8-K: DallasNews Corporation Announces Print Operation Streamlining and Q1 2024 Results

DallasNews Corporation will streamline its print operations to a smaller facility and reported a reduced operating loss in Q1 2024 compared to Q1 2023.

Summary

• DallasNews Corporation announced it will relocate its print operations from Plano to a smaller leased facility in Carrollton, Texas.
• The company expects to invest approximately $8 million in new printing equipment as part of this transition.
• The new facility is expected to be operational in early 2025, with an anticipated annual expense savings of $5 million.
• The company reported a net loss of $1.4 million, or $(0.25) per share, for the first quarter of 2024.
• This is an improvement from a net loss of $2.6 million, or $(0.49) per share, in the first quarter of 2023.
• The adjusted operating loss for Q1 2024 was $0.8 million, a $1.4 million improvement compared to Q1 2023.
• Total revenue for Q1 2024 was $31.1 million, a decrease of $4.1 million or 11.6 percent compared to Q1 2023.
• The company's headcount decreased by 121 employees, or 18.6 percent, year-over-year, to 531 employees as of March 31, 2024.
• The company had $18.4 million in cash and short-term investments and no debt as of March 31, 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the significant improvement in adjusted operating loss and planned cost savings, but tempered by the revenue decline and dividend suspension.

Positives

• The company's adjusted operating loss improved significantly by 64 percent year-over-year in Q1 2024.
• The planned print operation streamlining is expected to generate $5 million in annual expense savings.
• Digital-only subscription revenue saw a substantial increase of 25.2 percent.
• The company has no debt and $18.4 million in cash and short-term investments.
• Total operating expenses decreased by $5.1 million, or 13.4 percent, in Q1 2024 compared to Q1 2023.

Negatives

• Total revenue decreased by $4.1 million, or 11.6 percent, in Q1 2024 compared to Q1 2023.
• Advertising and marketing services revenue decreased by $3.7 million, or 23.9 percent, in Q1 2024 compared to Q1 2023.
• The company reported a net loss of $1.4 million in Q1 2024.
• The company is reducing its workforce by approximately 85 employees as part of the print operation transition.
• The company has suspended the declaration and payment of dividends.

Risks

• The company faces risks related to changes in advertising demand and other economic conditions.
• There are risks associated with volatility in the North Texas real estate market.
• The company is exposed to risks related to consumer tastes, newsprint and distribution prices, and program costs.
• The company's ability to successfully execute the Return to Growth Plan and digital strategy is uncertain.
• The company faces risks related to labor relations, cybersecurity incidents, and technological obsolescence.
• There is no guarantee that the board of directors will approve dividends in the future or that the company's financial projections are accurate.

Future Outlook

The company expects the print operation transition to be completed in early 2025, generating $5 million in annual expense savings, and is evaluating options for its current property, including a potential sale. The company is focused on its Return to Growth Plan and achieving sustainable profitability.

Management Comments

• Grant Moise, Chief Executive Officer, stated he is pleased with the progress in reducing the adjusted operating loss by 64 percent year-over-year.
• Grant Moise also said the improvement is consistent with the company's Return to Growth Plan and reassures him they are on the right path towards future profitability.
• Katy Murray, president of DallasNews Corporation, commented that the board has decided to suspend dividends due to the required capital investments.

Industry Context

The move to streamline print operations reflects a broader trend in the media industry to reduce costs and focus on digital growth. Many traditional print media companies are facing declining print advertising revenue and are adapting by consolidating operations and investing in digital platforms.

Comparison to Industry Standards

• Gannett, another major newspaper publisher, has also been consolidating print operations and focusing on digital growth, similar to DallasNews Corporation.
• The 25.2% increase in digital-only subscription revenue is a positive sign, as many media companies are seeing growth in digital subscriptions to offset print declines.
• The $5 million in expected annual savings from the print operation transition is a significant cost reduction, which is a common goal for media companies facing financial pressures.
• The company's move to a smaller leased facility is similar to other media companies that have reduced their physical footprint to cut costs.
• The suspension of dividends is a common move for companies undergoing restructuring or facing financial challenges, as seen in other media companies.

Stakeholder Impact

• Shareholders will be impacted by the dividend suspension, but may benefit from the expected cost savings and improved profitability.
• Employees will be impacted by the headcount reduction in print operations, with approximately 85 fewer positions.
• Customers will not experience any interruption in subscriber or distribution services.
• Suppliers may see changes in their business with the company due to the print operation transition.

Next Steps

• The company will complete the transition of print operations to the new facility in Carrollton, Texas by early 2025.
• The company will conduct a market study and assess the best future use for the current property in Plano, including a potential sale.
• The company will continue to execute its Return to Growth Plan.
• The company will hold a conference call on May 16, 2024, to discuss the financial results.

Key Dates

Keywords

print operations, financial results, expense savings, digital subscriptions, operating loss, revenue decline, capital investment, headcount reduction, Return to Growth Plan, dividend suspension