DallasNews Q3 2023 Earnings Call Transcript

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Provided by Quartr
October 24, 2023

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Dallas News Corporation Third Quarter 2023 Investor Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Instructions will be given at that time.

Operator

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

Speaker 1

Good morning, everyone. This is Gary Cobley, Vice President and Controller Of Dallas News Corporation, welcome to our Q3 2023 investor call. I am joined by Katie Murray, President and Chief Financial Officer, who will be reviewing financial results and Grant Moise, Chief Executive Officer, who will provide brief business remarks. Yesterday afternoon, we issued a press release announcing Q3 2023 results and filed our Q3 2023 10 Q. Both of these are posted on our website, balancenewscorporation.com, under the Investor Relations section.

Speaker 1

Unless otherwise specified, comparisons used on today's call measure Q3 2023 performance against Q3 2022 performance. Our discussion today will include forward looking statements. Forward looking statements are subject to risks, 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.

Speaker 1

A reconciliation of GAAP to non GAAP financial measures is included with our press release. I'll now turn the call over to Katie.

Speaker 2

Good morning, everyone, and thank you for joining today's call. On a GAAP basis for the quarter, Dallas News Corporation reported a net loss of $1,400,000 or $0.26 per share and an operating loss of 1,600,000 In Q3 of last year, we reported a net loss of $2,600,000 and an operating loss of $2,300,000 On a non GAAP basis for the quarter, We reported an adjusted operating loss of $900,000 an improvement of $700,000 when compared to an adjusted operating loss of $1,600,000 reported for the same period last year. The improvement is primarily due to expense savings of $3,900,000 partially offset by a total revenue decline of $3,200,000 We reported $34,500,000 of total revenue for the quarter compared to $37,700,000 last year. The decline is primarily due to a $2,000,000 or 18% decrease in print advertising revenue, which was driven by the company's strategic decision to exit its shared mail program to deliver weekly preprints and inserts. After accounting for this decline, core print advertising was flat year over year.

Speaker 2

Digital advertising Services revenue was down $800,000 or 13% year over year, primarily due to a decline in marketing services revenue, resulting from some contracts ending, partially offset by an increase in digital advertising on dallascenews.com, primarily related to financial service clients. Circulation revenue was flat compared to last year. The digital only subscription revenue increase 700,000 or 21.4 percent mostly offset the print circulation revenue decline of 800,000 or 6.1 percent. As of September 30, the News had 66,563 digital only subscribers, which is a 2,391 or 3.7 percent year over year improvement. However, we did have Grant is going to provide some additional comments on overall digital subscriber trends in a moment.

Speaker 2

Total subscribers, including both home delivery and digital subscribers, was 137,493 as of September 30, compared to 144,631 as of Q3 last year and 142,436 as of June 30. Printing, distribution and other revenue was $3,600,000 a decrease of $300,000 or 8.3 percent when compared to the Q3 of 2022 and 2, primarily due to a decline in commercial printing revenue. On a non GAAP basis, Total adjusted operating expense for the quarter was $35,400,000 an improvement of $3,900,000 or 9.9 percent when compared to the same period of last year, driven by expense savings of $1,700,000 in distribution, dollars 900,000 in outside services and $800,000 in news The company will continue to experience savings in distribution expense for the remainder of the year with the recent discontinuation of the briefing and Aldea publications. Newsprint expense is favorable year over year as the result of lower circulation and fewer out of market preprints when compared to last year. The newsprint purchase price has continued to trend favorably down.

Speaker 2

The cost of newsprint in September was $6.83 per metric ton, a decrease of $91 or 11.8 percent per metric ton when compared to September of last year. We expect to continue realizing these savings in late Q4 early next year. As of September 30, headcount was 608, down 60 headcount compared to last year. Headcount reductions and increased severance expense are Cash and short term investments was $24,500,000 on September 30. As of October 20, we We have $23,300,000 in cash, including short term investments.

Speaker 2

For the Q4, the company recorded $100,000 of tax expense for the Texas franchise tax. I will now turn the call over to Grant.

Speaker 3

Thanks, Katie, and good morning, everyone. I want to start by mentioning an important event That took place in September of this year when Robert Deckard retired after 50 years of service as an employee and 47 years as a Director. Robert's commitment to Dallas News Corporation and the North Texas region is hard to capture in words, but on behalf of the Board And our employees, I want to thank Robert for his commitment to journalism and for being a pillar of this institution for 5 wonderful decades. While I'm on the topic of our commitment to journalism, I'm proud of our newsroom for the ambitious Fentanyl series that was entitled Deadly Fake, where we published a story per day, every day for the entire month of September. We focused on Fentanyl in this unique Way because last year, Fentanyl killed an average of 5 Texans every day And almost 500 of them lived in North Texas.

Speaker 3

Most North Texans did not know how to identify nor treat the lethal effects of Fentanyl. And in the words of Patrice Hardy, our Executive Editor, if this series helped save one life, it was worth it. Shifting topics from journalism to the financial progress at the company, we have had a year of mixed results. I've been pleased with the team's ongoing expense management Katie was just referring to, but our revenue performance has fallen short of our expectations. Many of you are familiar with the return to growth plan we have in place with our Board that we've been discussing for quite some time.

Speaker 3

The goal of what we call the RTG plan is to build a sustainably profitable media and marketing company. For this plan to ultimately be successful, we need to grow revenue from the core product lines of digital membership, digital advertising and marketing services. This year, we have grown in 2 of those three areas, but we want to see growth in all three. In the Q3, we were more aggressive with the pricing of our digital subscription offering and I'm pleased with the early returns from this change. This change will result, as we are seeing, in short term volume declines, but will improve the revenue trajectory of digital subscription revenue.

Speaker 3

On the marketing services side of the business at Medium Giant, this year has been marked by trepidation from our current clients who are being cautious with their advertising dollars in the midst of a challenging economic environment. In order for us to return to growth in this important area, We are focused on attracting new retainer based clients, while helping our current clients with marketing solutions to help them grow their businesses. Greg, we will now open up the line for questions.

Operator

Thank And at this time, there are no questions.

Speaker 2

Well, Greg, thank you. Thank you everyone for joining our call. I'm sorry, Greg.

Operator

You just had one queue up. Would you like to take that question?

Speaker 2

Absolutely.

Operator

Okay. That question comes from the line of Chris Mooney from Wedbush Securities. Please go ahead.

Speaker 1

Hey, good morning all.

Speaker 2

Good morning, Chris.

Speaker 1

The 608 headcount, Where do you anticipate that going to by the end of the year?

Speaker 2

Chris, as we announced earlier, probably about a month ago, We did have a we're having a voluntary severance offer. We expect probably about maybe 40 or so people to take that, give or take. We don't know yet. There was not a set target. We didn't Any kind of specific headcount number or expense number.

Speaker 2

So, I expect that this number we will probably be, we're going to be below 600, probably maybe $580,000 $570,000,000 just depending on what we do with the DSO. And again, that's just to be determined.

Speaker 1

Understood. And the cost of this will appear in the Q4, will it roll into the Q1 as well?

Speaker 2

No, it won't. The cost of the offering in the program will be fully booked in the Q4. And while there may be cash payments in 2024, the expense will be in 2023. Okay. It will be in 2023.

Speaker 1

Okay. And what was the union response to this?

Speaker 2

As part of our collective bargaining agreement, we have the ability to offer a voluntary severance offering whenever we would like to. So, there really was no response from the guild.

Speaker 1

Okay. Thank you.

Speaker 2

Thank you, Chris. Okay. Well, again Greg, sorry?

Operator

There are no further questions.

Speaker 2

Greg, thank you. Everyone, thank you again for joining our Q3 call. We look forward to A great Q4 and we'll have our earnings call in the Q1 of next year. And for those of you in Dallas and Texas, go Rangers.

Operator

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

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Key Takeaways

  • On a non-GAAP basis, Q3 adjusted operating loss improved to $0.9 million from $1.6 million a year ago, driven by $3.9 million in expense savings despite a $3.2 million revenue decline.
  • Total revenue fell to $34.5 million from $37.7 million, led by an 18% drop in print advertising after exiting the shared mail program, while digital-only subscription revenue rose 21.4% and digital-only subscribers grew 3.7% to 66,563.
  • The company’s headcount was reduced to 608 (down 60 year-over-year), and a voluntary severance offer is expected to bring staffing to roughly 570–580 by year-end.
  • Newsprint costs declined 11.8% per metric ton year-over-year, contributing to ongoing expense savings that are expected to continue into late Q4 and early 2024.
  • CEO highlighted the “Deadly Fake” fentanyl journalism series launched in September and reiterated the Return to Growth (RTG) plan, focused on boosting digital membership, digital advertising and marketing services through pricing and new client strategies.
AI Generated. May Contain Errors.
Earnings Conference Call
DallasNews Q3 2023
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