DallasNews Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Dallas News Corporation Investor Q2 earnings call. This call is being recorded, and a replay will be available starting at 11 a.m. Central Time today through midnight on August 7th. To access the replay, dial 866-207-1041 and enter access code 499-3908. Once again, replays will be available starting 11 a.m. Central Time today through midnight on August 7th, and the number to call is 866-207-1041. And the access code to enter is 499-3908. At this time, all participants are in listen-only mode. Later, you will have an opportunity to ask questions. For those listening by phone, you may queue up at any time during the presentation by pressing 1, then 0 on your phone's keypad. Pressing 10 a second time will remove you from the queue and withdraw your question. And you may queue up any time. Listen for your name at the end of the presentation during the Q&A session. At this time, I would like to turn the conference call over to your host, Vice President and Comptroller of Dallas News Corporation, Gary Cobley. Please go ahead, sir.

Good morning, everyone. This is Gary Cobley, Vice President and Comptroller of Dallas News Corporation. Welcome to our second quarter 2024 investor call. I'm joined by Kathy Collins, Dallas News' Chief Financial Officer, who will be reviewing financial results, Katie Murray, President of Dallas News, and Grant Moyes, Chief Executive Officer, who will provide brief business remarks. Yesterday afternoon, we issued a press release announcing second quarter 2024 results, and we filed our second quarter 10-Q. All these are posted on our website, dallasnewscorporation.com, under the investor relations section. Unless otherwise specified, comparisons used on today's call measure a second quarter 2024 performance against second 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 Kathy.

Good morning, everyone, and thank you for joining today's call. On a GAAP basis for the quarter, Dallas News Corporation reported net income of $1.5 million or 27 cents per share and operating income of 600,000. In Q2 last year, we reported a net loss of 900,000 and an operating loss of $1.2 million. On a non-GAAP basis for the quarter, we reported adjusted operating income of $1.2 million, an improvement of $1.4 million when compared to an adjusted operating loss of $250,000 reported for the same period last year. The improvement is primarily due to expense savings of $2.3 million in distribution, $2.1 million in employee compensation and benefits, and $1 million in newsprint. partially offset by a total revenue decline of $4 million that is primarily due to the decision in the third quarter of 2023 to end the shared mail program to deliver weekly preprints and print-only editions of our niche publications. All other advertising and marketing services revenue, excluding the discontinued products I just mentioned, increased $400,000 or 3.5% when compared to the second quarter of 2023. This is primarily due to classified advertising that continues to be a steady source of revenue for us. Circulation revenue increased $200,000, or 1.2%, driven by our focus on pricing, specifically in digital subscriptions. Moving forward, the company will adjust its focus to find the optimal balance between volume and price with the ultimate goal of generating the most digital subscription revenue. Digital-only subscriptions decreased 7,704, or 11.2%, compared to Q2 last year. Total subscribers, including both home delivery and digital subscribers, was 126,405 as of June 30, compared to 132,694 at December 31, and 142,436 as of June of last year. Other revenue decreased $700,000, primarily due to declines in commercial printing and distribution revenue. On a non-GAAP basis, total adjusted operating expenses for the quarter improved $5.4 million, driven by expense savings of $2.3 million in distribution and $1 million in newsprint, primarily resulting from the discontinued products and a decline in the cost of newsprint, which was down 13.9% compared to prior year. In addition, employee compensation improved $2.1 million. As of June 30th, headcount was 533, down 111 compared to last year, resulting from the voluntary severance program offered in the fall of 2023 and additional first quarter headcount reductions within medium-giant. Consistent with interim periods, the company used the estimated annual effective tax rate method which when applied to the Q2 year-to-date income resulted in a tax benefit of $240,000. We do expect Texas franchise tax expense later this year. We paid approximately $540,000 of Texas franchise tax for fiscal year 2023 in the second quarter. We continue to have a strong balance sheet with no debt, and as of the end of June, cash and short-term investments were $17.1 million. And as of July 26, we had $19.1 million in cash and cash equivalents. I was pleased to see the financial progress we made in the second quarter. As we look to the second half of the year, we will continue our disciplined expense management. But the transition to the new printing facility will require incurring capital and operating costs this year, which Katie will elaborate on. I will now turn the call over to Katie.