8-K: DallasNews Corporation Reports Q3 2024 Results: Revenue Declines, but Adjusted Operating Loss Improves

DallasNews Corporation reported a net loss of $3.9 million for the third quarter of 2024, but showed improvement in adjusted operating loss due to cost-cutting measures.

Summary

• DallasNews Corporation announced a net loss of $3.9 million, or $(0.73) per share, for the third quarter of 2024, compared to a net loss of $1.4 million, or $(0.26) per share, in the same period last year.
• The company's operating loss was $4.1 million for the quarter, compared to $1.6 million in the third quarter of 2023.
• The net loss includes a $3.0 million severance expense related to anticipated headcount reductions due to a transition to a smaller printing facility.
• On a non-GAAP basis, the adjusted operating loss was $0.7 million, an improvement of $0.2 million or 18.5 percent compared to the third quarter of 2023.
• Total revenue decreased by $3.4 million, or 9.7 percent, to $31.1 million, primarily due to exiting the shared mail program and discontinuing print-only niche publications.
• Advertising and marketing services revenue decreased by $2.7 million, or 18.5 percent, to $12.0 million, with a $3.1 million decline in print advertising.
• Circulation revenue decreased slightly by $0.1 million, or 0.8 percent, to $16.1 million, with digital-only subscriptions increasing by $0.4 million, or 8.8 percent.
• Total operating expenses improved by $0.9 million, or 2.4 percent, to $35.3 million, while adjusted operating expenses improved by $3.5 million, or 10.0 percent.
• The company had 534 employees as of September 30, 2024, a decrease of 74 employees, or 12.2 percent, compared to the prior year.
• Cash and cash equivalents were $14.0 million at the end of the quarter, with no debt.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the reported net loss and revenue decline, although there are some positive aspects such as the improvement in adjusted operating loss and digital subscription growth. The company is facing significant challenges in its transition.

Positives

• Adjusted operating loss improved by $0.2 million, or 18.5 percent, year-over-year, indicating progress towards sustainable profitability.
• Expense savings of $3.5 million contributed to the improvement in adjusted operating loss.
• Digital-only subscription revenue increased by $0.4 million, or 8.8 percent, partially offsetting print circulation revenue decline.
• The company successfully ended a 14-month volume decline in digital subscriptions by implementing a new volume-centric pricing strategy.
• Total operating expenses improved by $0.9 million, or 2.4 percent, and adjusted operating expenses improved by $3.5 million, or 10.0 percent.
• Excluding severance, employee compensation and benefits expense improved $1.2 million.
• The company has no debt and $14.0 million in cash and cash equivalents.

Negatives

• The company reported a net loss of $3.9 million, or $(0.73) per share, for the third quarter of 2024.
• Total revenue decreased by $3.4 million, or 9.7 percent, compared to the same period last year.
• Advertising and marketing services revenue decreased by $2.7 million, or 18.5 percent, primarily due to the end of the shared mail program and print-only niche publications.
• Print advertising revenue declined by $3.1 million.
• Circulation revenue decreased slightly by $0.1 million, or 0.8 percent.
• The company incurred a $3.0 million severance expense related to headcount reductions.
• Printing, distribution and other revenue decreased by $0.5 million, or 14.0 percent.

Risks

• The company faces risks related to changes in advertising demand and other economic conditions.
• Volatility in the North Texas real estate market could impact the company's performance.
• The timeline for transitioning print operations presents a risk.
• Changes in consumer tastes could affect the company's revenue.
• Fluctuations in newsprint and distribution prices pose a risk.
• The company's ability to successfully execute its Return to Growth Plan is uncertain.
• Maintaining compliance with Nasdaq listing requirements is a risk.
• The success of the company's digital strategy is not guaranteed.
• Labor relations and cybersecurity incidents are potential risks.
• Technological obsolescence could impact the company's operations.

Future Outlook

The company is focused on returning to sustainable profitability and is pleased with the early results of its new digital subscription pricing strategy, though it will take time to be reflected in revenue growth. The company also notes that forward-looking statements are subject to risks and uncertainties.

Management Comments

• Grant Moise, Chief Executive Officer, said, 'The third quarter $0.2 million year-over-year financial improvement in adjusted operating loss reflects our continued focus on returning to sustainable profitability.'
• Grant Moise stated that while the company has not reached sustainable operating profitability, they are making progress.
• Management noted that they modified their digital subscription strategy to a volume-centric strategy, which has successfully ended a 14-month volume decline.

Industry Context

The results reflect the ongoing challenges faced by traditional media companies in transitioning to digital platforms, with declines in print advertising and circulation revenue being partially offset by growth in digital subscriptions. The company's focus on cost-cutting and adjusted operating loss improvement is a common strategy in the industry.

Comparison to Industry Standards

• Gannett, a large US newspaper chain, has also been facing similar challenges with declining print revenue and is focusing on digital growth and cost management.
• Lee Enterprises, another newspaper publisher, has reported similar trends with revenue declines in print and growth in digital subscriptions.
• The shift to a volume-centric digital subscription strategy is a common approach in the industry to increase subscriber numbers, similar to strategies employed by The New York Times and The Wall Street Journal.
• The cost-cutting measures, including headcount reductions and facility consolidation, are also common strategies used by media companies to improve profitability, similar to actions taken by McClatchy and Tribune Publishing.

Stakeholder Impact

• Shareholders will be concerned about the net loss and revenue decline, but may be encouraged by the improvement in adjusted operating loss.
• Employees have been impacted by headcount reductions and severance expenses.
• Customers may see changes in subscription pricing and service offerings.
• Suppliers may be affected by changes in the company's operations and spending.
• Creditors are not impacted as the company has no debt.

Next Steps

• The company will continue to focus on returning to sustainable profitability.
• The company will monitor the results of its new digital subscription pricing strategy.
• The company will continue to manage costs and expenses.
• The company will hold a conference call on November 14, 2024, to discuss the financial results.

Key Dates

Keywords

DallasNews Corporation, Financial Results, Third Quarter, Net Loss, Operating Loss, Revenue Decline, Adjusted Operating Loss, Digital Subscriptions, Advertising Revenue, Cost Savings, Severance Expense, Headcount Reduction