DallasNews Q4 2023 Earnings Call Transcript

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March 7, 2024

There are 4 speakers on the call.

Operator

The Dallas News Corporation Investor Call. Call. And at this time, I'd like to turn the conference call over to your host, Vice President and Controller, Mr. Gary Kabley. Please go ahead, sir.

Speaker 1

Good morning, everyone. This is Gary Kumbley, Vice President and Controller of Dallas News Corporation. Welcome to our Q4 and full year 2023 investor call. I'm 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 4th quarter and full year 2023 results and filed our 2023 10 ks.

Speaker 1

Both of these are posted on our website, dallascenewscorporation.com under the Investor Relations section. Unless otherwise specified, comparisons used on today's call measure 4th quarter and full year 2023 performance against 4th quarter and full year 2022 performance. Our discussion today will include forward looking statements. Forward looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. The company assumes no obligation to update the information in this communication, except as otherwise required by law.

Speaker 1

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. I'll now turn the call over to Katie.

Speaker 2

Good morning, everyone, and thank you for joining today's call. I'm going to begin by reviewing 4th quarter financial results and then follow with the full year results. On a GAAP basis for the quarter, Dallas News Corporation reported a net loss of $2,200,000 or $0.41 per share and an operating loss of $2,500,000 which includes $2,700,000 related to previously announced voluntary severance program that closed in the 4th quarter. Excluding the severance impact, Dallas News would have reported $200,000 operating income in the quarter. In Q4 last year, we reported a net loss of $2,100,000 and an operating loss of 1,900,000 dollars On a non GAAP basis for the quarter, we reported adjusted operating income of $600,000 an improvement of $1,600,000 compared to an adjusted operating loss of $1,000,000 reported for the same period last year.

Speaker 2

The improvement is primarily due to expense savings of $6,700,000 with the greatest reductions in distribution and employee compensation and benefits, partially offset by a total revenue decline of 5,100,000 dollars We reported $34,000,000 of total revenue for the quarter. This compares to $39,100,000 last year. The year over year decline is primarily due to a $5,300,000 or 45.6 percent reduction in print advertising revenue, primarily resulting from the decision to end our shared mail program to deliver weekly preprints and inserts on August 31. After accounting for this decline, core print advertising was down 5.1% year over year. Circulation revenue increased $500,000 when compared to last year, which includes $230,000 from single copy sales celebrating the Texas Rangers winning the World Series.

Speaker 2

Digital only subscription revenue increased $1,200,000 or 34.1 percent, partially offset by a print circulation decline of $600,000 or 4.8 percent. On a non GAAP basis, total adjusted operating expense for the quarter was $33,400,000 an improvement of $6,700,000 when compared to the same period last year, driven by expense savings of 3.1 $1,000,000 in distribution, dollars 1,600,000 in employee compensation and benefits, dollars 1,100,000 in newsprint and $600,000 in outside services. The expense reduction is primarily again the result of the discontinuation of the shared mail program and print only additions of our niche publications, ALDEA and Briefing, at the end of August of last year. Turning to full year results. On a GAAP basis, we reported a net loss of $7,100,000 or 1 $3.3 per share and an operating loss of $8,000,000 which includes severance expense of 3,800,000 For 2022, we reported a GAAP net loss of $9,800,000 and an operating loss of 9,000,000 dollars which includes severance expense of $800,000 On a non GAAP basis for the year, we reported an adjusted operating loss of $2,700,000 an improvement of $2,600,000 when compared to an adjusted operating loss of $5,300,000 for the year 2022.

Speaker 2

The improvement is primarily due to expense savings of $13,500,000 with the greatest reductions in distribution costs, outside services and newsprint, partially offset by a total revenue decline of $11,000,000 The $7,000,000 expense savings and distribution and total revenue decline of 11,000,000 again are primarily the result of the discontinuation of the shared mail program and the print only additions. We reported $139,700,000 of total revenue for the year, and this compares to $150,700,000 last year. The year over year decline is primarily due to a print advertising decline of $9,800,000 again, driven by the discontinuation of the shared mail program and print only editions of our niche publications. Digital advertising and marketing services revenue declined $900,000 or 3 0.5 percent, primarily due to a decline in marketing services revenue, partially offset by an increase in digital advertising on dallasnews.com and in our digital replica. Circulation revenue increased $200,000 This is the 3rd consecutive year of year over year growth, again helped by Ranger single copy sales.

Speaker 2

As of December 31, the news had 63,000 digital only subscribers, a decrease of 5,010 or 7.4 percent compared to last year. The decline in digital subscribers is the result of the company's specific focus on balancing volume and price. Total subscribers, including both home delivery and digital subscribers, was 132,000 6194 as of December 31, and this compares to 146,583 as of December 31, 2022. A quarterly summary of historical print and digital subscriptions, also known as memberships, is saved on our website under the Investor Relations section. Other revenue decreased $500,000 or 3.1 percent compared to last year, and these are primarily due to reductions in revenue from commercial printing and distribution.

Speaker 2

On a non GAAP basis, total adjusted operating expense for the year was $142,400,000 improvement of $13,500,000 or 8.7 percent when compared to $155,900,000 of adjusted operating expense last year. The improvement is primarily due to expense savings of $7,000,000 in distribution, again resulting from the changes in our shared mail program, dollars 2,200,000 in outside services, dollars 2,200,000 in newsprint, dollars 600,000 in employee comp and VIN and $800,000 in property rental. Newsprint expense is favorable year over year as a result of lower circulation and discontinuing print only additions of Aldea and Briefing. The newsprint purchase price has continued to trend favorably. As of the end of the year, average newsprint inventory cost per metric ton was $6.87 and this compares to $8.29 per metric ton in 2022, a decrease of $142 or 17.1 percent.

Speaker 2

And I'm pleased to say we are continuing to see favorable pricing so far in 2024. As of December 31, headcount was 601, down 62 compared to last year. As of the end of February, we had 546 employees, which reflects the departure of most of the 58 employees who elected to $22,500,000 as of December 31st and then $22,500,000 as of December 31. And as of March 1, cash was 19,000,000 dollars For the year, the company recorded $464,000 of tax expense. We expect cash taxes to be approximately $580,000 in 20.24, primarily related to the Texas franchise tax.

Speaker 2

As of December 31, 2023, the company had $54,200,000 in federal net operating loss carryforwards. Dollars 17,500,000 expires in 2037, and $36,700,000 does not have any expiration. In regards to our pension plan, we do not expect to have any mandatory contributions in 2024 or in 2025. We are pleased with the progress the company made this year toward our long term strategy, and we were right in line with how we expected to end the year. We remain in a good position on our balance sheet and are encouraged by what we are seeing so far in 2024.

Speaker 2

I will now turn the call over to Grant.

Speaker 3

Thank you, Katie. Reflecting on 2023, I was pleased with our progress in improving our adjusted operating income. The year was highlighted by exceptional journalism, a strong year of digital subscription revenue growth and a disciplined approach to managing the decline of the print business. Starting with our journalism, our year was highlighted by 2 strong series that framed important issues facing North Texans. First, our newsroom created a 30 day series in September entitled Deadly Faith, which highlighted the threat of Fentanyl in our community and helped inform North Texans about the threat of this deadly drug.

Speaker 3

2nd, our editorial board focused on a 6 part series throughout the year that was called the unraveling of Latin America, where we help North Texans understand the root causes of the immigration problems on our southern border. This outstanding journalism largely contributed to what Katie referred to as our 3rd consecutive year of membership revenue growth, because we remain committed to pricing our digital membership at a premium rate. Last, I'm proud of our Medium Giant team's discipline when we chose to exit the shared mail business in August of last year. Medium Giant continues to offer advertisers the products and services they value most and it was clear from the rapid decline in our shared mail revenue that advertisers no longer saw value in this product offering. Looking ahead to 2024, we've recently added Chris Pothiger to our team as the company's Chief Product and Innovation Officer.

Speaker 3

We brought Chris on board to enhance our digital product offering and build new digital products to reach new audiences. We are in the early stages of Chris' work, but our goal is to expand our product portfolio to reach new audiences and provide new sources of revenue growth for the company. John, we will now open it up to questions.

Operator

Thank you. And we have no callers queuing up with questions.

Speaker 2

All right. Well, John, thank you very much for your assistance this morning. Everyone who has joined, thank you again for listening to our Q4 and full year 2023 results, and we look forward to updating everyone with our progress on our Q1 of 2024 earnings call, which will be handled sometime in the Q2. Thank you.

Operator

And ladies and gentlemen, that does conclude your conference call for today. We do thank you for your

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