Q1 2025 DallasNews Corp Earnings Call
Okay.
Operator: Hello and welcome to the Dallas News quarter 2025 invest. All lines have been placed on mute to prevent any back.
Hello, and welcome to the Dallas News Corporation first quarter 2025 Investor call.
Lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time. Please press star one on your telephone keypad.
Operator: I would like to ask a question during press star one on your telephone keypad.
Gary Cobleigh: I would now like to turn the conference over Gary Cobleigh, Vice President and Controller. Good morning, everyone. This is Gary Cobleigh, Vice President and Controller of Dallas News Corporation.
I would now like to turn the conference over to Gary Copley, Vice President and controller you may begin.
Speaker Change: Good morning, everyone. This is Gerry Connolly, Vice President and controller, a Dallas News Corporation welcome to our first quarter 2025 investor call.
Gary Cobleigh: Welcome to our first quarter 2025 investor I'm joined by Cathy Collins, Dallas News' Chief Financial Officer, who will be reviewing financial results, Katie Murray, President of Dallas News, and Grant Moise, Chief Executive Officer, who will provide brief business remarks.
Speaker Change: I'm joined by Kathy Collins, Dallas News, Chief Financial Officer, who will be reviewing financial results.
Murray: Murray President of Dallas News, and Grant Bowie, Chief Executive Officer, who will provide brief business remarks, yes.
Gary Cobleigh: Yesterday afternoon we issued a press release announcing first quarter 2025 results and filed our first quarter 10-Q. Both of these are posted on our website, dallasnewscorporation.com, under the Investor Relations section. Unless otherwise specified, comparisons used on today's call measure first quarter 2025 performance against first quarter 2024.
Murray: Yesterday afternoon, we issued a press release announcing first quarter 2025 results.
Murray: We filed our first quarter 10-Q.
Murray: These are posted on our website Dallas News Corporation Dot com under the Investor Relations section.
Murray: Unless otherwise specified comparisons used on todays call measure first quarter 2025 performance against first quarter 2020 for performance.
Gary Cobleigh: Our discussion today will include forward-looking statements, including statements concerning our transition of print operations and associated expense savings, our business outlook or future economic performance, revenues, expenses, cash balance, investments, business initiatives, working capital, and other financial and non-financial items that are not historical facts. Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those statements, including those identified in the earnings release we issued yesterday.
Murray: Our discussion today will include forward looking statements.
Murray: Including statements concerning our transition of print operations and associated expense savings our business outlook future economic performance revenues expenses cash balance investments business initiatives working capital and other financial and nonfinancial items that are not historical facts.
Murray: Forward looking statements are subject to risks uncertainties and other factors that could cause actual results to differ materially from those statements, including those identified in the earnings release, we issued yesterday.
Gary Cobleigh: 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.
Murray: The company assumes no obligation to update the information in this communication, except as otherwise required by law.
Murray: Additional information about these factors is detailed in the company's press releases and publicly available filings with the SEC.
Gary Cobleigh: 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.
Murray: 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.
Murray: A reconciliation of GAAP to non-GAAP financial measures is included with our press release.
Catherine Collins: I will now turn the call over to Catherine. Good morning, everyone, and thank you for joining today's call. On a gap basis for the quarter, Dallas News Corporation reported net income of $28.3 million or $5.28 per share and operating income of $34.2 million, which includes a net gain of $36.2 million from the Plano Printing Facility sale.
Kathy Collins: I'll now turn the call over to Kathy.
Kathy Collins: Good morning, everyone and thank you for joining today's call.
Kathy Collins: On a GAAP basis for the quarter Dallas News Corporation reported net income of $28 $3 million or $5 28 per share and operating income of $34.2 million, which includes a net gain of $36 2 million from the Plano printing facility sale.
Catherine Collins: In the first quarter last year, we reported a net loss of $1.4 million and an operating loss of $1.8 million. On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $1.2 million, a decrease of $400,000 when compared to an adjusted operating loss of $800,000 reported for the same period last year. The decline is primarily due to a total revenue decrease of $2 million, partially offset by expense savings of $1.2 million in employee compensation and benefits. We reported total revenue of $29.1 million compared to $31.1 million reported for Q1 last year. Advertising and Marketing Services revenue was $10.8 million, a decrease of $800,000 or 7.2% compared to $11.6 million reported last year, and is primarily due to a print advertising revenue decline of $700,000 or 12.2%.
Kathy Collins: In the first quarter last year, we reported a net loss of $1 $4 million and an operating loss of $1 8 million.
Kathy Collins: On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $1 2 million a decrease of $400000 when compared to an adjusted operating loss of 800000 reported for the same period last year.
Kathy Collins: The decline is primarily due to a total revenue decreased $2 million.
Kathy Collins: Partially offset by expense savings of $1 2 million in employee compensation and benefits.
Kathy Collins: We reported total revenue of $29 1 million compared to $31 1 million reported for Q1 last year.
Kathy Collins: Advertising and marketing services revenue was $10 8 million a decrease of 800000 or seven 2% compared to $11 6 million reported last year and is primarily due to a print advertising revenue decline of $700000 or 12, 2%.
Catherine Collins: Circulation revenue was $15.4 million, a decrease of $900,000 or 5.2% compared to the $16.3 million reported last year. The decline is primarily due to a print circulation revenue decrease of $700,000 or 6%. Total membership, including both print and digital, was 125,972 as of March 31, compared to 126,973 as of December 31, and 129,857 as of March last year. Digital only subscriptions of 65,028 reflect an increase of 1.1% as of March 31st compared to December 31st, and an increase of 4.2% compared to March of last year.
Kathy Collins: Circulation revenue was $15 4 million a decrease of 900000 or five 2%.
Kathy Collins: To the $16 3 million reported last year.
Kathy Collins: The decline is primarily due to a print circulation revenue decrease of $700000 or 6%.
Kathy Collins: Total membership, including both print and digital was 125972 as of March 31, compared to 126973 as of December 31st.
Kathy Collins: 129857 as of March last year.
Kathy Collins: Digital only subscriptions of 65028, reflecting an increase of one 1% as of March 31, compared to December 31st and an increase of four 2% compared to March of last year. Shortly grant will provide additional commentary on our digital strategy to drive additional member.
Catherine Collins: Shortly, Grant will provide additional commentary on our digital strategy to drive additional membership volume. On a non-GAAP basis, total adjusted operating expenses for the quarter improved $1.6 million due to employee compensation and benefits expense savings of $1.2 million. As of March 31st, total headcount was 461, down 70 compared to last year, primarily resulting from the transition to a smaller, more efficient printing facility requiring less staff. Consistent with interim periods, the company uses the estimated annual effective tax rate method and recorded $6 million of tax expense for the quarter due to an estimated $600,000 for the Texas Franchise Tax and the $36.2 million gain generated from the sale of the Plano property.
Kathy Collins: Ship volume.
Kathy Collins: On a non-GAAP basis total adjusted operating expenses for the quarter improved $1 $6 million due to employee compensation and benefits expense savings of $1 2 million.
Kathy Collins: As of March 31st total head Count was 461 down 70 compared to last year, primarily resulting from the transition to a smaller more efficient printing facility requiring less staff.
Kathy Collins: Consistent with interim periods. The company company uses the estimated annual effective tax rate method and recorded $6 million of tax expense for the quarter due to an estimated $600000 for the Texas franchise tax and the $36 $2 million gain generated from the sale of the Plano.
Kathy Collins: Property. However, the utilization of our net operating loss carryforwards will reduce our cash taxes to approximately $700000 for federal and state purposes.
Catherine Collins: However, the utilization of our net operating loss carry forwards will reduce our cash taxes to approximately $700,000 for federal and state purposes. The Plano Properties sale strengthened our balance sheet, and at the end of March, cash and cash equivalents were $44.2 million.
Kathy Collins: The Plano property sales strengthened our balance sheet and at the end of March cash and cash equivalents were $44 $2 million and as of the end of April 25th following the pension funding, we had $36 million in cash and cash equivalents.
Catherine Collins: And at the end of April 25, following the pension funding, we had $36 million in cash and cash equivalents.
Katie Murray: I will now turn the call over to Katie. Thank you, Kathy. Good morning, everyone, and thank you for joining today's call. We are pleased with the progress we've made so far in 2025 on two key initiatives that were significant milestones in our return to growth plan. As noted on our 2024 year-end call, the sales of Plano property provided us the required capital to fully fund our pension plan. In April, we were able to utilize approximately $10 million of company funds, along with $132 million in plan assets to purchase an annuity contract. The transition of the full administration of the plan is in process and will be completed by July 1.
Katy: I will now turn the call over to Katy.
Katy: Thank you Kathy.
Speaker Change: Good morning, everyone and thank you for joining today's call. We are pleased with the progress. We've made so far in 2025 on two key initiatives that were significant milestones in our return to growth plan.
Katy: As noted on our 2024 year end call the sale of the Plano property provided us the required capital to fully fund our pension plan and.
Katy: In April we were able to utilize approximately $10 million of company bonds.
Speaker Change: Along with $132 million in plan assets to purchase an annuity contract.
Speaker Change: The transition of the full administration of the plan is in process and will be completed by July 1st.
Katie Murray: We are thrilled that we have been able to fully fund our pension obligations, which has been a priority for the board, to secure the retirement benefits of former and current employees who have dedicated so many years of service to the company. As of the end of April, we have fully transitioned our print operations to our smaller, more efficient lease facility. Starting in May, we will begin to realize planned expense savings relating to this transition since this will be our first full month no longer operating in dual facilities. As Kathy noted, as of April 25th, we had approximately $36 million in cash on the balance sheet as the result of the sale of our last piece of real estate.
Speaker Change: We are thrilled that we have been able to fully fund our pension obligations, which has been a priority for the board to secure the retirement that a bit.
Speaker Change: Of former and current employees, who have dedicated so many years of service to the company.
Speaker Change: As at the end of April we have fully transitioned our print operations to our smaller more efficient leased facility.
Speaker Change: Starting in May we will begin to recognize.
Speaker Change: Realized play in savings planned expense savings relating to this transition.
Speaker Change: This will be our first full month no longer operating in dual facilities.
Kathy Collins: As Kathy noted as of April 20, <unk>, we had approximately $36 million in cash on the balance sheet.
Kathy Collins: As a result of the sale of our last piece of real estate.
Katie Murray: As the board continues to discuss capital allocation strategies of one, investing back into the business to drive digital revenue growth, and two, returning capital shareholders, we are also continuing to carefully monitor the economy to see how changes in economic policies and tariffs may impact not only our business, but also the advertising and marketing budgets of our clients, as well as the impact For more information visit www.fema.gov of the cost savings we expect to realize as a result of the Plano sale. I am very pleased with the realization of these two important milestones within our return to growth plan and feel confident this puts us on a better trajectory moving forward.
Kathy Collins: As the board continues to discuss capital allocation strategies of one <unk>.
Kathy Collins: Investing back into the business to drive digital revenue growth and to returning capital shareholders. We are also continually to carefully we are continuing to carefully monitor.
Kathy Collins: The economy does see how changes in economic policies and tariffs may impact not only our business, but also the advertising and marketing budgets of our clients as well as the impact.
Of the cost savings, we expect to realize as a result of the Plano sale.
Kathy Collins: I am very pleased with the realization of these two important milestones within our return to growth plan and feel confident this puts us on a better trajectory moving forward I will now turn the call over to grant. Thanks, Katie and good morning, everyone as Katy mentioned, our commitment to fulfill our pension obligations has always been one of our top priorities and we're proud.
Grant Moise: I will now turn the call over to Grant. Thanks, Katie, and good morning, everyone. As Katie mentioned, our commitment to fulfill our pension obligations has always been one of our top priorities, and we're proud that we were able to take care of these employees who gave so much to the company over their many years of service. Eliminating our pension obligation is also a benefit to our shareholders because it eliminates our last source of debt and the need for any future contributions. Eliminating this debt will give investors clearer visibility on how to value our company as we continue to get closer to operating profitably.
Speaker Change: But we were able to take care of these employees, who gave so much to the company over there are many years of service.
Speaker Change: Eliminating our pension obligation is also a benefit to our shareholders because it eliminates our last source of debt.
Speaker Change: Need for any future contributions eliminating this debt will give investors clear visibility on how to value our company as we continue to get closer to operating profitably.
Grant Moise: Turning to Medium Giant, the agency's contribution to the company continues to improve year over year with an operating income increase of $600,000. As we've discussed on prior calls, last year we introduced segment reporting, which was designed to break out the agency business separate from the traditional Dallas Morning News business. Segment reporting has given us better visibility into aligning costs with revenues. We believe there is additional opportunity for margin improvements, and we continue to focus on growing revenues with larger, more profitable accounts at Medium Giant. The expansion of the medium giant agency operating margin is a priority and its improvement is a result of two new large clients being added and a disciplined approach to expense management.
Speaker Change: Turning to medium giant the agency's contribution to the company continues to improve year over year with an operating income increase of $600000.
Speaker Change: As we've discussed on prior calls last year, we introduced segment reporting which was designed to breakout the agency business separate from the traditional Dallas morning News business.
Speaker Change: <unk> reporting is giving us better visibility into aligning costs with revenues. We believe there is additional opportunity for margin improvements and we continue to focus on growing revenues with larger more profitable accounts at medium giant.
Speaker Change: The expansion of the medium giant agency operating margin is a priority.
Speaker Change: Improvement is a result of new large clients being added and a disciplined approach to expense management. In addition to the agency medium giant did see softness in our print advertising related to the Dallas morning News, which was down 12, 2% on a year over year basis I was happy to see this.
Grant Moise: In addition to the agency, Medium Giant did see softness in our print advertising related to the Dallas Morning News, which was down 12.2% on a year-over-year basis. I was happy to see this trend start to improve in April, but as Katie mentioned, we continue to monitor how our clients are responding to these uncertain economic conditions. The softness in the economy often presents itself in the print advertising line first because clients are able to stop this method of advertising more quickly than they are others.
Speaker Change: Start to improve in April, but as Katie mentioned, we continue to monitor how our clients are responding to these uncertain economic conditions.
Speaker Change: The softness in the economy, often presents itself in the print advertising line first because clients are able to stop this method of advertising more quickly than they are others.
Grant Moise: Turning to digital membership, while digital volume grew slightly quarter over quarter, the growth has been slower than we expected.
Speaker Change: Turning to digital membership, while digital volume grew slightly quarter over quarter. The growth has been slower than we expected we knew the transition to our new dynamic paywall that occurred in March would take time for the AI algorithms to learn the uniqueness of our audience, but it took a little bit longer than we expected now.
Grant Moise: We knew the transition to our new dynamic paywall that occurred in March would take time for the AI algorithms to learn the uniqueness of our audience, but it took a little bit longer than we expected. Now that the tool is established, we are seeing the results we were expecting with a 16% lift in starts coming from the new paywall versus our former meter strategy. In addition to the paywall, we have also been rolling out our new video player and user commenting tools across the site. Both tools are intended to increase user engagement while adding a premium source of digital advertising revenue.
Speaker Change: The tool is established we are seeing the results we were expecting with a 16% lift and starts coming from the new payroll versus our former meters strategy. In addition to the paywall. We have also been rolling out our new video player and user user commenting tools across the site both tools.
Speaker Change: Our intended to increase user engagement, while adding a premium source of digital advertising revenue.
Grant Moise: The board and I remain confident in our return to growth plan, and the second quarter is an important milestone in our plan for this year to ensure the expense savings from our printing transition will materialize as planned. In addition to these expense savings, we are considering where we need to invest in the business to deliver sustainable revenue growth. The investments we plan to evaluate will likely range from portfolio expansion to the continued evolution of our digital products and features. However, the timing and ultimate investment decisions will be evaluated over the next 90 days.
Speaker Change: The board and I remain confident in our return to growth plan in the second quarter is an important milestone in our plan for this year to ensure the expense savings from our printing transition will materialize as planned. In addition to these expense savings we are considering where we need to invest in the business to deliver sustainable revenue growth.
Speaker Change: The investments we plan to evaluate will likely range from portfolio expansion to the continued evolution of our digital products and features however, the timing and ultimate investment decisions will be evaluated over the next 90 days. This.
Grant Moise: This work will continue over these months, and we will be able to provide further guidance on those initiatives and what it means for shareholders at the end of the second quarter. In closing, these first four months of 2025 have been significant in terms of accomplishments and alignment with our plan, and I'm optimistic about what that means for the company moving forward.
Speaker Change: This work will continue over these months and we will be able to provide further guidance on those initiatives and what it means for shareholders at the end of the second quarter.
Speaker Change: In closing these first four months of 2025 have been significant in terms of accomplishments in alignment with our plan and I'm optimistic about what that means for the company moving forward.
Operator: So, Sarah, we are now ready for questions. you would like to ask a. star one. I'm sure you are not on. and that your phone. Your first.
Sarah: So Sarah we're now ready for questions.
Sarah: Thank you if you would like to ask a question. Please press star one on your telephone keypad. Please ensure you are not on speaker phone and that your phone is not on mute when called upon thank you.
Speaker Change: Your first question comes from Adam Ballantyne with bundling capital Your line is open.
Unknown Attendee: Adam Ballantyne with Gondolin Capital. Hey, good morning, everyone. Good morning, Adam. Hey, so on the profit improvement expectation that was kind of laid out at the end of 2024, I think it was around 5 million year over year. And I was wondering if you guys were still on track for that in 2025. Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Yeah, Adam, no, we still fully expect to realize the $5 million of savings, as I made a comment in my prepared remarks. We won't start realizing those savings until May.
Sarah: Yes.
Adam Ballantyne: Hey, good morning, everyone. Thanks for taking the questions.
Speaker Change: Good morning, Adam.
Sarah: Yes.
Sarah: So.
Sarah: On the profit improvement expectation I was kind of laid out at the end of 2024 I think it was around 5 million a year.
Sarah: Year over year and I was wondering if you guys were still on track for that.
Speaker Change: 25, I think.
Speaker Change: It does imply a couple of million dollars and adjusted EBIT versus a year ago.
Speaker Change: We are at.
Speaker Change: Out there.
Speaker Change: Yeah, Adam no, we still fully expect to realize the $5 million of savings.
Speaker Change: As I made a comment in my prepared remarks.
Speaker Change: We will start realizing those savings until may.
Gary Cobleigh: Between January and April, we were running in both facilities, and we had additional staff. So those savings you'll start to see realized in the month of May, but again, it's going to be an annualized number, so it's going to be over the months, it's not all going to happen in one specific quarter. Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Yeah, we're going to, sorry, we're going to start seeing the expense savings coming through in May. So you're going to see a partial of that in the second quarter and then a full third quarter and fourth quarter.
Speaker Change: Between January and April we were running in both facilities and we had additional staff. So those savings youll start to see realized in the month of May but again, it's going to be an annualized number so it's going to be over the minds, it's not all going to happen in one specific quarter.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: So maybe that kind of gets moved about three months ahead of time, but is that.
Speaker Change: On a pro forma basis kind of on a.
Speaker Change: Run rate I should say.
Speaker Change: Does that expectation for.
Speaker Change: On a run rate basis to kind of hit there. This summer this fall that proposed profitability levels.
Speaker Change: Yeah.
Speaker Change: I'm, sorry, we're going to start seeing the expense savings.
Speaker Change: Going through in May so youre going to see a partial of that in the second quarter, and then a full third quarter and fourth quarter.
Unknown Attendee: Okay, great. Thanks.
Speaker Change: Okay, great. Thanks, and then on the.
Unknown Attendee: And then on the digital revenue side.
Speaker Change: Digital revenue side.
Speaker Change: That's helpful color in terms of the change.
Speaker Change: Changes strategies that you guys had.
Speaker Change: So the algorithms kind of learn your audience I guess the first question.
Speaker Change: Could you explain what you meant by that 16% lift and starts.
Gary Cobleigh: Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Unknown Attendee, Gary Cobleigh, Catherine Collins, Dallasnews Yeah, Adam, it's a it's a it's a great question. So let me clarify the 16%. So the meter is our largest source of starts. We have other sources as well. For example, we have an email list of over a million people who take newsletters, but they don't, they're not subscribing. So that's one where, you know, we have different methods of how we acquire subscribers, but the meter is the largest. So our former model, which was just set by, I'll just try to simplify it, it was a hard business rule of how often you came to the site or what you were reading.
Speaker Change: Yes from a strategy and then.
Speaker Change: Part two would just be how.
Speaker Change: Things are changing.
Speaker Change: April.
Speaker Change: Still seeing growth subscribers so.
Speaker Change: So far in Q2.
Speaker Change: Yes, Adam it's a great question. So let me clarify the 16%. So the meter is our largest source of starts we have other sources as well for example, we have an email list of over a million people, who take newsletters, but they don't they are not subscribing.
Speaker Change: It's one where we have different methods of how we acquire subscribers, but the meter is the largest.
Speaker Change: So our former model, which was just set by I'll just try to simplify it it was a hard business rule of how often you came to the site or what you were reading.
Grant Moise: So the meter, which is our number one source of starts, we transitioned that to what's called a dynamic paywall, which is basically it's an AI driven algorithm, which helps us understand what is the uniqueness of the person hitting the meter and what is their propensity to subscribe. And so using the AI for the meter, we are generating 16% more starts of people who are hitting our old business rules of a meter versus this new dynamic meter. So it's a 16% more starts than they were in the trailing 90 days before we implemented. And really, when the AI algorithm had at least four to five weeks to learn, it's going to learn our audience.
Speaker Change: So the meter which is our number one source of starts we transitioned that to what's called a dynamic paywall, which is basically it's an AI driven algorithm, which helps us understand.
Speaker Change: What is the uniqueness of the person hitting the meter and what is their propensity to subscribe and so using the AI for the meter we are generating 16% more starts of people who were hitting our old business rules of a meter versus this new dynamic meter so it's at 16%.
Speaker Change: More starts than they were in the trailing 90 days before we implemented.
Speaker Change: Yes.
Speaker Change: Really when the when it was when the AI algorithm how to at least four to five weeks to to learn kind of where in our audience.
Speaker Change: Yes.
Unknown Attendee: That's really helpful, Culler. Thanks, Grant.
Speaker Change: That's really helpful color. Thanks Grant.
Unknown Attendee: And then just on that part, too, I was just kind of curious how subscribers were trending, if there was still growth there, year over year, quarter over quarter. Yeah, it's still growing, Adam, but I'll tell you, as I mentioned in my prepared remarks, it's not growing as fast as we would like.
Speaker Change: And then just on that part too I, just kind of curious how subscribers were trending and if there is still growth there year over year quarter over quarter.
Grant: Yes, it's still growing Adam, but I will tell you is as I mentioned in my prepared remarks.
Grant: It's not growing as fast as we would like so actually today, we are testing a new a little bit more aggressive offer we were in a dollar for three months on starts we went to one dollar for six months.
Grant Moise: So, actually, today, we're testing a new, a little bit more aggressive offer. We were at $1 for three months on starts. We went to $1 for six months this morning. We've studied other markets, and we think that will help us galvanize and kind of get this volume up a bit more. So, again, we're just continuing with a sense of urgency. We are so focused on volume, and we're going to just keep staying on top of this with as many tactics as we have studied and feel like are going to be beneficial, not only to the volume, but obviously, ultimately, to the revenue.
Grant: This morning, we've studied other markets and we think that will help us galvanize and kind of get <unk>.
Grant: This volume up.
Grant: A bit more so.
Grant: Again, we're just continuing with the sense of urgency. This year is all we are so focused on volume.
Grant: And we're going to just keep staying on top of this with as many tactics as we have studied and feel like.
Grant: We're going to be beneficial not only to the volume, but obviously ultimately to the to the revenue.
Unknown Attendee: Okay, and then just kind of one more for me and I'll hop hop back in but in terms of the kind of demand that you're seeing on the advertising front. I was wondering if you could kind of comment on maybe areas that were really weak in the first quarter or areas that were stronger than others in terms of verticals. You know, there are a number of businesses that are, especially in the Texas area, some, you know, homebuilders, D.R. Horan, LGI, AutoNation in Texas have significantly ramped up advertising, which would be local in nature. So I guess I was kind of surprised to see kind of some advertising weakness.
Grant: Okay.
Grant: And then just one more for me and I'll hop back in but in terms of the.
Grant:
Grant: Kind of demand that youre seeing on the advertising front I was wondering if you could kind of comment on.
Grant: Maybe areas that were really weak in the first quarter.
Grant: Or areas that were stronger than others in terms of verticals.
Grant: There are.
Grant: Number of businesses that are.
Grant: Especially in the Texas area, some homebuilders D. R. Horton LG Autonation in Texas have significantly ramped up advertising, which would be local in nature.
Grant: So I guess I was kind of surprised to see us.
Grant: Some advertising weakness.
Unknown Attendee: Yeah, so it would just be kind of helpful to kind of maybe run through some of the verticals and where you're maybe over-indexed or under-indexed so far this year.
Grant: Yes, so we just get that helpful to kind of maybe run through some of the verticals and where you are may be over indexed or under indexed so.
Grant: So far this year.
Grant Moise: Yeah, happy to do it, Adam. And let me talk about it on the both sides of the advertising business. Let's start with the Dallas Morning News, where really, let's just say print and the digital advertising in our paper and on our site. Our category diversity, Adam, is very spread out. So we do not have a category or a vertical of business over 15% of that makeup. So it's very diversified. We have seen some softness. Interestingly, we don't have a lot of automotive business, Adam, so that did not affect us much. Our real estate business, though, just especially because the inventory has slowed down, especially on the high end real estate, which is where advertisers come to us.
Grant: Yes happy to do it.
Speaker Change: Let me talk about it on the both sides of the advertising business, let's start with the Dallas morning News, we're really let's just say print and the digital advertising in our paper and on our site.
Grant: We.
Grant: Our our category diversity, Adam is very spread out so we do not have a category or a vertical business over 15% of that makeup. So it's very diversified.
Grant: We have seen some softness.
Grant: Interestingly, we don't have a lot of the automotive business, Adam so that did not affect us much our real estate business, though.
Grant: Especially because the inventory is slowed down, especially on the high end real estate, which is where advertisers come to us.
Grant Moise: We saw the real estate start to soften. We also have seen a little bit of that in retail. I think retailers right now just with the questions on tariffs or the questions on just, you know, their consumer demand, we saw a little bit of pullback there. And I would say the third recruiting for us is a meaningful category. And we and again, I don't think any of us are surprised by this. But obviously, with the uncertainty in the economy, we saw some of the different methods people use with us to recruit talent slow down. Now, I will say there's that is offset a bit by the financial services category at the Dallas Morning News, which continues to be very robust.
Grant: We saw real estate start to soften we also have seen a little bit of that in retail.
Grant: Retailers right now just with the questions on tariffs or the questions on.
Grant: Just the consumer demand.
Grant: A little bit of pullback there.
Grant: And I would say the third.
Grant: We're recruiting for us as a meaningful category and.
Grant: And again I don't think any of us are surprised by this but obviously.
Grant: With the uncertainty in the economy, we saw some of the different methods people use with us to recruit talent slowdown.
Grant: Now I will say there is that has offset a bit by the financial services category.
Grant: <unk> morning news, which continues to be very robust I think they are.
Grant Moise: I think they're especially with people at CD rates, for example, Adam, people who are trying to move money to safer havens. We've definitely seen more there. On the agency side, we are very our two largest categories are tourism, and they are basically academics. We have a lot of charters, a couple very significant charter school clients. And that's been, you know, not as impacted the tourism piece, especially for state tourism boards would probably have a lag to that were that probably if the economy softened 25, that probably wouldn't really be seen in the agency till 26.
Grant: Especially with people our CD rates for example, Adam <unk>.
Speaker Change: People, who are trying to move money to safer havens, we've definitely seen more there on the agency side.
Speaker Change: Barry our two largest categories, our tourism and they are.
Speaker Change: Basically academics, we have a lot of charter a couple of very significant charter school clients.
Speaker Change: That's been not as impacted the tourism piece.
Speaker Change: Especially for state tourism boards would probably have a lag to that where that probably if the economy soft in 'twenty five that probably wouldn't really be seen in the agency till 2006. So the agencies are definitely steadier.
Grant Moise: So the agency's definitely steadier than we're seeing on the print side. But as I mentioned, in my prepared remarks, you know, I've been in this business a long time.
And then we're seeing on the print side, but as I mentioned in my prepared remarks I've been in this business a long time.
Grant Moise: And unfortunately, it is easier for an advertiser to turn off a print ad campaign that it is something like an outdoor billboard campaign, because of the complexity of, of kind of getting those advertisements started and stopped.
Speaker Change: Unfortunately, it is easier for an advertiser to turn off a print AD campaign that it is something like an outdoor Billboard campaign because of the complexity of kind of getting those advertisements started and stopped so I'll pause there.
Unknown Attendee: So whole part Really helpful for the color. Thanks, Grant.
Speaker Change: Really helpful color, Thanks, Craig I'll hop back in.
Unknown Attendee: I'll be back.
Speaker Change: Okay.
Operator: Again, ladies and gentlemen, if you have a question, it is star one.
Speaker Change: Again, ladies and gentlemen, if you have a question. It is star one on your telephone keypad.
Speaker Change: And we have a follow up question from Adam Valentine with God willing capital. Your line is open.
Unknown Attendee: We have a follow-up question from Adam Ballantyne with Gondolin Capital. All right, I'll take the mic back. In terms of the metric tons that you guys used on the newspaper side, that was a bit of a drag to margins. I think there was a 32% increase in the tonnage there. And I was just curious, is that structurally going to be higher 30% for the one time in terms of sort of working capital, you know, that got expensed through the income statement. I was kind of curious if we can get some color there because it did kind of drag on margins.
Speaker Change: Yes.
Speaker Change: Alright, I'll I'll take the mic back.
Speaker Change: In terms of the metric.
Speaker Change: <unk> that you guys used on the newspaper side that was a bit of a drag.
Speaker Change: Margins I think there was a 32% increase in.
Speaker Change: And the tonnage there and I was just curious is that a.
Speaker Change: Is that.
Speaker Change: Structurally going to be hired 30% for the rest of the year.
Speaker Change: As you ramp up on the new printing facility or is that.
Speaker Change: One time in terms of sort of working capital.
Speaker Change: That got expense through the income statement I'm, just kind of curious if we can get some color there because it did cause a drag on margins.
Grant Moise: Adam, it's a great question. And it was specific to the quarter. As we were running both facilities and actually testing our new print, our new printing presses. We had to increase our newsprint purchasing, and that's where you saw the newsprint usage increase in the first quarter, but it'll normalize going into the second quarter. Okay, and then when you say normalizes that sort of back to 2024 levels, which were fairly consistent quarterly, quarterly basis. Well, the usage will go back to the 24 levels. But remember, the pricing could go up. We have not been hit with tariffs.
Speaker Change: Adam It's a great question and it was specific to the quarter.
Speaker Change: As we were running both facilities and actually testing our new print.
Speaker Change: Printing presses.
Speaker Change: We had to increase our newsprint purchasing and Thats, where you saw the newsprint usage increase in the first quarter, but it will normalize going into the second quarter.
Speaker Change: Okay, and then when you say normalized that sort of back to 2024 levels, which were fairly consistent quarterly on a quarterly basis.
Speaker Change: While the usage will go back to the 24 levels that remember the pricing could go up we have not been hit with tariffs.
Grant Moise: So when you're thinking about the actual expense, you know, we do first in, first out. And so depending on the price, the pricing and the expense may move, but the tonnage that we're using will go back to the 24 levels. Okay, perfect.
Speaker Change: So when youre thinking about the actual expense.
Speaker Change: We do first in first out.
Speaker Change: And so depending on the price the pricing and the extent may move, but the tonnage that we're using we will go back to the 24 level.
Okay perfect. Thank you.
Unknown Attendee: Thank you.
Gary Cobleigh: And then, just to kind of jump back to the pension, I think you had noted that there was $14 to $16 million to pay out to fulfill the obligations. And I was just wondering, is that still the case? And are we going to see that flow through the 2Q cash flow statement and balance sheet? Yeah, Adam, it will be in Q2, but it was it was the $10 million that I referenced in my remarks.
Speaker Change: And then.
Speaker Change: Just to kind of jump back to.
Speaker Change: The pension I think you had noted that there was 14 to 16 million.
Speaker Change: Pay out fulfill the obligations and I was just wondering does that is that still the case or are we going to see that flow through the <unk>.
Speaker Change: Cash flow statement and balance sheet.
Speaker Change: Yes, Adam it will be in Q2, but it wasn't it was the $10 million that I referenced.
Speaker Change: In my remarks, so we spent $10 million of company cash.
Gary Cobleigh: So we spent $10 million of company cash to fully fund the pension, and that was less than the 14 to 16 that we had expected. Oh, perfect. Apologies for missing that. Thank you.
Speaker Change: To fully fund the pension and that was less than the 14 to 16 that we had expected.
Speaker Change: Oh, perfect apologize for missing that.
Speaker Change: Thank you and then.
Unknown Attendee: And then just kind of a final question here in terms of medium giants, profitability, It was interesting to see that given there was still a small year-over-year decline in the business, so marketing and media services, and I was just curious, is that profitability level sort of go forward from here or kind of mid-single-digit range and profitable or is it going to be still pretty volatile throughout the year? So, Adam, first of all, it's a good pickup. Part of what we've done to get there is John Kiker, who leads our agency, has been very intentional about us basically stopping our relationships with smaller clients and really attracting larger clients to the agency.
Speaker Change: Just kind of.
Speaker Change: Final question here in terms of medium Giants profitability.
Speaker Change: It was interesting to see that given there is still a small year over year decline in the business. So the marketing and media services and I was just curious is that you know.
Speaker Change: Is that profitability level.
Speaker Change: Sort of go forward from here or.
Speaker Change: So kind of mid single digit range and profitable or is it going to be still pretty.
Speaker Change: Volatile throughout the year.
Adam Ballantyne: So Adam.
Speaker Change: First of all it's a good pickup part of what we've done to get there as Jon <unk>, who leads our agency.
Speaker Change: It's been very intentional about us basically stopping our relationships with smaller clients.
Speaker Change: And really attracting larger clients to the agency and a professional services business like medium giant sometimes you can spend as much time on a small client as you can on a big one and that obviously impacts margins. He has done an exceptional job in that whole team has.
Grant Moise: In a professional services business like Medium Giant, sometimes you can spend as much time on a small client as you can on a big one, and that obviously impacts margins. He's done an exceptional job, and that whole team has, of really just kind of discontinuing those relationships with those small clients while focusing on the bigger ones. That's what's helping the margin, and I alluded to it in my prepared remarks, though, Adam, but no, I think the kind of margin that we've seen in the first quarter, we need to see that not only continue where it is, but I want it to improve.
Speaker Change: Really just kind of discontinuing those relationships with those small clients, while focusing on the bigger ones, that's what's helping the margin.
Speaker Change: And I alluded to it in my prepared remarks, though Adam.
But no I think the kind of margin that we've seen in the first quarter.
We need to see that not only continue where it is but I want it to improve now how much bigger can that margin become tight.
Grant Moise: Now, how much bigger can that margin become? Time will tell, but I want to see that improve into the double digits. I just don't know how far into the double digits we will ultimately get.
Speaker Change: Time will tell but I would want to see that improve into the double digits I just don't know how far into the double digits, we will ultimately get.
Speaker Change: Yes.
Unknown Attendee: Great. Thanks. Thanks for the call, you guys. Appreciate it. Sure thing. Thank you.
Speaker Change: Great. Thanks, Thanks, Craig for the color guys I appreciate it.
Speaker Change: Sure thing thank you.
Speaker Change: This concludes the question and answer session I'll turn the call to you Kathy Collins for closing remarks.
Operator: This concludes the question and answer session.
Catherine Collins: I'll turn the call to Kathy Collins. Thank you, Sarah, for your assistance this morning and to everyone who has joined, thank you again for listening to our first quarter 2025 results.
Speaker Change: Thank you Sir for your assistance this morning and to everyone who has joined thank you again for listening to our first quarter 2025 results and we look forward to updating everyone on our second quarter 2025 earnings call, which will be held in late July early August.
Catherine Collins: And we look forward to updating everyone on our second quarter 2025 earnings call, which will be held in late July or early August. call.
Speaker Change: Yes.
Speaker Change: This concludes today's conference call. Thank you for joining you may now disconnect.
Operator: Thank you for joining. You may
Speaker Change: Okay.
Speaker Change: Yeah.