operator will assist you offline as a reminder, today's call is being recorded I'll turn the call now over to Mr. Gary Cobley. Please go ahead.
Good morning, everyone. This is Gary Cowboy, Vice President and controller, a Dallas News Corporation welcome to our first quarter 2022, Investor call I'm joined by Katie Murray Executive Vice President and Chief Financial Officer, who will be reviewing financial results Robert Decker Chairman President.
And Chief Executive Officer of Dallas News Corporation, and Grant Moise publisher and President of the Dallas morning News.
Last Friday, we issued a press release announcing first quarter 2022 results and we filed our first quarter 10-Q.
Both of these have been posted on our website Dallas News Corporation Dot com under the Investor Relations section.
Unless otherwise specified comparisons used on todays call measure first quarter 2022 performance against first quarter 2021 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.
<unk> of GAAP to non-GAAP financial measures is included with our press release.
I'll now turn the call over to Katy.
Good morning, everyone and thank you for joining today's call.
On a GAAP basis for the quarter, we reported a net loss of $2 6 million or 49 per share and an operating loss of two and a half million in.
In Q1 last year, we reported a net loss of $2 8 million and an operating loss of $3 7 million.
On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $1 6 million, an improvement of 700000 or 36% compared to $2 4 million for the same period last year the.
The improvement is primarily due to a decrease of $1 5 million in employee compensation and benefits, partially offset by a decrease in total revenue of half a million dollars.
We reported $36 3 million of total net revenue for the quarter and this compares to $36 8 million last year, the $500000 decline year over year is primarily due to a 600000 dollar reduction in print advertising revenue, partially offset by 100000 dollar increase in digital advertising and marketing.
Getting services revenue.
Medium giant continues to see supply chain issues for certain advertisers in some key categories, but in the month of March we saw robust activity in our marketing and agency service offerings, which grant will expand on shortly.
Circulation revenue increased $100000 when compared to the first quarter of last year. This.
This growth follows the trend we experienced in 2021, driven by more total members print and digital combined and our pricing strategies.
As of March 31, the Dallas morning News had 62356 digital only subscribers.
It is an 11504 or 22, 6% year over year improvement and a 2885 sequential improvement.
Total subscribers as of March 31 was 149117.
Compared to 148061 as of March 31 of last year and 148742 as of December 31.
Total adjusted operating expense for the quarter was $43 9 million, reflecting an improvement of $1 4 million from last year, primarily related to the reduction of $1 5 million in compensation and benefit expense.
As of the end of the quarter head count with 662 compared to 713 as of March 31 of last year.
Cash on the balance sheet was 31 million as of April 22nd It was $31 million.
Consistent with the interim periods last year, we used the estimated annual tax rate method and we recorded a $184000 tax expense for the Texas margin tax we expect the Texas margin tax to be approximately $600000 for this year.
A few other notable items.
Charter holdings continues to make its interest payments timely, we anticipate receipt of $22 7 million, including interest and principal payments on June 30th.
Overall, we are encouraged by the progress thus far in 2022 and look forward to a year focused on becoming a sustainably profitable digital news and information company supported by our strong balance sheet I.
I will now turn the call over to grant.
Thanks, Katie I wanted to expand on a few of our most important lines of business and what we're seeing in these areas.
First medium giant saw increased RFP and new business wins in the month of March the activity was primarily in the tourism City economic development and financial services verticals medium giant is also showing excellent client retention rates as well.
24 of our 25 largest accounts have renewed service agreements with us year over year. This renewal rate gives us confidence that medium giant is providing an excellent level of service and return on investment for its clients.
The second area is membership revenue as Katie mentioned relative to financial performance. We continue to see digital membership revenue grow in the mid 40% range year over year.
That growth combined with stability in membership revenue continues to provide stable and slightly growing subscription revenue.
We continue to see stability in membership volume growth and the ability to maximize the price members are willing to pay for our content.
Membership growth is predicated on our newsroom continuing to add staff in areas members value. The most examples of recent hires are in business real estate restaurants, and our braking and trending news team.
Research has indicated members value these coverage areas and the conversion metrics. We are experiencing are proving those assumptions to be accurate.
On the expense side of the ledger, we're being impacted by commodity prices in a significant way this.
This year, we have planned for two newsprint price increases.
We recently received notice of another $50 per metric ton increase effective may one with this price increase newsprint cost per metric ton is the highest it has been since the first quarter of 2019.
While we cannot control the cost of newsprint. We are actively monitoring this area and are proactively working to mitigate the impact to our financials.
I will now turn the call over to Robert.
Great. Thank you and good morning, everyone.
This is your third version for me. This year, we had the first quarter report we of course had my letter with the proxy. So the themes are the same theres good momentum coming into 2022.
I don't want to Miss the opportunity to call out the increase in circulation year over year. This is the first time in many years, we have had that kind of positive circulation result.
And we think it can continue as momentum continues to build.
Going back to my shareholder letter.
Purposes of the company are the same as it has always been we feel more strongly about this today than ever providing accurate news and information that's taken on Paramount importance in the world around us and across the country.
Our investment in these resources as people and technology and we are very carefully developing the financial model that enables us to make those investments well moving in the direction Kt reminded us that has to be a sustainably profitable enterprise. We're also making really important progress in the <unk>.
Area of D I.
Grant can address that in the Q&A. If you wish I cited a couple of examples in my letter.
And we're just tremendously encouraged by the progress there.
We all know that the market is moving around quite a bit of volatility has become almost the norm since the beginning of the year and as grant noted with respect to the cost of newsprint, which also spills over to ink supplies every version of our every aspect of our.
Operations.
Predicting the effect of inflation is a very tricky, but we have contingency.
Contingency plans in place. If this continues and we'll play that forward with you through the remainder of this year.
Our shareholder meeting is going to be [noise] person again in the post pandemic world will be here in our auditorium at our company headquarters on May 12, and any of you who are in the vicinity are more than welcome. We look forward to the opportunity to visit about all the matters addressed in this call but also.
So look forward as to how our company is going to succeed over the long term.
Operator, why don't we pause there and open the line for questions granted Katie can go into detail about any of the matters we broke.
Certainly.
Ladies and gentlemen, if you wish to ask a question. Please press one then zero on your telephone keypad.
You may withdraw your question at any time by repeating the one zero command and if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again if you have a question you May press. One then zero at this time.
Okay.
Yeah.
And once again, if you'd like to ask a question. Please press one zero and then we'll go to line of Chris Mooney with Wedbush Securities. Please go ahead.
Chris money. Your line is open if you're on mute, possibly.
Okay got it I'm here thanks, Gary.
Good morning.
The DTI or cei could you explain I didn't quite get that I think grant that is in your court.
Diversity equity and inclusion so this is the.
The broad effort, we're making to.
Well.
Expand our workforce through those models, but.
Also to turn them into substantial business advantages for us it's a.
Primarily about people and equity and inclusion but.
For us as a company. These are really important factors and I'll, let grant elaborate on it because he's been leading that charge, yes, Chris I think that the.
Probably the clearest way to explain it is we believe that as the demographics change in North Texas.
Our aspiration is to reflect those in.
Our especially in our client facing departments first I mean, obviously that means our newsroom our sales teams.
And we've just really done a great job in the way that we're hiring we.
We have been very pleased with the we're making.
Great progress in our management and our leadership ranks of getting greater diversity in perspective, there and then the last thing that we're always monitoring or if it were it really been refocused on Chris is making sure that all of the vendors, who we do business with that they kind of share in this commitment to us and that are they kind of share that.
Same kind of commitment to better kind of diversifying their own workforces and making sure that we're doing business with people who share our values, so but were making really important progress in each of those areas.
Okay, and can you talk a little bit more grand about business trends you indicated.
The marketing side, we're seeing some positive trends.
Yes.
Yeah go ahead.
The basic question yes.
Touch on on medium giant first Chris as Katie mentioned, the supply chain issues, which we thought would be behind us.
Or not.
For example, I think primarily I'll start with some of our furniture stores.
Just really kind of went dark with us for two out of the three months of the first quarter, just because they were having trouble getting enough inventory and so they didn't want to advertise if the inventory was not there to be purchased so.
But what I was pleased on what we were mentioning there towards the end is our RFP process, which is when we are trying to win Big agency and marketing services clients. It is primarily going through a big request for proposal process and we saw some significant wins in March.
<unk>.
It's business that we will start to provide those services in the second quarter and beyond.
And so in a combination of getting new business that we picked up mostly in March in the first quarter.
And.
Being able to hold on to 'twenty four of our top 25 accounts. This has really been an important focal point for us Chris because.
As you will remember because I know how closely you monitor to US. This was not the case three years ago, we had a churn problem and our clients in that area and I'm, just really really proud of the way that this team is his shored that up that's very important and then as Katie mentioned, Chris on the on the membership or subscription side of the biz.
The fact that our volume is growing meaning that our digital growth has been offsetting our print loss now for a bit over a year is a very positive sign and also I've been extremely pleased.
With not only retaining them, but also to retain them, while we're putting it.
Are seeing trying to be as aggressive as we can be on pricing and seeing how much are people willing to pay us in the digital subscription area and <unk> just been very pleased there. So I think the momentum of not only volume growth, but obviously revenue growth in subscriptions as well as a positive sign for.
<unk>.
This is I was doing a little.
It is calculating I guess on the Lee enterprises business.
And it looks like Lee is generating about out.
They're our most recent annual September annual 159000, or so per employee and it looks like.
You all are generating about something thousand per employee.
Hey, Chris This is Katie so are you looking at total revenue or are you looking at subscription revenue.
I was looking at total revenue and I realized Lee has got one division, but not particularly on that.
Probably applicable is.
So the analysis that.
I haven't read it but it would reduce it down somewhat but it's still significantly higher revenue per employee.
So I'll take a look at that I I'll have to say on the Lee revenue, they probably need to look and see what employee base and what revenues you're using on that calculation.
But I think.
10-K.
Okay. Okay I can go back and look at that but I will say I mean, Chris where we are from an employee perspective.
Feel good about where we are from an obviously a revenue per head.
We do have the difference when you think about the revenue.
And looking at advertising and marketing services.
And the medium giant employees that service that revenue line, we would really need to take that out separately versus and theres, probably I'm going to say 100 and <unk>.
70 to 180 people within medium giant versus looking at the rest of the employee base and looking at the print advertising revenue versus you know the circulation revenue, but that's something I can look at but at this point, we feel really good about where we are from an employee base.
Date perspective, obviously, we're growing right now in the newsroom, which we need to do medium giant is hiring as the revenue opportunities at grant.
And elaborate on are coming through and.
Just don't see ourselves being any smaller than where we are today and like I said in fact, we're hiring in the newsroom in hiring on the technology side as well.
Okay.
And this one I guess is probably for Robert.
So the Collin County has a SaaS pure property.
Plano.
Just under $19 million.
'twenty two.
Right it looks like.
You'll have it.
50, 52 billion in cash at the end of June this year or July early July .
Okay.
And you were happy to re able to receive or may become happy to receive a 4.5%.
Rate of return on the 22.
Million that was owed to us from that.
That's it.
Headquarter sale yet.
You're paying 9.5% or more at the current share price.
Out to your shareholders, which I.
I appreciate it but.
There's a quicker way to get a higher return than four 5% on your money.
So why Havent you started the share repurchase program.
Chris we have talked about.
I'll tell you the whole range of capital distribution choices with our board for three years.
Ears, as you know and we are regularly.
Invited investment bankers, who we worked with three years to run analyses of those choices and the benefits are.
Our exists for each of those it is a choice though.
We're going to.
Gladly deposit proceeds from charter at the end of June .
The board will be addressing this question again at its meeting in September .
Share repurchase is.
If we're a larger base and a very efficient market.
It is an attractive choice we have neither of those advantages we do not have a lot of float.
And purchasing shares even under an authorized plan.
First it's difficult to do in large numbers.
Second is a little bit disruptive in the market now you immediately go to a Dutch auction or something of that variety.
That's.
An idea we have discussed more than once in the past, but we've trended because of its simplicity in execution and it's all.
I'll say, it's matching up to our current.
Float current market activity.
To dividends, whether their regular specials. So those those will all be conversations we have with the directors promptly we have them recently.
But we want to see the money as the saying goes in.
We will address it promptly thereafter.
Okay.
And that's all for me.
Thank you Chris for Us.
And just as a reminder, ladies and gentlemen, if you do have a question. Please press one then zero.
And it allows you to enrollments yeah, I was just going to say no further questions coming in.
Right well everyone. Thank you very much for joining our first quarter of this year is phone call and look forward to.
Seeing any of you can come to the shareholder meeting in early May.
Have a good week. Thank you.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.
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