DallasNews Corporation

Welcome to the Dallas News Corporation Investor 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. If you should require assistance during the call, please press star, then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gary Cobley.

Please go ahead. Good morning, everyone. This is Gary Cobley, Vice President and Controller of Dallas News Corporation Investor Welcome to our third 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 Moise, Chief Executive Officer, who will provide brief business remarks. Tuesday afternoon, we issued a press release announcing third quarter 2024 results, and we filed our third quarter 10-Q. 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 third quarter 2024 performance against third 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 SEC. Today's discussion will include non-GAAP financial measures. We believe 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 a net loss of $3.9 million, or 73 cents per share, and an operating loss of $4.1 million. Thank you to Q3 last year, we reported a net loss of $1.4 million and an operating loss of $1.6 million. 2024 net loss includes $3 million severance expense due to the anticipated headcount reductions related to our transition to a smaller printing facility. On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $700,000 An improvement of $200,000 when compared to an adjusted operating loss of $900,000 reported for the same period last year. The improvement is due to expense savings of $1.9 million in distribution, $1.2 million in employee benefits and compensation, and $1.1 million in newsprint, partially offset by a total revenue decline of $3.4 million. That is primarily due to discontinuing the shared mail program and printing our niche publications. All other advertising and marketing services revenue, excluding the discontinued products I just mentioned, increased $400,000, or 3.3%, when compared to the third quarter last year. While print advertising revenue was down, digital advertising revenue improved $48,000, primarily due to an increase in advertisements in the Dallas Morning News e-paper, partially offset by a decline in digital advertisements on DallasNews.com. In a moment, Grant will provide insight into the digital advertising trends we are seeing on our website. Marketing and media services revenue improved $900,000, primarily resulting from two new customer contracts focused on media services that began in the third quarter of the year. Circulation revenue decreased $100,000 or less than 1%. The digital circulation revenue increase of $400,000 mostly offset the print circulation revenue decline of $500,000. Digital-only subscription rates increased approximately 13.5%, offsetting the decline of 5,348, or 8%, in digital subscribers. Total subscribers, including both home delivery and digital subscribers, was 124,886 as of September 30th, compared to 132,694 as of December 31st, and 137,493 as of September last year. Graham will also provide commentary on our digital pricing strategy. Other revenue decreased $500,000, primarily due to declines in commercial printing and distribution revenue and mailed advertisements to business customers. In the third quarter, our partner for our program to distribute shared mail located in Tempe, Arizona, gave their six-month termination notice. This program has been experiencing revenue declines consistent with the overall industry trend. So ending this business relationship is consistent with the shared mail business in Dallas that we exited in 2023. We do not expect a significant financial impact from the termination of this agreement when production ends in April of 2025. On a non-GAAP basis, total adjusted operating expenses for the quarter improved $3.5 million, driven by expense savings of $1.9 million in distribution, $1.2 million in employee compensation and benefits, and $1.1 million in newsprint. primarily resulting from the discontinued product and the decline in the cost of newsprint, which was down 6.2% compared to prior year. As of September 30th, headcount was 534, down 74 compared to last year, resulting from the voluntary severance program offered in the fall of 2023 and additional first quarter headcount reductions within medium giants. As we previously announced in May of this year, we expect additional headcount reductions in the first quarter of 2025 due to our transition to a smaller printing facility and less staff needed to operate a more modern press. Consistent with interim periods, the company used the estimated annual effective tax method and recorded $345,000 of tax expense in the quarter for the Texas franchise tax. We continue to have a strong balance sheet with no debt, At the end of September, cash and cash equivalents were $14 million. And as of November 8th, we had $11.6 million in cash and cash equivalents. As we look to the last quarter of the year, we will continue our disciplined expense management. The transition to the new printing facility requires incurring additional capital and operating costs this year. But once complete, we will result in annual expense savings that is key to our return to growth plan. I'll now turn the call over to Katie.