GlobeNewswire Inc | Oct 25, 2021 04:30PM EDT

October 25, 2021

DALLAS, Oct. 25, 2021 (GLOBE NEWSWIRE) -- DallasNews Corporation (Nasdaq: DALN) today reported third quarter2021 net income of $1.6million, or $0.30per share, and an operating loss of $2.6million. In the third quarter of 2020, the Company reported a net loss of $0.1million, or $(0.02) per share, and an operating loss of $2.4million. Third quarter 2021 net income includes a tax benefit of $2.4million primarily related to the release of a non-cash uncertain tax reserve whereby the federal statute of limitations lapsed.

For the third quarter of 2021, on a non-GAAP basis, DallasNews reported an operating loss adjusted for certain items (adjusted operating loss) of $1.2million, a decline of $1.1million when compared to an adjusted operating loss of $0.1million reported in the third quarter of 2020. The decline is due to increases of $0.9million in employee compensation and benefits expense and $0.7million in revenue-related outside services expense, partially offset by an increase in total revenue of $0.6million.

Robert W. Decherd, chairman, president and Chief Executive Officer, said, While employment expense was adjusted back to pre-pandemic levels and there were some reserves released in the prior year third quarter, operating trends were generally positive. We are particularly pleased that total revenue was slightly higher than the prior year and that digital subscription growth continued at a positive pace. Adjusted operating income / loss will be under pressure for the next 15 months as TheDallasMorningNews continues to invest in digital products and digital marketing initiatives. These investments have the highest potential for long-term returns for the Company and its shareholders.

Third Quarter Results

Total revenue was $38.3million in the third quarter of 2021, an increase of $0.6million or 1.5percent when compared to the third quarter of 2020.

Revenue from advertising and marketing services, including print and digital revenues, was $18.1million in the third quarter of 2021, an increase of $0.6million or 3.6percent when compared to the $17.5million reported for the third quarter of 2020. The improvement is primarily due to a $0.9million increase in digital advertising revenue.

Circulation revenue was $16.2million in the third quarter of 2021, a slight increase when compared to the $16.1million reported for the third quarter of 2020. Digital-only subscription revenue increased $0.7million or 42.5percent, offset by a print circulation decline of $0.7million or 4.9 percent.

Printing, distribution and other revenue decreased $0.1million, or 2.5percent, to $4.1million, primarily due to a reduction in commercial printing revenue.

Total consolidated operating expense in the third quarter of 2021, on a GAAP basis, was $40.9million, an increase of $0.7million or 1.8percent compared to the third quarter of 2020. The change is primarily due to increases of $0.7million in revenue-related outside services expense and $0.6million in employee compensation and benefits expense, partially offset by a decrease of $0.7million in depreciation expense. The employee compensation and benefits expense increase is primarily due to medical cost savings in the third quarter of 2020 and restoring employees base salaries to pre-pandemic amounts.

In the third quarter of 2021, on a non-GAAP basis, adjusted operating expense was $46.2million, an increase of $5.2million or 12.7percent when compared to $41.0million of adjusted operating expense in the third quarter of 2020. The change is primarily due to increases of $3.6million in contra expense, which includes items like certain cost of sales, $0.7million in outside services expense, and $0.9million in employee compensation and benefits expense.

As of September 30, 2021, the Company had 672 employees, a decrease of 78 full-time equivalents, or 10.4percent, when compared to the prior year period. Cash and cash equivalents were $34.7million and the Company had no debt.

Non-GAAPFinancialMeasures

Reconciliations of operating loss to adjusted operating loss, total net operating revenue to adjusted operating revenue, and total operating costs and expense to adjusted operating expense are included in the exhibits to this release.

Financial Results Conference Call

DallasNews Corporation will conduct a conference call on Tuesday, October26, 2021, at 9:00a.m. CDT to discuss financial results. The conference call will be available via webcast by accessing the Companys website at investor.dallasnewscorporation.com/events. An archive of the webcast will be available at dallasnewscorporation.com in the Investor Relations section.

To access the listen-only conference call, dial 1-844-867-6169 and enter the following access code when prompted: 670105. A replay line will be available at 1-866-207-1041 from 12:00 p.m. CDT on October26, 2021 until 11:59 p.m. CDT on November1,2021. The access code for the replay is 2131223.

AboutDallasNewsCorporation

DallasNews Corporation is the leading local news and information publishing company in Texas. The Company has a growing presence in emerging media and digital marketing, and maintains capabilities related to commercial printing, distribution and direct mail. DallasNews delivers news and information in innovative ways to a broad range of audiences with diverse interests and lifestyles. For additional information, visit dallasnewscorporation.com or email invest@dallasnews.com.

Statements in this communication concerning DallasNews Corporations business outlook or future economic performance, revenues, expenses, and other financial andnon-financialitems that are not historical facts, including statements about the Companys expectations relating to the reverse stock split, are forward-looking statements as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. Such risks, trends and uncertainties are, in most instances, beyond the Companys control, andinclude changes in advertising demand and other economic conditions; consumers tastes; newsprint prices; program costs; labor relations; cybersecurity incidents; technological obsolescence; and the current and future impacts of the COVID-19 pandemic. Among other risks, there can be no guarantee that the board of directors will approve a quarterly dividend in future quarters; as well as other risks described in the Companys Annual Report on Form10-Kand in the Companys other public disclosures and filings with the Securities and Exchange Commission. Forward-looking statements, which are as of the date of this filing, are not updated to reflect events or circumstances after the date of the statement.

DallasNews Corporation and SubsidiariesConsolidated Statements of Operations

Three Months Ended Nine Months Ended September30, September30,In thousands,except shareand per share 2021 2020 2021 2020 amounts(unaudited)Net Operating Revenue:Advertising andmarketing $ 18,101 $ 17,474 $ 53,471 $ 52,392 servicesCirculation 16,157 16,111 48,272 48,248 Printing,distribution 4,053 4,157 12,051 12,860 and otherTotal netoperating 38,311 37,742 113,794 113,500 revenueOperating Costs and Expense:Employeecompensation 17,131 16,499 53,194 52,512 and benefitsOtherproduction,distribution 20,041 19,307 59,282 58,958 and operatingcostsNewsprint, inkand other 2,439 2,476 7,158 8,018 suppliesDepreciation 1,018 1,753 3,127 5,320 Amortization ? 63 64 191 Loss on sale/disposal of 30 61 29 56 assets, netAsset 232 ? 232 ? impairmentsTotal operatingcosts and 40,891 40,159 123,086 125,055 expenseOperating loss (2,580 ) (2,417 ) (9,292 ) (11,555 )Other income, 1,827 2,095 4,694 4,778 netLoss Before (753 ) (322 ) (4,598 ) (6,777 )Income TaxesIncome tax (2,384 ) (224 ) (1,982 ) (1,644 )benefitNet Income $ 1,631 $ (98 ) $ (2,616 ) $ (5,133 )(Loss) Per Share Basis Net income (loss)Basic and $ 0.30 $ (0.02 ) $ (0.49 ) $ (0.96 )diluted ^(1)Number ofcommon sharesused in the per sharecalculation:Basic and 5,352,490 5,352,490 5,352,490 5,352,490 diluted ^(1)

(1)All share and per share amounts have been retroactively adjusted to reflect the one-for-four reverse stock split effective June8, 2021. All fractional shares were settled in cash in connection with the reverse stock split.

DallasNews Corporation and SubsidiariesConsolidated Balance Sheets

September30, December31,In thousands (unaudited) 2021 2020Assets Current assets: Cash and cash equivalents $ 34,659 $ 42,015Accounts receivable, net 14,249 16,562Notes receivable 22,400 22,775Other current assets 7,417 6,754Total current assets 78,725 88,106Property, plant and equipment, net 9,208 11,959Operating lease right-of-use assets 18,219 20,406Intangible assets, net ? 64Deferred income taxes, net 102 76Other assets 2,203 2,604Total assets $ 108,457 $ 123,215Liabilities and Shareholders? Equity Current liabilities: Accounts payable $ 6,197 $ 7,759Accrued compensation and other current 12,151 10,829liabilitiesContract liabilities 12,139 12,896Total current liabilities 30,487 31,484Long-term pension liabilities 14,317 18,520Long-term operating lease liabilities 19,863 21,890Other liabilities 1,487 4,913Total liabilities 66,154 76,807Total shareholders' equity 42,303 46,408Total liabilities and shareholders? equity $ 108,457 $ 123,215

DallasNews Corporation - Non-GAAP Financial MeasuresReconciliation of Operating Loss to Adjusted Operating Loss

Three Months Ended Nine Months Ended September30, September30,In thousands (unaudited) 2021 2020 2021 2020 Total net operating $ 38,311 $ 37,742 $ 113,794 $ 113,500 revenueTotal operating costs and 40,891 40,159 123,086 125,055 expenseOperating Loss $ (2,580 ) $ (2,417 ) $ (9,292 ) $ (11,555 ) Total net operating $ 38,311 $ 37,742 $ 113,794 $ 113,500 revenueAddback: Advertising contra 6,596 3,012 18,908 5,400 revenueCirculation contra 106 104 296 205 revenueAdjusted Operating $ 45,013 $ 40,858 $ 132,998 $ 119,105 Revenue Total operating costs and $ 40,891 $ 40,159 $ 123,086 $ 125,055 expenseAddback: Advertising contra 6,596 3,012 18,908 5,400 expenseCirculation contra 106 104 296 205 expenseLess: Depreciation 1,018 1,753 3,127 5,320 Amortization ? 63 64 191 Severance expense 115 418 1,721 621 Loss on sale/disposal of 30 61 29 56 assets, netAsset impairments 232 ? 232 ? Adjusted Operating $ 46,198 $ 40,980 $ 137,117 $ 124,472 Expense Adjusted operating $ 45,013 $ 40,858 $ 132,998 $ 119,105 revenueAdjusted operating 46,198 40,980 137,117 124,472 expenseAdjusted Operating Loss $ (1,185 ) $ (122 ) $ (4,119 ) $ (5,367 )

The Company calculates adjusted operating income (loss) by adjusting operating income (loss) to exclude depreciation, amortization, severance expense, (gain) loss on sale/disposal of assets, and asset impairments (adjusted operating income (loss)). The Company believes that inclusion of certain noncash expenses and other items in the results makes for more difficult comparisons between years and with peer group companies.

The Company adopted the new revenue guidance (Topic 606) using the modified retrospective approach as of January1, 2018. While the Company adjusts operating revenue and expense for non-GAAP presentation, these adjustments have no effect on adjusted operating income (loss).

Adjusted operating income (loss) is not a measure of financial performance under generally accepted accounting principles (GAAP). Management uses adjusted operating income (loss) and similar measures in internal analyses as supplemental measures of the Companys financial performance, and for performance comparisons versus its peer group of companies. Management uses this non-GAAP financial measure for the purposes of evaluating consolidated Company performance. The Company therefore believes that the non-GAAP measure presented provides useful information to investors by allowing them to view the Companys business through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods and providing a focus on the underlying ongoing operating performance of its business. Adjusted operating income (loss) should not be considered in isolation or as a substitute for net income (loss), cash flows provided by (used for) operating activities or other comparable measures prepared in accordance with GAAP. Additionally, this non-GAAP measure may not be comparable to similarly-titled measures of other companies.

Contact:Katy Murray214-977-8869