DallasNews Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Dallas News Corporation 2022 Investor Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. If you should require assistance during the call, please press star, then zero. As a reminder, this call is being recorded. I would now like to turn the call over to our host, Gary Cobley. Please go ahead.

Good morning, everyone. Gary Cobley, Vice President and Controller of Dallas News Corporation. Welcome to our fourth quarter and full year 2022 investor call. I am joined by Katie Murray, President and Chief Financial Officer, who will be reviewing financial results. Grant Moise, Chief Executive Officer, who will provide brief business remarks, and Robert Deckard, Executive Chairman, who is available for questions. Yesterday afternoon, we issued a press release announcing fourth quarter and full year 2022 results and filed our 2022 10K. 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 fourth quarter 2022 and full year 2022 performance against fourth quarter 2021 and full year 2021 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. 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.

Good morning, everyone, and thank you for joining today's call. I will begin by reviewing fourth quarter financial results and will follow with the full year financial results. On a gap basis for the quarter, Dallas News Corporation reported a net loss of $2.1 million, or 40 cents per share, and an operating loss of $1.9 million. In Q4 of last year, we reported net income of $2.1 million and an operating loss of $700,000. As a reminder, fourth quarter 2021 net income includes a non-cash pension benefit of $1 million and cash proceeds of $1.3 million related to the sale of inactive IP addresses. On a non-GAAP basis for the quarter, we reported an adjusted operating loss of 1 million, a decrease of 1.3 million compared to adjusted operating income of 300,000 reported for the same period last year. The decrease is primarily due to a 1.5 million revenue decline in revenue. We reported 39.1 million of total revenue for the quarter, which compares to 40.6 million last year. The year-over-year decline is primarily due to a 1 million or 8.1% reduction in print advertising revenue. Both circulation and other revenue each decreased less than $100,000 when compared to prior year. On a non-GAAP basis, total adjusted operating expense for the quarter was $40.1 million, an improvement of $200,000 when compared to the same period last year, driven by expense savings of $1.1 million in distribution expense due to reduced TMC and out-of-market preprint revenue, and $600,000 in services, partially offset by an increase of $1.4 million in employee compensation and benefit expense. Turning to our full year results on a GAAP basis, we reported a net loss of $9.8 million, or $1.83 per share, and an operating loss of $9 million. For 2021, we reported a net loss of a half a million and an operating loss of $10 million. As a reminder, the 2021 net loss includes a non-cash pension benefit of 4.2 million, a non-cash tax benefit of 2.6 million related to the release of an uncertain tax reserve, and cash proceeds of 1.3 million related to sale of inactive IP addresses. On a non-GAAP basis for the year, we reported an adjusted operating loss of 5.3 million, a 1.5 million greater loss when compared to an adjusted operating loss of 3.8 million reported for the same time last year. The decrease is primarily due to a $3.7 million decline in total revenue and a newsprint expense increase of $1.2 million partially offset by expense savings of $2.7 million in distribution and $1 million in employee compensation and benefits. We reported $150.7 million of total revenue for the year, and this compares to $154.4 million last year. The year-over-year decline is primarily due to reductions of $2.7 million or 5.6% in print advertising revenue, and $900,000 or 3.6% in digital advertising and marketing services revenue. As we've noted previously, the digital advertising decline is primarily due to the company's strategic decision to exit sales that carry a low margin, partially offset by selling more consultative marketing services. Circulation revenue increased $200,000 when compared to last year. This stability follows the trend we have been experiencing driven by a continued focus on growing digital subscriptions and revenue. As of December 31st, the news had 68,010 digital-only subscribers, which is an 8,539, or 14.4% year-over-year improvement. Total subscribers, including both home delivery and digital subscribers, was 146,583 as of December 31st, and that compares to 148,742 last year. A summary of historical print and digital subscriptions, also known as memberships, by quarter is saved on our website under the investor relations section. Other revenue decreased $400,000 or 2.3% compared to last year, primarily due to reductions in revenue from mailed advertisements for business customers and distribution revenue from commercial printing. On a non-GAAP basis, total adjusted operating expense for the year was $155.9 million and an improvement of 2.3 million or 1.4% when compared to 158.2 million of adjusted operating expense last year. The improvement is primarily due to expense savings of 2.7 million in distribution, 1 million in employee compensation and benefits, partially offset by an increase of 1.2 million in newsprint expense. For the year, our average newsprint consumption price was $728 per metric ton as compared to $572 per metric ton in 2021, reflecting a 27% increase year over year. As of December 31st, headcount was 663, up seven headcount compared to last year. Cash on the balance sheet was $27.8 million on December 31st, and as of March 3rd, cash was $28 million. For the year, the company recorded $558,000 of tax expense, We expect cash taxes to be approximately $650,000 in 2023, primarily related to the Texas franchise tax. As of December 31st, the company had $47.4 million of federal net operating loss carry forwards. We are pleased with the progress the company has made this year toward our long-term strategy, and we are 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 2023. I will now turn the call over to Grant.