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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2023

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file no. 1-33741

DallasNews CORPORATION

(Exact name of registrant as specified in its charter)


Texas		38-3765318
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

P. O. Box 224866, Dallas, Texas 75222-4866		(214) 977-8869
(Address of principal executive offices, including zip code)		(Registrant’s telephone number, including area code)
Former name, former address and former fiscal year, if changed since last report.
None

Securities registered pursuant to Section 12(b) of the Act:




Title of each class	Trading Symbol	Name of each exchange on which registered
Series A Common Stock, $0.01 par value	DALN	The Nasdaq Stock Market LLC

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer: ¨

Accelerated Filer: ¨

Non-Accelerated Filer: þ

Smaller Reporting Company: þ

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

Shares of Common Stock outstanding at April 20, 2023: 5,352,490 shares (consisting of 4,737,792 shares of Series A Common Stock and 614,698 shares of Series B Common Stock).

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DALLASNEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS




		Page
PART I
Item 1.	Financial Information		PAGE 3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		PAGE 16
Item 4.	Controls and Procedures		PAGE 22

PART II
Item 1.	Legal Proceedings		PAGE 23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		PAGE 23
Item 3.	Defaults Upon Senior Securities		PAGE 23
Item 4.	Mine Safety Disclosures		PAGE 23
Item 5.	Other Information		PAGE 23
Item 6.	Exhibits		PAGE 24
Signatures			PAGE 27
Exhibit Index			PAGE 28

DallasNews Corporation First Quarter 2023 on Form 10-Q

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PART I

Item 1. Financial Information

DallasNews Corporation and Subsidiaries

Consolidated Statements of Operations



	Three Months Ended March 31,
In thousands, except share and per share amounts (unaudited)	2023		2022
Net Operating Revenue:
Advertising and marketing services	$	15,309	$	16,264
Circulation		16,011		16,096
Printing, distribution and other		3,882		3,927
Total net operating revenue		35,202		36,287
Operating Costs and Expense:
Employee compensation and benefits		17,373		16,410
Other production, distribution and operating costs		18,028		19,249
Newsprint, ink and other supplies		2,184		2,394
Depreciation		373		712
Total operating costs and expense		37,958		38,765
Operating loss		(2,756)		(2,478)
Other income, net		362		18
Loss Before Income Taxes		(2,394)		(2,460)
Income tax provision		232		184
Net Loss	$	(2,626)	$	(2,644)

Per Share Basis
Net loss
Basic	$	(0.49)	$	(0.49)
Number of common shares used in the per share calculation:
Basic		5,352,490		5,352,490

See the accompanying Notes to the Consolidated Financial Statements.

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DallasNews Corporation First Quarter 2023 on Form 10-Q 3

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DallasNews Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)



	Three Months Ended March 31,
In thousands (unaudited)	2023		2022
Net Loss	$	(2,626)	$	(2,644)
Other Comprehensive Income (Loss), Net of Tax:
Amortization of actuarial (gains) losses		(10)		130
Total other comprehensive income (loss), net of tax		(10)		130
Total Comprehensive Loss	$	(2,636)	$	(2,514)

See the accompanying Notes to the Consolidated Financial Statements.

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DallasNews Corporation First Quarter 2023 on Form 10-Q 4

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DallasNews Corporation and Subsidiaries

Consolidated Balance Sheets



	March 31,		December 31,
In thousands, except share amounts (unaudited)	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	15,258	$	27,825
Short-term investments		10,500		—
Accounts receivable (net of allowance of $396 and $490 at March 31, 2023 ‎and December 31, 2022, respectively)		11,604		14,023
Inventories		2,537		2,725
Prepaids and other current assets		5,176		3,352
Total current assets		45,075		47,925
Property, plant and equipment, at cost		313,676		313,440
Less accumulated depreciation		(306,375)		(306,002)
Property, plant and equipment, net		7,301		7,438
Operating lease right-of-use assets		14,991		14,811
Deferred income taxes, net		293		282
Other assets		1,805		1,809
Total assets	$	69,465	$	72,265
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	4,318	$	5,041
Accrued compensation and benefits		4,552		4,154
Other accrued expense		3,621		4,060
Contract liabilities		10,932		9,504
Total current liabilities		23,423		22,759
Long-term pension liabilities		19,229		19,455
Long-term operating lease liabilities		16,802		16,546
Other post-employment benefits		978		982
Other liabilities		162		160
Total liabilities		60,594		59,902
Shareholders’ equity:
Preferred stock, $0.01 par value; Authorized 2,000,000 shares; none issued		—		—
Common stock, $0.01 par value; Authorized 31,250,000 shares
Series A: issued 5,216,237 shares at March 31, 2023 and December 31, 2022		52		52
Series B: issued 614,718 shares at March 31, 2023 and December 31, 2022		6		6
Treasury stock, Series A, at cost; 478,465 shares held at March 31, 2023 and December 31, 2022		(13,443)		(13,443)
Additional paid-in capital		494,563		494,563
Accumulated other comprehensive loss		(41,390)		(41,380)
Accumulated deficit		(430,917)		(427,435)
Total shareholders’ equity		8,871		12,363
Total liabilities and shareholders’ equity	$	69,465	$	72,265

See the accompanying Notes to the Consolidated Financial Statements.

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DallasNews Corporation First Quarter 2023 on Form 10-Q 5

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DallasNews Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity



	Three Months Ended March 31, 2023 and 2022
	Common Stock						Treasury Stock
In thousands, except share and per share amounts (unaudited)	Shares Series A	Shares Series B	Amount		Additional ‎Paid-in ‎Capital		Shares ‎Series A	Amount		Accumulated ‎Other ‎Comprehensive ‎Loss		Accumulated ‎Deficit		Total
Balance at December 31, 2021	5,216,045	614,910	$	58	$	494,563	(478,465)	$	(13,443)	$	(32,406)	$	(406,195)	$	42,577
Net loss	—	—		—		—	—		—		—		(2,644)		(2,644)
Other comprehensive income	—	—		—		—	—		—		130		—		130
Dividends declared ($0.16 per share)	—	—		—		—	—		—		—		(856)		(856)
Balance at March 31, 2022	5,216,045	614,910	$	58	$	494,563	(478,465)	$	(13,443)	$	(32,276)	$	(409,695)	$	39,207
Balance at December 31, 2022	5,216,237	614,718	$	58	$	494,563	(478,465)	$	(13,443)	$	(41,380)	$	(427,435)	$	12,363
Net loss	—	—		—		—	—		—		—		(2,626)		(2,626)
Other comprehensive loss	—	—		—		—	—		—		(10)		—		(10)
Dividends declared ($0.16 per share)	—	—		—		—	—		—		—		(856)		(856)
Balance at March 31, 2023	5,216,237	614,718	$	58	$	494,563	(478,465)	$	(13,443)	$	(41,390)	$	(430,917)	$	8,871

See the accompanying Notes to the Consolidated Financial Statements.

‎

DallasNews Corporation First Quarter 2023 on Form 10-Q 6

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DallasNews Corporation and Subsidiaries

Consolidated Statements of Cash Flows



	Three Months Ended March 31,
In thousands (unaudited)	2023		2022
Operating Activities
Net loss	$	(2,626)	$	(2,644)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		373		712
Net periodic pension and other post-employment expense (benefit)		(225)		227
Bad debt expense		8		31
Deferred income taxes		(11)		25
Provision, interest and penalties for uncertain tax positions		2		2
Changes in working capital and other operating assets and liabilities:
Accounts receivable		2,411		3,223
Inventories, prepaids and other current assets		(1,636)		(837)
Other assets		4		3
Accounts payable		(723)		(1,989)
Compensation and benefit obligations		398		117
Other accrued expenses		(363)		625
Contract liabilities		1,428		60
Other post-employment benefits		(15)		(19)
Net cash used for operating activities		(975)		(464)
Investing Activities
Purchases of assets		(236)		(227)
Purchases of short-term investments		(10,500)		—
Net cash used for investing activities		(10,736)		(227)
Financing Activities
Dividends paid		(856)		(856)
Net cash used for financing activities		(856)		(856)
Net decrease in cash and cash equivalents		(12,567)		(1,547)
Cash and cash equivalents, beginning of period		27,825		32,439
Cash and cash equivalents, end of period	$	15,258	$	30,892

Supplemental Disclosures
Income tax paid, net (refund)	$	2	$	(32)
Noncash investing and financing activities:
Dividends payable		856		856

See the accompanying Notes to the Consolidated Financial Statements.

DallasNews Corporation First Quarter 2023 on Form 10-Q 7

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DallasNews Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

Note 1: Basis of Presentation and Recently Issued Accounting Standards

Description of Business. DallasNews Corporation, formerly A. H. Belo Corporation, and its subsidiaries are referred to collectively herein as “DallasNews” or the “Company.” DallasNews was formed in February 2008 through a spin-off from its former parent company and is registered on The Nasdaq Stock Market LLC (Nasdaq trading symbol: DALN). DallasNews is the Dallas-based holding company of The Dallas Morning News and Medium Giant.

The Company operates The Dallas Morning News (dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes, and various niche publications targeting specific audiences. These operations generate revenue from sales of advertising within the Company’s newspaper and digital platforms, subscriptions and retail sales of its newspapers, commercial printing and distribution services primarily related to national newspapers, and preprint advertising.

In addition, the Company has a full-service agency, Medium Giant, with capabilities including strategy, creative and media management with a focus on strategic and digital marketing, and data intelligence that provide a measurable return on investment to its clients.

COVID-19 Pandemic. Beginning in early 2020, the COVID-19 pandemic impacted, and may continue to impact, the Company’s customers, distribution partners, advertisers, production facilities, and third parties, and could result in additional loss of advertising revenue or supply chain disruption. If the pandemic were to affect a significant number of the workforce employed in printing operations, the Company may experience delays or be unable to produce, print and deliver its publications and other third-party print publications on a timely basis. The Company continues to evaluate for any future material impacts on its consolidated financial statements.

Basis of Presentation. The interim consolidated financial statements included herein are unaudited; however, they include adjustments of a normal recurring nature which, in the Company’s opinion, are necessary to present fairly the consolidated financial information as of and for the periods indicated in conformity with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim periods. All intercompany balances and transactions have been eliminated in consolidation. The Company consolidates its majority owned subsidiaries over which the Company exercises control. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. All dollar amounts presented herein, except share and per share amounts, are in thousands, unless the context indicates otherwise.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net operating revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

Areas where estimates are used include valuation allowances for doubtful accounts, fair value measurements, pension plan assets, pension and other post-employment benefit obligation assumptions, income taxes, leases, self-insured liabilities, and assumptions related to long-lived assets impairment review.

Segment Presentation. Based on the Company’s structure and organizational chart, the Company’s chief operating decision-maker (the “CODM”) is its Chief Executive Officer, Grant S. Moise. Based on how the Company’s CODM makes decisions about allocating resources and assessing performance, the Company determined it has one reportable segment.

Recently Adopted Accounting Pronouncements. In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted this ASU on January 1, 2023, using the modified retrospective approach and it did not have a material impact on its consolidated financial statements; see Note 3 – Financial Instruments and Accounts Receivable, Net for additional information.

DallasNews Corporation First Quarter 2023 on Form 10-Q 8

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Note 2: Revenue

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. This occurs when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, typically at contract price or determined by stand-alone selling price. The Company has an estimated allowance for credits, refunds and similar obligations. Sales tax collected concurrent with revenue-producing activities are excluded from revenue.

The table below sets forth revenue disaggregated by revenue source.



	Three Months Ended March 31,
	2023		2022
Advertising and Marketing Services
Print advertising	$	9,296	$	10,597
Digital advertising and marketing services		6,013		5,667
Total	$	15,309	$	16,264

Circulation
Print circulation	$	12,381	$	13,119
Digital circulation		3,630		2,977
Total	$	16,011	$	16,096

Printing, Distribution and Other	$	3,882	$	3,927

Total Revenue	$	35,202	$	36,287

Advertising and Marketing Services

Print advertising is comprised of display, classified and preprint advertising revenue. Display revenue results from sales of advertising space within the Company’s core newspapers and niche publications to local, regional or national businesses with local operations, affiliates or resellers. Classified revenue, which includes automotive, real estate, employment, obituaries and other, results from sales of advertising space in the classified and other sections of the Company’s newspapers. Preprint revenue results from sales of preprinted advertisements or circulars inserted into the Company’s core newspapers, niche publications, and distributed to publications in other markets, or distributed by mail or through third-party distributors to households in targeted areas in order to provide total market coverage for advertisers. The Company’s capabilities allow its advertisers to target preprint distribution selectively at the sub-zip code level in order to optimize coverage for the advertisers’ locations. Preprint advertising also includes other services revenue related to the Company’s niche publications.

Digital advertising and marketing services revenue consists of strategic marketing services, consulting, branding, paid media strategy and management, creative services, search optimization, direct mail and the sale of promotional materials, as well as providing multi-channel marketing solutions through subscription sales of the Company’s cloud-based software. In addition, it includes digital sales of banner, classified and native advertisements on the Company’s news and entertainment-related websites and mobile apps, as well as targeted and multi-channel (programmatic) advertising placed on third-party websites.

Advertising and marketing services revenue is primarily recognized at a point in time when the ad or service is complete and delivered, based on the customers’ contract price. Barter advertising transactions are recognized at estimated fair value based on the negotiated contract price and the range of prices for similar advertising from customers unrelated to the barter transaction. The Company expenses barter costs as incurred, which is independent from the timing of revenue recognition. In addition, certain digital advertising revenue related to website access is recognized over time, based on the customers’ monthly rate. The Company typically extends credit to advertising and marketing services customers, although for certain advertising campaigns the customer may pay in advance.

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DallasNews Corporation First Quarter 2023 on Form 10-Q 9

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For ads placed on certain third-party websites, the Company must evaluate and use judgment to determine whether it is acting as the principal, where revenue is reported on a gross basis, or acting as the agent, where revenue is reported on a net basis. Generally, the Company reports advertising revenue for ads placed on third-party websites on a net basis, meaning the amount recorded to revenue is the amount billed to the customer net of amounts paid to the publisher of the third-party website. The Company is acting as the agent because the publisher controls the advertising inventory. The Company will record certain arrangements gross when it has latitude in establishing price or it determines the placement of the ads as a value added service to the customer.

Circulation

Print circulation revenue is generated primarily by selling home delivery subscriptions, including premium publications, and from single copy sales to non-subscribers. Home delivery revenue is recognized over the subscription period based on the days of actual delivery over the total subscription days and single copy revenue is recognized at a point in time when the paper is purchased. Revenue is directly reduced for any non-payment for the grace period of home delivery subscriptions where the Company recorded revenue for newspapers delivered after a subscription expired.

Digital circulation revenue is generated by digital-only subscriptions and is recognized over the subscription period based on daily or monthly access to the content in the subscription period.

Payment of circulation fees is typically received in advance and deferred over the subscription period. There is little judgment required for valuation or timing of circulation revenue recognition.

Printing, Distribution and Other

Printing, distribution and other revenue is primarily generated from printing and distribution of other newspapers, as well as production of preprinted advertisements for other newspapers. Printing, distribution and other revenue is recognized at a point in time when the product or service is delivered, which requires little judgment to determine. The Company typically extends credit to printing and distribution customers.

Deferred Revenue

Deferred revenue is recorded when cash payments are received in advance of the Company’s performance, including amounts which are refundable. The Company’s primary sources of deferred revenue are from circulation subscriptions and advertising paid in advance of the service provided. These up-front payments are recorded upon receipt as contract liabilities in the Consolidated Balance Sheets and the revenue is recognized when the Company’s obligations under the terms of the contract are satisfied. In the three months ended March 31, 2023, the Company recognized $6,621 of revenue that was included in the contract liabilities balance as of December 31, 2022. The Company typically recognizes deferred revenue within 1 to 12 months.

Practical Expedients and Exemptions

The Company generally expenses sales commissions and circulation acquisition costs when incurred because the amortization period would have been one year or less. These costs are recorded within employee compensation and benefits expense and other production, distribution and operating costs expense, respectively.

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts for which revenue is recognized at the amount invoiced for services performed.

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DallasNews Corporation First Quarter 2023 on Form 10-Q 10

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Note 3: Financial Instruments and Accounts Receivable, Net

Short-Term Investments. In the first quarter of 2023, the Company invested $10,500 in Certificates of Deposit with original maturities of more than 90 days but one year or less, included in short-term investments in the Consolidated Balance Sheet. These investments are classified as held-to-maturity and are valued at amortized cost, which approximates fair value. These investments are considered Level 2 investments.

Accounts Receivable, Net. Accounts receivable are reported net of the allowance for credit losses calculated based on customer category. For example, trade receivables for advertising customers are evaluated separately from trade receivables from single copy sales. For all trade receivables, the reserve percentage considers the Company’s historical loss experience and is applied to each customer category based on aging. In addition, each category has specific reserves for at risk accounts that vary based on the nature of the underlying trade receivables. The calculation of the allowance considers current economic, industry and customer-specific conditions such as high-risk accounts, bankruptcies and other aging specific reserves. The collectability of trade receivables depends on a variety of factors, including trends in local, regional or national economic conditions that affect our customers’ ability to pay. Accounts are written-off after all collection efforts fail; generally, after one year has expired. Expense for such uncollectible amounts is included in other production, distribution and operating costs. Credit terms are customary.

The table below sets forth changes in the allowance for credit losses for the three months ended March 31, 2023.



Beginning balance	$	490
Current period provision		8
Write-offs charged against the allowance		(105)
Recoveries of amounts previously written-off		3
Ending balance	$	396

For the three months ended March 31, 2023 and 2022, the Company recorded $8 and $31 in bad debt expense, respectively, which is included in other production, distribution and operating costs in the Consolidated Statements of Operations. The reduction in required reserves was primarily due to a lower volume of accounts receivable in the three month ended March 31, 2023, compared to the corresponding prior year period. We did not record any one-time adjustments as a result of adopting the new guidance on credit losses.

Note 4: Leases

Lease Accounting

The Company has various operating leases primarily for office space and other distribution centers, some of which include escalating lease payments and options to extend or terminate the lease. The Company’s leases have remaining terms of less than 1 year to 11 years.