The parent company of The Dallas Morning News posted an operating loss in the third quarter due to higher costs and warned investors that its results will be under pressure through 2022 due to larger investments in digital products.
During a telephone conversation with investors on Tuesday, Robert W. Decherd, chairman, president and chief executive of DallasNews Corporation said that additional digital investments will lead to financial pressure over the next 15 months.
“We are investing in the business and this will continue for the next two to five years. This results in operating losses in the early part of the transition, but we will eventually become an even more dynamic digitally focused company, ”Decherd told investors.
Planned investments “have the highest potential for long-term returns for the company and its shareholders,” said Decherd.
DallasNews, like most regional and local newspaper companies, seeks to make the leap to a sustainable digital business model in which online subscriptions and advertising revenues support a newsroom that has historically been funded by declining advertising and distribution revenues from the printed newspaper.
For the three-month period ended September 30, DallasNews reported earnings of $ 1.6 million, or 30 cents per share, but that was due to a $ 2.4 million tax benefit on the sale of the Denton Record chronicle declined in 2017. The company had a loss of $ 98,000, or 2 cents per share, for the same period last year.
Excluding tax income, the company recorded an operating loss of $ 2.6 million last year, compared to an operating loss of $ 2.4 million last year. This was attributed to higher employee compensation and benefit expenses of $ 900,000 as medical costs and salaries returned to pre-pandemic levels, as well as $ 700,000 in payments for outside services related to digital services.
“While employment costs were adjusted back to pre-pandemic levels and some reserves were released in the third quarter of last year, operational trends were generally positive,” said Decherd. “We are particularly pleased that total sales were slightly above the previous year and that the growth in digital subscriptions has continued positively.”
Total revenue for the quarter was $ 38.3 million, up 1.5% year over year, and the largest increase was from digital advertising revenue.
The News added 3,565 subscriptions to end the third quarter with 57,084 digital subscribers, up 22.2% year over year. Katy Murray, chief financial officer and executive vice president, said The News had approximately 147,000 print and digital subscribers, up from 136,000 a year ago.
DallasNews is in better shape than most media companies working to improve the local news gathering business model. It has no debt and a cash cushion of $ 34.7 million. The company also made a $ 22.4 million payment over the next year for the sale of its former long-standing headquarters at 508 Young St.
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https://www.dallasnews.com/business/local-companies/2021/10/26/dallas-morning-news-parent-plans-to-spend-more-on-digital-to-lift-its-long-term-potential/