DallasNews Corporation

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

Good morning, everyone. This is Gary Comley, 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 our second quarter investor call. 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 our first quarter 10Q. All 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 2024 performance against first quarter 2023 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 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. I'll now turn the call over to Katie.

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 gap basis for the quarter, Dallas News Corporation reported a net loss of $1.4 million, or 25 cents 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. 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. The improvement is primarily due to expense savings of $2.5 million in distribution, $1.6 million in employee comp and VIN, 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%. 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 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 129,857 as of March 31, and that compares to $132,694 as of the end of last year and $145,369 as of March of last year. 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 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, 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 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. 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 the fiscal year 2023 later this month. 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 reduction 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. Given the investment, the Board of Directors 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 Gramps.