Q2 2023 DallasNews Corporation Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the second quarter 2023, Dallas News Corporation Investor Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. If you should require assistance during the call. Please press Star then zero.

As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Gary Cuddly. Please go ahead.

Good morning, everyone. This is Gary Cowboy, Vice President President and controller of Dallas News Corporation, and welcome to our second quarter 2023 Investor call.

I'm joined by Katie Murray, President and Chief Financial Officer, who will be reviewing financial results and Grant Bowie, Chief Executive Officer, who will provide a brief business remarks.

Yesterday afternoon, we issued a press release announcing second quarter 2023 results and filed our Q2 2023 10-Q.

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 measure second quarter 2023 performance against second quarter 2022 appointments.

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.

Now I'll turn the call over to case.

Good morning, everyone and.

And thank you for joining today's call.

On a GAAP basis for the quarter Dallas News Corporation reported a net loss of $900000 or <unk> 10 per share and an operating loss of $1 2 million.

In Q2 last year, we reported a net loss of $2 4 million and an operating loss of $2 3 million.

On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $300000 an improvement of $800000 when compared to the adjusted operating loss of $1 million for the same period last year.

This improvement is primarily due to expense savings of $2 3 million, partially offset by the by a total revenue decline of $1 6 million.

We reported $36 million of total revenue for the quarter compared to $37 6 million last year. The year over year decline is primarily due to an 800000 or 17, 3% reduction in frequent advertising revenue the.

The decline in <unk> is consistent with the decline we reported in the first quarter of this year and the decline we expect to see going forward last month, we announced our decision to exit a shared mail a delivery partnership are delivering weekly preprinted inserts on August 31 of this year.

After the elimination of associated expenses, including employee related expenses, we expect the impact to the bottom line to be net neutral.

Digital advertising and marketing services revenue was down 100000, or one 9% year over year.

Circulation revenue decreased $300000 compared to Q2 of last year. The print circulation revenue decline of $900000 or six 6% was partially offset by a digital only subscription revenue increase of $600000 or 18, 5%.

As of June 30th the news had 68000 846000 digital only subscribers, which is a 6158 or nine 8% year over year improvement.

However, we did have a slight sequential decline in our digital only subscribers.

Grant will provide some additional comments on the overall digital subscriber trends.

Total subscribers, including both home delivery and digital with 142436 as of June 30th compared to 146065 as of Q2 of last year and 145369 as of March 31.

On a non-GAAP basis total adjusted operating expense for the quarter was $36 3 million, an improvement of $2 3 million or six 1% when compared to last year.

This was driven by expense savings of $1 2 million of distributions 600000 related to a nonrecurring lease cost benefit we recognized this quarter.

$500000 in outside services and 200000 of newsprint.

Regarding distribution expense the year over year decrease was driven by our decision to eliminate the Bulldog and briefing Saturday print editions in.

In addition, with the recent announcement of the discontinuation of the breathing and L. D. A publications at the end of August the company will experience additional savings for the remainder of the year.

Turning to news print expense the newsprint purchase price has recently been trending favorably down with our latest pricing of $715 per metric ton of June a decrease of $7 30 per metric ton or 1% when compared to this time last year.

This last month was the lowest average newsprint purchase price we've seen since April of last year, and we expect to continue to see expense favorability as newsprint is consumed.

As of June 30th head Count was 644 down 27 head count compared to last year cash and short term investments was $22 6 million on June 30th.

This quarter, we were public we recorded approximately $400000 in severance expense related to the 13 terminations announced in late June June ending head count of 644 does not reflect these terminations.

In addition, as of July 21, we show $25 million in cash, including short term investments.

For the quarter. The company recorded a 26000 of tax expense for the Texas franchise tax.

Lower this quarter, primarily due to the reversal of a <unk>.

They recorded uncertain tax position, which had expired.

In Q2, we paid 609000 of Texas franchise tax for fiscal year 2022.

I will now turn the call over to grant.

Thank you Katie and good morning, everyone I want to expand on our decision to exit the Wednesday preprint business, we expected to continue to see the declines in preprint advertising. When we entered 2023. However, the declines have been greater than we anticipated.

When the contract with our preprint partner came up for renewal in June we made the decision to exit this line of business to allow us more visibility into our revenue.

Providing more detail medium giants revenue associated with the Wednesday Preprint program declined by $2 $3 million year to date through June which accounted for more than the total advertising decline of all of them medium giant which was $2 $2 million by.

By executing this line of business, we can rightsize, our expense structure and realign the medium giant sales resources it was towards the products our clients value most.

Decision was affirmed when kroger, the nation's largest grocery store chain announced in may that they would be exiting the preprint business in favor of digital solutions medium giant is well positioned towards digital portfolio of marketing solutions to help advertisers like kroger well into the future with its marketing strategies that provide a return.

On investment for our clients.

These strategic changes that medium giant were led by John Kiker, the new President of medium giant who we announced in May John comes to us from the integer group, where he spent the last 11 years and most recently was president for the agency.

<unk> is owned by Omnicom, one of the world's most respected agency holding companies in a place where John learned how to run profitable and sustainable agency models.

We're so happy to have him.

Shifting our focus to the morning news I was pleased to see our digital audiences begin to grow again following an audience decline that occurred late in the pandemic R.

Our visitors to Dallas News Dot com have increased by 8% this year, allowing us to grow our digital membership base and our digital advertising related to the website.

Third our digital membership volume momentum slowed down in the second quarter.

Two contributing factors that led to this decline. The first is the result of holiday promotions. We ran in December of last year, where we have significant starts from a six month introductory offer when those introductory prices expired and they began to pay full price we had higher cancellation volumes than we had experienced with past discount.

It offers.

The second contributing factor to our digital membership decline as seasonality our digital traffic is always lower in the summer and we will rebound as families returned to regular routines in August when kids return to school.

The Texas football season begins.

Digital memberships will remain an essential part of our business strategy moving forward and we will continue to optimize between volume and price as we grow this important line of revenue for the company.

Greg We will now open up the line for questions.

Okay, ladies and gentlemen, if you'd like 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 if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one then zero at this time and one moment. Please.

And at this time there are no questions.

Alright, well, Greg will thank you I'd like to thank everyone for joining us on our second quarter call.

We hope you all have an enjoyable remainder of your summer and we will speak with you after the end of our third quarter.

In late October Thank you bye bye.

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.

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