Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DallasNews Corp (DALN, Financial) reported a net income of $1.5 million or $0.27 per share for Q2 2024, a significant improvement from a net loss of $900,000 in Q2 2023.
- Adjusted operating income for Q2 2024 was $1.2 million, an improvement of $1.4 million compared to an adjusted operating loss of $250,000 in Q2 2023.
- Expense savings of $2.3 million in distribution, $2.1 million in employee compensation and benefits, and $1 million in newsprint contributed to the improved financial performance.
- Circulation revenue increased by $200,000 or 1.2%, driven by a focus on pricing, specifically in digital subscriptions.
- The company has a strong balance sheet with no debt and cash and short-term investments totaling $17.1 million as of June 30, 2024.
Negative Points
- Total revenue declined by $4 million, primarily due to the decision to end the shared mail program and print-only editions of niche publications.
- Digital-only subscriptions decreased by 7,704 or 11.2% compared to Q2 2023.
- Total subscribers, including both home delivery and digital, decreased to 126,405 as of June 30, 2024, from 142,436 in June 2023.
- Other revenue decreased by $700,000, primarily due to declines in commercial printing and distribution revenue.
- The transition to a new printing facility will require incurring capital and operating costs, with $2.9 million already spent in Q2 and an additional $5 million expected.
Q & A Highlights
Q: First of all, congratulations on a really strong quarter. I just have a -- my question is centered around the new digital products. Is there any timeline that can be shared around that? And would it be fair to say that management hopes that the majority of future digital growth will be from these new digital products?
A: Yeah. Rohan, it's Grant. Good to talk to you. Thanks for calling in. Right now, we are doing extreme scrutinizing of pro formas on these future products. People know whenever you're trying to build something new, you can get married to a pro forma that you can hope is realistic. But ultimately, we are in this space where scrutinizing the pro formas and making sure these new products are truly accretive is what we're digging into. We're also looking at which areas, content areas have our best success rate. So for example, we're looking at things like potential expansion of high school sports. We're looking at other things that look into product expansion into the suburbs with more of a hyper local digital strategy. But right now, Rohan, we are just trying to make sure that the pro formas are really realistic and something that will be accretive before we start investing the hard costs against development. But in terms of looking into the future of how much of that will come from new products versus enhancing our current digital products, I don't have a clear answer for that yet, and that's why we're investing in both. For example, we've got features that need to come into our core digital product right now like additional video. Video is meaningful for engagement of current subscribers, and it also carries a premium price for advertising. So looking at those type of features are the things where we're trying to enhance the current products while also building new products. But thanks for the question.
Q: Thank you. I just have one follow-up, if that's all right. On the advertising side of the business, are you guys able to quantify how much revenue was generated from the Eclipse? I guess I'm just trying to see how much of the advertising revenues was onetime in nature from that tailwinds versus from just a general improvement in market conditions on the business?
A: Yeah. I think Rohan, it's a good question. One of the things that we're always looking out with something like the Eclipse is when it's a one-time event and it's material, we point that out. So for example, the Texas Rangers winning the World Series last year is we have -- we had publicly documented was a very meaningful advertising revenue event. The Eclipse was -- I'm looking at Cathy. I think we don't have the number top of mind. And it's because Rohan, it was not a very material spike in advertising revenue. It was a nice -- it grew some short-term page views, but it was not financially material.
Q: Hi, Grant, Katy, Cathy. Congrats on a great quarter. Just one question from me today. The company put out a press release on May 14 that had mentioned a market study was being conducted to assess the future use of the Plano facility. I know you shared a brief update on the prepared remarks, but any additional color you can share on the marketing front of that asset and the brokerage firm you guys are working with would be great to hear?
A: Hey, John. Sure. So really what we spent time looking at is what would be the best possible uses of that property. One, it is the last significant infill property in Plano. So one is getting a lot of interest. It's hard to find 29 acres with the access to significant between the roads and highways and that. So the other piece of that was really understanding from an industrial redevelopment perspective what benefits the property had, but then from a data center perspective, really sitting there and focusing on what were the power requirements. As most people know, as you know, in Austin, that the data center growth in Texas is pretty significant. It is reliant on how much power you can generate to that property. We do have two lines of power going into the property. So that was a lot of the work that we were doing, was really trying to understand what kind of power requirements we were going to have to have if somebody potentially wanted to come in with a data center opportunity. We also have an active rail spur on the property, which is unique from a lot of -- think about manufacturing industry. So John, that's really what we were doing and Holt Lunsford and Foundry, you probably know the names, significant experience in industrial redevelopment. Also on the data center side, a lot of activity in the area near us. They've sold a lot of the properties that are up there. So really excited about partnering with them. And again, just kicked off the marketing of that. But the interest has been solid, which has been really great. Again, just don't know exactly how long it's going to take to sell the property, but very excited about the potential outcome.
Q: Hi, good morning. I have a question regarding the letter that you received about delisting. What exactly are they asking for you to do to get the market price up to a certain level or to get the market cap up to a certain level? That was my question first question. And my second would be, I know you paused the dividend, is there any possibility in line that the dividend may be reinstated and or stock purchases in the market?
A: Hi, Barry. It's good to talk to you again. So on the Nasdaq listing, what that specifically means when we receive a letter in June is our stockholders' equity has fallen below the requirement of a $2.5 million stockholder equity. The good news is when we closed June, we were back over that requirement and we're actually at $3.3 million. So we did file an 8-K in the middle of July, about a week or two ago, that stated that, And so, at this point, we're back in compliance with Nasdaq. There's nothing else that we need to do. We need to show consistently that we can stay in compliance. But there's nothing we need to do from a share price perspective or from a market cap perspective, It was strictly related to the stockholders' equity balance as of March 31. And again, we remitted that at June 30. On the dividend, great question and appreciate you bringing that up and on the stock repurchase. I think everybody -- when we talk about capital allocation and as we think about capital allocation with the amount of cash we have on the books, we have to think about really the three ways. We think about it investments back into the business. As we mentioned, even this transition, we're going to spend $8 million transitioning our print facility, which is going to generate for us a net $5 million of savings on annualized starting in 2025. The other piece of that is we have to think about what do we do from a shareholder perspective. And historically, we had issued dividends. We also have had share repurchase program. There's nothing that's active right now. The last piece of that is
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
