Q1 2024 DallasNews Corporation Earnings Call

Speaker Change: [music].

Yeah.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Dallas News Corporation's earnings 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. Should you require assistance during the call, please press a star, then zero, and an operator will assist you offline.

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Dallas News Corp's earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer and instructions will be given at that time should you require assistance during the call. Please press.

Speaker Change: Star then zero and then operate Rader, while assist you offline as a reminder, your conference is being recorded.

Operator: As a reminder, your conference is being recorded. I would now like to turn the conference over to your host, Gary Cobleigh. Please go ahead.

Speaker Change: And I'd like to turn the conference over to your host Gary Copley. Please go ahead.

Gary Cobleigh: Good morning, everyone. This is Gary Cobleigh, Vice President and Controller of Dallas News Corporation. Welcome to our first quarter 2024 investor call. I'm joined by Katie Murray, President of Dallas News, who will be reviewing the financial results, and Grant Moise, Chief Executive Officer, who will provide brief business remarks. Kathy Collins, Dallas News' chief financial officer, is unable to attend today's call but will be available for a second quarter investor call.

Gary Cobleigh: Good morning, everyone. This is Gary <unk>, Vice President and controller of Dallas News Corporation welcome to our first quarter 2024 investor call on.

Gary Cobleigh: I'm joined by Katie Murray President of Dallas News, who will be reviewing the financial results and grant Louise Chief Executive Officer, who will provide brief business remarks, Kathy Collins Dallas News as Chief Financial Officer is unable to attend today's call, but will be available for our second quarter investor call.

Gary Cobleigh: Earlier this week, we issued a press release announcing the company's plan to move our printing operations from Plano to a smaller facility in Carrollton. Katie and Grant will provide additional clarity on this announcement in a moment. Yesterday afternoon, we issued a press release announcing first quarter 2024 results, and we followed with our first quarter 10Q. All of these are posted on our website, dallasnewscorporation.com, under the investor relations section.

Speaker Change: Earlier this week, we issued a press release announcing announcing the company's plan to move our printing operations complaining to smaller facility in Carrollton.

Speaker Change: Grant will provide additional clarity on this announcement in a moment.

Speaker Change: Yesterday afternoon, we issued a press release announcing first quarter 2024 result, and we've talked about our first quarter 10-Q. All of these are posted on our website Dallas News Corporation Dot com under the Investor Relations section.

Gary Cobleigh: Unless otherwise specified, comparisons used on today's call measure first quarter 2024 performance against first quarter 2023. 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.

Speaker Change: Unless otherwise specified comparisons used on todays call measure first quarter 2020 for performance against first quarter 2023 performance.

Speaker Change: Our discussion today will include forward looking statements.

Speaker Change: <unk> looking statements are subject to risks uncertainties and other factors that could cause actual results to differ materially from those statements.

Speaker Change: The company assumes no obligation to update the information in this communication, except as otherwise required by law.

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

Gary Cobleigh: Additional information about these factors is detailed in the company's press releases and publicly available filings with the FCC. 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 Kate.

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.

Speaker Change: A reconciliation of GAAP to non-GAAP financial measures is included with our press release I'll now turn the call over to Katy.

Mary Kathryn Murray: Good morning everyone, and thank you for joining today's call. I'm going to start with a discussion of the company's first quarter results and then provide financial commentary on our Printing Operations announcement before I turn the call over to Grant. On a GAAP basis for the quarter, Dallas News Corporation reported a net loss of $1.4 million, or $0.25 per share, and an operating loss of $1.8 million. In Q1 last year, we reported a net loss of $2.6 million and an operating loss of $2.8 million.

Katy: Good morning, everyone and thank you for joining today's call.

Mary Kathryn Murray: On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $800,000, or an improvement of 1.4 million, or 64%, when compared to an adjusted operating loss of 2.2 million reported for the same period last year.

Katy: I'm going to start with a discussion of the company's first quarter results and then provide financial commentary on our printing operations announcement before I turn the call over to grant.

Mary Kathryn Murray: The improvement is primarily due to expense savings of $2.5 million in distribution, $1.6 million in employee comp and benefits, and $900,000 in newsprint, partially offset by a total revenue decline of $4.1 million. We reported $31.1 million of total revenue for the quarter compared to $35.2 million last year. The decline is primarily due to a 3.7 million or 39.3% decrease in print advertising revenue, driven by the company's strategic decision last year to discontinue our shared mail program and print-only editions of our niche publications. Excluding the shared mail and publications impact, all other advertising and marketing services revenue increased $100,000 or 1%.

Mary Kathryn Murray: Circulation revenue increased $300,000 compared to Q1 of last year. The digital-only subscription revenue increase of $900,000, or 25.2%, offset the print circulation revenue decline of $600,000, or 5%. As of March 31, the News had 62,434 digital-only subscribers, which is a 6,616, or 9.6% year-over-year decline. While digital subscribers declined, the increase in digital-only subscription revenue is a positive result of the company's focus on finding the optimal balance of volume and price. Total subscribers, including both home delivery and digital, were 129,857 as of March 31, and that compares to 132,694 at the end of last year and 145,369 in March of last year.

Speaker Change: On a GAAP basis for the quarter Dallas News Corporation reported a net loss of $1 4 million or <unk> 25 per share and an operating loss of $1 8 million in Q1 last year, we reported a net loss of $2 6 million and an operating loss of $2 8 million.

Speaker Change: On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $800000 or an improvement of $1 4 million or 64% when compared to an adjusted operating loss of $2 2 million reported for the same period last year.

Speaker Change: The improvement is primarily due to expense savings of $2 5 million in distributions.

Speaker Change: One 6 million in employee comp and Ben and $900000 in newsprint, partially offset by a total revenue decline of $4 1 million.

Mary Kathryn Murray: Printing, distribution, and other revenue was $3.2 million, a decrease of $700,000 or 18.7% when compared to the first quarter of last year, primarily due to a decline in commercial printing and distribution revenue, as well as mailed advertisements for business customers. On a non-GAAP basis, total adjusted operating expense of the quarter was $31.9 million, an improvement of $5.5 million, or 14.7%, when compared to the same period last year, driven by expense savings of $2.5 million in distribution, primarily resulting from the shared mail program and niche publication changes made in the third quarter of last year, $1.6 million in employee compensation and benefits, and $900,000 in newsprint. Newsprint expenses were favorable year-over-year as a result of lower circulation, and the newsprint purchase price has continued to trend favorably. The cost of newsprint in March was $615 per metric ton, a 24.7% year-over-year decrease.

Speaker Change: We reported $31 1 million of total revenue for the quarter compared to $35 2 million last year.

Mary Kathryn Murray: We expect to continue realizing these savings in the second quarter, but pricing may level off later this year. As of March 31st, headcount was 531, down 121 headcount compared to last year, resulting from the Voluntary Service Program we offered to participants in 2023 and the additional first quarter headcount reductions made within Medium Giant. Cash and short-term investments were $18.4 million on March 31st. And as of last Friday, May 10th, we had $19 million in cash and cash equivalents. For the quarter, the company recorded $200,000 of tax expense for the Texas Franchise Tax. We expect to pay approximately $540,000 of Texas Franchise Tax for fiscal year 2023 later this month.

Mary Kathryn Murray: On Tuesday, we announced the streamlining and relocation of our print operations to a smaller facility. This decision is a key step in our return to profitability. The transition is expected to be completed in early 2025 and once completed, will lead to approximately $5 million in annualized operating expense savings. These savings will be generated from a reduction in headcount of about 85 employees and other operating expense reductions related to the facility move.

Speaker Change: The decline is primarily due to a $3 7 million or 39, 3% decrease in print advertising revenue.

Mary Kathryn Murray: Over the next eight months, we will be making an estimated $8 million of capital investment in a press and other related equipment. Given the investment, the Board of Directors has decided to suspend the declaration and payment of dividends until further notice. I was pleased to see the financial progress we made in the first quarter and am looking forward to the successful transition of our print operations to a more efficient and streamlined process. I will now turn the call over to Graeme.

Speaker Change: Driven by the company's strategic decision last year to discontinue our shared mail program and print only additions of our niche publications.

Grant S. Moise: Thanks, Katie, and good morning, everyone. The favorable first quarter results, coupled with the recent announcement to streamline our printing operations, reflect management's and our board's steadfast commitment to returning to a sustainably profitable business, as outlined in our return to growth plan. In the first quarter, I was particularly pleased with our revenue performance. Medium Giants revenue from continued operations grew 1% in the first quarter, which is an encouraging sign that we're delivering on the products and services our clients value most.

Grant S. Moise: This growth also assures me we made the right move in exiting our shared mail business last year since advertiser interest was waning, and it's allowed our medium-sized sales team to focus on more relevant marketing solutions. The first quarter also provided evidence that the print advertising business is resilient. When we look at it without the pre-print business, our ROP revenue remained flat compared to the prior year, which continues a multi-year trend of ROP stability.

Speaker Change: Excluding the shared mail and publications impact all other advertising and marketing services revenue increased $100000 or 1%.

Grant S. Moise: I'm also encouraged by the circulation revenue growth we saw in the first quarter. Circulation revenue improved 1.8% year-over-year. This growth was driven by our focus on charging a premium price for our digital content, but we also know that we will need to continue to find the optimal balance that Katie was referring to between price and volume. Our headwinds in digital volume were expected during this time since we shortened our introductory pricing in the second half of last year.

Speaker Change: Circulation revenue increased $300000 compared to Q1 of last year. The digital only subscription revenue of not increase of 900000 or 25, 2%.

Grant S. Moise: And as we look forward, we will focus on a sustainable strategy that balances price with the ability to continue to grow our digital subscriber base. Shifting our attention to our announcement on Tuesday that we'll be moving our print operation to a facility that is to measure it against our current volumes, I want to focus on two specifics of that decision. The first is the financial improvements Katie mentioned, and the second is the opportunity to monetize the North Plant property.

Speaker Change: Upset the print circulation revenue decline of $600000 or 5%.

Grant S. Moise: Our financial improvement in our business operations is an important component of this decision. I am confident we can improve our operating expenses by $5 million annually, which will play a significant role in returning the company to profitability. As we have shown over the past four quarters, we are improving our adjusted operating loss consistently. This estimated $5 million improvement from the facility change, when combined with our ongoing improvement from current operations, gives me confidence that we're moving in the right direction financially.

Speaker Change: As of March 31, the news had 62434 digital only subscribers, which is a 6616 or nine 6% year over year decline.

Speaker Change: While subscription digital subscribers declined the increase in digital only subscription revenue as the positive result of the company's focus on finding the optimal balance of volume and price.

Total subscribers, including both home delivery and digital was 129857 as of March 31, and that compares to 132694 as of the end of last year and 145369 as of March of last year.

Speaker Change: Printing distribution and other revenue was $3 2 million a decrease of 700000 or 18, 7% when compared to the first quarter of last year, primarily due to a decline in commercial printing and distribution revenue as well as mailed advertisement for business customers.

On a non-GAAP basis total adjusted operating expense for the quarter was $31 9 million an improvement of $5 5 million or 14, 7% when compared to the same period last year.

Speaker Change: Given by expense savings of $2 5 million in distributions, primarily resulting from shared from the shared mail program and niche publication changes made in the third quarter of last year, $1 6 million in employee compensation and benefits and $900000 in newsprint.

Speaker Change: Newsprint expenses favorable year over year as a result of lower circulation in the newsprint purchase price has continued to trend favorably the cost of newsprint and March was $615 per metric ton, a 24, 7% year over year decrease.

Speaker Change: We expect to complete we expect to continue realizing these savings in the second quarter, but pricing may level off later this year.

Speaker Change: As of March 31, headcount was 531 down 121 head count compared to last year, resulting from the voluntary severance program. We offered to participants in 2023 and the additional first first quarter head count reductions made within medium giant.

Speaker Change: Yeah.

Speaker Change: Cash and short term investments were $18 4 million on March 31, and as of last Friday may 10th we had $19 million in cash and cash equivalents.

Speaker Change: For the quarter the company recorded $200000 of tax expense for the Texas franchise tax we expect to pay approximately $540000 of tax Texas franchise tax for fiscal year 2023 later this month.

Speaker Change: On Tuesday, we announced the streamlining and relocation of our print operations to a smaller facility.

Speaker Change: This decision is a key step in our return to profitability.

Speaker Change: The transition is expected to be completely completed in early 2025, and once completed will lead to approximately $5 million in annualized operating expense savings. These savings will be generated from a reduction in head count of about 85 employees and other operating expense reductions.

Speaker Change: Production related to the facility move.

Over the next eight months, we will be making an estimated $8 million of capital investment in a press and other related equipment.

Speaker Change: Given the investment the board of directors decided to suspend the declaration and payment of dividends until further notice.

Speaker Change: I was pleased to see the financial progress we've made in the first quarter and then looking forward to the successful transition of our print operations to a more efficient and streamlined process I will now turn the call over to grant.

Grant: Thanks, Katie and good morning, everyone. The favorable the favorable first quarter results coupled with the recent announcement to streamline our printing operations reflect management and our board and steadfast commitment to returning to a sustainably profitable business outlined in our return to growth plan in the first quarter I was particularly.

Grant: We are pleased with our revenue performance medium Giants revenue from continued operations grew 1% in the first quarter, which is an encouraging sign that we're delivering on the products and services our clients value most.

Grant: Also assures me we've made the right move and exiting our shared mail business last year since advertiser interest was waning and it's allowed our medium giant sales team to focus on more relevant marketing solutions. The first quarter also provided evidence that the print advertising business is resilient when we look at it without the preprint.

Grant: Business, our Aro P revenue remained flat compared to prior year, which continues the multi year trend of Aro piece stability.

Speaker Change: I'm also encouraged by the circulation revenue growth we saw in the first quarter circulation revenue improved one 8% year over year. This growth was driven by our focus on charging a premium price for our digital content, but we also know that we will need to continue to find the optimal balance the kt was referring to between price and volume.

Our headwinds and digital volume were expected during this time since we shortened our introductory pricing in the second half of last year and as we look forward, we will focus on a sustainable strategy that balances price with the ability to continue to grow our digital subscriber base.

Speaker Change: Shifting our attention on Tuesday to our announcement on Tuesday that we will be moving our print operation to a facility that is commensurate with our current volumes I wanted to focus on to specifics of that decision first is the financial improvements JD mentioned and the second is the opportunity to monetize the north plant.

Speaker Change: D R.

Speaker Change: Our financial improvement in our business operations is an important component of this decision I am confident we can improve our operating expense by $5 million annually, which will play a significant role in returning the company to profitability as we have shown over the past four quarters, we are improving our adjusted operating loss.

Speaker Change: <unk> consistently this estimated 5 million dollar improvement from this facility change when combined with our ongoing improvement from current operations gives me confidence that we're moving in the right direction financially.

Grant S. Moise: This decision also allows us to patiently weigh our options with the 29-acre property in Plano, which is zoned as a light industrial property. Light industrial zoning provides a variety of options for the North Plant, including the potential use as a data center or other types of logistics operations that are popular in our e-commerce-driven society. It will take us at least 8 months to get the new facility in Carrollton up and running, and while we're getting that operation moving, we will immediately start looking at the best options for how to monetize the Plano property.

Speaker Change: The decision also allows us to patiently weigh our options with the 29 acre property in Plano, which is zoned as a light industrial property light industrial zoning provides a variety of options with the north plant, including the potential use as a data center or other types of logistics operation that are popular.

Speaker Change: And our E Commerce driven society.

Speaker Change: It will take us at least eight months to get the new facility in Carrollton up and running and while we're getting that operation.

Speaker Change: Moving we will immediately start looking at the best options for how to monetize the Plano property overall I see encouraging signs in both our first quarter operating metrics and our long term strategic moves highlighted by the transition to more efficient print operations all of these moves.

Grant S. Moise: Overall, I see encouraging signs in both our first quarter operating metrics and our long-term strategic moves, highlighted by the transition to more efficient print operations. All of these moves are motivated by our desire to build a sustainable media and marketing company that supports excellent local journalism. The excellence of our journalism was recognized over the first quarter with a myriad of awards we won, ranging from winning the Newspaper of the Year in Texas by the Texas Managing Editors to also winning national awards for the amazing work we did last year with our Deadly Fake series, which focused on the fentanyl epidemic happening throughout North Texas.

Speaker Change: Motivated by our desire to build a sustainable media and marketing company that supports excellent local journalism.

Speaker Change: The excellence of our journalism was recognized over the first quarter with a myriad of awards, we won ranging from winning the newspaper of the year in Texas by the Texas Managing editors to also winning National Awards for the Amazing work, we did last year with our deadly fake series, which focused on the fentanyl epidemic happening throughout North Texas.

Grant S. Moise: Last but not least, we added an important role to our company last month with the announcement of Stephen Buckley as the new public editor of the Dallas Morning News. My team and I felt it was time to do something bold to address the lack of trust in the media. So we put this unique position in place to help bridge the gap between the public and our newsroom. The early response to this initiative has been encouraging, which we hope leads to greater trust in the media and ultimately to improved subscription acquisition and retention. Lois, we'll now open it up to questions. Thank you, and Ladies and Gentlemen. That's a good question.

Speaker Change: Last but not least we added an important role to our company last month with the announcement of Steven Buckley as the new public editor of the Dallas morning News My team and I felt it was time to do something bold to address the lack of trust in the media. So we put this unique position in place to help bridge the gap between the public and our newsroom.

Speaker Change: The early response to this initiative has been encouraging which we hope leads to greater trust in the media and ultimately to improved subscription acquisition and retention.

Speaker Change: Lewis, let's now open it up to questions.

Speaker Change: Okay.

Operator: Thank you, and ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your touchtone phone. You will hear an acknowledgement tone that you've been placed in a queue, and you may remove yourself from the queue at any time by repeating the 1-0 command.

Speaker Change: Thank you and ladies and gentlemen, if you wish to ask a question. Please press <unk> one.

Speaker Change: Zero on your Touchtone phone you will hear an acknowledgment Tom that you've been place. Thank you and you may remove yourself from queue at any time by repeating the ones they will come and go.

Operator: And if you're on a speakerphone, please pick up your handset before pressing the number. Once again, if you have a question, please press 1 then 0 at this time. We'll have a moment for our first question.

Speaker Change: And if you're on a speakerphone. Please pick up your handset before pressing the number once again if you have a question. Please press in London zero at this time.

Speaker Change: And one moment for your first question.

Speaker Change: Yeah.

Speaker Change: You do have a question on <unk>.

Speaker Change: London Zero.

Speaker Change: Yeah.

Operator: Lois, well, thank you. I'd like to thank everyone for joining our call today. Thank you for listening, and obviously, as we said, we had recorded this, and it will be available on the website. And we look forward to updating everyone on our second quarter 2024 earnings call, which will be held sometime later in the summer. Thank you, everyone. Thank you, and ladies and gentlemen, that does conclude your conference for today and the AT&T Teleconference.

Speaker Change: Lowest well thank you.

Speaker Change: I'd like to thank everyone for joining our call today. Thank you for listening and obviously as we said we had recorded this and it will be available.

Speaker Change: On the website.

Speaker Change: And we look forward to updating everyone on our second quarter 2024 earnings call, which will be held sometime later in the summer.

Speaker Change: Thank you everyone.

Operator: Thank you, and 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.

Speaker Change: Thank you and 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.

Operator: We're sorry, your conference is ending now. Please hang up.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: We're sorry your conferences ending now please hang up.