Welcome to the DallasNews Corporation First Quarter 2025 Investor Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Gary Cobleigh, Vice President and Controller. You may begin. Good morning, everyone. This is Gary Cobleigh, Vice President and Controller of DallasNews Corporation. Welcome to our First Quarter 2025 Investor Call. I'm joined by Cathy Collins, DallasNews' Chief Financial Officer, who will be reviewing financial results; Katy Murray, President of DallasNews; and Grant Moise, Chief Executive Officer, who will provide brief business remarks. Yesterday afternoon, we issued a press release announcing First Quarter 2025 results and filed our First 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 First Quarter 2025 performance against First Quarter 2024 performance. Our discussion today will include forward-looking statements, including statements concerning our transition of print operations and associated expense savings, our business outlook or future economic performance, revenues, expenses, cash balance, investments, business initiatives, working capital, and other financial and non-financial items that are not historical facts. Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those statements, including those identified in the earnings release we issued yesterday. 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 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 will now turn the call over to Cathy. Good morning, everyone, and thank you for joining today's call. On a GAAP basis for the quarter, DallasNews Corporation reported net income of $28.3 million, or $5.28 per share, and operating income of $34.2 million, which includes a net gain of $36.2 million from the Plano printing facility sale. In the first quarter last year, we reported a net loss of $1.4 million and an operating loss of $1.8 million. On a non-GAAP basis for the quarter, we reported an adjusted operating loss of $1.2 million, a decrease of $400,000 when compared to an adjusted operating loss of $800,000 reported for the same period last year. The decline is primarily due to a total revenue decrease of $2 million, partially offset by expense savings of $1.2 million in employee compensation and benefits. We reported total revenue of $29.1 million compared to $31.1 million reported for Q1 last year. Advertising and marketing services revenue was $10.8 million, a decrease of $800,000, or 7.2%, compared to $11.6 million reported last year, and is primarily due to a print advertising revenue decline of $700,000, or 12.2%. Circulation revenue was $15.4 million, a decrease of $900,000, or 5.2%, compared to the $16.3 million reported last year. The decline is primarily due to a print circulation revenue decrease of $700,000, or 6%. Total membership, including both print and digital, was 125,972 as of March 31st, compared to 126,973 as of December 31st and 129,857 as of March last year. Digital-only subscriptions of 65,028 reflect an increase of 1.1% as of March 31st compared to December 31st and an increase of 4.2% compared to March of last year. Shortly, Grant will provide additional commentary on our digital strategy to drive additional membership volume. On a non-GAAP basis, total adjusted operating expenses for the quarter improved $1.6 million due to employee compensation and benefits expense savings of $1.2 million. As of March 31st, total headcount was 461, down 70 compared to last year, primarily resulting from the transition to a smaller, more efficient printing facility requiring less staff. Consistent with interim periods, the company uses the estimated annual effective tax rate method and recorded $6 million of tax expense for the quarter due to an estimated $600,000 for the Texas franchise tax and the $36.2 million gain generated from the sale of the Plano property. However, the utilization of our net operating loss carryforwards will reduce our cash taxes to approximately $700,000 for federal and state purposes. The Plano property sale strengthened our balance sheet, and at the end of March, cash and cash equivalents were $44.2 million. As of the end of April 25th, following the pension funding, we had $36 million in cash and cash equivalents. I will now turn the call over to Katy. Thank you, Cathy. Good morning, everyone, and thank you for joining today's call. We are pleased with the progress we've made so far in 2025 on two key initiatives that were significant milestones in our return-to-growth plan. As noted on our 2024 year-end call, the sale of the Plano property provided us the required capital to fully fund our pension plan. In April, we were able to utilize approximately $10 million of company funds, along with $132 million in plan assets to purchase an annuity contract. The transition of the full administration of the plan is in process and will be completed by July 1st. We are thrilled that we have been able to fully fund our pension obligations, which has been a priority for the board to secure the retirement benefits of former and current employees who have dedicated so many years of service to the company. As of the end of April, we have fully transitioned our print operations to our smaller, more efficient lease facility. Starting in May, we will begin to recognize planned expense savings relating to this transition since this will be our first full month no longer operating in dual facilities. As Cathy noted, as of April 25, we had approximately $36 million in cash on the balance sheet as the result of the sale of our last piece of real estate. As the board continues to discuss capital allocation strategies of, one, investing back into the business to drive digital revenue growth and, two, returning capital to shareholders, we are also continuing to carefully monitor the economy to see how changes in economic policies and tariffs may impact not only our business but also the advertising and marketing budgets of our clients, as well as the impact of the cost savings we expect to realize as a result of the Plano sale. I am very pleased with the realization of these two important milestones within our return-to-growth plan and feel confident this puts us on a better trajectory moving forward. I will now turn the call over to Grant. Thanks, Katy, and good morning, everyone. As Katy mentioned, our commitment to fulfill our pension obligations has always been one of our top priorities, and we're proud that we were able to take care of these employees who gave so much to the company over their many years of service. Eliminating our pension obligation is also a benefit to our shareholders because it eliminates our last source of debt and the need for any future contributions. Eliminating this debt will give investors clearer visibility on how to value our company as we continue to get closer to operating profitably. Turning to Medium Giant, the agency's contribution to the company continues to improve year-over-year, with an operating income increase of $600,000. As we've discussed on prior calls, last year we introduced segment reporting, which was designed to break out the agency business separate from the traditional Dallas Morning News business. Segment reporting has given us better visibility into aligning costs with revenues. We believe there is additional opportunity for margin improvements, and we continue to focus on growing revenues with larger, more profitable accounts at Medium Giant. The expansion of the Medium Giant agency operating margin is a priority, and its improvement is a result of two new large clients being added and a disciplined approach to expense management. In addition to the agency, Medium Giant did see softness in our print advertising related to the Dallas Morning News, which was down 12.2% on a year-over-year basis. I was happy to see this trend start to improve in April, but as Katy mentioned, we continue to monitor how our clients are responding to these uncertain economic conditions. The softness in the economy often presents itself in the print advertising line first because clients are able to stop this method of advertising more quickly than they are others. Turning to digital membership, while digital volume grew slightly quarter-over-quarter, the growth has been slower than we expected. We knew the transition to our new dynamic paywall that occurred in March would take time for the AI algorithms to learn the uniqueness of our audience, but it took a little bit longer than we expected. Now that the tool is established, we are seeing the results we were expecting with a 16% lift in starts coming from the new paywall versus our former meter strategy. In addition to the paywall, we have also been rolling out our new video player and user commenting tools across the site. Both tools are intended to increase user engagement while adding a premium source of digital advertising revenue. The board and I remain confident in our return-to-growth plan, and the second quarter is an important milestone in our plan for this year to ensure the expense savings from our printing transition will materialize as planned. In addition to these expense savings, we are considering where we need to invest in the business to deliver sustainable revenue growth. The investments we plan to evaluate will likely range from portfolio expansion to the continued evolution of our digital products and features. However, the timing and ultimate investment decisions will be evaluated over the next 90 days. This work will continue over these months, and we will be able to provide further guidance on those initiatives and what it means for shareholders at the end of the second quarter. In closing, these first four months of 2025 have been significant in terms of accomplishments and alignment with our plan, and I'm optimistic about what that means for the company moving forward. Sarah, we are now ready for questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Thank you. Your first question comes from Adam Ballantyne with Gondolin Capital. Your line is open. Hey, good morning, everyone. Thanks for taking the questions. Good morning, Adam. Hey, on the profit improvement expectation that was kind of laid out at the end of 2024, I think it was around $5 million year-over-year, and I was wondering if you guys were still on track for that in 2025. I think it does imply a couple million dollars in adjusted EBIT versus a year ago. I'm just kind of seeing where we're at there. Yeah, Adam, no, we still fully expect to realize the $5 million of savings. As I made a comment in my prepared remarks, we will not start realizing those savings until May. Between January and April, we were running in both facilities, and we had additional staff. Those savings, you will start to see realized in the month of May, but again, it is going to be an annualized number, so it is going to be over the months. It is not all going to happen in one specific quarter. Okay. Maybe that kind of gets moved about three months ahead of time. Is that on a pro forma basis, kind of around a run rate, I should say? Is that expectation for on a run rate basis to kind of hit there this summer, this fall, those profitability levels? Yeah, I mean, we're going to—sorry. We're going to start seeing the expense savings coming through in May, so you're going to see a partial of that in the second quarter and then a full third quarter and fourth quarter. Okay, great. Thanks. Then on the digital revenue side, it was helpful color in terms of the changes strategy that you guys had for the algorithms kind of learning your audience. I guess the first question is, could you explain what you meant by the 16% lift in starts versus the former strategy? Part two would just be how things were trending in April and if you're still seeing growth in subscribers so far in Q2. Yeah, Adam, it's a great question. Let me clarify the 16%. The meter is our largest source of starts. We have other sources as well. For example, we have an email list of over a million people who take newsletters, but they're not subscribing. That's one where we have different methods of how we acquire subscribers, but the meter is the largest. Our former model, which was just set by—I'll just try to simplify it. It was a hard business rule of how often you came to the site or what you were reading. The meter, which is our number one source of starts, we transitioned that to what's called a dynamic paywall, which is basically an AI-driven algorithm which helps us understand what is the uniqueness of the person hitting the meter and what is their propensity to subscribe. Using the AI for the meter, we are generating 16% more starts of people who are hitting our old business rules of a meter versus this new dynamic meter. It is 16% more starts than they were in the trailing 90 days before we implemented, really when it was when the AI algorithm had at least four to five weeks to learn to kind of learn our audience. That's really helpful color. Thanks, Grant. Just on that part two, I was just kind of curious how subscribers were trending if there was still growth there year-over-year, quarter-over-quarter. Yeah, it's still growing, Adam, but I'll tell you, as I mentioned in my prepared remarks, it's not growing as fast as we would like. Actually, today, we're testing a new, a little bit more aggressive offer. We were at a dollar for three months on starts. We went to a dollar for six months this morning. We've studied other markets, and we think that will help us galvanize and kind of get this volume up a bit more. Again, we're just continuing with the sense of urgency this year as all we are so focused on volume, and we're going to just keep staying on top of this with as many tactics as we have studied and feel like are going to be beneficial not only to the volume, but obviously ultimately to the revenue. Okay. And then just kind of one more from me, and I'll hop back in. In terms of the kind of demand that you're seeing on the advertising front, I was wondering if you could kind of comment on maybe areas that were really weak in the first quarter or areas that were stronger than others in terms of verticals. There are a number of businesses that are, especially in the Texas area, some home builders, D.R. Horton, LGI, Auto Nation in Texas have significantly ramped up advertising, which would be local in nature. I guess I was kind of surprised to see kind of some advertising weakness. Yeah, it would just be kind of helpful to kind of maybe run through some of the verticals and where you're maybe over-indexed or under-indexed so far this year. Yeah, happy to do it, Adam. Let me talk about it on both sides of the advertising business. Let's start with The Dallas Morning News, where really, let's just say print and the digital advertising in our paper and on our site. Our category diversity, Adam, is very spread out. We do not have a category or a vertical of business over 15% of that makeup. It is very diversified. We have seen some softness. Interestingly, we do not have a lot of automotive business, Adam, so that did not affect us much. Our real estate business, though, just especially because the inventory has slowed down, especially on the high-end real estate, which is where advertisers come to us, we saw the real estate start to soften. We also have seen a little bit of that in retail. I think retailers right now, just with the questions on tariffs or the questions on just their consumer demand, we saw a little bit of pullback there. I would say the third, recruiting for us is a meaningful category. I don't think any of us are surprised by this, but obviously with the uncertainty in the economy, we saw some of the different methods people use with us to recruit talent slow down. I will say that is offset a bit by the financial services category at The Dallas Morning News, which continues to be very robust. I think there, especially with people at CD rates, for example, Adam, people who are trying to move money to safer havens, we've definitely seen more there. On the agency side, our two largest categories are tourism, and they are basically academics. We have a lot of charters, a couple of very significant charter school clients, and that's been not as impacted. The tourism piece, especially for state tourism boards, would probably have a lag to that, where that probably, if the economy soft in 2025, that probably wouldn't really be seen in the agency till 2026. The agency's definitely steadier than we're seeing on the print side, but as I mentioned in my prepared remarks, I've been in this business a long time, and unfortunately, it is easier for an advertiser to turn off a print ad campaign than it is something like an outdoor billboard campaign because of the complexity of kind of getting those advertisements started and stopped. I'll pause there. Really helpful for the color. Thanks, Grant. I'll hop back in. Again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad. We have a follow-up question from Adam Ballantyne with Gondolin Capital. Your line is open. All right, I'll take the mic back. In terms of the metric tons that you guys used on the newspaper side, that was a bit of a drag to margins. I think there was a 32% increase in the tonnage there. I was just curious, is that structurally going to be higher, 30% for the rest of the year as you ramp up on the new printing facility, or is that one time in terms of sort of working capital that got expensed through the income statement? I was just kind of curious if we can get some color there because it did kind of drag on margins. Adam, it's a great question, and it was specific to the quarter. As we were running both facilities and actually testing our new printing presses, we had to increase our newsprint purchasing, and that's where you saw the newsprint usage increase in the first quarter, but it'll normalize going into the second quarter. Okay. When you say normalize, is that sort of back to 2024 levels, which were fairly consistent on a quarterly basis? The usage will go back to the 2024 levels, but remember, the pricing could go up. We have not been hit with tariffs. When you're thinking about the actual expense, we do first in, first out. Depending on the price, the pricing and the expense may move, but the tonnage that we're using will go back to the 2024 levels. Okay. Perfect. Thank you. Just to kind of jump back to the pension, I think you had noted that there was $14 million-$16 million to pay out to fulfill the obligations. I was just wondering, is that still the case, and are we going to see that flow through the 2Q cash flow statement and balance sheet? Yeah, Adam, it will be in Q2, but it was the $10 million that I referenced in my remarks. We spent $10 million of company cash to fully fund the pension, and that was less than the $14 million-$16 million that we had expected. Oh, perfect. Apologies for missing that. Thank you. No worries. Just kind of final question here. In terms of Medium Giant's profitability, it was interesting to see that given there was still a small year-over-year decline in the business, so of marketing and media services. I was just curious, is that profitability level sort of go forward from here or kind of mid-single digit range and profitable, or is it going to be still pretty volatile throughout the year? Adam, first of all, it's a good pickup. Part of what we've done to get there is John Kiker, who leads our agency, has been very intentional about us basically stopping our relationships with smaller clients and really attracting larger clients to the agency. In a professional services business like Medium Giant, sometimes you can spend as much time on a small client as you can on a big one, and that obviously impacts margins. He's done an exceptional job, and that whole team has of really just kind of discontinuing those relationships with those small clients while focusing on the bigger ones. That's what's helping the margin. I alluded to it in my prepared remarks, though, Adam. I think the kind of margin that we've seen in the first quarter, we need to see that not only continue where it is, but I want it to improve. Now, how much bigger can that margin become? Time will tell, but I want to see that improve into the double digits. I just don't know how far into the double digits we will ultimately get. Great. Thanks for the color, guys. Appreciate it. Sure thing. Thank you. This concludes the question and answer session. I'll turn the call to Cathy Collins for closing remarks. Thank you, Sarah, for your assistance this morning. To everyone who has joined, thank you again for listening to our First Quarter 2025 Results. We look forward to updating everyone on our Second Quarter 2025 Earnings Call, which will be held in late July or early August. This concludes today's conference call. Thank you for joining. You may now disconnect.