UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

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

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022

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

FOR THE TRANSITION PERIOD FROM __________________ TO __________________

COMMISSION FILE NUMBER

000-26497

SALEM MEDIA GROUP, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE		77-0121400
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)

6400 NORTH BELT LINE ROAD IRVING, TEXAS		75063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (469)

586-0080


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	SALM	NASDAQ Global Market

Indicate by check mark whether the 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company or an emerging growth company. See definition 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	☒	Smaller Reporting Company	☒


		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 Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class A		Outstanding at ~~November 2, 2021~~August 1, 2022
Common Stock, $0.01 par value per share		~~21,431,824~~21,661,091 shares


Class B		Outstanding at ~~November 2, 2021~~August 1, 2022
Common Stock, $0.01 par value per share		5,553,696 shares

~~Table of Contents~~

SALEM MEDIA GROUP, INC.

INDEX


	PAGE NO.
COVER PAGE

INDEX		2

FORWARD LOOKING STATEMENTS		32

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.		43

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		3432

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		6156

Item 4. Controls and Procedures.		6256

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.		6256

Item 1A. Risk Factors.		6256

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		6256

Item 3. Defaults Upon Senior Securities.		6256

Item 4. Mine Safety Disclosures.		6256

Item 5. Other Information.		6257

Item 6. Exhibits.		6257

EXHIBIT INDEX		6357

SIGNATURES		6458

~~Table of Contents~~

CERTAIN DEFINITIONS

Unless the context requires otherwise, all references in this report to “Salem” or the “company,” including references to Salem by “we” “us” “our” and “its” refer to Salem Media Group, Inc. and our subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Salem makes “forward-looking statements” from time to time in both written reports (including this annual report) and oral statements, within the meaning of federal and state securities laws. Disclosures that use words such as the company “believes,” “anticipates,” “estimates,” “expects,” “intends,” “will,” “may,” ~~“intends,”~~ “could,” “would,” “should,” “seeks,” “predicts,” or “plans” and similar expressions are intended to identify forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995.

You should not place undue reliance on these forward-looking statements, which reflect our expectations based upon data available to the company as of the date of this annual report. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Except as required by law, the company undertakes no obligation to update or revise any forward-looking statements made in this annual report. Any such forward-looking statements, whether made in this annual report or elsewhere, should be considered in context with the various disclosures made by Salem about its business. These projections and other forward-looking statements fall under the safe harbors of Section 27A of the Securities Act of 1933, as amended ~~(the “Securities~~(“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(the “Exchange~~(“Exchange Act”).

~~Table of Contents~~

PART I – FINANCIAL INFORMATION

SALEM MEDIA GROUP, INC.

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(~~Dollars~~ in thousands, except share and per share data)


	December 31, 2021 (Note 1)			June 30, 2022 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,785		$	2,540
Accounts receivable (net of allowances of $13,022 in 2021 and $7,496 in 2022)		25,663			29,271
Unbilled revenue		3,406			2,960
Other receivables (net of allowances of $455 in 2021 and $586 in 2022)		1,377			2,721
Inventories		960			1,528
Prepaid expenses		6,772			8,380
Assets held for sale		1,551			267

Total current assets		41,514			47,667

Notes receivable (net of allowance of $938 in 2021 and $427 in 2022)		274			1,072
Property and equipment (net of accumulated depreciation of $186,053 in 2021 and $186,881 in 2022)		79,339			79,713
Operating lease right-of-use assets		43,560			44,020
Financing lease right-of-use assets		105			90
Broadcast licenses		320,008			313,500
Goodwill		23,986			23,861
Amortizable intangible assets (net of accumulated amortization of $58,110 in 2021 and $58,777 in 2022)		2,444			1,799
Deferred financing costs		843			774
Other assets		4,039			2,773

Total assets	$	516,112		$	515,269

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,661		$	2,623
Accrued expenses		12,006			18,679
Accrued compensation and related expenses		13,054			12,278
Accrued interest		1,030			952
Contract liabilities		12,294			12,401
Deferred rent income		157			144
Income taxes payable		1,544			222
Current portion of operating lease liabilities		8,651			8,795
Current portion of financing lease liabilities		58			57
Current portion of long-term debt		—			10

Total current liabilities		51,455			56,161

Long-term debt, less current portion		170,581			155,595
Operating lease liabilities, less current portion		42,208			42,599
Financing (capital) lease liabilities, less current portion		65			53
Deferred income taxes		67,012			65,808
Contract liabilities, long-term		2,222			1,948
Deferred rent income, less current portion		3,772			3,705
Other long-term liabilities		586			65

Total liabilities		337,901			325,934

Commitments and contingencies (Note 14)	0			0
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,922,974 and 23,978,741 issued and 21,605,324 and 21,661,091 outstanding at December 31, 2021 and June 30, 2022, respectively		232			232
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2021 and June 30, 2022, respectively		56			56
Additional paid-in capital		248,438			248,706
Accumulated deficit		(36,509	)		(25,653	)
Treasury stock, at cost (2,317,650 shares at December 31, 2021 and June 30, 2022)		(34,006	)		(34,006	)

Total stockholders’ equity		178,211			189,335

Total liabilities and stockholders’ equity	$	516,112		$	515,269

   December 31, 2020
(Note 1)
September 30, 2021

(Unaudited)

ASSETS

Current assets:
Cash and cash equivalents    $ 6,325
$
23,781

Trade accounts receivable (net of allowances of $14,069 in 2020 and $11,680 in 2021)    24,469

24,429

Unbilled revenue    3,192

3,300

Other receivables (net of allowances of $124 in 2020 and $455 in 2021)    1,122

1,589

Inventories    495

907

Prepaid expenses    6,847

7,970

Assets held for sale    3,346

1,875


Total current assets    45,796

63,851


Notes receivable (net of allowance of $461 in 2020 and $996 in 2021)    721

364

Property and equipment (net of accumulated depreciation of $180,336 in 2020 and $185,127 in 2021)    79,122

78,425

Operating lease
right-of-use
assets
   48,203

44,100

Financing lease
right-of-use
assets
   152

121

Broadcast licenses    319,773

320,008

Goodwill    23,757

23,986

Amortizable intangible assets (net of accumulated amortization of $58,897 in 2020 and $57,769 in 2021)    4,017

2,785

Deferred financing costs    213

895

Other assets    2,817

3,678


Total assets    $ 524,571
$
538,213


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable    $ 2,006
$
2,180

Accrued expenses    11,002

11,740

Accrued compensation and related expenses    10,242

10,752

Accrued interest    1,225

2,750

Contract liabilities    11,652

11,561

Deferred rent income    147

114

Income taxes payable    563

626

Current portion of operating lease liabilities    8,963

8,604

Current portion of financing lease liabilities    60

59

Current portion of long-term debt    5,000

0


Total current liabilities    50,860

48,386


Long-term debt, less current portion    213,764

208,559

Operating lease liabilities, less current portion    47,740

43,180

Financing (capital) lease liabilities, less current portion    107

79

Deferred income taxes    68,883

69,287

Contract liabilities, long-term    1,869

2,081

Deferred rent income, less current portion    3,864

3,795

Other long-term liabilities    2,205

2,248


Total liabilities    389,292

377,615


Commitments and contingencies (Note 14) 0 0
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,447,317 and 23,639,824 issued and 21,129,667 and 21,322,174 outstanding at December 31, 2020 and September 30, 2021, respectively    227

229

Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2020 and September 30, 2021, respectively    56

56

Additional
paid-in
capital
   247,025

247,668

Accumulated deficit    (78,023 )

(53,349
)
Treasury stock, at cost (2,317,650 shares at December 31, 2020 and September 30, 2021)    (34,006 )

(34,006
)

Total stockholders’ equity    135,279

160,598


Total liabilities and stockholders’ equity    $ 524,571
$
538,213


See accompanying notes

~~SALEM MEDIA GROUP, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(Dollars in thousands, except share and per share data)~~

~~(Unaudited)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

   2020
2021
2020
2021

Net broadcast revenue    $ 45,391
$
49,591

$ 130,041
$
140,422

Net digital media revenue    9,808

10,645

28,355

30,603

Net publishing revenue    5,442

5,747

13,366

18,093


Total net revenue    60,641

65,983

171,762

189,118


Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $447 and $480 for the three months ended September 30, 2020 and 2021, respectively, and $1,313 and $1,369 for the nine months ended September 30, 2020 and 2021, respectively, paid to related parties)    34,283

37,463

104,704

106,968

Digital media operating expenses, exclusive of depreciation and amortization shown below    7,144

8,269

23,123

25,280

Publishing operating expenses, exclusive of depreciation and amortization shown below    5,814

5,213

16,443

16,844

Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $18 and $0 for the three months ended September 30, 2020 and 2021, respectively, and $198 and $5 for the nine months ended September 30, 2020 and 2021, respectively, paid to related parties)    3,849

4,284

11,909

12,764

Debt modification costs    —

2,347

—

2,347

Depreciation    2,677

2,788

8,108

8,118

Amortization    751

427

2,578

1,553

Change in the estimated fair value of contingent
earn-out
consideration
   (10 )

—

(12 )

—

Impairment of indefinite-lived long-term assets other than goodwill    —

—

17,254

—

Impairment of goodwill    —

—

307

—

Net (gain) loss on the disposition of assets    1,381

(10,607
)
1,494

(10,552
)

Total operating expenses    55,889

50,184

185,908

163,322


Operating income (loss)    4,752

15,799

(14,146 )

25,796

Other income (expense):
Interest income    1

—

1

1

Interest expense    (4,024 )

(4,026
)
(12,069 )

(11,887
)
Gain on the forgiveness of PPP loans    —

11,212

—

11,212

Gain (loss) on the early retirement of long-term debt    —

(56
)
49

(56
)
Net miscellaneous income and (expenses)    1

2

(45 )

87


Net income (loss) before income taxes    730

22,931

(26,210 )

25,153

Provision for income taxes    401

837

31,180

479


Net income (loss)    $ 329
$
22,094

$ (57,390 )
$
24,674


Basic income (loss) per share data:
Basic income (loss) per share    $ 0.01
$
0.82

$ (2.15 )
$
0.92

Diluted income (loss) per share data:
Diluted income (loss) per share    $ 0.01
$
0.81

$ (2.15 )
$
0.91

Basic weighted average shares outstanding    26,683,363

26,870,664

26,683,363

26,825,483


Diluted weighted average shares outstanding    27,791,353

27,280,949

26,683,363

27,217,382



See accompanying notes

See accompanying notes

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2022			2021			2022
Net broadcast revenue	$	46,783		$	52,452		$	90,831		$	100,884
Net digital media revenue		10,339			10,804			19,958			21,104
Net publishing revenue		6,660			5,426			12,346			9,303

Total net revenue		63,782			68,682			123,135			131,291

Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $446 and $453 for the three months ended June 30, 2021 and 2022, respectively, and $889 and $901 for the six months ended June 30, 2021 and 2022, respectively, paid to related parties)		36,162			42,489			69,505			80,610
Digital media operating expenses, exclusive of depreciation and amortization shown below		8,338			8,273			17,011			16,746
Publishing operating expenses, exclusive of depreciation and amortization shown below		6,426			5,432			11,631			9,899
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $2 and $159 for the three months ended June 30, 2021 and 2022, respectively, and $5 and $168 for the six months ended June 30, 2021 and 2022, respectively, paid to related parties)		4,192			4,781			8,480			9,591
Debt modification costs		—			20			—			248
Depreciation		2,741			2,858			5,330			5,800
Amortization		545			332			1,126			666
Change in the estimated fair value of contingent earn-out consideration		—			—			—			(5	)
Impairment of indefinite-lived long-term assets other than goodwill		—			3,935			—			3,935
Impairment of goodwill		—			127			—			127
Net (gain) loss on the disposition of assets		(263	)		(6,893	)		55			(8,628	)

Total operating expenses		58,141			61,354			113,138			118,989

Operating income (loss)		5,641			7,328			9,997			12,302
Other income (expense):
Interest income		—			149			1			149
Interest expense		(3,935	)		(3,389	)		(7,861	)		(6,783	)
Gain (loss) on early retirement of long-term debt		—			35			—			(18	)
Earnings from equity method investment		—			3,913			—			3,913
Net miscellaneous income and (expenses)		63			(1	)		85			—

Net income before income taxes		1,769			8,035			2,222			9,563
Benefit from income taxes		(488	)		(1,082	)		(358	)		(1,293	)

Net income	$	2,257		$	9,117		$	2,580		$	10,856

Basic income per share data:
Basic income per share	$	0.08		$	0.33		$	0.10		$	0.39
Diluted income per share data:
Diluted income per share	$	0.08		$	0.33		$	0.10		$	0.39
Basic weighted average shares outstanding		26,869,145			27,214,787			26,802,892			27,196,081

Diluted weighted average shares outstanding		27,232,423			27,570,881			27,185,598			27,590,644


See accompanying notes

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(~~Dollars~~ in thousands, except share and per share data

)

Class A

Class B


Common Stock

Common Stock

Additional


Paid-In

Accumulated

Treasury


Shares

Amount

Shares

Amount

Capital

Deficit

Stock

Total

Stockholders’ equity, December 31, 2019
   23,447,317    $ 227    5,553,696    $ 56    $ 246,680    $ (23,294 ) $ (34,006 ) $ 189,663
Stock-based compensation    —      —      —      —      103    —   —   103
Cash distributions    —      —      —      —      —      (667 ) —   (667 )
Net loss    —      —      —      —      —      (55,204 ) —   (55,204 )

Stockholders’ equity, March 31, 2020
   23,447,317    $ 227    5,553,696    $ 56    $ 246,783    $ (79,165 ) $ (34,006 ) $ 133,895

Distributions per share
   $ 0.025       $ 0.025

Stock-based compensation    —      —      —      —      96    —   —   96
Net loss    —      —      —      —      —      (2,515 ) —   (2,515 )

Stockholders’ equity, June 30, 2020
   23,447,317    $ 227    5,553,696    $ 56    $ 246,879    $ (81,680 ) $ (34,006 ) $ 131,476
Stock-based compensation    —      —      —      —      74    —   —   74
Net income    —      —      —      —      —      329 —   329

Stockholders’ equity, September 30, 2020


23,447,317


$
227



5,553,696


$
56


$
246,953


$
(81,351
)

$
(34,006
)

$
131,879

Class A

Class B


Common Stock

Common Stock

Additional


Paid-In

Accumulated

Treasury


Shares

Amount

Shares

Amount

Capital

Deficit

Stock

Total

Stockholders’ equity, December 31, 2020
   23,447,317    $ 227    5,553,696    $ 56    $ 247,025    $ (78,023 ) $ (34,006 ) $ 135,279
Stock-based compensation    —      —      —      —      78    —   —   78
Options exercised    185,782    2    —      —      390    —   —   392
Net income    —      —      —      —      —      323 —   323

Stockholders’ equity, March 31, 2021
   23,633,099    $ 229    5,553,696    $ 56    $ 247,493    $ (77,700 ) $ (34,006 ) $ 136,072

Stock-based compensation    —      —      —      —      84    —   —   84
Net income    —      —      —      —      —      2,257 —   2,257

Stockholders’ equity, June 30, 2021
   23,633,099    $ 229    5,553,696    $ 56    $ 247,577    $ (75,443 ) $ (34,006 ) $ 138,413

Stock-based compensation    —      —      —      —      78    —   —   78
Options exercised    6,725    —      —      —      13    —   —   13
Net income    —      —      —      —      —      22,094 —   22,094

Stockholders’ equity, September 30, 2021


23,639,824


$
229



5,553,696


$
56


$
247,668


$
(53,349
)

$
(34,006
)

$
160,598


	Class A				Class B
	Common Stock				Common Stock				Additional
									Paid-In		Accumulated			Treasury
	Shares		Amount		Shares		Amount		Capital		Deficit			Stock			Total
Stockholders’ equity, December 31, 2020		23,447,317	$	227		5,553,696	$	56	$	247,025	$	(78,023	)	$	(34,006	)	$	135,279
Stock-based compensation		—		—		—		—		78		—			—			78
Options exercised		185,782		2		—		—		390		—			—			392
Net income		—		—		—		—		—		323			—			323

Stockholders’ equity, March 31, 2021		23,633,099	$	229		5,553,696	$	56	$	247,493	$	(77,700)		$	(34,006	)	$	136,072

Stock-based compensation		—		—		—		—		84		—			—			84
Net income		—		—		—		—		—		2,257			—			2,257

Stockholders’ equity, June 30, 2021		23,633,099	$	229		5,553,696	$	56	$	247,577	$	(75,443)		$	(34,006)		$	138,413


	Class A				Class B
	Common Stock				Common Stock				Additional
									Paid-In		Accumulated			Treasury
	Shares		Amount		Shares		Amount		Capital		Deficit			Stock			Total
Stockholders’ equity, December 31, 2021		23,922,974	$	232		5,553,696	$	56	$	248,438	$	(36,509	)	$	(34,006	)	$	178,211
Stock-based compensation		—		—		—		—		106		—			—			106
Options exercised		40,913		—		—		—		94		—			—			94
Lapse of restricted shares		14,854		—		—		—		—		—			—			—
Net income		—		—		—		—		—		1,739			—			1,739

Stockholders’ equity, March 31, 2022		23,978,741	$	232		5,553,696	$	56	$	248,638	$	(34,770	)	$	(34,006	)	$	180,150

Stock-based compensation		—		—		—		—		68		—			—			68
Net income		—		—		—		—		—		9,117			—			9,117

Stockholders’ equity, June 30, 2022		23,978,741	$	232		5,553,696	$	56	$	248,706	$	(25,653	)	$	(34,006	)	$	189,335

See accompanying notes

~~Table of Contents~~

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~Dollars~~ in thousands)

(Unaudited)

Nine Months Ended

September 30,


2020

2021

OPERATING ACTIVITIES

Net income (loss)    $ (57,390 )
$
24,674

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash
stock-based compensation
   273

240

Depreciation and amortization    10,686

9,671

Amortization of deferred financing costs    675

690

Non-cash
lease expense
   6,745

6,527

Provision for bad debts    4,122

(248
)
Deferred income taxes    30,954

404

Change in the estimated fair value of contingent
earn-out
consideration
   (12 )

—

Impairment of indefinite-lived long-term assets other than goodwill    17,254

—

Impairment of goodwill    307

—

Gain on the forgiveness of PPP loans    —

(11,212
)
Gain (loss) on the early retirement of long-term debt    (49 )

56

Net (gain) loss on the disposition of assets    1,494

(10,552
)
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue    2,565

(67
)
Inventories    99

(412
)
Prepaid expenses and other current assets    (1,343 )

(1,218
)
Accounts payable and accrued expenses    5,871

2,596

Operating lease liabilities    (6,396 )

(7,317
)
Contract liabilities    5,274

782

Deferred rent income    (268 )

28

Other liabilities    2,254

41

Income taxes payable    30

63


Net cash provided by operating activities    23,145

14,746


INVESTING ACTIVITIES

Cash paid for capital expenditures net of tenant improvement allowances    (3,565 )

(6,952
)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements    (140 )

(138
)
Deposit on broadcast assets and radio station acquisitions    —

(100
)
Purchases of broadcast assets and radio stations    —

(600
)
Purchases of digital media businesses and assets    (400 )

(3,980
)
Proceeds from sale of long-lived assets    188

15,771

Proceeds from the cash surrender value of life insurance policies    2,363

—

Other    (353 )

(1,227
)

Net cash provided by (used in) investing activities    (1,907 )

2,774


FINANCING ACTIVITIES

Proceeds from 2028 Notes    —

114,731

Payments to repurchase or exchange 2024 Notes    (3,392 )

(119,443
)
Proceeds from borrowings under ABL Facility    38,626

16

Payments on ABL Facility    (34,452 )

(5,016
)
Proceeds from borrowings under PPP Loans    —

11,195

Payments under PPP loans    —

17

Payments of debt issuance costs    (124 )

(1,921
)
Proceeds from the exercise of stock options    —

405

Payments on financing lease liabilities    (52 )

(48
)
Payment of cash distribution on common stock    (667 )

—

Book overdraft    (1,885 )

—


Net cash used in financing activities    (1,946 )

(64
)

Net increase in cash and cash equivalents    19,292

17,456

Cash and cash equivalents at beginning of year    6

6,325


Cash and cash equivalents at end of period    $ 19,298
$
23,781


	Six Months Ended June 30,
	2021			2022
OPERATING ACTIVITIES
Net income	$	2,580		$	10,856
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash stock-based compensation		162			174
Depreciation and amortization		6,456			6,466
Amortization of deferred financing costs		426			496
Non-cash lease expense		4,348			4,414
Provision for bad debts		(325	)		(102	)
Deferred income taxes		(403	)		(1,204	)
Change in the estimated fair value of contingent earn-out consideration		—			(5	)
Impairment of indefinite-lived long-term assets other than goodwill		—			3,935
Impairment of goodwill		—			127
(Gain) loss on early retirement of long-term debt		—			18
Net (gain) loss on the disposition of assets		55			(8,628	)
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		421			(5,314	)
Inventories		(224	)		(568	)
Prepaid expenses and other current assets		(319	)		(1,608	)
Accounts payable and accrued expenses		453			5,162
Operating lease liabilities		(4,931	)		(4,324	)
Contract liabilities		1,310			(167	)
Deferred rent income		111			(88	)
Other liabilities		35			(518	)
Income taxes payable		42			(1,322	)

Net cash provided by operating activities		10,197			7,800

INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances		(3,994	)		(6,153	)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements		(19	)		(52	)
Deposit on broadcast assets and radio station acquisitions		(100	)		—
Purchases of broadcast assets and radio stations		(600	)		(548	)
Purchases of digital media businesses and assets		(1,300	)		(190	)
Return of equity investment in OneParty America LLC		—			4,500
Equity investment in OneParty America LLC		(500	)		(3,500	)
Proceeds from sale of assets		3,627			14,150
Other		(314	)		106

Net cash provided by (used in) investing activities		(3,200	)		8,313

FINANCING ACTIVITIES
Payments to repurchase 2024 Notes		—			(15,394	)
Proceeds from borrowings under ABL Facility		16			26,229
Payments on ABL Facility		(5,016	)		(26,219	)
Proceeds from borrowings under PPP Loans		11,195			—
Payments of debt issuance costs		(19	)		(37	)
Proceeds from the exercise of stock options		392			94
Payments on financing lease liabilities		(32	)		(31	)

Net cash provided by (used in) financing activities		6,536			(15,358	)

Net increase in cash and cash equivalents		13,533			755
Cash and cash equivalents at beginning of year		6,325			1,785

Cash and cash equivalents at end of period	$	19,858		$	2,540

See accompanying notes

~~Table of Contents~~

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Dollars in thousands)

(Unaudited)

Nine Months Ended

September 30,


2020

2021

Supplemental disclosures of cash flow information:

Cash paid during the period for:
Cash paid for interest, net of capitalized interest    $   7,731
$
  9,628

Cash paid for interest on finance lease liabilities    $ 6
$
6

Net cash paid for (received from) income taxes    $ 196
$
13

Other supplemental disclosures of cash flow information:
Barter revenue    $ 2,152
$
1,647

Barter expense    $ 1,971
$
1,699

Non-cash
investing and financing activities:

Capital expenditures reimbursable under tenant improvement allowances    $ 140
$
138

Deferred payments on acquisitions    $ 708

0

Right-of-use
assets acquired through operating leases
   $ 2,715
$
3,466

Right-of-use
assets acquired through financing leases
   $ —
$
17

Non-cash
capital expenditures for property & equipment acquired under trade agreements
   $ 4
$
27

Net assets and liabilities assumed in a
non-cash
acquisition
   $ —
$
311

Estimated present value of contingent-earn out consideration    $ —
$
11

See accompanying notes


	Six Months Ended June 30,
	2021		2022
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Cash paid for interest, net of capitalized interest	$	7,391	$	6,156
Cash paid for interest on finance lease liabilities	$	4	$	4
Net cash paid for (received from) income taxes	$	3	$	1,233
Other supplemental disclosures of cash flow information:
Barter revenue	$	1,065	$	1,525
Barter expense	$	1,092	$	1,632
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	$	19	$	52
Right-of-use assets acquired through operating leases	$	1,957	$	5,569
Right-of-use assets acquired through financing leases	$	4	$	17
Non-cash capital expenditures for property & equipment acquired under trade agreements	$	27	$	—
Net assets and liabilities assumed in a non-cash acquisition	$	129	$	—
Estimated present value of contingent-earn out consideration	$	11	$	6

See accompanying notes

~~Table of Contents~~

SALEM MEDIA GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BUSINESS AND BASIS OF PRESENTATION

Business

Salem Media Group, Inc. (“Salem,” “we,” “us,” “our” or the “company”) is a domestic multimedia company specializing in Christian and conservative content. Our media properties include radio broadcasting, digital media, and publishing entities. We have 3three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 17 – Segment Data.

~~Impact of the~~

~~COVID-19~~

~~Pandemic~~

~~The~~

~~COVID-19~~

global pandemic that began in March 2020 materially impacted our business. We experienced a rapid decline in revenue from advertising, programming, events and book sales. Several advertisers reduced or ceased advertising spending due to the outbreak and

~~stay-at-home~~

orders that effectively shut many businesses down. The revenue decline impacted our broadcast segment, which derives substantial revenue from local advertisers who were particularly hard hit due to social distancing and government interventions, and our publishing segment, which derives revenue from book sales through retail stores and live events.

~~While we see progress being made in revenue returning to~~

~~pre-pandemic~~

~~levels, the~~

~~COVID-19~~

pandemic continues to create significant uncertainty and disruption in the economy. These uncertainties could materially impact significant accounting estimates related to, but not limited to, allowances for doubtful accounts, impairments and

~~right-of-use assets.~~

As a result, many estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. These estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.

~~During 2020 we implemented several measures to reduce costs and conserve cash to ensure that we had adequate cash to meet our debt servicing requirements, including:~~

~~limiting capital expenditures;~~

~~reducing discretionary spending, including travel and entertainment;~~

~~eliminating open positions and freezing new hires;~~

~~reducing staffing levels;~~

~~implementing temporary company-wide pay cuts of 5%, 7.5% or 10% depending on salary level;~~

~~furloughing certain employees;~~

~~temporarily suspending the company 401(k) match;~~

~~requesting rent concessions from landlords;~~

~~requesting discounts from vendors;~~

~~offering early payment discounts to certain customers in exchange for advance cash payments; and~~

~~suspending the payment of distributions on our common stock indefinitely.~~

As the economy continues to show signs of recovery, many of these cost reduction initiatives were reversed during 2021. We continue to operate with lower staffing levels, we have not reinstated the company 401(k) match and we have not paid equity distributions on our common stock.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020. The CARES Act provided emergency economic assistance for individuals and businesses impacted by the

~~COVID-19~~

pandemic, including opportunities for additional liquidity, loan guarantees, and other government programs. On December 27, 2020, Congress passed the Consolidated Appropriations Act (“CAA”) that included a second relief package, which, among other things, provides for an extension of the Payroll Support Program established by the CARES Act. We utilized certain benefits of the CARES Act and the CAA, including:

we deferred $3.3 million of employer FICA taxes from April 2020 through December 2020, with 50% payable in December 2021 recorded in accrued compensation and related expenses and 50% payable in December 2022 recorded in other long-term liabilities;

~~Table of Contents~~

~~relaxation of interest expense deduction limitation for income tax purposes;~~

we received Paycheck Protection Program (“PPP”) loans of $11.2 million in total during the first quarter of 2021 through the Small Business Association (“SBA”) based on the eligibility as determined on a

~~per-location~~

~~basis; and~~

~~In July 2021, the SBA forgave all but $20,000 of the PPP loans, with the remaining PPP loan repaid in July 2021.~~

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of Salem include the company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Investments in entities for which we have a significant influence, but less than a controlling financial interest, are accounted for using the equity method.

Information with respect to the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 is unaudited. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form

10-Q

and Article 10 of Regulation

S-X.

Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the company. The unaudited interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Salem filed on Form

10-K

for the year ended December 31, ~~2020.~~2021. Our results are subject to seasonal fluctuations and therefore, the results of operations for the interim periods presented are not necessarily indicative of the results of operations for a full year.

The balance sheet at December 31, ~~2020~~2021 included in this report has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP. Certain reclassifications have been made to the prior year financial statements to conform to the presentation in the current year, which had no impact on the previously reported financial statements.

Impact of the

COVID-19

Pandemic

During 2020 we implemented several measures to reduce costs and conserve cash to ensure that we had adequate liquidity to meet our debt servicing requirements. As the economy began to show signs of recovery, we reversed several of these cost reduction initiatives during 2021. We continue to operate with lower staffing levels where appropriate, we have not declared or paid equity distributions on our common stock, and the company 401(k) match was not reinstated until January 2022.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided emergency economic assistance for individuals and businesses impacted by the

COVID-19

pandemic, including opportunities for additional liquidity, loan guarantees, and other government programs. The Consolidated Appropriations Act (“CAA”) included a second relief package, which, among other things, provides for an extension of the Payroll Support Program established by the CARES Act. We utilized certain benefits of the CARES Act and the CAA, including:

We deferred $3.3 million of employer FICA taxes from April 2020 through December 2020, of which 50% was paid in December 2021 and the remaining 50% is payable in December 2022;

A relaxation of interest expense deduction limitation for income tax purposes;

We received Paycheck Protection Program (“PPP”) loans of $11.2 million in total during the first quarter of 2021 through the Small Business Association (“SBA”) based on the eligibility as determined on a

per-location

basis; and

In July 2021, the SBA forgave all but $20,000 of the PPP loans, with the remaining PPP loan repaid in July 2021.

Equity Method Investment

We invested in OneParty America LLC (“OPA”), an entity formed for the purpose of developing, producing, and distributing a documentary motion picture. We analyzed our investment to determine the degree to which we influenced OPA. The determination of the degree to which we can influence an investee requires extensive analysis depending on the terms and nature of each investment.

We reviewed OPA in accordance with the guidance within Accounting Standards Codification (“ASC”) 810

, Consolidation

. Based on our analysis using the variable interest model, we determined that OPA was a Variable Interest Entity (“VIE”), but because we did not have a controlling financial interest, we were not the primary beneficiary of OPA. Accordingly, we accounted for our investment in OPA in accordance with ASC

323-30

, Investments – Equity Method and Joint Ventures

We recorded our equity method investment at cost with subsequent adjustments to the carrying value for our share of the earnings or losses of OPA. Distributions received from the equity method investment were recorded as reductions in the carrying value of such investment and are classified on the unaudited condensed consolidated interim statements of cash flows pursuant to the cumulative earnings approach. Under the cumulative earnings approach, distributions received are accounted for as a return on investment in cash inflows from operating activities unless the cumulative distributions received exceed the cumulative equity in earnings recognized from the investment. When such an excess occurs, the current period distributions up to this excess are considered returns of investment and are classified as cash inflows from investing activities.

The documentary motion picture,

2,000 Mules

, was released in May 2022. We recorded $3.9 million of earnings from our equity investment in OPA. At June 30, 2022, we recorded a net receivable of $1.3 million from OPA that is included in other receivables in our Condensed Consolidated Balance sheet representing our share of profit from the documentary motion picture.

We monitor equity method investments for impairment and records a reduction in the carrying value if the carrying exceeds the estimated fair value. An impairment charge is recorded when such impairment is deemed to be other than temporary. To determine whether an impairment is other than temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered. Circumstances that indicate an impairment may have occurred include factors such as decreases in quoted market prices or declines in the operations of the investee. The evaluation of the investment for potential impairment requires us to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. There were no indications of impairment at June 30, 2022.

Use of Estimates

~~The preparation of~~Our consolidated financial statements are prepared in ~~conformity~~accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts ~~reported in the financial statements~~of assets, liabilities, revenue and ~~accompanying notes. Actual results can be materially different from these estimates and assumptions.~~

~~Significant areas for which management uses estimates include:~~

~~revenue recognition;~~

~~asset impairments, including broadcasting licenses, goodwill and other indefinite-lived intangible assets;~~

~~probabilities associated with the potential for contingent~~

~~earn-out~~

~~consideration;~~

~~fair value measurements;~~

~~contingency reserves;~~

~~allowance for doubtful accounts;~~

~~sales returns and allowances;~~

~~barter transactions;~~

~~inventory obsolescence;~~

~~reserves for royalty advances;~~

~~fair value of equity awards;~~

~~self-insurance reserves;~~

~~estimated lives for tangible and intangible assets;~~

~~assessment of contract-based factors, asset-based factors, entity-based factors and market-based factors to determine the lease term impacting~~

~~Right-Of-Use~~

~~(“ROU”) assets and lease liabilities;~~

~~determining the Incremental Borrowing Rate (“IBR”) for calculating ROU assets and lease liabilities,~~

~~income tax valuation allowances;~~

~~uncertain tax positions; and~~

~~estimates used in going concern analysis.~~

expenses. These estimates require the use of judgment as future events, and the effect of these events cannot be predicted with certainty. The estimates will change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

~~The~~

COVID-19

pandemic ~~continues to create~~created significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could materially impact our estimates related to, but not limited to, revenue recognition, broadcast licenses, goodwill, and income taxes. As a result, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility.

Significant areas for which management uses estimates include:

revenue recognition;

asset impairments, including broadcasting licenses and goodwill;

contingency reserves;

allowance for doubtful accounts;

barter transactions;

assessment of contract-based factors, asset-based factors, entity-based factors and market-based factors to determine the lease term impacting

Right-Of-Use

(“ROU”) assets and lease liabilities;

determining the Incremental Borrowing Rate (“IBR”) for calculating ROU assets and lease liabilities,

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~There~~Except for our accounting policies for investments, there have been no changes to our significant accounting policies described in Note 2 to our Annual Report on Form

10-K

for the year ended December 31, ~~2020,~~2021, filed with the SEC on March 4, ~~2021,~~2022, that have had a material impact on our Condensed Consolidated Financial Statements and related notes.

We may make strategic investments in entities that share similar interests in Christian and conservative content. The accounting for these investments depends on the degree to which we influence the investee. The determination of the degree to which we can influence the investee requires extensive analysis depending on the terms and nature of each investment. For material investments that we directly or indirectly hold a controlling financial interest, we apply the guidance within Accounting Standards Codification (“ASC”) 810

, Consolidation

. For material investments that we do not hold a controlling interest, but for which we have significant influence, we apply the equity method of accounting under ASC

323-30,

Investments – Equity Method and Joint Ventures

. For investments in which we do not have significant influence, we apply the accounting guidance in ASC 321

– Investments Equity Securities

Recent Accounting Pronouncements

~~All new~~

Changes to accounting ~~pronouncements that~~principles are established by the Financial Accounting Standards Board (“FASB”) in ~~effect that may~~the form of Accounting Standards Update (“ASUs”) to the FASB’s Codification. We consider the applicability and impact ~~our financial statements have been implemented. We do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact~~of all ASUs on our financial position, results of operations, or cash flows,

. or presentation thereof. Described below are ASUs that may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to not be applicable to our financial position, results of operations, cash flows, or presentation thereof.

Accounting Standards Adopted in 2022

In November 2021, the FASB issued ASU

No. 2021-10,

Disclosures by Business Entities about Government Assistance

. The ASU codifies new requirements to disclose information about the nature of certain government assistance received, the accounting policy used to account for the transactions, the location in the financial statements where such transactions were recorded, and significant terms and conditions associated with such transactions. The guidance was effective for annual periods beginning on January 1, 2022. The adoption of ASU

No. 2021-10

did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

Recent Accounting Standards or Updates Not Yet Effective

In June 2022, the FASB issued ASU

2022-03,

Fair Value Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions

. This amended guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU is effective January 1, 2024 and is to be applied prospectively with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

In March 2022, the FASB issued ASU

2022-02,

Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures

(Topic 326):

Financial Instruments – Credit Losses

. This amended guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

October 2021,

the FASB issued ASU

2021

08,

Business Combinations (Topic

805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

, which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic

606

) rather than adjust them to fair value at the acquisition date. The ASU is effective January 1, 2023, with early adoption permitted. The impact that this pronouncement will have will depend on the nature of business acquisitions that may take place in the future.

NOTE 3. RECENT TRANSACTIONS

During the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021,~~2022, we completed or entered into the following transactions:

Debt Transactions

~~On September 24, 2021, we repurchased $4.7 million~~

We completed repurchases of ~~the 6.75% Senior Secured Notes due 2024 (“2024 Notes”) for $4.7 million in cash, recognizing a net loss of $56,000 after adjusting for bond issuance costs.~~

~~On September 10, 2021, we exchanged $112.8 million of the~~our 2024 Notes for $114.7 million (reflecting a call premium of 1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (“2028 Notes.”) Contemporaneously with the refinancing, we obtained commitments from the holders of the 2028 Notes to purchase up to $50 million in additional 2028 Notes (“Delayed Draw 2028 Notes,”) contingent upon satisfying certain performance benchmarks, the proceeds of which are to be used exclusively to repurchase or repay the remaining balance outstanding of the 2024 Notes. The transaction was assessed on a lender-specific level and was accounted for as ~~a debt modification in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 470, “~~

~~Debt~~follows:

.” We incurred debt issuance costs of $4.2 million, of which $2.3 million of third-party debt modification costs are reflected in operating expenses for the current period, $0.8 million is deferred with the Delayed Draw 2028 Notes, and $1.1 million, along with $3.0 million from the exchanged 2024 Notes, is being amortized as part of the effective yield on the 2028 Notes.

~~We received $11.2 million in aggregate principal amount of PPP loans through the SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a~~

~~per-location~~

basis. The PPP loans were accounted for as debt in accordance with FASB ASC Topic 470. The loan balances and accrued interest were forgivable provided that the proceeds were used for eligible purposes, including payroll, benefits, rent and utilities within the covered period. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a

~~pre-tax~~

~~gain on the forgiveness of $11.2 million. The remaining PPP loan was repaid in July~~ ~~2021~~.

~~Shelf Registration Statement and~~

~~At-the-Market~~

~~Facility~~

~~In April 2021, we filed a prospectus supplement to our shelf registration statement on Form~~

~~S-3~~

~~with the SEC covering the offering, issuance and sale of up to $15.0 million of our Class A Common Stock pursuant to an~~

~~at-the-market~~

~~facility, with B. Riley Securities, Inc. acting as sales agent. No Common Stock transactions have taken place under the facility.~~

~~Table of Contents~~


Date	Principal Repurchased		Cash Paid		% of Face Value			Bond Issue Costs		Net Gain (Loss)

	(Dollars in thousands)
June 13, 2022	$	5,000	$	4,947		98.95	%	$	35	$	18
June 10, 2022		3,000		2,970		99.00	%		21		9
June 7, 2022		2,464		2,446		99.25	%		17		1
May 17, 2022		2,525		2,500		99.00	%		18		7
January 12, 2022		2,500		2,531		101.26	%		22		(53	)

Acquisitions

On ~~July~~May 2, ~~2021,~~2022, we acquired websites and the ~~SeniorResource.com domain~~related assets of Retirement Media for ~~$0.1 million in cash.~~

~~On July 1, 2021, we acquired the ShiftWorship.com domain and digital assets for $2.6~~$0.2 million in cash. ~~The digital content library is operated within Salem Web Network’s church products division.~~ We ~~recognized~~recorded goodwill of ~~$0.2 million attributable to~~approximately $2,400 associated with the expected synergies to be realized ~~when~~upon combining the operations into our digital media platform within Eagle Financial Publications. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this entity ~~into~~as of the closing date within our ~~existing operations.~~digital media segment.

On ~~June 1, 2021,~~February 15, 2022, we ~~acquired~~closed on the acquisition of radio ~~stations~~station

~~KDIA-AM~~WLCC-AM

and

~~KDYA-AM~~

an FM translator in ~~San Francisco, California~~the Tampa, Florida market for $0.6 million inof cash. The WLCC transmitter site will be used to broadcast radio ~~stations were acquired in formats that we operate and resulted in $4,000 of goodwill attributable~~station

WTBN-AM

due to the ~~additional audience reach obtained and~~sale of land housing the ~~expected synergies to be realized from combining the operations of these stations into our existing market cluster.~~

WTBN-AM

On April 28, 2021, we acquired the Centerline New Media domain and digital assets for $1.3 million in cash. The digital content library is operated within Salem Web Network’s church products division. We recognized goodwill of $24,000 attributable to the expected synergies to be realized when combining the operations of this entity into our existing operations.

On March 8, 2021, we acquired the Triple Threat Trader newsletter. We paid no cash at the time of closing and assumed deferred subscription liabilities of $0.1 million. As part of the purchase agreement, we may pay up to an additional $11,000 in contingent

~~earn-out~~

~~consideration over the next two years based on the achievement of certain revenue benchmarks.~~

A summary of our business acquisitions and asset purchases during the nine-month period ending September 30, 2021, none of which were individually or in the aggregate material to our consolidated financial position as of the respective date of acquisition, is as follows:

Acquisition Date

Description

Total Consideration


(Dollars in thousands)

July 2, 2021    SeniorResource.com (asset acquisition)
$
80

July 1, 2021    ShiftWorship.com (business acquisition)

2,600

June 1, 2021
KDIA-AM
and
KDYA-AM
San Francisco, California (business acquisition)

600

April 28, 2021    Centerline New Media (business acquisition)

1,300

March 8, 2021    Triple Threat Trader (asset acquisition)

127



$
4,707

~~Under the acquisition method of accounting as specified in FASB ASC Topic 805, “~~

~~Business Combinations~~

,” the total acquisition consideration of a business is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the transaction. Transactions that do not meet the definition of a business in ASU

~~2017-01~~

“

~~Business Combinations (Topic 805) Clarifying the Definition of a Business”~~

are recorded as asset purchases. Asset purchases are recognized based on their cost to acquire, including transaction costs. The cost to acquire an asset group is allocated to the individual assets acquired based on their relative fair value with no goodwill recognized.

~~The total acquisition consideration is equal to the sum of all cash payments, the fair value of any deferred payments and promissory notes, and the present value of any estimated contingent~~

~~earn-out~~

~~consideration. We estimate the fair value of any contingent~~

~~earn-out~~

~~consideration using a probability-weighted discounted cash flow model. The fair value measurement is based on significant inputs that are not observable in the market~~

~~and~~

~~thus represent a Level 3 measurement as defined in Note 12, Fair Value Measurements and Disclosures.~~transmitter.

The total purchase price consideration for our business acquisitions and asset purchases during the ~~nine-month~~

six-month

period ending ~~September~~June 30, ~~2021,~~2022, is as follows:


Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	738
Escrow deposits paid in prior years		60

Total purchase price consideration	$	798

Description

Total Consideration


(Dollars in thousands)

Cash payments made upon closing
$
4,580

Deferred payments

116

Present value of estimated fair value of contingent
earn-out

consideration


11


Total purchase price consideration
$
4,707

~~Table of Contents~~

The allocations presented in the table below are based upon estimates of the fair values using valuation techniques including income, cost, and market approaches. The following preliminary purchase price allocations are based upon the valuation of assets and these estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. Differences between the preliminary and final valuation could be substantially different from the initial estimate.

Net Broadcast
Assets Acquired

Net Digital
Assets Acquired

Total
Net Assets



(Dollars in thousands)

Assets

   Property and equipment    $ 361    $ 3,221    $ 3,582
   Broadcast licenses    235    0      235
   Goodwill    4    225    229
   Customer lists and contracts    0      789    789
   Domain and brand names    0      66    66


$
600


$
4,301


$
4,901


Liabilities

   Contract liabilities, short-term    0      (194 )    (194 )


$
600


$
4,107


$
4,707


		Net Broadcast Assets		Net Digital Media Assets		Total Net Assets
Assets
	Property and equipment	$	418		166		584
	Broadcast licenses		190		—		190
	Goodwill		—		2		2
	Domain and brand names		—		11		11
	Non-Compete agreement		—		11		11

		$	608	$	190	$	798

Divestitures

The operating results of business and asset divestitures are excluded from our consolidated results of operations from their respective closing date or the date that a third-party began operating them under an LMA or TBA.

On ~~July~~June 27, ~~2021,~~2022, we sold ~~the Hilary Kramer Financial Newsletter and related assets for $0.2 million to be collected in quarterly installments over the~~

~~two-year~~

~~period ending September 30, 2023. We recognized a~~

~~pre-tax~~

~~gain on the sale of $0.1 million.~~

~~On July 23, 2021, we sold approximately 34 acres of land in Lewisville, Texas, for $12.1 million in cash. The land was being used for as the transmitter site for company owned radio station~~

~~KSKY-AM.~~

~~We retained a portion of the land in the southwest corner of the site to continue operating the radio station. We recognized a~~

~~pre-tax~~

~~gain on the sale of $10.5 million.~~

On May 25, 2021, we sold Singing News Magazine and Singing News Radio for $0.1 million in cash. In addition to the assets sold, the buyer assumed deferred subscription liabilities of $0.4 million resulting in a

~~pre-tax~~

~~gain on the sale of $0.5 million.~~

~~On March 18, 2021, we sold radio station~~

~~WKAT-AM~~

and an FM translator in Miami, Florida for $3.5 million. We collected $3.2 million in cash upon closing and received a promissory note for $0.3 million due one year from the closing date. The buyer began operating the station under an LMA in November 2020. We recognized an estimated

~~pre-tax~~

loss of $1.4 million during the three-month period ended September 30, 2020, the date we entered into an Asset Purchase Agreement (“APA”) with the buyer, which reflected the sale price as compared to the carrying value of the assets to be sold, estimated closing costs, and the

~~write-off~~

~~of the remaining Miami assets as a result of exiting this market. We adjusted the~~

~~pre-tax~~

~~loss by $0.4 million to $1.8 million upon closing based on the actual closing costs incurred and a reconciliation of total station assets to the assets included in the sale.~~

~~Pending Transactions~~

~~On August 31, 2021, we entered an agreement to sell~~ 9.3 acres of land in the Denver area for $8.2 million resulting in a

pre-tax

gain of $6.5 million. The land was being used as the transmitter site for radio stations

KRKS-AM

and

KBJD-AM

and was an integral part of our broadcast operations for these stations. We ~~expect to close this sale early in 2022 and plan to~~will continue broadcasting both

KRKS-AM

and

KBJD-AM

from this site.

On May 25, 2022, we sold radio stations

WFIA-AM,

WFIA-FM

and

WGTK-AM

in Louisville, Kentucky for $4.0 million with credits applied from amounts previously paid, including a portion of the monthly fees paid under a Time Brokerage Agreement (“TBA”). We recorded a

pre-tax

gain of $0.5 million.

On ~~August 23, 2021,~~January 10, 2022, we ~~entered an agreement to sell approximately 77~~closed on the sale of 4.5 acres of land in ~~Tampa, Florida~~Phoenix, Arizona for ~~$13.5 million. We will move~~$2.0 million in cash. The land was being used as the transmitter site for radio station

~~WTBN-AM~~KXXT-AM

and ~~diplex it at~~was an integral part of our ~~owned~~broadcast operations for that station. We recorded a

pre-tax

gain of $1.8 million on the sale and ~~operated~~had access to the land for 90-days

~~WGUL-AM~~

~~facility.~~ to relocate our transmitter equipment for KXXT-AM.

We ~~expect~~continue to ~~close on this transaction by the end of the year.~~operate radio station KXXT-AM with a similar broadcast signal.

Pending Transactions

On June 2, 2021, we entered into an ~~APA~~Asset Purchase Agreement (“APA”) to acquire radio station

KKOL-AM

in Seattle, Washington for $0.5 million. We paid $0.1 million in cash into an escrow account, and we began operating the station under an ~~LMA~~Local Marketing Agreement (“LMA”) on June 7, 2021.

~~On February 5, 2020, we entered into an APA with Word Broadcasting~~ We expect this transaction to ~~sell radio stations~~

~~WFIA-AM,~~

~~WFIA-FM~~

~~and~~

~~WGTK-AM~~

close in ~~Louisville, Kentucky for $4.0 million with credits applied from amounts previously paid, including a portion~~the latter half of the monthly fees paid under a TBA. Due to changes in debt markets, the transaction was not funded, and it is uncertain when, or if, the transaction will close. Word Broadcasting continues to program the stations under a TBA that began in January 2017.

~~Table of Contents~~

2022.

NOTE 4. REVENUE RECOGNITION

~~We recognize revenue in accordance with FASB ASC Topic 606, “~~

~~Revenue from Contracts with Customers,”~~

a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to customers at an amount that reflects the consideration expected to be received. The application of FASB ASC Topic 606 requires us to use significant judgment and estimates when applying a five-step model applicable to all revenue streams.

The following table presents our revenues disaggregated by revenue source for each of our operating segments:

Nine Months Ended September 30, 2021


Broadcast

Digital Media

Publishing

Consolidated



(Dollars in thousands)

By Source of Revenue:
Block Programming – National    $ 35,824    $ 0—      $ 0—      $ 35,824
Block Programming – Local    18,072    0—      0—      18,072
Spot Advertising – National    10,565    0—      0—      10,565
Spot Advertising – Local    30,123    0—      0—      30,123
Infomercials    682    0—      0—      682
Network    14,729    0—      0—      14,729
Digital Advertising    18,415    13,859    132    32,406
Digital Streaming    3,559    2,579    0—      6,138
Digital Downloads and eBooks    509    4,637    1,294    6,440
Subscriptions    828    9,227    262    10,317
Book Sales and
e-commerce,
net of estimated sales returns and allowances
   289    163    10,851    11,303
Self-Publishing Fees    0—      0—      4,730    4,730
Print Advertising    2    0—      123    125
Other Revenues    6,825    138    701    7,664


$
140,422


$
30,603


$
18,093


$
189,118


Timing of Revenue Recognition
Point in Time    $ 138,540    $ 30,603    $ 18,093    $ 187,236
Rental Income (1)    1,882    0—      0—      1,882


$
140,422


$
30,603


$
18,093


$
189,118


	Six Months Ended June 30, 2022
	Broadcast		Digital Media		Publishing			Consolidated

	(Dollars in thousands)
By Source of Revenue:
Block Programming – National	$	26,399	$	—	$	—		$	26,399
Block Programming – Local		12,049		—		—			12,049

Broadcast Programming Revenue		38,448		—		—			38,448

Spot Advertising – National		7,700		—		—			7,700
Spot Advertising – Local		21,552		—		—			21,552
Network Advertising		10,240		—		—			10,240

Broadcast Advertising Revenue		39,492		—		—			39,492

Infomercials		373		—		—			373
Other Revenue		4,484		—		—			4,484

Other Broadcast Revenue		4,857		—		—			4,857

Digital Advertising		14,112		9,088		—			23,200
Digital Streaming		2,492		1,798		—			4,290
Digital Downloads		387		3,797		—			4,184
Digital Subscriptions		503		6,343		—			6,846
Other Digital Revenue		593		78		—			671

Digital Revenue		18,087		21,104		—			39,191

Book Sales		—		—		6,204			6,204
Estimated Sales Returns & Allowances		—		—		(1,444	)		(1,444	)

Net Book Sales		—		—		4,760			4,760

E-Book Sales		—		—		625			625
Self-Publishing Fees		—		—		3,379			3,379
Other Publishing Revenue		—		—		539			539
Publishing Revenue		—		—		9,303			9,303

	$	100,884	$	21,104	$	9,303		$	131,291

Timing of Revenue Recognition
Point in Time	$	99,744	$	21,104	$	9,303		$	130,151
Rental Income (1)		1,140		—		—			1,140

	$	100,884	$	21,104	$	9,303		$	131,291

Nine Months Ended September 30, 2020


Broadcast

Digital Media

Publishing

Consolidated



(Dollars in thousands)

By Source of Revenue:
Block Programming – National    $ 35,536    $ —      $ —      $ 35,536
Block Programming – Local    18,211    —      —      18,211
Spot Advertising – National    10,179    —      —      10,179
Spot Advertising – Local    28,630    —      —      28,630
Infomercials    750    —      —      750
Network    13,505    —      —      13,505
Digital Advertising    10,676    14,473    216    25,365
Digital Streaming    1,981    2,611    —      4,592
Digital Downloads and eBooks    3,049    4,291    960    8,300
Subscriptions    868    6,679    519    8,066
Book Sales and
e-commerce,
net of estimated sales returns and allowances
   1,128    108    6,849    8,085
Self-Publishing Fees    —      —      3,860    3,860
Print Advertising    1    —      278    279
Other Revenues    5,527    193    684    6,404


$
130,041


$
28,355


$
13,366


$
171,762


Timing of Revenue Recognition
Point in Time    $ 128,157    $ 28,319    $ 13,366    $ 169,842
Rental Income (1)    1,884    36    —      1,920


$
130,041


$
28,355


$
13,366


$
171,762


	Six Months Ended June 30, 2021
	Broadcast		Digital Media		Publishing			Consolidated

	(Dollars in thousands)
By Source of Revenue:
Block Programming – National	$	23,322	$	—	$	—		$	23,322
Block Programming – Local		11,773		—		—			11,773

Broadcast Programming Revenue		35,095		—		—			35,095

Spot Advertising – National		7,118		—		—			7,118
Spot Advertising – Local		19,441		—		—			19,441
Network Advertising		9,821		—		—			9,821

Broadcast Advertising Revenue		36,380		—		—			36,380

Infomercials		462		—		—			462
Other Revenue		4,097		—		—			4,097

Other Broadcast Revenue		4,559		—		—			4,559

Digital Advertising		11,745		8,806		132			20,683
Digital Streaming		2,093		1,706		—			3,799
Digital Downloads		200		3,267		—			3,467
Digital Subscriptions		562		6,072		—			6,634
Other Digital Revenue		197		107		—			304

Digital Revenue		14,797		19,958		132			34,887

Book Sales		—		—		10,513			10,513

Estimated Sales Returns & Allowances		—		—		(3,011	)		(3,011	)

Net Book Sales		—		—		7,502			7,502
E-Book Sales		—		—		792			792
Self-Publishing Fees		—		—		3,174			3,174
Publishing Magazine Subscriptions		—		—		262			262
Other Publishing Revenue		—		—		484			484

Publishing Revenue		—		—		12,214			12,214

	$	90,831	$	19,958	$	12,346		$	123,135

Timing of Revenue Recognition									—
Point in Time	$	89,583	$	19,958	$	12,346		$	121,887
Rental Income (1)		1,248		—		—			1,248

	$	90,831	$	19,958	$	12,346		$	123,135

(1)	Rental income is not applicable to ~~FASB~~ ASC Topic 606, but shown for the purpose of identifying each revenue source presented in total revenue on our Condensed Consolidated Financial Statements within this report on Form 10-Q.

~~Table~~A summary of ~~Contents~~

~~A summary of our principal sources of revenue is as follows:~~

Block Programming

We recognize revenue from the sale of blocks of airtime to program producers that typically range from 12

, 25 or

50-minutes

of time. We separate block program revenue into

categories, National, Local, and Infomercial revenue. Our stations are classified by format, including ~~our three main formats~~ Christian Teaching and Talk, News Talk, and Contemporary Christian Music. National and local programming content is complementary to our station format while infomercials are closely associated with long-form advertisements. Block Programming revenue may include variable consideration for charities and programmers that purchase blocks of airtime to generate donations and contributions from our audience. Block programming revenue is recognized at the time of broadcast, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Programming revenue is recorded on a gross basis unless an agency represents the programmer, in which case, revenue is reported net of the commission retained by the agency. ~~Block Programming revenue may also include variable consideration for charities and programmers that purchase blocks of airtime to generate donations and contributions from our audience.~~

Spot Advertising

. We recognize revenue from the sale of airtime to local and national advertisers who purchase spot commercials of varying lengths. Spot Advertising may include variable consideration for charities and programmers that purchase spots to generate donations and contributions from our audience. Advertising revenue is recognized at the time of broadcast, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Advertising revenue is recorded on a gross basis unless an agency represents the advertiser, in which case, revenue is reported net of the commission retained by the agency.

Network Revenue

Network revenue includes the sale of advertising time on our national network and fees earned from the syndication of programming on our national network. Network revenue is recognized at the time of broadcast, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Network revenue is recorded on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.

Digital Advertising.

We recognize revenue from the sale of banner advertising on our owned and operated websites ~~the sale of advertisements~~and on our ~~own~~owned and operated mobile applications. Each of our radio stations, our digital media entities and certain of our publishing entities have custom websites and mobile applications ~~the sale of advertisements in digital newsletters~~ that ~~we produce, the sale of advertising in streaming and podcasts, and the sale of custom~~generate digital advertising ~~solutions, such as web pages and social media campaigns that we offer to our customers.~~revenue. Digital advertising revenue is recognized at the time that the ~~advertisement~~banner display is delivered, or ~~when~~ the number of impressions delivered meets the previously agreed-upon performance criteria, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Digital advertising revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.

Broadcast digital advertising revenue consists of local digital advertising, such as the sale of banner advertisements on our owned and operated websites, the sale of advertisements on our owned and operated mobile applications, and advertisements in digital newsletters that we produce, as well as national digital advertising, or the sale of custom digital advertising solutions, such as web pages and social media campaigns that we offer to our customers. Advertising revenue is recorded on a gross basis unless an agency represents the advertiser, in which case, revenue is reported net of the commission retained by the agency.

Salem Surround, our national multimedia advertising agency, offers a comprehensive suite of digital marketing services to develop and execute audience-based marketing strategies for clients on both the national and local level. Salem Surround specializes in digital marketing services for each of our radio stations and websites as well as provides a full-service digital marketing strategy for each of our clients. In our role as a digital agency, our sales team provides our customers with integrated digital advertising solutions that optimize the performance of their campaign, which we view as one performance obligation. Our advertising campaigns are designed to be “white label” agreements between Salem and our advertiser, meaning we provide special care and attention to the details of the campaign. We provide custom digital product offerings, including tools for metasearch, retargeting, website design, reputation management, online listing services, and social media marketing. Digital advertising solutions may include third-party websites, such as Google or Facebook, which can be included in a digital advertising social media campaign. We manage all aspects of the digital campaign, including social media placements, review and approval of target audiences, and the monitoring of actual results to make modifications as needed. We may contract directly with a third-party, however, we are responsible for delivering the campaign results to our customer with or without the third-party. We are responsible for any payments due to the third-party regardless of the campaign results and without regard to the status of payment from our customer. We have discretion in setting the price to our customer without input or approval from the third-party. Accordingly, revenue is reported gross, as principal, as the performance obligation is delivered, which represents the point in time that control is transferred to the customer thereby completing our performance obligation.

~~Table of Contents~~

Digital Streaming

. We recognize revenue from the sale of advertisements and from the placement of ministry content that is streamed on our owned and operated websites and on our owned and operated mobile applications. Each of our radio stations, our digital media entities and certain publishing entities have custom websites and mobile applications that generate streaming revenue. Digital streaming revenue is recognized at the time that the content is delivered, or when the number of impressions delivered meets the previously agreed-upon performance criteria. Delivery of the content represents the point in time that control is transferred to the customer thereby completing our performance obligation. Streaming revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.

Digital Downloads and

e-books

. We recognize revenue from sale of downloaded materials, including videos, song tracks, sermons, content archives, and

e-books.

Payments for downloaded materials are due in advance of the download, however, the download is often instant upon confirmation of payment. Digital download revenue is recognized at the time of download, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is recorded at the gross amount due from the customer. All sales are final with no allowances made for returns.

Subscriptions

. We recognize revenue from the sale of subscriptions for financial publication digital newsletters, digital magazines, and podcast subscriptions for

on-air

~~content, and subscriptions to our print magazine.~~content. Subscription terms typically range from

three

months

two years,

, with a money-back guarantee for the first 30 days. Refunds after the first

30-day

period are considered on a

pro-rata

basis based on the number of publications issued and delivered. Payments are due in advance of delivery and can be made in full upon subscribing or in quarterly installments. Cash received in advance of the subscription term, including amounts that are refundable, is recorded in contract labilities. Revenue is recognized ratably over the subscription term at the point in time that each publication is transmitted or shipped, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is reported net of estimated cancellations, which are based on our experience and historical cancellation rates during the cancellable period.

Book Sales

. We recognize revenue from the sale of books upon shipment, which represents the point in time that control is transferred to the customer thereby completing the performance obligation. Revenue is recorded at the gross amount due from the customer, net of estimated sales returns and allowances based on our historical experience. Major new title releases represent a significant portion of the revenue in the current period. Print-based consumer books are sold on a fully returnable basis. We do not record assets or inventory for the value of returned books as they are considered used regardless of the condition returned. Our experience with unsold or returned books is that their resale value is insignificant and they are often destroyed or disposed of.

~~e-Commerce~~

. We recognize revenue from the sale of products sold through our digital platform. Payments for products are due in advance shipping. We record a contract liability when we receive customer payments in advance of shipment. The time frame from receipt of payment to shipment is typically one business day based on the time that an order is placed as compared to fulfillment.

~~E-Commerce~~

revenue is recognized at the time of shipment, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is reported net of estimated returns, which are based on our experience and historical return rates. Returned products are recorded in inventory if they are unopened and

~~re-saleable~~

~~with a corresponding reduction in the cost of goods sold.~~

Self-Publishing Fees

. We recognize revenue from self-publishing services through Salem Author Services (“SAS”), including book publishing and support services to independent authors. Services include book cover design, interior layout, printing, distribution, marketing services and editing for print books and

~~e-Books.~~

eBooks. As each book and related support services are unique to each author, authors must make payments in advance of the performance. Payments are typically made in installments over the expected production timeline for each publication. We record contract liabilities equal to the amount of payments received, including those amounts that are fully or partially refundable. Contract liabilities were historically recorded under the caption “deferred revenue” and are reported as current liabilities or long-term liabilities on our consolidated financial statements based on the time to fulfill the performance obligations under terms of the contract. Refunds are limited based on the percentage completion of each publishing project.

Revenue is recognized upon completion of each performance obligation, which represents the point in time that control of the product is transferred to the author, thereby completing our performance obligation. Revenue is recorded at the net amount due from the author, including discounts based on the service package.

~~Advertising – Print~~

. We recognized revenue from the sale of print magazine advertisements. Revenue was recognized upon delivery of the print magazine which represents the point in time that control is transferred to the customer thereby completing the performance obligation. Revenue was reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.

~~Table of Contents~~

Other ~~Revenues~~Revenue

Other ~~revenues include~~revenue includes various sources, such as event revenue, listener purchase programs, talent fees for

on-air

hosts, rental income for studios and towers, production services, and shipping and handling fees. We recognize event revenue, including fees earned for ticket sales and sponsorships, when the event occurs, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue for all other products and services is recorded as the products or services are delivered or performed, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Other revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.

Principal versus Agent Considerations

When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent.

Contract Assets

Contract Assets – Costs to Obtain a Contract:

We capitalize commissions paid to sales personnel in our self-publishing business when customer contracts are signed and advance payment is received. These capitalized costs are recorded as prepaid commission expense in the Condensed Consolidated Balance Sheets. The amount capitalized is incremental to the contract and would not have been incurred absent the execution of the customer contract. Commissions paid upon the initial acquisition of a contract are expensed at the point in time that related revenue is recognized. Prepaid commission expenses are periodically reviewed for impairment. At June 30, 2022, our prepaid commission expense was $0.7 million.

Contract Liabilities

Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. Additionally, new customers, existing customers without approved credit terms and authors purchasing specific self-publishing services, are required to make payments in advance of the delivery of the products or performance of the services. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities were historically recorded under the caption “deferred revenue” and are reported as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. Long-term contract liabilities represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year. Our long-term liabilities consist of subscriptions with a term of

two-years

for which some customers have purchased and paid for multiple years.

Significant changes in our contract liabilities balances during the period are as follows:


	Short Term			Long-Term
	(Dollars in thousands)
Balance, beginning of period January 1, 2022	$	12,294		$	2,222
Revenue recognized during the period that was included in the beginning balance of contract liabilities		(6,868	)		—
Additional amounts recognized during the period		12,525			424
Revenue recognized during the period that was recorded during the period		(6,248	)		—
Transfers		698			(698	)

Balance, end of period June 30, 2022	$	12,401		$	1,948

Amount refundable at beginning of period	$	12,282		$	2,222
Amount refundable at end of period	$	12,389		$	1,948

We expect to satisfy these performance obligations as follows:


	Amount
For the Year Ended June 30,	(Dollars in thousands)
2023	$	12,401
2024		1,264
2025		448
2026		138
2027		98
Thereafter		0—

	$	14,349

Significant Financing Component

The length of our typical sales agreement is less than 12 months; however, we may sell subscriptions with a

two-year

term. The balance of our long-term contract liabilities represents the unsatisfied performance obligations for subscriptions with a remaining term in excess of one year. We review long-term contract liabilities that are expected to be completed in excess of one year to assess whether the contract contains a significant financing component. The balance includes subscriptions that will be satisfied at various dates between July 1, 2022, and June 30, 2027. The difference between the promised consideration and the cash selling price of the publications is not significant. Therefore, we have concluded that subscriptions do not contain a significant financing component under ASC 606.

Our self-publishing contracts may exceed a

one-year

term due to the length of time for an author to submit and approve a manuscript for publication. The author may pay for publishing services in installments over the production timeline with payments due in advance of performance. The timing of the transfer of goods and services under self-publishing arrangements are at the discretion of the author and based on future events that are not substantially within our control. We require advance payments to provide us with protection from incurring costs for products that are unique and only sellable to the author. Based on these considerations, we have concluded that our self-publishing contracts do not contain a significant financing component under ASC 606.

Variable Consideration

We make significant estimates related to variable consideration at the point of sale, including estimates for refunds and product returns. Under ASC 606, estimates of variable consideration are to be recognized before contingencies are resolved in certain circumstances, including when it is probable that a significant reversal in the amount of any estimated cumulative revenue will not occur.

We enter into agreements under which the amount of revenue we earn is contingent upon the amount of money raised by our customer over the contract term. Our customer is typically a charity or programmer that purchases blocks of programming time or spots to generate revenue from our audience members. Contract terms can range from a few weeks to a few months, depending on the charity or programmer. If the campaign does not generate a

pre-determined

level of donations or revenue to our customer, the consideration that we expect to be entitled to may vary above a minimum base level per the contract. Historically, under ASC Topic 605, we reported variable consideration as revenue when the amount was fixed and determinable. Under ASC 606, variable consideration is to be estimated using the expected value or the most likely amount to the extent it is probable that a significant reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Based on the constraints for using estimates of variable consideration within ASC 606, and our historical experience with these campaigns, we will continue to recognize revenue at the base amount of the campaign with variable consideration recognized when the uncertainty of each campaign is resolved. These constraints include: (1) the amount of consideration received is highly susceptible to factors outside of our influence, specifically the extent to which our audience donates or contributes to our customer or programmer, (2) the length of time in which the uncertainty about the amount of consideration expected is to be resolved, and (3) our experience has shown these contracts have a large number and broad range of possible outcomes.

Trade and Barter Transactions

In broadcasting, trade or barter agreements are commonly used to reduce cash expenses by exchanging advertising time for goods or services. We may enter barter agreements to exchange airtime or digital advertising for goods or services that can be used in our business or that can be sold to our audience under Listener Purchase Programs. The terms of these barter agreements permit us to preempt the barter airtime or digital campaign in favor of customers who purchase the airtime or digital campaign for cash. The value of these

non-cash

exchanges is included in revenue in an amount equal to the fair value of the goods or services we receive. Each transaction must be reviewed to determine that the products, supplies, and/or services we receive have economic substance, or value to us. We record barter operating expenses upon receipt and usage of the products, supplies and services, as applicable. We record barter revenue as advertising spots or digital campaigns are delivered, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Barter revenue is recorded on a gross basis unless an agency represents the programmer, in which case, revenue is reported net of the commission retained by the ~~agency~~agency.

Trade and barter revenues and expenses were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,


   2020
2021
   2020
2021



(Dollars in thousands)

Net broadcast barter revenue    $ 444
$
582

   $ 2,118
$
1,647

Net digital media barter revenue    —

—

   —

—

Net publishing barter revenue    3

—

   34

—

Net broadcast barter expense    $ 413
$
619

   $ 1,971
$
1,704

Net digital media barter expense    —

0—

   —

0—

Net publishing barter expense    —

(2
)
   —

(5
)

~~Contract Assets~~

~~Contract Assets – Costs to Obtain a Contract:~~

We capitalize commissions paid to sales personnel in our self-publishing business when customer contracts are signed and advance payment is received. These capitalized costs are recorded as prepaid commission expense in our Consolidated Balance Sheets. The amount capitalized is incremental to the contract and would not have been incurred absent the execution of the customer contract. Commissions paid upon the initial acquisition of a contract are expensed at the point in time that related revenue is recognized. Prepaid commissions are periodically reviewed for impairment. At September 30, 2021, our prepaid commissions were $0.7 million.

~~Contract Liabilities~~

~~two-years~~

~~for which some customers have purchased and paid for multiple years.~~

~~Table of Contents~~

~~Significant changes in our contract liabilities balances during the period are as follows:~~

Short-Term

Long-Term



(Dollars in thousands)

Balance, beginning of period January 1, 2021    $ 11,652

   $ 1,869
Revenue recognized during the period that was included in the beginning balance
of contract liabilities

(7,770 )    0—
Additional amounts recognized during the period

19,742    883
Revenue recognized during the period that was recorded during the period

(12,734 )    0—
Transfers

671    (671 )

Balance, end of period September 30, 2021
$
11,561

   $ 2,081

Amount refundable at beginning of period    $ 11,607

   $ 1,869
Amount refundable at end of period    $ 11,549

   $ 2,081


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2022		2021		2022
	(Dollars in thousands)
Net broadcast barter revenue	$	674	$	679	$	1,065	$	1,525
Net digital media barter revenue		—		—		—		—
Net publishing barter revenue		—		—		—		—
Net broadcast barter expense	$	712	$	873	$	1,085	$	1,632
Net digital media barter expense		0—		0—		—		—
Net publishing barter expense		7		—		7		—

~~We expect to satisfy these performance obligations as follows:~~

Amount

For the Twelve Months Ended September 30,

(Dollars in thousands)

2022
   $ 11,561
2023
   979
2024
   787
2025
   238
2026
   77
Thereafter
   0

   $ 13,642

~~Significant Financing Component~~

~~Our sales agreements are typically less than 12 months; however, we may sell subscriptions with a~~

~~two-year~~

term. The balance of our long-term contract liabilities represents the unsatisfied performance obligations for subscriptions with a remaining term in excess of one year. We review long-term contract liabilities that are expected to be completed in excess of one year to assess whether the contract contains a significant financing component. The balance includes subscriptions that will be satisfied at various dates between October 1, 2021, and September 30, 2026. The difference between the promised consideration and the cash selling price of the publications is not significant and therefore, we concluded that subscriptions do not contain a significant financing component under FASB ASC Topic 606.

~~Our self-publishing contracts may exceed a~~

~~one-year~~

NOTE 5. INVENTORIES

Inventories consist of finished books from ~~Regnery~~

Salem Publishing. All inventories are valued at the lower of cost or net realizable value as determined on a weighted average cost method.

NOTE 6. PROPERTY AND EQUIPMENT

We account for property and equipment in accordance with FASB ASC Topic

360-10,

“

Property, Plant and Equipment

.”

~~Table of Contents~~

The following is a summary of the categories of our property and equipment:

   December 31, 2020
September 30, 2021



(Dollars in thousands)

Buildings    $ 28,922


$
28,567

Office furnishings and equipment

36,875



36,592

Antennae, towers and transmitting equipment

78,057



77,543

Studio, production, and mobile equipment

29,023



29,333

Computer software and website development costs

33,928



38,272

Record and tape libraries

17



—

Automobiles

1,514



1,492

Leasehold improvements    18,187

18,703


   $ 226,523
$
230,502

Less accumulated depreciation    (180,336 )

(185,127
)

   46,187

45,375

Land    $ 30,254
$
27,040

Construction-in-progress
   2,681

6,010


   $ 79,122
$
78,425


	As of
	December 31, 2021			June 30, 2022
	(Dollars in thousands)
Buildings	$	28,593		$	28,406
Office furnishings and equipment		36,598			36,601
Antennae, towers and transmitting equipment		77,813			74,937
Studio, production, and mobile equipment		29,498			29,094
Computer software and website development costs		38,271			39,265
Automobiles		1,515			1,556
Leasehold improvements		18,104			17,739

	$	230,392		$	227,598
Less accumulated depreciation		(186,053	)		(186,881	)

		44,339		$	40,717

Land	$	26,896			26,893
Construction-in-progress		8,104			12,103

Property and Equipment, net	$	79,339		$	79,713

Depreciation expense was approximately $2.9 million and $2.7 million for the three-month periods ended ~~September~~June 30, 2022 and 2021, respectively, and ~~2020,~~$5.8 million and ~~$8.1~~$5.3 million for the ~~nine-month~~

six-month

periods ended ~~September~~June 30, 2022 and 2021, ~~and 2020.~~respectively. We ~~periodically~~ review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. This review requires us to estimate the fair value of the assets using significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value, including assumptions about risk. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. There were no indications of impairment during the ~~three- and nine-month period~~six months ended ~~September~~June 30, ~~2021~~2022.

NOTE 7. OPERATING AND FINANCE LEASE

RIGHT-OF-USE

ASSETS

Leases

We account for leases in accordance with ~~FASB~~ ASC ~~Topic~~ 842, “

Leases

” that requires lessees to recognize Right of Use (“ROU”) assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. ~~FASB~~ ASC ~~Topic~~ 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows.

Leasing Transactions

Our leased assets include offices and studios, transmitter locations, antenna sites, tower and tower sites, and land. Our lease portfolio has terms remaining from less than

one-year

to up to twenty years. Many of these leases contain options under which we can extend the term from ~~five~~five to twenty years. Renewal options are excluded from our calculation of lease liabilities unless we are reasonably assured to exercise the renewal option. Our lease agreements do not contain residual value guarantees or material restrictive covenants. We lease certain properties from our principal stockholders or from trusts and partnerships created for the benefit of the principal stockholders and their families. These leases are designated as Related Party leases in the details provided.

Operating leases are reflected on our balance sheet within operating lease ROU assets and the related current and

non-current

operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement. Operating lease ROU assets and liabilities are recognized at the commencement date, or the date on which the lessor makes the underlying asset available for use, based upon the present value of the lease payments over the respective lease term. As the implicit rate for operating leases is not readily determinable, the future minimum lease payments were discounted using an incremental borrowing rate. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the lease terms. Variable lease costs, such as common area maintenance, property taxes, and insurance, are expensed as incurred.

~~Table of Contents~~

Balance Sheet

Supplemental balance sheet information related to leases is as follows:


	September 30, 2021
	(Dollars in thousands)						June 30, 2022
							(Dollars in thousands)
Operating Leases	Related Party		Other		Total		Related Party		Other		Total
Operating leases ROU assets	$	6,303	$	37,797	$	44,100	$	6,717	$	37,303	$	44,020

Operating lease liabilities (current)	$	1,004	$	7,600	$	8,604	$	877	$	7,918	$	8,795
Operating lease liabilities (non-current)		5,479		37,701		43,180		5,944		36,655		42,599

Total operating lease liabilities	$	6,483	$	45,301	$	51,784	$	6,821	$	44,573	$	51,394


Weighted Average Remaining Lease Term
Operating leases	~~7.8~~7.6 years
Finance leases	~~2.9~~2.6 years
Weighted Average Discount Rate
Operating leases	~~7.98~~ 8.11	%
Finance leases	~~5.74~~ 6.18	%

Lease Expense

The components of lease expense were as follows:

Nine Months Ended

September 30, 2021


(Dollars in thousands)

Amortization of finance lease ROU Assets    $ 48
Interest on finance lease liabilities    6

Finance lease expense    54
Operating lease expense    9,656
Variable lease expense    430
Short-term lease expense    444

Total lease expense    $ 10,584


	Six Months Ended June 30, 2022
	(Dollars in thousands)
Amortization of finance lease ROU Assets	$	30
Interest on finance lease liabilities		4

Finance lease expense		34
Operating lease expense		6,479
Variable lease expense		290
Short-term lease expense		623

Total lease expense	$	7,426

Supplemental Cash Flow

Supplemental cash flow information related to leases was

follows:

Nine Months Ended

September 30, 2021


(Dollars in thousands)

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases    $ 10,403
Operating cash flows from finance leases    4
Financing cash flows from finance leases    48
Leased assets obtained in exchange for new operating lease liabilities    $ 3,466
Leased assets obtained in exchange for new finance lease liabilities    17

~~Table of Contents~~


	Six Months Ended June 30, 2022
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,519
Operating cash flows from finance leases		2
Financing cash flows from finance leases		31
Leased assets obtained in exchange for new operating lease liabilities	$	5,569
Leased assets obtained in exchange for new finance lease liabilities		17

Maturities

Future minimum lease payments under leases that had initial or remaining

non-cancelable

lease terms in excess of one year as of ~~September~~June 30, ~~2021,~~2022, are as follows:

   Operating Leases

   Related Party Other Total Finance Leases Total


(Dollars in thousands)

2021
(Oct-Dec)
   $ 1,505 $ 10,789 $ 12,294 $ 66 $ 12,360
2022    1,370 10,908 12,278 47 12,325
2023    1,070 8,533 9,603 24 9,627
2024    1,021 6,890 7,911 10 7,921
2025    1,089 5,640 6,729 1 6,730
Thereafter    3,293 22,222 25,515 —   25,515

Undiscounted Cash Flows    $ 9,348 $ 64,982 $ 74,330 $ 148 $ 74,478

Less: imputed interest    (2,865 ) (19,681 ) (22,546 ) (10 ) (22,556 )

Total
$
6,483

$
45,301

$
51,784

$
138

$
51,922


Reconciliation to lease liabilities:
Lease liabilities – current    $ 1,004 $ 7,600 $ 8,604 $ 59 $ 8,663
Lease liabilities – long-term    5,479 37,701 43,180 79 43,259

Total Lease Liabilities
$
6,483

$
45,301

$
51,784

$
138

$
51,922


	Operating Leases
	Related Party			Other			Total			Finance Leases			Total

	(Dollars in thousands)
2023 (July-Dec)	$	1,308		$	10,620		$	11,928		$	60		$	11,988
2024		1,250			10,022			11,272			26			11,298
2025		1,274			8,547			9,821			21			9,842
2026		1,280			7,475			8,755			8			8,763
2027		865			4,355			5,220			4			5,224
Thereafter		3,955			22,801			26,756			1			26,757

Undiscounted Cash Flows	$	9,932		$	63,820		$	73,752		$	120		$	73,872

Less: imputed interest		(3,111	)		(19,247	)		(22,358	)		(10	)		(22,368	)

Total	$	6,821		$	44,573		$	51,394		$	110		$	51,504

Reconciliation to lease liabilities:
Lease liabilities – current	$	877		$	7,918		$	8,795		$	57		$	8,852
Lease liabilities – long-term		5,944			36,655			42,599			53			42,652

Total Lease Liabilities	$	6,821		$	44,573		$	51,394		$	110		$	51,504

NOTE 8. BROADCAST LICENSES

We account for broadcast licenses in accordance with FASB ASC Topic 350 “

Intangibles—Goodwill and Other

.” We do not amortize broadcast licenses, but rather test for impairment annually or more frequently if events or circumstances indicate that the value may be impaired. In the case of our broadcast radio stations, we would not be able to operate the properties without the related broadcast license for each property. Broadcast licenses are renewed with the FCC every eight years for a nominal fee that is expensed as incurred. We continually monitor our stations’ compliance with the

various

regulatory requirements that are necessary for the FCC renewal and all of our broadcast licenses have been renewed at the end of their respective periods. We expect all of our broadcast licenses to be renewed in the future and therefore, we consider our broadcast licenses to be indefinite-lived intangible assets. We are ~~not~~0t aware of any legal, competitive, economic, or other factors that materially limit the useful life of our broadcast licenses. ~~There~~

As a result of changes in macroeconomic conditions and rising interest rates that increase the Weighted Average Cost of Capital (“WACC”), we performed an interim review of broadcast licenses for impairment at June 30, 2022. We updated our 2021

year-end

valuations for changes in the WACC and revenue forecasts as of the interim testing date. We performed an assessment of the amount by which the prior year estimated fair value exceeded the carrying value of the broadcast license and the

year-to-date

market revenues as compared to the forecasted market revenue used in the prior year valuation under the

start-up

income approach.

Impairment testing requires an estimate of the fair value of our indefinite-lived intangible assets. We believe that these estimates of fair value are critical accounting estimates as the value is significant in relation to our total assets and the estimates incorporate variables and assumptions based on our experiences and judgment about our future operating performance. Fair value measurements use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value, including assumptions about risk. If actual future results are less favorable than the assumptions and estimates used in our estimates, we are subject to future impairment charges, the amount of which may be material. The unobservable inputs are defined in FASB ASC Topic 820 “Fair Value Measurements and Disclosures” as Level 3 inputs discussed in detail in Note 15 – Fair Value Measurements.

Based on our assessment, we engaged Bond & Pecaro, an independent third-party appraisal and valuation firm, to assist us with determining the enterprise value of 17 of our market clusters. The estimated fair value of each market cluster was determined using the Greenfield Method, a form of the income approach. The premise of the Greenfield Method is that the value of a broadcast license is equivalent to a hypothetical

start-up

in which the only asset owned by the station as of the valuation date is the broadcast license. This approach eliminates factors that are unique to our operation of the station, including its format and historical financial performance. The method then assumes the entity has to purchase, build, or rent all of the other assets needed to operate a comparable station to the one in which the broadcast license is being utilized as of the valuation date. Cash flows are estimated and netted against all

start-up

costs, expenses and investments necessary to achieve a normalized and mature state of operations, thus reflecting only the cash flows directly attributable to the broadcast license. A multi-year discounted cash flow approach is then used to determine the net present value of these cash flows to derive an indication of fair value. For cash flows beyond the projection period, a terminal value is calculated using the Gordon constant growth model and long-term industry growth rate assumptions based on long-term industry growth and Gross Domestic Product (“GDP”) inflation rates.

The primary assumptions used in the Greenfield Method are:

(1)

gross operating revenue in the station’s designated market area,

(2)

normalized market share,

(3)

normalized profit margin,

(4)

duration of the

“ramp-up”

period to reach normalized operations, (which was assumed to be three years),

(5)

estimated

start-up

costs (based on market size),

(6)

ongoing replacement costs of fixed assets and working capital,

(7)

the calculations of yearly net free cash flows to invested capital; and

(8)

amortization of the intangible asset, or the broadcast license.

The assumptions used reflect those of a hypothetical market participant and not necessarily the actual or projected results of Salem. The key estimates and assumptions used in the

start-up

income valuation for our broadcast licenses were ~~0 indications~~as follows:


Broadcast Licenses	December 31, 2020	June 30, 2022
Risk-adjusted discount rate	8.5%	9.5%
Operating profit margin ranges	3.9% - 30.9%%	3.9% - 30.9%
Long-term revenue growth rates	0.4% - 0.7%	0.4% - 0.7%

The risk-adjusted discount rate reflects the WACC developed based on data from same or similar industry participants and publicly available market data as of the measurement date.

Based on our review and analysis, we determined that the carrying value of broadcast licenses in seven of our market clusters were impaired as of the interim testing period ending June 30, 2022. We r

corded an impairment ~~during~~charge of $3.9 million to the ~~three-~~value of broadcast licenses in Columbus, Dallas, Greenville, Honolulu, Orlando, Portland, and ~~nine-month period ended September~~Sacramento. The impairment charges were driven by an increase in the WACC that was partially offset with improvements in revenue growth rates over those used in the

year-end

valuation forecasts. We believe that these factors are indicative of trends in the industry as a whole and not unique to our company or operations.

The table below presents the results of our interim impairment testing under the

start-up

income approach at June 30, ~~2021.~~2022:


Market Cluster		Excess Fair Value June 30, 2022
Atlanta, GA		61.2%
Boston, MA		2.0%
Chicago, IL		1.7%
Cleveland, OH		10.0%
Col Springs, CO		36.9%
Columbus, OH		(7.8)%
Dallas, TX		(3.0)%
Greenville, SC		(4.2)%
Honolulu, HI		(4.8)%
Little Rock, AR		8.9%
Minneapolis, MN		126.6%
Orlando FL		(5.5)%
Philadelphia, PA		1.1%
Portland, OR		(0.5)%
Sacramento, CA		(5.6)%
San Diego, CA		31.2%
San Francisco, CA		7.0%

The following table presents the changes in broadcasting licenses ~~including~~that include acquisitions and divestitures of radio stations and

translators.

Broadcast Licenses    Twelve Months Ended
December 31, 2020
Nine Months Ended

September 30, 2021



(Dollars in thousands)

Balance before cumulative loss on impairment,
beginning of period    $ 435,300
$
434,209

Accumulated loss on impairment, beginning of
period    (97,442 )

(114,436
)

Balance after cumulative loss on impairment, beginning
of period    337,858

319,773


Acquisitions of radio stations    —

235

Dispositions of radio stations    (1,091 )

—

Impairments based on the estimated fair value of
broadcast licenses    (16,994 )

—


Balance, end of period after cumulative loss on
impairment    $ 319,773
$
320,008


Balance, end of period before cumulative loss on
impairment    $ 434,209
$
434,444

Accumulated loss on impairment, end of period    (114,436 )

(114,436
)

Balance, end of period after cumulative loss on
impairment    $ 319,773
$
320,008

~~Table of Contents~~


Broadcast Licenses	Twelve Months Ended December 31, 2021			Six Months Ended June 30, 2022
	(Dollars in thousands)
Balance before cumulative loss on impairment, beginning of period	$	434,209		$	434,444
Accumulated loss on impairment, beginning of period		(114,436	)		(114,436	)

Balance after cumulative loss on impairment, beginning of period		319,773			320,008
Acquisitions of radio stations		235			190
Dispositions of radio stations and FM translators		—			(2,763	)
Loss on impairment		—			(3,935	)

Balance, end of period after cumulative loss on impairment	$	320,008		$	313,500

Balance, end of period before cumulative loss on impairment	$	434,444		$	429,566
Accumulated loss on impairment, end of period		(114,436	)		(116,066	)

Balance, end of period after cumulative loss on impairment	$	320,008		$	313,500

NOTE 9. GOODWILL

We account for goodwill in accordance with FASB ASC Topic 350 “

Intangibles—Goodwill and Other

.” We do not amortize goodwill, but rather test for impairment annually or more frequently if events or circumstances indicate that an asset may be impaired. We perform our annual impairment testing during the fourth quarter of each year, which coincides with our budget and planning process for the upcoming year. ~~There~~

As a result of changes in macroeconomic conditions and rising interest rates that increase the WACC, we performed an interim review of goodwill for impairment at June 30, 2022. The first step of our impairment testing was to perform a qualitative assessment to determine if events and circumstances have occurred that indicate it is more likely than not that the fair value of the assets, including goodwill, are less than their carrying values. We reviewed the significant inputs used in our prior year fair value estimates to determine if any changes to those inputs should be made. We estimate the fair value using a market approach and compare the estimated fair value of each entity to its carrying value, including goodwill. Under the market approach, we apply a multiple of four to each entity’s operating income to estimate the fair value. If the results of our qualitative assessment indicate that the fair value of a reporting unit may be less than its carrying value, we perform a second quantitative review of the reporting unit. We engage an independent third-party appraisal and valuation firm to assist us with determining the enterprise value as part of this quantitative review.

The key estimates and assumptions used for our enterprise valuations were ~~0 indications~~as follows:


Broadcast Markets Enterprise Valuations	December 31, 2021	June 30, 2022
Risk-adjusted discount rate	8.5%	9.5%
Operating profit margin ranges	(1.4%) – 15.0%	(7.8%) – 15.0%
Long-term revenue growth rates	0.4%	0.4%

The risk-adjusted discount rate reflects the WACC developed based on data from same or similar industry participants and publicly available market data as of the measurement date.

Based on our qualitative review, we tested one market cluster for goodwill impairment. We engaged Bond & Pecaro, an independent appraisal and valuation firm, to assist us in estimating the enterprise value of our market cluster to test goodwill for impairment. The enterprise valuation assumes that the subject assets are installed as part of an operating business rather than as a hypothetical

start-up.

The analysis includes both an income and cost approach to valuation. The income approach uses a discounted cash flow projection while the cost approach, or “stick” value of the underlying assets is used.

Based on our review and analysis, we recorded an impairment ~~during~~charge of $0.1 million to goodwill in one of our broadcast markets at June 30, 2022. The impairment charge was driven by an increase in the ~~three- and nine-month period ended September 30, 2021.~~WACC that was partially offset with improvements in revenue growth rates over those used in the

year-end

valuation forecasts.

The following table presents the changes in goodwill including business acquisitions ~~and dispositions as~~ discussed in Note 3 of our Condensed Consolidated Financial Statements.

Goodwill    Twelve Months Ended
December 31, 2020
Nine Months Ended
September 30, 2021



(Dollars in thousands)

Balance, beginning of period before cumulative loss
on

impairment,
   $ 28,454
$
28,520

Accumulated loss on impairment    (4,456 )

(4,763
)

Balance, beginning of period after cumulative loss on
impairment    23,998

23,757


Acquisitions of radio stations    66

4

Acquisitions of digital media entities    —

225

Impairments based on the estimated fair value
goodwill    (307 )

—


Ending period balance    $ 23,757
$
23,986


Balance, end of period before cumulative loss on
impairment    28,520

28,749

Accumulated loss on impairment    (4,763 )

(4,763
)

Ending period balance    $ 23,757
$
23,986


Goodwill	Twelve Months Ended December 31, 2021			Six Months Ended June 30, 2022
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment,	$	28,520		$	28,749
Accumulated loss on impairment		(4,763	)		(4,763	)

Balance, beginning of period after cumulative loss on impairment		23,757			23,986

Acquisitions of radio stations		4			—
Acquisitions of digital media entities		225			2
Loss on impairment		—			(127	)

Ending period balance	$	23,986		$	23,861

Balance, end of period before cumulative loss on impairment		28,749			28,751
Accumulated loss on impairment		(4,763	)		(4,890	)

Ending period balance	$	23,986		$	23,861

NOTE 10. AMORTIZABLE INTANGIBLE ASSETS

The following tables provide a summary of our significant classes of amortizable intangible assets:

September 30, 2021

      Accumulated
   Cost    Amortization    Net


(Dollars in thousands)

Customer lists and contracts
$
23,700


$
(21,987
)

$
1,713

Domain and brand names

19,875



(19,340
)


535

Favorable and assigned leases

2,188



(1,955
)


233

Subscriber base and lists

8,647



(8,343
)


304

Author relationships

2,771



(2,771
)


—

Non-compete
agreements


2,041



(2,041
)


—

Other amortizable intangible assets

1,332



(1,332
)


—



$
60,554


$
(57,769
)

$
2,785


	As of June 30, 2022
			Accumulated
	Cost		Amortization			Net
	(Dollars in thousands)
Customer lists and contracts	$	23,700	$	(22,609	)	$	1,091
Domain and brand names		19,886		(19,581	)		305
Favorable and assigned leases		2,188		(1,968	)		220
Subscriber base and lists		8,647		(8,474	)		173
Author relationships		2,771		(2,771	)		—
Non-compete agreements		2,052		(2,042	)		10
Other amortizable intangible assets		1,332		(1,332	)		—

	$	60,576	$	(58,777	)	$	1,799

December 31,
2020


      Accumulated
   Cost    Amortization    Net


(Dollars in thousands)

Customer lists and contracts    $ 24,012    $ (22,533 )    $ 1,479
Domain and brand names    20,350    (19,127 )    1,223
Favorable and assigned leases    2,188    (1,943 )    245
Subscriber base and lists    9,886    (8,974 )    912
Author relationships    2,771    (2,765 )    6
Non-compete
agreements
   2,041    (1,954 )    87
Other amortizable intangible assets    1,666    (1,601 )    65

   $ 62,914    $ (58,897 )    $ 4,017

~~Table of Contents~~


	As of December 31, 2021
			Accumulated
	Cost		Amortization			Net
	(Dollars in thousands)
Customer lists and contracts	$	23,700	$	(22,198	)	$	1,502
Domain and brand names		19,875		(19,421	)		454
Favorable and assigned leases		2,188		(1,960	)		228
Subscriber base and lists		8,647		(8,387	)		260
Author relationships		2,771		(2,771	)		—
Non-compete agreements		2,041		(2,041	)		—
Other amortizable intangible assets		1,332		(1,332	)		—

	$60,554		$(58,110)			$2,444

Amortization expense was approximately ~~$0.4~~$0.3 million and ~~$0.8~~$0.5 million for the three-month periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$1.5~~$0.7 million and ~~$2.6~~$1.1 million for the ~~nine-month~~

six-month

periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Based on the amortizable intangible assets asheld at of ~~September~~June 30, ~~2021,~~2022, we estimate amortization expense for the next five years to be as follows:

Year Ended December 31,

Amortization Expense


(Dollars in thousands)

2021 (Oct – Dec)    $ 341
2022    1,219
2023    796
2024    205
2025    21
Thereafter    203

Total    $ 2,785


Year Ended December 31,	Amortization Expense
	(Dollars in thousands)
2022 (July – Dec)	$	557
2023		803
2024		209
2025		24
2026		14
Thereafter		192

Total	$	1,799

NOTE 11. LONG-TERM DEBT

Salem Media Group, Inc. has no independent assets or operations, the subsidiary guarantees relating to certain debt are full and unconditional and joint and several, and any subsidiaries of Salem Media Group, Inc. other than the subsidiary guarantors are minor.

Long-term debt consists of the following:

   December 31, 2020
September 30, 2021



(Dollars in thousands)

7.125% Senior Secured Notes    $ —
$
114,731

Less unamortized discount and debt issuance costs based on imputed interest rate of 7.64%    —

(4,048
)


7.125% Senior Secured Notes net carrying value    —

110,683


6.75% Senior Secured Notes    216,341

98,815

Less unamortized debt issuance costs based on imputed interest rate of 7.10%    (2,577 )

(939
)


6.75% Senior Secured Notes net carrying value    213,764

97,876


Asset-Based Revolving Credit Facility principal
outstanding (1)    5,000

—

SBA Paycheck Protection Program loans    —

0—


Long-term debt less unamortized discount and debt issuance costs    $ 218,764
$
208,559


Less current portion    (5,000 )

—


Long-term debt less unamortized discount and debt issuance costs, net of current portion    $ 213,764
$
208,559


	December 31, 2021			June 30, 2022

	(Dollars in thousands)
2028 Notes	$	114,731		$	114,731
Less unamortized discount and debt issuance costs based on imputed interest rate of 7.64%		(3,844	)		(3,549	)

2028 Notes, net carrying value		110,887			111,182

2024 Notes		60,174			44,685
Less unamortized debt issuance costs based on imputed interest rate of 7.10%		(480	)		(272	)

2024 Notes, net carrying value		59,694			44,413

Asset-Based Revolving Credit Facility principal outstanding (1)		—			10

Long-term debt less unamortized discount and debt issuance costs	$	170,581		$	155,605

Less current portion		—			(10	)

Long-term debt less unamortized discount and debt issuance costs, net of current portion	$	170,581		$	155,595

(1)	As of ~~September~~June 30, ~~2021,~~2022, the Asset-Based Revolving Credit Facility (“ABL”), had a borrowing base of ~~$24.6~~$24.3 million, 0 outstanding borrowings of $10,000, and $0.3 million of outstanding letters of credit, resulting in a ~~$24.3~~$24.0 million borrowing base availability.

Our weighted average interest rate was ~~6.65%~~6.99% and ~~6.94%~~7.01% at December 31, ~~2020~~2021, and ~~September~~June 30, ~~2021, respectively~~

.2022, respectively.

In addition to the outstanding amounts listed above, we also have interest ~~payments~~obligations related to our long-term debt as follows as of ~~September~~June 30, ~~2021:~~2022:

$114.7 million aggregate principal amount of 2028 Notes with semi-annual interest payments at an annual rate of 7.125%;

$~~98.8~~44.7 million aggregate principal amount of 2024 Notes with semi-annual interest payments at an annual rate of 6.75%; and

Commitment fee of 0.25% to 0.375% per annum on the unused portion of the ABL Facility.

~~7.125% Senior Secured~~

2028 Notes

On September 10, 2021, we refinanced $112.8 million of the 2024 Notes ~~by exchanging $112.8 million of 2024 Notes into~~for $114.7 million (reflecting a call premium of 1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (“2028 ~~Notes.”~~Notes”). Contemporaneously with the refinancing, we obtained commitments from the holders of the 2028 Notes to purchase up to $50 million in additional 2028 Notes (“Delayed Draw 2028 Notes”), contingent upon satisfying certain performance benchmarks, the proceeds of which are to be used exclusively to repurchase or repay the remaining balance outstanding of the 2024 Notes.

~~Table of Contents~~

We used the cash proceeds from 2028 Notes to fund the repurchase of a portion of our 2024 Notes. The 2028 Notes and the related guarantees were ~~exchanged and~~ sold to certain holders of the 2024 Notes, whom we believe to be qualified institutional buyers, in a private placement. The 2028 Notes and the related guarantees have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act or any state securities laws. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with FASB ASC Topic 470.

The 2028 Notes are guaranteed on a senior secured basis. We may redeem the ~~7.125%~~2028 Notes, in whole or in part, at any time prior to June 1, 2024, at a price equal to 100% of the principal amount of the 2028 Notes plus a “make-whole” premium as of, and accrued and unpaid interest, if any, up to, but not including, the redemption date. At any time on or after June 1, 2024, we may redeem some or all of the 2028 Notes at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth in the 2028 Notes ~~Indenture,~~indenture, plus accrued and unpaid interest, if any, up to, but not including the redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the 2028 Notes before June 1, 2024, with the net cash proceeds from certain equity offerings at a redemption price of 107.125% of the principal amount plus accrued and unpaid interest, if any, up to, but not including the redemption date. We may also redeem up to 10% of the aggregate original principal amount of the 2028 Notes per twelve-month period, in connection with up to two redemptions in such twelve-month period, at a redemption price of 101% of the principal amount plus accrued and unpaid interest up to, but not including, the redemption date.

The 2028 Notes mature on June 1, 2028, unless earlier redeemed or repurchased. Interest accrues on the 2028 Notes from September 10, 2021, and is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year, commencing December 1, 2021. Based on the balance of the 2028 Notes outstanding, we are required to pay $8.2 million per year in interest. ~~As of September~~At June 30, ~~2021,~~2022, accrued interest on the 2028 Notes was ~~$0.5~~$0.7 million.

The indenture to the 2028 Notes ~~(“2028 Indenture”)~~ contains covenants that, among other things and subject in each case to certain specified exceptions, limit the ability to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets. At ~~September~~June 30, ~~2021,~~2022, we were, and we remain, in compliance with all of the covenants under the ~~7.125% Indenture.~~indenture.

We ~~incurred~~recorded debt issuance costs of ~~$4.2~~$4.7 million, of which ~~$2.3~~$2.5 million of third-party debt modification costs ~~are reflected in operating expenses for~~were expensed during 2021 and $0.2 million were expensed during the ~~current period,~~three months ended March 31, 2022, $0.8 million iswas deferred with the Delayed Draw 2028 Notes, and $1.1 million, along with $3.0 million from the exchanged 2024 Notes, is being amortized as part of the effective yield on the 2028 Notes. During the three and six months ended June 30, 2022, $0.2 million and $0.4 million, respectively, of debt issuance costs and delayed draw fees associated with the Notes were amortized to interest expense.

SBA PPP Loans

We received $11.2 million in aggregate principal amount of PPP loans through the SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a

per-location

basis. The PPP loans were accounted for as debt in accordance with FASB ASC Topic 470. The loan balances and accrued interest were forgivable provided that the proceeds were used for eligible purposes, including payroll, benefits, rent, and utilities within the covered period. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a

pre-tax

gain on the forgiveness of $11.2 million. The remaining PPP loan was repaid in July 2021.

~~6.75% Senior Secured~~

2024 Notes

On May 19, 2017, we issued 6.75% Senior Secured Notes (“2024 Notes”) in a private placement. The 2024 Notes are guaranteed on a senior secured basis by our existing subsidiaries ~~(the “Subsidiary~~(“Subsidiary Guarantors”). The 2024 Notes bear interest at a rate of 6.75% per year and mature on June 1, 2024, unless they are earlier redeemed or repurchased. Interest is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year.

The 2024 Notes are secured by a first-priority lien on substantially all assets of ours and the Subsidiary Guarantors other than the ABL Facility Priority Collateral ~~(as~~as described ~~below) (the “2024 Notes Priority Collateral”).~~below. There is no direct lien on our FCC licenses to the extent prohibited by law or regulation ~~(other~~other than the economic value and proceeds ~~thereof).~~thereof.

The indenture relating to the 2024 Notes ~~(the “2024 Indenture”)~~ contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets. At ~~September~~June 30, ~~2021,~~2022, we were, and we remain, in compliance with all of the covenants under the ~~Indenture.~~

25indenture.

~~Table~~We recorded debt issuance costs of ~~Contents~~$6.3 million as a reduction of the debt proceeds being amortized to

non-cash

interest expense over the life of the Notes using the effective interest method. During the three and six months ended June 30, 2022, $45,000 and $0.1 million, respectively, of debt issuance costs associated with the Notes was amortized to interest expense. During the three and six months ended June 30, 2021, $0.2 million and $0.4 million, respectively, of debt issuance costs associated with the Notes was amortized to interest expense.

Based on the balance of the 2024 Notes outstanding of $44.7 million, we are required to pay $3.0 million per year in interest on the 2024 Notes. At June 30, 2022, accrued interest on the 2024 Notes was $0.3 million.

We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity, and other factors, seek to repurchase the 2024 Notes in open market transactions, privately negotiated transactions, by tender offer or otherwise, as market conditions warrant.

As described above within the 2028 Notes, on September 10, 2021, we ~~exchanges of~~exchanged $112.8 million of the 2024 Notes for $114.7 million of newly issued 2028 Notes, reflecting a call premium of 1.688%. Bond issuance costs of $1.1 million associated with the $112.8 million of the 2024 Notes are being amortized as part of the effective yield on the 2028 Notes.

~~On September~~

24 ~~2021, we repurchased $4.7 million of the 2024 Notes for $4.7 million in cash, recognizing a net loss of $56,000 after adjusting for bond issuance costs.~~

Based on the ~~balance~~then existing market conditions, we also completed repurchases of ~~the~~our 2024 Notes ~~outstanding of $98.8 million, we are required to pay $6.6 million per year in interest on the 2024 Notes. As of September 30, 2021, accrued interest on the 2024 Notes was $2.3 million.~~as follows:

~~We incurred debt issuance costs of $6.3 million that were recorded as a reduction of the debt proceeds that are being amortized to~~

~~non-cash~~

interest expense over the life of the Notes using the effective interest method. During the three and nine-month periods ended September 30, 2021, $0.2 million and $0.5 million, respectively, of debt issuance costs associated with the Notes was amortized to interest expense. During the three and nine-month periods ended September 30, 2020, $0.2 million and $0.6 million, respectively, of debt issuance costs associated with the Notes was amortized to interest expense.


Date	Principal Repurchased		Cash Paid		% of Face Value			Bond Issue Costs		Net Gain (Loss)
	(Dollars in thousands)
June 13, 2022	$	5,000	$	4,947		98.95	%	$	35	$	18
June 10, 2022		3,000		2,970		99.00	%		21		9
June 7, 2022		2,464		2,446		99.25	%		17		1
May 17, 2022		2,525		2,500		99.00	%		18		7
January 12, 2022		2,500		2,531		101.26	%		22		(53	)
December 10, 2021		35,000		35,591		101.69	%		321		(912	)
October 25, 2021		2,000		2,020		101.00	%		19		(39	)
October 12, 2021		250		251		100.38	%		2		(3	)
October 5, 2021		763		766		100.38	%		7		(10	)
October 4, 2021		628		629		100.13	%		6		(7	)
September 24, 2021		4,700		4,712		100.25	%		44		(56	)
January 30, 2020		2,250		2,194		97.50	%		34		22
January 27, 2020		1,245		1,198		96.25	%		20		27
December 27, 2019		3,090		2,874		93.00	%		48		167
November 27, 2019		5,183		4,548		87.75	%		82		553
November 15, 2019		3,791		3,206		84.58	%		61		524
March 28, 2019		2,000		1,830		91.50	%		37		134
March 28, 2019		2,300		2,125		92.38	%		42		133
February 20, 2019		125		114		91.25	%		2		9
February 19, 2019		350		319		91.25	%		7		24
February 12, 2019		1,325		1,209		91.25	%		25		91
January 10, 2019		570		526		92.25	%		9		35
December 21, 2018		2,000		1,835		91.75	%		38		127
December 21, 2018		1,850		1,702		92.00	%		35		113
December 21, 2018		1,080		999		92.50	%		21		60
November 17, 2018		1,500		1,357		90.50	%		29		114
May 4, 2018		4,000		3,770		94.25	%		86		144
April 10, 2018		4,000		3,850		96.25	%		87		63
April 9, 2018		2,000		1,930		96.50	%		43		27

	$	97,489	$	94,949				$	1,218	$	1,322

Asset-Based Revolving Credit Facility

On May 19, 2017, we entered into the ABL Facility pursuant to a Credit Agreement ~~(the “Credit~~(“Credit Agreement”) by and among us and our subsidiaries party thereto as borrowers, Wells Fargo Bank, National Association, as administrative agent and lead arranger, and the lenders that are parties thereto. We used the proceeds of the ABL Facility, together with the net proceeds from the Notes offering, to repay outstanding borrowings under our previously existing senior credit facilities and related fees and expenses. Current proceeds from the ABL Facility are used to provide ongoing working capital and for other general corporate purposes, including permitted acquisitions.

The ABL Facility is ~~a five-year~~ $30.0 million revolving credit facility due March 1, 2024, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans. All borrowings under the ABL Facility accrue interest at a rate equal to a base rate or LIBOR plus a spread. The spread, which is based on an availability-based measure, ranges from 0.50% to 1.00% for base rate borrowings and 1.50% to 2.00% for LIBOR borrowings. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then reborrowed at our discretion without penalty or premium. Additionally, we pay a commitment fee on the unused balance from 0.25% to 0.375% per year based on the level of borrowings.

On October 20, 2020, we entered into a fourth amendment to our ABL Facility that provides a

one-time

waiver with respect to the current covenant testing period allowing the covenant trigger event date be the first day after the availability on the ABL Facility had equaled or exceeded (1) 15% of the maximum revolver amount and (2) $4.5 million and a waiver permitting our July 2020 financial statements to be issued on or before September 30, 2020 due to delays that were caused by a ransomware attack.

On April 7, 2020, we entered into a third amendment to ABL Facility that increased the advance rate on eligible accounts receivable from 85% to 90% and extended the maturity date from May 19, 2022 to March 1, 2024. The April 7, 2020 amendment also allows for an alternative benchmark rate that may include SOFR due to LIBOR being scheduled to be discontinued at the end of calendar year 2021.

Availability under the ABL Facility is subject to a borrowing base consisting of (a) 90% of the eligible accounts receivable plus (b) a calculated amount based on the value of certain real property. As of ~~September~~June 30, ~~2021,~~2022, the amount available under the ABL Facility was ~~$25.0~~$24.0 million of which ~~NaN~~$10,000 was outstanding. The ABL Facility has a first-priority lien on our and the Subsidiary Guarantors’ accounts receivable, inventory, deposit and securities accounts, certain real estate and related assets, ~~(the “ABL Facility Priority Collateral”)~~ and by a second-priority lien on the Notes Priority Collateral. There is no direct lien on our FCC licenses to the extent prohibited by law or regulation ~~(other~~other than the economic value and proceeds ~~thereof).~~thereof.

The Credit Agreement includes a springing fixed charge coverage ratio of 1.0 to 1.0, which is tested during the period commencing on the last day of the fiscal month most recently ended prior to the date on which Availability (as defined in the Credit Agreement) is less than the greater of 15% of the Maximum Revolver Amount (as defined in the Credit Agreement) and $4.5 million and continuing for a period of 60 consecutive days after the first day on which Availability exceeds such threshold amount. The Credit Agreement also includes other negative covenants that are customary for credit facilities of this type, including covenants that, subject to exceptions described in the Credit Agreement, restrict our ability and the ability of our subsidiaries (i) to incur additional indebtedness; (ii) to make investments; (iii) to make distributions, loans or transfers of assets; (iv) to enter into, create, incur, assume or suffer to exist any liens, (v) to sell assets; (vi) to enter into transactions with affiliates; (vii) to merge or consolidate with, or dispose of all assets to a third party, except as permitted thereby; (viii) to prepay indebtedness; and (ix) to pay dividends.

The Credit Agreement provides for the following events of default: (i) default for

non-payment

of any principal or letter of credit reimbursement when due or any interest, fees, or other amounts within five days of the due date; (ii) the failure by any borrower or any subsidiary to comply with any covenant or agreement contained in the Credit Agreement or any other loan document, in certain cases subject to applicable notice and lapse of time; (iii) any representation or warranty made pursuant to the Credit Agreement or any other loan document is incorrect in any material respect when made; (iv) certain defaults of other indebtedness of any borrower or any subsidiary of indebtedness of at least $10 million; (v) certain events of bankruptcy or insolvency with respect to any borrower or any subsidiary; (vi) certain judgments for the payment of money of $10 million or more; (vii) a change of control; and (viii) certain defaults relating to the loss of FCC licenses, cessation of broadcasting and termination of material station contracts. If an event of default occurs and is continuing, the Administrative Agent and the Lenders may accelerate the amounts outstanding under the ABL Facility and may exercise remedies in respect of the collateral. At ~~September~~June 30, ~~2021,~~2022, we were, and we remain, in compliance with all of the covenants under Credit Agreement.

On September 10, 2021, we entered into the fifth amendment to the ABL Facility to designate the incurrence of the 2028 Notes, and any further refinancing of 2024 Notes through the issuance of additional 2028 Notes, as permitted indebtedness thereunder and to effect related arrangements for the interests in the ABL Priority Collateral and the Notes Priority Collateral. We ~~incurred~~recorded debt issue costs of $0.9 million ~~that were recorded~~ as an asset ~~and are~~ being amortized to

non-cash

interest expense over the term of the ABL Facility using the effective interest method. During the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2021, $27,000~~2022, $28,000 and $0.1 million, respectively, of debt issuance costs associated with the ABL Facility was amortized to interest expense. During the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2020, $30,000~~2021, $29,000 and $0.1 million, respectively, of debt ~~issue~~issuance costs associated with the ABL Facility was amortized to interest expense. At June 30, 2022, the blended interest rate on amounts outstanding under the ABL Facility was 0.0%.

We report outstanding balances on the ABL Facility as short-term regardless of the maturity date based on use of the ABL Facility to fund ordinary and customary operating cash needs with frequent repayments. We believe that our borrowing capacity under the ABL Facility allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

~~Table of Contents~~

Maturities of Long-Term Debt

Principal repayment requirements under all long-term debt agreements outstanding at ~~September~~June 30, ~~2021~~2022 for each of the next five years and thereafter are as follows:

Amount

For the Year Ended September 30,

(Dollars in thousands)

2022    $ 0
2023    0
2024    98,815
2025    0
2026    0
Thereafter    114,731

   $ 213,546


	Amount
For the Year Ended June 30,	(Dollars in thousands)
2023	$	10
2024		44,685
2025		—
2026		—
2027		—
Thereafter		114,731

	$	159,426

NOTE 12. FAIR VALUE MEASUREMENTS

As of ~~September~~June 30, ~~2021,~~2022, the carrying value of cash and cash equivalents, ~~trade~~ accounts receivables, accounts payable, accrued expenses, and accrued interest approximates fair value due to the short-term nature of such instruments. The carrying amount of the Notes at ~~September~~June 30, ~~2021~~2022, was ~~$213.5~~$159.4 million compared to the estimated fair value of ~~$213.3~~$153.1 million, based on the prevailing interest rates and trading activity of our Notes.

We have certain assets that are measured at fair value on a

non-recurring

basis that are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered Level 3 due to the subjective nature of the unobservable inputs used when estimating the fair value.

The following table summarizes the fair value of our financial assets and liabilities that are measured at fair value:

September 30, 2021


   Carrying Value on
Balance Sheet    Fair Value Measurement Category
   Level 1    Level 2    Level 3


(Dollars in thousands)

Liabilities:
Estimated fair value of contingent
earn-out
consideration included in
accrued expenses
   $ 11    —      —      $ 11
Long-term debt less unamortized discount and debt issuance costs    208,559    —      208,314    —


	June 30, 2022
	Carrying Value on Balance Sheet		Fair Value Measurement Category
	Carrying Value on Balance Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses	$	6		—		—	$	6
Long-term debt less unamortized debt issuance costs		155,605		—		151,923		—

NOTE 13. INCOME TAXES

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our consolidated financial statement carrying amount of assets and liabilities and their respective tax bases. We measure these deferred tax assets and liabilities using enacted tax rates expected to apply in the years in which these temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change.

~~The adoption of ASU~~

~~2019-12,~~

“

~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”~~

~~(“ASU~~

~~2019-12”)~~

~~in the current year did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.~~

At December 31, ~~2020,~~2021, we had net operating loss carryforwards for federal income tax purposes of approximately ~~$135.3~~$98.4 million that expire in years ~~2021~~2024 through 2038 and for state income tax purposes of approximately ~~$610.8~~$607.7 million that expire in years ~~2021~~2022 through ~~2040.~~2041. As a result of our adjusted cumulative three-year

pre-tax

book loss as of December 31, 2020, we performed an assessment of positive and negative evidence with respect to the realization of our net deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, the availability of carryforwards and estimates of projected future taxable ~~income. The economic uncertainty from the~~

~~COVID-19~~

~~pandemic provided additional negative evidence that outweighed positive evidence resulting~~income which resulted in ~~our conclusion that additional deferred tax assets~~recognition of ~~$35.1~~a $48.1 million ~~related to federal and state net operating loss carryforwards are more likely than not to be not realized. As such, an additional~~ valuation allowance ~~of $35.1 million was recorded,~~ for ~~a total valuation allowance of $48.1 million as of~~ the year ended December 31, 2020. During year 2021, through operational activity of the company primarily through various land sales throughout the year, Salem utilized its operating loss carryforwards and adjusted the related valuation allowance by $9 million bringing the total valuation allowance to $39.1 million for the year ended December 31, 2021. During interim period ended June 30, 2022, as the economy comes out of the

COVID-19

pandemic and

27stay-at-home

~~Table~~shelter orders, the Company continues to monitor its budget; however, at this time the Company has determined it is more likely than not that a reasonable forecast beyond the current year does not provide enough evidence to measure its realization of ~~Contents~~December 31, 2021 and June 30, 2022 deferred tax assets.

During the interim period ended ~~September~~June 30, ~~2021,~~2022, we computed the income tax provision using the estimated effective annual rate applicable for the full year. We updated our forecast to project income for the ~~2021~~2022 calendar year. In accordance with the guidance under FASB ASC Topic

740-270-25-4,

we measured the estimated utilization of the operating loss carryforwards and the release of the valuation allowance for both federal and state jurisdictions.

The effective tax rate differs from our statutory rate as a result of the forecasted change in the valuation allowance against expected operating income, permanently disallowed expenses, PPP loan forgiveness, state tax and changes to the deferred tax liability for amortization of indefinite-lived intangible assets.

Given that we have a valuation allowance placed on our net operating losses, and as part of our annual effective tax rate exercise, we estimate annual taxable income for purposes of determining the utilization of the operating loss carryforwards resulting in a tax benefit recognized in the overall annual effective tax rate. We recognized a favorable tax adjustment attributable to the GAAP income recognition of the PPP loan forgiveness within the quarter as a discrete adjustment for both federal and state jurisdictions where applicable given its unusual and infrequent nature.

During the quarter ended September 30, 2021, we refinanced $112.8 million of the 2024 Notes by exchanging $112.8 million of the 2024 Notes into $114.7 million of newly issued 2028 Notes, incurring third-party debt modification costs during the quarter. For tax purposes, we considered these debt modification costs in our operating loss utilization analysis.

The amortization of our indefinite-lived intangible assets for tax purposes, but not for book purposes, creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (1) become impaired; or (2) are sold, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods exclusive of any impairment losses in future periods. These deferred tax liabilities and net operating loss carryforwards result in differences between our provision for income tax and cash paid for taxes.

We review and reevaluate uncertain tax positions on a quarterly basis. Changes in assumptions may result in the recognition of a tax benefit or an additional charge to the tax provision.

~~Valuation Allowance (Deferred Taxes)~~

For financial reporting purposes, we recorded a valuation allowance of $28.4 million as of December 31, 2020 to offset $28.4 million of the deferred tax assets related to the federal net operating loss carryforwards, and $19.7 million of the deferred tax assets related to state net operating loss carryforwards of $15.7 million and other financial statement accrual assets of $4.0 million, for a total valuation allowance of $48.1 million for the year ended December 31, 2020.

NOTE 14. COMMITMENTS AND CONTINGENCIES

~~We enter~~

The company enters into various agreements in the normal course of business that contain minimum guarantees. Minimum guarantees are typically tied to future events, such as future revenue earned in excess of the contractual level. Accordingly, the fair value of these arrangements is zero.

~~We may record~~The company also records contingent

earn-out

consideration representing the estimated fair value of future liabilities associated with acquisitions that may have additional payments due upon the achievement of certain performance targets. The fair value of the contingent

earn-out

consideration is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the expected payment amounts. We review the probabilities of possible future payments to estimate the fair value of any contingent

earn-out

consideration on a quarterly basis over the

earn-out

period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent

earn-out

consideration liability will increase or decrease, up to the contracted limit, as applicable. Changes in the estimated fair value of the contingent

earn-out

consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent

earn-out

consideration may materially impact and cause volatility in our operating results.

The company and ~~our~~its subsidiaries, incident to ~~our~~its business activities, are parties to a number of legal proceedings, lawsuits, ~~arbitration~~arbitrations, and other claims. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance. ~~We evaluate~~The company evaluates claims based on what we believe to be both probable and reasonably estimable. ~~We maintain~~The company maintains insurance that may provide coverage for such matters. Consequently, ~~we are~~the company is unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters. ~~We believe,~~The company believes, at this time, that the final resolution of these matters, individually and in the aggregate, will not have a material adverse effect upon ~~our~~the company’s condensed consolidated financial position, results of operations or cash flows.

~~Table of Contents~~

NOTE 15. STOCK INCENTIVE PLAN

~~Our Amended and Restated 1999 Stock Incentive Plan (the “Plan”) provides for grants of equity-based awards to employees,~~

~~non-employee~~

~~directors and officers, and advisors (“Eligible Persons”). A maximum of 8,000,000 shares are authorized under the Plan. Insiders may participate in plans established pursuant to Rule~~

~~10b5-1~~

~~under the Exchange Act that allow them to exercise awards subject to~~

~~pre-established~~

~~criteria.~~

We recognize

non-cash

stock-based compensation expense based on the estimated fair value of awards in accordance with FASB ASC Topic 718 “

Compensation—Stock Compensation

.” Stock-based compensation expense fluctuates over time as a result of the vesting periods for outstanding awards and the number of awards that actually vest.

The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the ~~three-~~three and

~~six-~~six-month

~~month~~ periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended

September 30,

Nine Months Ended

September 30,



2020

2021

2020

2021



(Dollars in thousands)

(Dollars in thousands)

Stock option compensation expense included in unallocated corporate
expenses    $ 30
$
23

   $ 122
$
75

Stock option compensation expense included in broadcast operating
expenses    32

31

   106

92

Stock option compensation expense included in digital media operating
expenses    12

24

   44

73

Stock option compensation expense included in publishing operating
expenses    —

—

   1

—


Total stock-based compensation expense,
pre-tax
   $ 74
$
78

   $ 273
$
240


Tax expense for stock-based compensation expense    (19 )

(20
)
   (71 )

(62
)

Total stock-based compensation expense, net of tax    $ 55
$
58

   $ 202
$
178

~~Stock Option and Restricted Stock Grants~~

~~Eligible employees may receive incentive and~~

~~non-qualified~~

stock option awards that allow the recipient to purchase shares of our common stock at a set price, not to be less than the closing market price on the date of award, for no consideration payable by the recipient. The related number of shares underlying the stock option is fixed at the time of the grant. Options generally vest over a four-year period with a maximum term of five years from the vesting date.

The Plan also allows for awards of restricted stock that contain transfer restrictions under which they cannot be sold, pledged, transferred or assigned until the period specified in the award, generally from ~~one~~ to five years. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards are considered issued and outstanding from the date of grant.

The fair value of each award is estimated as of the date of the grant using the Black-Scholes valuation model. The expected volatility reflects the consideration of the historical volatility of our common stock as determined by the closing price over a ~~six~~ to

~~ten-year~~

term commensurate with the expected term of the award. Expected dividends reflect the amount of quarterly distributions authorized and declared on our Class A and Class B common stock as of the grant date. The expected term of the awards is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rates for periods within the expected term of the award are based on the U.S. Treasury yield curve in effect during the period the options were granted. We have used historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model. These estimates have approximated our actual forfeiture rates.


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2022			2021			2022
	(Dollars in thousands)						(Dollars in thousands)
Stock option compensation expense included in unallocated corporate expenses	$	24		$	34		$	52		$	36
Restricted stock shares compensation expense included in corporate expenses		—			—			—			54
Stock option compensation expense included in broadcast operating expenses		33			19			61			49
Stock option compensation expense included in digital media operating expenses		27			15			49			35

Total stock-based compensation expense, pre-tax	$	84		$	68		$	162		$	174

Tax expense for stock-based compensation expense		(22	)		(18	)		(42	)		(45	)

Total stock-based compensation expense, net of tax	$	62		$	50		$	120		$	129

The weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes valuation model were as follows for the ~~three-~~three and ~~nine-month~~

six-month

periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended


September 30, 2020

September 30, 2020

September 30, 2021

September 30, 2021

Expected volatility    n/a    53.96 % 79.99 % 75.98 %
Expected dividends    n/a    7.30 % 0.00 % 0.00 %
Expected term (in years)    n/a    7.6 8.0 7.8
Risk-free interest rate    n/a    1.14 % 1.27 1.03 %


	Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
	June 30, 2021		June 30, 2021			June 30, 2022		June 30, 2022
Expected volatility		0n/a		74.83	%		0n/a		84.69	%
Expected dividends		0n/a		0.00	%		0n/a		0.00	%
Expected term (in years)		0n/a		7.7			0n/a		9.5
Risk-free interest rate		0n/a		0.96	%		0n/a		1.61	%

~~Table of Contents~~

Activity with respect to the company’s option awards during the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021~~2022 is as follows:

Options    Shares Weighted
Average
Exercise Price    Weighted Average
Grant Date
Fair Value    Weighted Average
Remaining
Contractual Term    Aggregate
Intrinsic
Value


(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)

Outstanding at January 1, 2021    2,291,020 $ 3.23    $ 1.52    4.3 years    $ —
Granted    270,000 2.14    1.55       —
Exercised    (192,507 ) 2.11    0.97       200
Forfeited or expired    (157,446 ) 6.73    4.74       —

Outstanding at September 30, 2021


2,211,067

$
2.95


$
1.34



4.4 years


$
2,484


Exercisable at September 30, 2021


1,209,942

$
3.84


$
1.75



2.6 years


$
640


Expected to Vest


950,568

$
2.97


$
1.35



4.3 years


$
2,391


Options	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2022		1,900,417		$	3.01	$	1.37		4.4 years	$	1,310
Granted		100,000			3.26		2.66				—
Exercised		(40,913	)		2.31		1.16				50
Forfeited or expired		(166,164	)		6.10		3.47				—

Outstanding at June 30, 2022		1,793,340			2.76		1.25		4.5 years	$	549

Exercisable at June 30, 2022		1,066,090			3.36		1.40		3.0 years		174

Expected to Vest		690,524			2.78		1.26		4.5 years	$	530

Activity with respect to the company’s restricted stock awards during the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021~~2022 is as follows:

Restricted Stock Awards    Shares    Weighted Average
Grant Date
Fair Value    Weighted Average
Remaining Contractual Term    Aggregate
Intrinsic Value


(Dollars in thousands, except weighted average exercise price and weighted average
grant date fair value)

Outstanding at January 1, 2021    107,990    $ 1.85    1.67 years    $ 112
Granted    —      —      —      —
Lapsed    (41,323 )    2.42    —      100
Forfeited    —      —      —      —

Outstanding at September 30, 2021

66,667


$
1.50



0.02 years


$
247


Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2022		—		—		—		—
Granted		14,854		3.66		—	$	54
Lapsed		—		—		—		—
Forfeited		—		—		—		—

Outstanding at June 30, 2022		14,854		3.66		1.7	$	31

The aggregate intrinsic value represents the difference between the company’s closing stock price on ~~September~~June 30, ~~2021~~2022 of ~~$3.71~~$2.12 and the option exercise price of the shares for stock options that were in the money, multiplied by the number of shares underlying such options. The total fair value of options vested during the periods ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021, was $0.3 ~~million and $0.4 million, respectively.~~million.

As of ~~September~~June 30, ~~2021,~~2022, there was ~~$22,000~~$0.4 million of total unrecognized compensation cost related to

non-vested

stock option awards. This cost is expected to be recognized over a weighted-average period of ~~2.3~~3.1 years.

NOTE 16. EQUITY TRANSACTIONS

~~In April 2021, we filed a prospectus supplement to our shelf registration statement on Form~~

~~S-3~~

~~with the SEC covering the offering, issuance and sale of up to $15.0 million of our Class A Common Stock pursuant to an~~

~~at-the-market~~

~~facility, with B. Riley Securities, Inc. acting as sales agent. No Common Stock transactions have taken place under the facility.~~

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “

Compensation-Stock Compensation

.” As a result, $0.1 million and $0.2 million of

non-cash

stock-based compensation expense has been recorded to additional

paid-in

capital for the three- and ~~nine-month~~

six-month

periods ended ~~September~~June 30, ~~2021, respectively, in comparison to $0.1 million~~2022 and ~~$0.3 million of~~

~~non-cash~~

~~stock-based compensation expense having been recorded to additional~~

~~paid-in~~

~~capital for the three- and nine-month periods ended September 30, 2020, respectively.~~2021.

Our dividend policy is based upon our Board of Directors’ current assessment of our business and the environment in which we operate. The declaration of any future distributions and the establishment of the per share amount, record dates, and payment dates are subject to final determination by our Board of Directors and dependent upon future earnings, cash flows, financial and legal requirements, and other factors. On May 6, 2020, our Board of Directors voted to discontinue equity distributions until further notice due to the adverse economic impact of the

~~COVID-19~~

~~pandemic on our financial position, results of operations, and cash flows.~~

NOTE 17. SEGMENT DATA

FASB ASC Topic 280, “

Segment Reporting

,” requires companies to provide certain information about their operating segments. We have 3 operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which also qualify as reportable segments. Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. We continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary.

~~Table of Contents~~

We measure and evaluate our operating segments based on operating income and operating expenses that do not include allocations of costs related to corporate functions, such as accounting and finance, human resources, legal, tax, and treasury, which are reported as unallocated corporate expenses in our condensed consolidated statements of operations included in this quarterly report on Form

10-Q.

We also exclude costs such as amortization, depreciation, taxes, and interest expense.

Segment performance, as defined by Salem, is not necessarily comparable to other similarly titled captions of other companies.

~~Broadcasting~~

Broadcast

Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets. Our broadcasting segment includes our national networks and national sales firms. National companies often prefer to advertise across the United States as an efficient and cost-effective way to reach their target audiences. Our national platform under which we offer radio airtime, digital campaigns, and ~~print~~other advertisements can benefit national companies by reaching audiences throughout the United States.

Salem Radio Network

(“SRN

”), based in Dallas, Texas, develops, produces, and syndicates a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and News Talk stations. SRN

delivers programming via satellite to approximately ~~3,100~~3,200 affiliated radio stations throughout the United States, including several of our Salem-owned stations. SRN

operates five divisions, SRN

Talk, SRN

News, SRN

Websites, SRN

Satellite Services and Salem Music Network that includes Today’s Christian Music (“TCM”). and Singing News

Radio.

Salem Media Representatives (“SMR”) is our national advertising sales firm with offices in 129 U.S. cities. SMR specializes in placing national advertising on Christian and talk formatted radio stations as well as other commercial radio station formats. SMR sells commercial airtime to national advertisers on our radio stations and through our networks, as well as for independent radio station affiliates. SMR also contracts with independent radio stations to create custom advertising campaigns for national advertisers to reach multiple markets.

Salem Surround, our national multimedia advertising agency with locations in 3329 markets across the United States, offers a comprehensive suite of digital marketing services to develop and execute audience-based marketing strategies for clients on both the national and local level. Salem Surround specializes in digital marketing services for each of our radio stations and websites as well as provides a full-service digital marketing strategy for each of our clients.

Salem Podcast Network (“SPN”), launched in January 2021, is our platform for conservative, political, news, and family-oriented podcasts. SPN reaches over 11 million downloads per month, with one show already in the top 10 of all podcasts, and another in the top 10 in the News category according to the Apple Podcast Rankings.

Digital Media

Our digital media-based businesses provide Christian, conservative, investing content,

~~e-commerce,~~

audio and video streaming, and other resources digitally through the web. Salem Web Network (“SWN”) websites include Christian content websites; BibleStudyTools.com, Crosswalk.com

, ~~GodVine.com,~~Christianity.com, iBelieve.com, GodTube

.com, OnePlace

™

.com, ~~Christianity.com,~~ GodUpdates.com, CrossCards

™

.com, ChristianHeadlines.com, ~~LightSource.com, AllCreated.com, ChristianRadio.com, CCMmagazine.com, SingingNews~~

~~.com~~ and ~~SouthernGospel.com~~LightSource.com, and our conservative opinion websites; collectively known as Townhall Media, include Townhall.com

, HotAir

™

.com, Twitchy

.com, RedState

.com, BearingArms.com, ConservativeRadio.com and pjmedia.com. We also publish digital newsletters through Eagle Financial Publications, which provide market analysis and

non-individualized

investment strategies from financial commentators on a subscription basis.

Our church

~~e-commerce~~

product websites, including SermonSearch

™

.com, ChurchStaffing.com, WorshipHouseMedia.com, SermonSpice

™

.com, WorshipHouseKids.com, Preaching.com, ChristianJobs.com, ~~Youthworker.com,~~ShiftWorship.com, JourneyBoxMedia.com, ~~Playblackmedia.com,~~Playbackmedia.com, and HyperPixelsMedia.com, offer a variety of digital resources including videos, song tracks, sermon archives and job listings to pastors and Church leaders.

Our web content is accessible through all of our radio station websites that feature content of interest to local audiences throughout the United States.

Publishing

Our publishing operating segment includes ~~three~~two businesses: (1) Regnery

Publishing and Salem Books, traditional book publishers that have published dozens of bestselling books by leading conservative and Christian authors and personalities and (2) Salem Author Services, a self-publishing service for authors through Xulon Press and Mill City Press.

~~Table of Contents~~

The table below presents financial information for each operating segment as of ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 based on the composition of our operating segments:

Broadcast

Digital
Media

Publishing

Unallocated
Corporate
Expenses

Consolidated



(Dollars in thousands)

Three Months Ended September 30, 2021

Net revenue
$
49,591

$
10,645

$
5,747

$
—

$
65,983

Operating expenses

37,463

8,269

5,213

4,284

55,229


Net operating income (loss) before depreciation, amortization, and net (gain) loss
on the disposition of assets
$
12,128

$
2,376

$
534

$
(4,284
)

$
10,754


Debt modification costs

—

—

—

2,347

2,347

Depreciation

1,539

965

43

241

2,788

Amortization

4

375

48

—

427

Net (gain) loss on the disposition of assets

(10,505
)

(148
)

22

24

(10,607
)

Net operating income (loss)
$
21,090

$
1,184

$
421

$
(6,896
)

$
15,799


Three Months Ended September 30, 2020

Net revenue    $ 45,391 $ 9,808 $ 5,442 $ —   $ 60,641
Operating expenses    34,283 7,144 5,814 3,849 51,090

Net operating income (loss) before depreciation, amortization, change in the
estimated fair value of contingent
earn-out
consideration, impairments, and net
(gain) loss on the disposition of assets
   $ 11,108 $ 2,664 $ (372 ) $ (3,849 ) $ 9,551

Depreciation    1,626 746 70 235 2,677
Amortization    4 537 210 —   751
Change in the estimated fair value of contingent
earn-out
consideration
   —   (10 ) —   —   (10 )
Net (gain) loss on the disposition of assets    1,380 —   1 —   1,381

Net operating income (loss)    $ 8,098 $ 1,391 $ (653 ) $ (4,084 ) $ 4,752


	Broadcast			Digital Media			Publishing			Unallocated Corporate Expenses			Consolidated

	(Dollars in thousands)
Three Months Ended June 30, 2022
Net revenue	$	52,452		$	10,804		$	5,426		$	—		$	68,682
Operating expenses		42,489			8,273			5,432			4,781			60,975

Net operating income (loss) before debt modification costs, depreciation, amortization, impairments, and net (gain) loss on the disposition of assets	$	9,963		$	2,531		$	(6	)	$	(4,781	)	$	7,707

Debt modification costs		—			—			—			20			20
Depreciation		1,530			979			89			260			2,858
Amortization		4			328			—			—			332
Impairment of indefinite-lived long-term assets other than goodwill		3,935			—			—			—			3,935
Impairment of goodwill		127			—			—			—			127
Net (gain) loss on the disposition of assets		(6,919	)		(1	)		—			27			(6,893	)

Net operating income (loss)	$	11,286		$	1,225		$	(95	)	$	(5,088	)	$	7,328

Three Months Ended June 30, 2021
Net revenue	$	46,783		$	10,339		$	6,660		$	—		$	63,782
Operating expenses		36,162			8,338			6,426			4,192			55,118

Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments, and net (gain) loss on the disposition of assets	$	10,621		$	2,001		$	234		$	(4,192	)	$	8,664

Depreciation		1,603			860			44			234			2,741
Amortization		4			397			144			—			545
Net (gain) loss on the disposition of assets		—			65			(328	)		—			(263	)

Net operating income (loss)	$	9,014		$	679		$	374		$	(4,426	)	$	5,641

Broadcast

Digital
Media

Publishing

Unallocated
Corporate
Expenses

Consolidated



(Dollars in thousands)

Nine Months Ended September 30, 2021

Net revenue
$
140,422

$
30,603

$
18,093

$
—

$
189,118

Operating expenses

106,968

25,280

16,844

12,764

161,856


Net operating income (loss) before depreciation, amortization, change in the
estimated fair value of contingent
earn-out
consideration, impairments, and net
(gain) loss on the disposition of assets

$
33,454

$
5,323

$
1,249

$
(12,764
)

$
27,262


Debt modification costs

—

—

—

��
2,347

2,347

Depreciation

4,667

2,606

134

711

8,118

Amortization

12

1,204

337

—

1,553

Net (gain) loss on the disposition of assets

(10,187
)

(83
)

(306
)

24

(10,552
)

Net operating income (loss)
$
38,962

$
1,596

$
1,084

$
(15,846
)

$
25,796


Nine Months Ended September 30, 2020

Net revenue    $ 130,041 $ 28,355 $ 13,366 $ —   $ 171,762
Operating expenses    104,704 23,123 16,443 11,909 156,179

Net operating income (loss) before depreciation, amortization, change in the
estimated fair value of contingent
earn-out
consideration, impairments, and net
(gain) loss on the disposition of assets
   $ 25,337 $ 5,232 $ (3,077 ) $ (11,909 ) $ 15,583

Depreciation    4,912 2,284 212 700 8,108
Amortization    18 1,928 631 1 2,578
Change in the estimated fair value of contingent
earn-out
consideration
   —   (12 ) —   —   (12 )
Impairment of indefinite-lived long-term assets other than goodwill    16,994 —   260 —   17,254
Impairment of goodwill    184 10 105 8 307
Net (gain) loss on the disposition of assets    1,489 —   1 4 1,494

Net operating income (loss)    $ 1,740 $ 1,022 $ (4,286 ) $ (12,622 ) $ (14,146 )


	Broadcast			Digital Media			Publishing			Unallocated Corporate Expenses			Consolidated

	(Dollars in thousands)
Six Months Ended June 30, 2022
Net revenue	$	100,884		$	21,104		$	9,303		$	—		$	131,291
Operating expenses		80,610			16,746			9,899			9,591			116,846

Net operating income (loss) before debt modification costs, depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments, and net (gain) loss on the disposition of assets	$	20,274		$	4,358		$	(596	)	$	(9,591	)	$	14,445

Debt modification costs		—			—			—			248			248
Depreciation		3,186			1,920			169			525			5,800
Amortization		8			658			—			—			666
Change in the estimated fair value of contingent earn-out consideration		—			(5	)		—			—			(5	)
Impairment of indefinite-lived long-term assets other than goodwill		3,935			—			—			—			3,935
Impairment of goodwill		127			—			—			—			127
Net (gain) loss on the disposition of assets		(8,657	)		(1	)		—			30			(8,628	)

Net operating income (loss)	$	21,675		$	1,786		$	(765	)	$	(10,394	)	$	12,302

Six Months Ended June 30, 2021
Net revenue	$	90,831		$	19,958		$	12,346		$	—		$	123,135
Operating expenses		69,505			17,011			11,631			8,480			106,627

Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments, and net (gain) loss on the disposition of assets	$	21,326		$	2,947		$	715		$	(8,480	)	$	16,508

Depreciation		3,128			1,641			91			470			5,330
Amortization		8			829			289			—			1,126
Net (gain) loss on the disposition of assets		318			65			(328	)		—			55

Net operating income (loss)	$	17,872		$	412		$	663		$	(8,950	)	$	9,997

~~Table of Contents~~


	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated

	(Dollars in thousands)
As of June 30, 2022
Inventories, net	$	—	$	—	$	1,528	$	—	$	1,528
Property and equipment, net		62,370		8,115		641		8,587		79,713
Broadcast licenses		313,500		—		—		—		313,500
Goodwill		2,622		19,793		1,446		—		23,861
Amortizable intangible assets, net		221		1,578		—		—		1,799
As of December 31, 2021
Inventories, net	$	—	$	—	$	960	$	—	$	960
Property and equipment, net		61,694		8,447		746		8,452		79,339
Broadcast licenses		320,008		—		—		—		320,008
Goodwill		2,750		19,790		1,446		—		23,986
Amortizable intangible assets, net		229		2,215		—		—		2,444

Broadcast

Digital
Media

Publishing

Unallocated
Corporate

Consolidated



(Dollars in thousands)

As of September 30, 2021

Inventories, net
$
—


$
—


$
907


$
—


$
907

Property and equipment, net

60,502



8,619



723



8,581



78,425

Broadcast licenses

320,008



—



—



—



320,008

Goodwill

2,750



19,790



1,446



—



23,986

Amortizable intangible assets, net

233



2,552



—



—



2,785

As of December 31, 2020

Inventories, net    $ —      $ —      $ 495    $ —      $ 495
Property and equipment, net    64,231    6,221    741    7,929    79,122
Broadcast licenses    319,773    —      —      —      319,773
Goodwill    2,746    19,565    1,446    —      23,757
Amortizable intangible assets, net    246    3,434    337    —      4,017

NOTE 18. SUBSEQUENT EVENTS

~~The following additional repurchases of the 2024 Notes were made after September 30, 2021:~~None.

Date

Principal
Repurchased

  Cash
Paid

% of Face
Value

Bond Issue
Costs

    Net Loss

(Dollars in thousands)

October 25, 2021
$ 2,000    $ 2,020 101.00 % $ 19 $ 39
October 12, 2021
250    251 100.38 % 2 3
October 5, 2021
763    766 100.38 % 7 10
October 4, 2021
628    629 100.13 % 6 7



$ 3,641    $ 3,666 $ 34 59

Subsequent events reflect all applicable transactions through the date of the filing.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General

Salem Media Group, Inc. is a domestic multimedia company specializing in Christian and conservative content, with media properties comprising radio broadcasting, digital media, and publishing. Our content is intended for audiences interested in Christian and family-themed programming and conservative news talk. We maintain a website at www.salemmedia.com. Our annual reports on Form

~~10-K,~~

~~quarterly reports on Form~~

~~10-Q,~~

~~current reports on Form~~

~~8-K,~~

~~and any amendments to these reports are available free of charge through our website as soon as reasonably practicable after those reports are electronically filed with or furnished to the SEC.~~

~~The information on our website is not a part of or incorporated by reference into this or any other report of the company filed with, or furnished to, the SEC.~~

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes included elsewhere in this report on Form

10-Q

and our audited Consolidated Financial Statements in our Annual Report on Form

10-K

for the year ended December 31, ~~2020.~~2021. Our Condensed Consolidated Financial Statements are not directly comparable from period to period due to acquisitions and dispositions. Refer to Note 3 of our Condensed Consolidated Financial Statements on Form

10-Q

for details of each of these transactions.

Historical operating results are not necessarily indicative of future operating results. Actual future results may differ from those contained in or implied by the forward-looking statements as a result of various factors. These factors include, but are not limited to:

the coronavirus

COVID-19

pandemic

(“COVID-19”)

isthat adversely ~~impacting~~impacted our business,

risks and uncertainties relating to the need for additional funds to service our debt,

risks and uncertainties relating to the need for additional funds to execute our business strategy,

our ability to access borrowings under our ABL Facility,

reductions in revenue forecasts,

our ability to renew our broadcast licenses,

changes in interest rates,

the timing of our ability to complete any acquisitions or dispositions,

costs and synergies resulting from the integration of any completed acquisitions,

our ability to effectively manage costs,

our ability to drive and manage growth,

the popularity of radio as a broadcasting and advertising medium,

changes in consumer tastes,

the impact of general economic conditions in the United States or in specific markets in which we do business,

the impact of inflation increasing operating costs and changing consumer habits,

industry conditions, including existing competition and future competitive technologies, ~~and cancellation,~~

disruptions or postponements of advertising schedules and programming in response to national or world events,

our ability to generate ~~revenues~~revenue from new sources, including local commerce and technology-based initiatives, and

the impact of regulatory rules or proceedings that may affect our business from time to time, and the future ~~write off~~

write-off

of any material portion of the fair value of our FCC broadcast licenses and goodwill.

Because these factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any of these forward-looking statements. In addition, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which the statement is made, to reflect the occurrence of unanticipated events or otherwise, except as required by law.

Overview

Salem Media Group, Inc. (“Salem,” “we,” “us,” “our” or the “company”) is a domestic multimedia company specializing in Christian and conservative content, with media properties comprising radio broadcasting, digital media, and publishing. Our content is intended for audiences interested in Christian and family-themed programming and conservative news talk. We maintain a website at www.salemmedia.com. Our annual reports on Form

10-K,

quarterly reports on Form

~~Table~~10-Q,

current reports on Form

8-K,

and any amendments to these reports are available free of ~~Contents~~

charge through our website as soon as reasonably practicable after those reports are electronically filed with or furnished to the SEC.

~~Overview~~The information on our website is not a part of or incorporated by reference into this or any other report of the company filed with, or furnished to, the SEC.

We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which also qualify as reportable segments. Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assess the performance of each operating segment and determine the appropriate allocations of resources to each segment. We continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary.

We measure and evaluate our operating segments based on operating income and operating expenses that exclude costs related to corporate functions, such as accounting and finance, human resources, legal, tax and treasury. We also exclude costs such as amortization, depreciation, taxes, and interest expense when evaluating the performance of our operating segments.

Our principal sources of broadcast revenue include:

the sale of block program time to national and local program producers;

the sale of advertising time on our radio stations to national and local advertisers;

the sale of banner advertisements on our station websites or on our mobile applications;

the sale of digital streaming advertisements on our station websites or on our mobile applications;

~~the sale of advertisements included in digital newsletters;~~

fees earned for the creation of custom web pages and custom digital media campaigns for our advertisers through Salem Surround;

the sale of advertising time on our national network;

the syndication of programming on our national network;

the sale of advertising time through podcasts and

video-on-demand

services;

product sales and royalties for

on-air

host materials, including podcasts, programs and ~~programs;~~media content including documentary motion pictures, films; and

other revenue such as events, including ticket sales and sponsorships, listener purchase programs, where revenue is generated from special discounts and incentives offered to our listeners from our ~~advertisers;~~advertisers, talent fees for voice-overs or custom endorsements from our

on-air

personalities and production services, and rental income for studios, towers, or office space.

Our principal sources of digital media revenue include:

the sale of digital banner advertisements on our websites and mobile applications;

the sale of digital streaming advertisements on websites and mobile applications;

the support and promotion to stream third-party content on our websites;

the sale of advertisements included in digital newsletters;

the digital delivery of newsletters to subscribers; and

the sale of video and graphic downloads.

Our principal sources of publishing revenue include:

the sale of books and

e-books;

publishing fees from authors; and

the sale of digital advertising ~~on our magazine websites and~~in digital newsletters;

~~subscription fees for our print magazine; and~~

~~the sale of print magazine advertising.~~

~~Table of Contents~~

In each of our operating segments, the rates we are able to charge for airtime, advertising and other products and services are dependent upon several factors, including:

audience share;

how well our programs and advertisements perform for our clients;

the size of the market and audience reached;

the number of impressions delivered;

the number of advertisements and programs streamed;

the number of page views achieved;

the number of downloads completed;

the number of events held, the number of event sponsorships sold and the attendance at each event;

demand for books and publications;

general economic conditions; and

supply and demand for airtime on a local and national level.

Broadcasting

Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets, our national networks and our national sales firms including Salem Surround. Revenues generated from our radio stations, networks and sales firms are reported as broadcast media revenue in our Condensed Consolidated Financial Statements included in Part 1 of this quarterly report on Form

10-Q.

Advertising revenue is recorded on a gross basis unless an agency represents the advertiser, in which case, revenue is reported net of the commission retained by the agency.

Broadcast revenues are impacted by the rates radio stations can charge for programming and advertising time, the level of airtime sold to programmers and advertisers, the number of impressions delivered, or downloads made, and the number of events held, including the size of the event and the number of attendees. Block programming rates are based upon our stations’ ability to attract audiences that will support the program producers through contributions and purchases of their products. Advertising rates are based upon the demand for advertising time, which in turn is based on our stations and networks’ ability to produce results for their advertisers. We market ourselves to advertisers based on the responsiveness of our audiences. We do not subscribe to traditional audience measuring services for most of our radio stations. In select markets, we subscribe to Nielsen Audio, which develops monthly reports measuring a radio station’s audience share in the demographic groups targeted by advertisers. Each of our radio stations and our networks has a

pre-determined

level of time available for block programming and/or advertising, which may vary at different times of the day.

Nielsen Audio uses the Portable People Meter

(“PPM

”

) technology to collect data for its ratings service. PPM is a small device that is capable of automatically measuring radio, television, Internet, satellite radio and satellite television signals encoded by the broadcaster. The PPM offers a number of advantages over traditional diary ratings collection systems, including ease of use, more reliable ratings data, shorter time periods between when advertising runs and actual listening data, and little manipulation of data by users. A disadvantage of the PPM includes data fluctuations from changes to the “panel” (a group of individuals holding PPM devices). This makes all stations susceptible to some inconsistencies in ratings that may or may not accurately reflect the actual number of listeners at any given time. We subscribe to Nielsen Audio for ratings services in 7 of our broadcast markets.

Our results are subject to seasonal fluctuations. As is typical in the broadcasting industry, our second and fourth quarter advertising revenue typically exceeds our first and third quarter advertising revenue. Seasonal fluctuations in advertising revenue correspond with quarterly fluctuations in the retail industry. Additionally, we experience increased demand for political advertising during election, or even numbered years, over

non-election

or odd numbered years. Political advertising revenue varies based on the number and type of candidates as well as the number and type of debated issues.

Our cash flows from broadcasting are affected by transitional periods experienced by radio stations when, based on the nature of the radio station, our plans for the market and other circumstances, we find it beneficial to change the station format. During this transitional period, when we develop a radio station’s listener and customer base, the station may generate negative or insignificant cash flow.

~~Table of Contents~~

non-cash

exchanges is included in revenue in an amount equal to the fair value of the goods or services we receive. Each transaction is reviewed to determine that the products, supplies and/or services we receive have economic substance, or value to us. We record barter operating expenses upon receipt and usage of the products, supplies and services, as applicable. We record barter revenue as advertising spots or digital campaigns are delivered, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Barter revenue is recorded on a gross basis unless an agency represents the programmer, in which case, revenue is reported net of the commission retained by the agency. During the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, 98% and ~~2020,~~ 99% ~~and 98%~~, respectively, of our broadcast revenue was sold for cash.

Broadcast operating expenses include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as lease cost and utilities, (iii) marketing and promotional expenses, (iv) production and programming expenses, and (v) music license fees. In addition to these expenses, our network incurs programming costs and lease expenses for satellite communication facilities.

Digital Media

Our digital media based businesses provide Christian, conservative, investing,

~~e-commerce,~~

audio and video streaming, and other resources digitally through the web. Refer to Item 1. Business of our annual report on Form

10-K

for the year ended December 31, ~~2020~~2021 for a description of each of our digital media websites and operations. Revenue generated from this segment is reported as digital media revenue in our Condensed Consolidated Financial Statements included in Part 1 of this quarterly report on Form

10-Q.

Digital media revenue is impacted by the rates our sites can charge for advertising time, the level of advertisements sold, the number of impressions delivered, or the number of products sold, and the number of digital subscriptions sold. Like our broadcasting segment, our second and fourth quarter advertising revenue generally exceeds our first and third quarter advertising revenue. This seasonal fluctuation in advertising revenue corresponds with quarterly fluctuations in the retail advertising industry. We also experience fluctuations in quarter-over-quarter comparisons based on the date on which Easter is observed, as this holiday generates a higher volume of product downloads from our church product websites. Additionally, we experience increased demand for advertising time and placement during election years for political advertisements.

The primary operating expenses incurred by our digital media businesses include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as lease expense and utilities, (iii) marketing and promotional expenses, (iv) royalties, (v) streaming costs, and (vi) cost of goods sold associated with

~~e-commerce~~ certain products.

~~sites.~~

Publishing

Our publishing operations include book publishing through Regnery

Publishing, and self-publishing through Salem Author Services. Refer to Item 1. Business of our annual report on Form

10-K

for the year ended December 31, 2021 for a ~~print magazine and~~description of each of our ~~self-publishing services. Revenues~~publishing entities. Revenue generated from this segment ~~are~~is reported as publishing revenue in our Condensed Consolidated Financial Statements included in Part 1 of this quarterly report on Form

10-Q.

Publishing revenue is impacted by the number and the retail price of books and

e-books

sold ~~the number and rate of print magazine subscriptions sold, the rate and number of pages of advertisements sold in each print magazine,~~ and the number and rate at which self-published books are published. Regnery

Publishing revenue is impacted by elections as it generates higher levels of interest and demand for publications containing conservative and political based opinions.

Publishing operating expenses include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as lease costs and utilities, (iii) marketing and promotional expenses; and (iv) cost of goods sold that includes printing and production costs, fulfillment costs, author royalties and inventory ~~obsolescence charges.~~reserves.

Known Trends and Uncertainties

~~The~~

~~COVID-19~~

Ongoing global supply chain disruptions from the pandemic ~~that began~~have been further impacted with the military conflict in ~~March 2020 materially impacted~~Ukraine. Additionally, increases in consumer prices, persistent inflation, the Federal Reserve’s raising of the federal funds interest rate and other actions to moderate inflation, may have a material impact on our ~~business. We experienced a rapid decline in revenue from~~business if the disruptions interfere with our customers advertising ~~programming, events~~ and ~~book sales. Several advertisers reduced or ceased advertising spending due to the outbreak and~~

~~stay-at-home~~

~~Table of Contents~~

~~While we see progress being made in revenue returning to~~

~~pre-pandemic~~

~~levels, the~~

~~COVID-19~~

~~pandemic continues to create significant uncertainty and disruption in the economy.~~promotional spending. These uncertainties could materially impact significant accounting estimates related to, but not limited to, allowances for doubtful accounts, impairments, and

right-of-use ~~assets.~~

assets. As a result, many estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. ~~These estimates may~~

We will experience an increase in lease expense as several of our leases have escalations that are tied to Consumer Price Index (“CPI”). CPI increased 9.1% for the twelve months ending June 30, 2022, the largest

12-month

change ~~as new events occur and additional information emerges, and such changes are recognized or disclosed~~since 1981, driven in ~~its consolidated financial statements.~~large part by the energy sector.

The growth of broadcast revenue associated with the sale of airtime remains challenged. We believe this is due to audiences spending less time commuting in cars, increased competition from other forms of content distribution, and decreases in the length of time spent listening to broadcast radio as compared to audio streaming services, podcasts, and satellite radio. ~~Increases in competition and the mix in listening time~~These factors may lead advertisers to conclude that the effectiveness of radio has diminished. ~~To reduce the impact of these factors,~~In response, we continue to enhance our digital assets to complement our broadcast content. The increased use of smart speakers, or voice activated platforms, ~~or smart speakers,~~ that provide audiences with the ability to access AM and FM radio stations show increased potential for radio broadcasters to reach audiences.

Our broadcast ~~spot~~ advertising revenue is particularly dependent on advertising from our Los Angeles and Dallas markets, which generated ~~13.8%~~12.7% and ~~21.8%~~18.5%, respectively, of our total net broadcast ~~spot~~ advertising revenue during the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021~~2022, compared to ~~14.3%~~13.6% and ~~22.1%~~21.6%, respectively, of our total net broadcast ~~spot~~ advertising revenue during the same period of the prior year.

Digital revenue is impacted by the nature and delivery of page views and the number of advertisements per page. We have experienced a shift in the number of page views from desktop devices to mobile devices. While mobile page views have increased dramatically, they carry a lower number of advertisements per page and are generally sold at lower rates. A shift from desktop page views to mobile device views negatively impacts revenue as mobile devices carry lower rates and less advertisement per page. Decreases in digital revenue could adversely affect our operating results, financial condition, and results of operations. To minimize the impact that any one of these areas could have, we continue to explore opportunities to cross-promote our brands and our content, and to strategically monitor costs.

Key Financial Performance Indicators – Same-Station Definition

In the discussion of our results of operations below, we compare our broadcast operating results between periods on an

as-reported

basis, which includes the operating results of all radio stations and networks owned or operated at any time during either period and on a Same Station basis. Same Station is a

Non-GAAP

financial measure used both in presenting our results to stockholders and the investment community as well as in our internal evaluations and management of the business. We believe that Same Station Operating Income provides a meaningful comparison of period over period performance of our core broadcast operations as this measure excludes the impact of new stations, the impact of stations we no longer own or operate, and the impact of stations operating under a new programming format. Our presentation of Same Station Operating Income is not intended to be considered in isolation or as a substitute for the most directly comparable financial measures reported in accordance with GAAP. Our definition of Same Station Operating Income is not necessarily comparable to similarly titled measures reported by other companies. Refer to

“NON-GAAP

FINANCIAL MEASURES” below for a reconciliation of these

non-GAAP

performance measures to the most comparable GAAP measures.

We define Same Station net broadcast revenue as net broadcast revenue from our radio stations and networks that we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. We define Same Station broadcast operating expenses as broadcast operating expenses from our radio stations and networks that we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station Operating Income includes those stations we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station Operating Income for a full calendar year is calculated as the sum of the Same Station results for each of the four quarters of that year.

Non-GAAP

Financial Measures

Management uses certain

non-GAAP

financial measures defined below in communications with investors, analysts, rating agencies, banks, and others to assist such parties in understanding the impact of various items on our financial statements. We use these

non-GAAP

financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.

Our presentation of these

non-GAAP

financial measures should not be considered as a substitute for, or superior to, the most directly comparable financial measures as reported in accordance with GAAP.

~~Table of Contents~~

Item ~~10€~~10(e) of Regulation

S-K

defines and prescribes the conditions under which certain

non-GAAP

financial information may be presented in this report. We closely monitor EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, and Publishing Operating Income (Loss), all of which are

non-GAAP

financial measures. We believe that these

non-GAAP

financial measures provide useful information about our core operating results, and thus, are appropriate to enhance the overall understanding of our financial performance. These

non-GAAP

financial measures are intended to provide management and investors a more complete understanding of our underlying operational results, trends, and performance.

The performance of a radio broadcasting company is customarily measured by the ability of its stations to generate SOI. We define SOI as net broadcast revenue less broadcast operating expenses. Accordingly, changes in net broadcast revenue and broadcast operating expenses, as explained above, have a direct impact on changes in SOI. SOI is not a measure of performance calculated in accordance with GAAP. SOI should be viewed as a supplement to, and not a substitute for, our results of operations presented on the basis of GAAP. We believe that SOI is a useful

non-GAAP

financial measure to investors when considered in conjunction with operating income (the most directly comparable GAAP financial measures to SOI), because it is generally recognized by the radio broadcasting industry as a tool in measuring performance and in applying valuation methodologies for companies in the media, entertainment, and communications industries. SOI is commonly used by investors and analysts who report on the industry to provide comparisons between broadcasting groups. We use SOI as one of the key measures of operating efficiency and profitability, including our internal reviews associated with impairment analysis of our indefinite-lived intangible assets. SOI does not purport to represent cash provided by operating activities. Our statement of cash flows presents our cash activity in accordance with GAAP and our income statement presents our financial performance prepared in accordance with GAAP. Our definition of SOI is not necessarily comparable to similarly titled measures reported by other companies.

We define Same Station net broadcast revenue as net broadcast revenue from our radio stations and networks that we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. We define Same Station broadcast operating expenses as broadcast operating expenses from our radio stations and networks that we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station Operating Income includes those stations we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station Operating Income for a full calendar year is calculated as the sum of the Same Station-results for each of the four quarters of that year. We use Same Station Operating Income, a

non-GAAP

financial measure, both in presenting our results to stockholders and the investment community, and in our internal evaluations and management of the business. We believe that Same Station Operating Income provides a meaningful comparison of period over period performance of our core broadcast operations as this measure excludes the impact of new stations, the impact of stations we no longer own or operate, and the impact of stations operating under a new programming format. Our presentation of Same Station Operating Income is not intended to be considered in isolation or as a substitute for the most directly comparable financial measures reported in accordance with GAAP. Our definition of Same Station net broadcast revenue, Same Station broadcast operating expenses and Same Station Operating Income is not necessarily comparable to similarly titled measures reported by other companies.

We apply a similar methodology to our digital media and publishing group. Digital Media Operating Income is defined as net digital media revenue less digital media operating expenses. Publishing Operating Income (Loss) is defined as net publishing revenue less publishing operating expenses. Digital Media Operating Income and Publishing Operating Income (Loss) are not measures of performance in accordance with GAAP. Our presentations of these

non-GAAP

financial performance measures are not to be considered a substitute for, or superior to, our operating results reported in accordance with GAAP. We believe that Digital Media Operating Income and Publishing Operating Income (Loss) are useful

non-GAAP

financial measures to investors, when considered in conjunction with operating income (the most directly comparable GAAP financial measure), because they are comparable to those used to measure performance of our broadcasting entities. We use this analysis as one of the key measures of operating efficiency, profitability, and in our internal review. This measurement does not purport to represent cash provided by operating activities. Our statement of cash flows presents our cash activity in accordance with GAAP and our income statement presents our financial performance in accordance with GAAP. Our definitions of Digital Media Operating Income and Publishing Operating Income (Loss) are not necessarily comparable to similarly titled measures reported by other companies.

We define EBITDA as net income before interest, taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA before gains or losses on the sale or disposition of assets, before changes in the estimated fair value of contingent

earn-out

consideration, before ~~gains on bargain purchases, before the change in fair value of interest rate swaps,~~debt modification costs, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of debt, ~~before (gain) loss from discontinued operations~~

and before

non-cash

compensation expense. EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to, and not a substitute for, or superior to, our results of operations and financial condition presented in accordance with GAAP. Our definitions of EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.

3936

~~Table of Contents~~

For all

non-GAAP

financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.

We use

non-GAAP

financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. Our presentation of this additional information is not to be considered as a substitute for, or superior to, the most directly comparable measures reported in accordance with GAAP.

Reconciliation of

Non-GAAP

Financial Measures:

In the tables below, we present a reconciliation of net broadcast revenue, the most comparable GAAP measure, to Same Station net broadcast revenue, and broadcast operating expenses, the most comparable GAAP measure to Same Station broadcast operating expense. We show our calculation of Station Operating Income and Same Station Operating Income, which is reconciled from net income, the most comparable GAAP measure in the table following our calculation of Digital Media Operating Income and Publishing Operating Income (Loss). Our presentation of these

non-GAAP

measures are not to be considered a substitute for, or superior to, the most directly comparable measures reported in accordance with GAAP.


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2020			2021			2020			2021				2021			2022			2021			2022

		(Dollars in thousands)													(Dollars in thousands)
Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue	Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue													Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue
Net broadcast revenue		$	45,391		$	49,591		$	130,041		$	140,422			$	46,783		$	52,452		$	90,831		$	100,884
Net broadcast revenue – acquisitions			—			(264	)		—			(343	)			—			(14	)		—			(247	)
Net broadcast revenue – dispositions			(192	)		2			(635	)		(36	)			(96	)		(56	)		(113	)		(49	)
Net broadcast revenue – format change			(104	)		(216	)		(384	)		(561	)			—			—			(65	)		(111	)

Same Station net broadcast revenue		$	45,095		$	49,113		$	129,022		$	139,482			$	46,687		$	52,382		$	90,653		$	100,477

Reconciliation of Broadcast Operating Expenses To Same Station Broadcast Operating Expenses
Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses														Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses
Broadcast operating expenses		$	34,283		$	37,463		$	104,704		$	106,968			$	36,162		$	42,489		$	69,505		$	80,610
Broadcast operating expenses – acquisitions			—			(168	)		—			(206	)			—			(63	)		(1	)		(279	)
Broadcast operating expenses – dispositions			(344	)		(14	)		(1,225	)		(199	)			(81	)		(24	)		(214	)		(48	)
Broadcast operating expenses – format change			(252	)		(209	)		(771	)		(593	)			—			—			(131	)		(132	)

Same Station broadcast operating expenses		$	33,687		$	37,072		$	102,708		$	105,970			$	36,081		$	42,402		$	69,159		$	80,151

Reconciliation of Operating Income to Same Station Operating Income	Reconciliation of Operating Income to Same Station Operating Income													Reconciliation of Operating Income to Same Station Operating Income
Station Operating Income		$	11,108		$	12,128		$	25,337		$	33,454			$	10,621		$	9,963		$	21,326		$	20,274
Station operating (income) loss –acquisitions			—			(96	)		—			(137	)			—			49			1			32
Station operating loss – dispositions			152			16			590			163
Station operating (income) loss – format change			148			(7	)		387			32
Station operating (income) loss – dispositions																(15	)		(32	)		101			(1	)
Station operating loss – format change																—			—			66			21

Same Station – Station Operating Income		$	11,408		$	12,041		$	26,314		$	33,512			$	10,606		$	9,980		$	21,494		$	20,326

In the table below, we present our calculations of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss). Our presentation of these

non-GAAP

performance indicators are not to be considered a substitute for, or superior to, the directly comparable measures reported in accordance with GAAP.


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
		September 30,						September 30,							June 30,						June 30,
		2020			2021			2020			2021				2021			2022			2021			2022

		(Dollars in thousands)													(Dollars in thousands)
Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)	Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)													Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
Net broadcast revenue		$	45,391		$	49,591		$	130,041		$	140,422			$	46,783		$	52,452		$	90,831		$	100,884
Less broadcast operating expenses			(34,283	)		(37,463	)		(104,704	)		(106,968	)			(36,162	)		(42,489	)		(69,505	)		(80,610	)

Station Operating Income		$	11,108		$	12,128		$	25,337		$	33,454			$	10,621		$	9,963		$	21,326		$	20,274

Net digital media revenue		$	9,808		$	10,645		$	28,355		$	30,603			$	10,339		$	10,804		$	19,958		$	21,104
Less digital media operating expenses			(7,144	)		(8,269	)		(23,123	)		(25,280	)			(8,338	)		(8,273	)		(17,011	)		(16,746	)

Digital Media Operating Income		$	2,664		$	2,376		$	5,232		$	5,323			$	2,001		$	2,531		$	2,947		$	4,358

Net publishing revenue		$	5,442		$	5,747		$	13,366		$	18,093			$	6,660		$	5,426		$	12,346		$	9,303
Less publishing operating expenses			(5,814	)		(5,213	)		(16,443	)		(16,844	)			(6,426	)		(5,432	)		(11,631	)		(9,899	)

Publishing Operating Income (Loss)		$	(372	)	$	534		$	(3,077	)	$	1,249			$	234		$	(6	)	$	715		$	(596	)

~~Table of Contents~~

In the table below, we present a reconciliation of net income, ~~(loss),~~ the most directly comparable GAAP measure to Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss). Our presentation of these

non-GAAP

performance indicators are not to be considered a substitute for, or superior to, the most directly comparable measures reported in accordance with GAAP.

Three Months Ended

Nine Months Ended


September 30,

September 30,


2020

2021

2020

2021



(Dollars in thousands)

Reconciliation of Net Income (Loss) to Operating Income and Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)

Net income (loss)
   $ 329
$
22,094

   $ (57,390 )
$
24,674

Plus provision for income taxes
   401
837
   31,180
479

Plus net miscellaneous income and (expenses)
   (1 )
(2
)

   45
(87
)

Plus gain on the forgiveness of PPP loans
   —
(11,212
)

   —
(11,212
)

Plus (gain) loss on early retirement of long-term debt
   —
56
   (49 )
56

Plus interest expense, net of capitalized interest
   4,024
4,026
   12,069
11,887

Less interest income
   (1 )
—

   (1 )
(1
)









Net operating income (loss)
   $ 4,752
$
15,799

   $ (14,146 )
$
25,796









Plus net (gain) loss on the disposition of assets
   1,381
(10,607
)

   1,494

(10,552
)
Plus change in the estimated fair value of contingent
earn-out
consideration
   (10 )

—

   (12 )

—

Plus debt modification costs
   —

2,347

   —

2,347

Plus impairment of indefinite-lived long-term assets other than goodwill
   —

—

   17,254

—

Plus impairment of goodwill
   —

—

   307

—

Plus depreciation and amortization
   3,428

3,215

   10,686

9,671

Plus unallocated corporate expenses
   3,849

4,284

   11,909

12,764









Combined Station Operating Income, Digital Media Operating Income and Publishing Operating Loss
   $ 13,400
$
15,038

   $ 27,492
$
40,026









Station Operating Income
   $ 11,108
$
12,128

   $ 25,337
$
33,454

Digital Media Operating Income
   2,664

2,376

   5,232

5,323

Publishing Operating Income (Loss)
   (372 )

534

   (3,077 )

1,249









   $ 13,400
$
15,038

   $ 27,492
$
40,026


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2022			2021			2022

	(Dollars in thousands)
Reconciliation of Net Income to Operating Income and Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
Net income	$	2,257		$	9,117		$	2,580		$	10,856
Plus benefit from income taxes		(488	)		(1,082	)		(358	)		(1,293	)
Plus net miscellaneous income and (expenses)		(63	)		1			(85	)		—
Plus (gain) loss on early retirement of long-term debt		—			(35	)		—			18
Plus earnings from equity method investment		—			(3,913	)		—			(3,913	)
Plus interest expense, net of capitalized interest		3,935			3,389			7,861			6,783
Less interest income		—			(149	)		(1	)		(149	)

Net operating income	$	5,641		$	7,328		$	9,997		$	12,302

Plus net (gain) loss on the disposition of assets		(263	)		(6,893	)		55			(8,628	)
Plus change in the estimated fair value of contingent earn-out consideration		—			—			—			(5	)
Plus debt modification costs		—			20			—			248
Plus impairment of indefinite-lived long-term assets other than goodwill		—			3,935			—			3,935
Plus impairment of goodwill		—			127			—			127
Plus depreciation and amortization		3,286			3,190			6,456			6,466
Plus unallocated corporate expenses		4,192			4,781			8,480			9,591

Combined Station Operating Income, Digital Media Operating Income and Publishing Operating Loss	$	12,856		$	12,488		$	24,988		$	24,036

Station Operating Income	$	10,621		$	9,963		$	21,326		$	20,274
Digital Media Operating Income		2,001			2,531			2,947			4,358
Publishing Operating Income (Loss)		234			(6	)		715			(596	)

	$	12,856		$	12,488		$	24,988		$	24,036

In the table below, we present a reconciliation of Adjusted EBITDA to EBITDA to Net Income, ~~(Loss),~~ the most directly comparable GAAP measure. EBITDA and Adjusted EBITDA are

non-GAAP

financial performance measures that are not to be considered a substitute for, or superior to, the most directly comparable measures reported in accordance with GAAP.


	Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
	September 30,						September 30,							June 30,						June 30,
	2020			2021			2020			2021				2021			2022			2021			2022

	(Dollars in thousands)													(Dollars in thousands)
Reconciliation of Adjusted EBITDA to EBITDA to Net Income (Loss)
Net income (loss)	$	329		$	22,094		$	(57,390	)	$	24,674
Reconciliation of Adjusted EBITDA to EBITDA to Net Income													Reconciliation of Adjusted EBITDA to EBITDA to Net Income
Net income														$	2,257		$	9,117		$	2,580		$	10,856
Plus interest expense, net of capitalized interest		4,024			4,026			12,069			11,887				3,935			3,389			7,861			6,783
Plus provision for income taxes		401			837			31,180			479
Plus benefit from income taxes															(488	)		(1,082	)		(358	)		(1,293	)
Plus depreciation and amortization		3,428			3,215			10,686			9,671				3,286			3,190			6,456			6,466
Less interest income		(1	)		—			(1	)		(1	)			—			(149	)		(1	)		(149	)

EBITDA	$	8,181		$	30,172		$	(3,456	)	$	46,710			$	8,990		$	14,465		$	16,538		$	22,663

Plus net (gain) loss on the disposition of assets		1,381			(10,607	)		1,494			(10,552	)			(263	)		(6,893	)		55			(8,628	)
Plus change in the estimated fair value of contingent earn-out consideration		(10	)		—			(12	)		—				—			—			—			(5	)
Plus debt modification costs		—			2,347			—			2,347				—			20			—			248
Plus impairment of indefinite-lived long-term assets other than goodwill		—			—			17,254			—				—			3,935			—			3,935
Plus impairment of goodwill		—			—			307			—				—			127			—			127
Plus net miscellaneous (income) and expenses		(1	)		(2	)		45			(87	)			(63	)		1			(85	)		—
Plus (gain) loss on early retirement of long-term debt		—			56			(49	)		56				—			(35	)		—			18
Plus gain on the forgiveness of PPP loans		—			(11,212	)		—			(11,212	)
Plus non-cash stock-based compensation		74			78			273			240				84			68			162			174

Adjusted EBITDA	$	9,625		$	10,832		$	15,856		$	27,502			$	8,748		$	11,688		$	16,670		$	18,532

~~Table of Contents~~

RESULTS OF OPERATIONS

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

The following factors affected our results of operations and cash ~~flows:~~flows for the three months ended June 30, 2022 as compared to the same period of the prior year:

Acquisitions and Divestitures

The operating results of our business acquisitions and asset purchases are included in our consolidated results of operations from their respective closing date or the date that we began operating them under an LMA or TBA. The operating results of business and asset divestitures are excluded from our consolidated results of operations from their respective closing date or the date that a third-party began operating them under an LMA or TBA.

On June 27, 2022, we sold 9.3 acres of land in the Denver area for $8.2 million resulting in a

pre-tax

gain of $6.5 million.

On May 25, 2022, we sold radio stations

WFIA-AM,

WFIA-FM

and

WGTK-AM

in Louisville, Kentucky for $4.0 million with credits applied from amounts previously paid, including a portion of the monthly fees paid under a TBA. We recorded a

pre-tax

gain of $0.5 million.

On May 2, 2022, we acquired websites and related assets of Retirement Media for $0.2 million in cash. We recorded goodwill of approximately $2,400 associated with the expected synergies to be realized upon combining the operations into our digital media platform within Eagle Financial Publications. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this entity as of the closing date within our digital media segment.

On February 15, 2022, we closed on the acquisition of radio station

WLCC-AM

and an FM translator in the Tampa, Florida market for $0.6 million of cash.

On January 10, 2022, we closed on the sale of 4.5 acres of land in Phoenix, Arizona for $2.0 million in cash. We recorded a

pre-tax

gain of $1.8 million on the sale.

Debt Transactions

During the three months ended June 30, 2022, we completed repurchases of $13.0 million of the 2024 Notes for $12.9 million in cash, recognizing a net gain of $35,000 after adjusting for bond issuance costs as detailed in Note 11 – Long-Term Debt of our Condensed Consolidated Financial Statements included in Part 1 of this quarterly report on Form

10-Q.

Net Broadcast Revenue


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022

	(Dollars in thousands)									% of Total Net Revenue
Net Broadcast Revenue	$	46,783	$	52,452	$	5,669		12.1	%		73.3	%		76.4	%
Same Station Net Broadcast Revenue	$	46,687	$	52,382	$	5,695		12.2	%

The following table shows the dollar amount and percentage of net broadcast revenue for each broadcast revenue source.


	Three Months Ended June 30,
	2021				2022

	(Dollars in thousands)
Block Programming:
National	$	11,861	25.4	%	$	13,340	25.4	%
Local		5,817	12.4	%		5,876	11.2	%

		17,678	37.8	%		19,216	36.6	%
Broadcast Advertising:
National		3,458	7.4	%		4,059	7.7	%
Local		10,546	22.5	%		11,269	21.5	%

		14,004	29.9	%		15,328	29.2	%
Station Digital (local)		7,728	16.5	%		9,881	18.9	%
Infomercials		225	0.5	%		182	0.4	%
Network		4,950	10.6	%		5,409	10.3	%
Other Revenue		2,198	4.7	%		2,436	4.6	%

Net Broadcast Revenue	$	46,783	100.0	%	$	52,452	100.0	%

Block programming revenue increased 8.7% to $19.2 million from $17.7 million due to an increase in rates and higher demand from the expansion of existing programs and the launch of new programs. Our 2022 annual renewals with national programmers reflected an average increase of 2.6% in rates. National programming from our Christian Teaching and Talk format radio stations increased $1.3 million while News Talk increased $0.1 million. Local programming increased $0.1 million from our News Talk format radio stations that was partially offset with a decline from Christian Teaching and Talk format radio stations.

Net advertising revenue increased 9.5%, or $1.3 million ($0.5 million net of political), to $15.3 million from $14.0 million, driven by a 17.4% increase in national spots and a 6.9% increase in local spots. National spot sales increased $0.2 million excluding political and local spot sales increased $0.3 million excluding political revenue. The largest increase was $0.7 million from our News Talk format stations followed by a $0.2 million increase from our Christian Teaching and Talk format ratio stations that was offset with a $0.4 million decline from our CCM format radio stations. The increase reflects a higher demand for advertising as pandemic restrictions ease but remains below

pre-pandemic

levels. National spot advertising is impacted by advertisers that are limiting ad spending as concerns grow regarding inflation and the overall state of the economy.

Broadcast digital revenue, net of agency commissions, or net digital revenue generated from our broadcast markets and networks, increased 27.9%, or $2.2 million, to $9.9 million from $7.7 million. The increase includes a $0.6 million increase of revenue generated from SalemNow, our

video-on-demand

service through Salem Consumer Products, that received distribution fees from the documentary motion picture that we invested in. We also saw increases of $0.7 million in digital marketing services through Salem Surround, a $0.4 million increase in advertising from the Salem Podcast Network, a $0.1 million increase in streaming revenue, a $0.3 million increase in digital advertising revenue from our station websites, and a $0.1 million increase from our networks. There were no significant changes in digital rates as compared to the prior year.

We experienced a small decline in infomercial revenue of $43,000 due to a lower number of infomercials aired during the period with no significant changes in rates as compared to the prior year. The placement of infomercials can vary significantly from one period to another due to the number of time slots available and the degree to which the infomercial content is considered to be of interest to our audience.

Network revenue, net of amounts reported as digital, increased 9.3%, or $0.5 million, due to a $0.3 million increase in political advertising and a $0.2 million increase in revenue from our nationally syndicated host programs. There were no significant changes in rates as compared to the same period of the prior year.

Other revenue increased 10.8%, or $0.2 million, due to an increase in event revenue. Revenue from live events can vary from period to period based on the nature and timing of events, audience demand, any applicable local pandemic restrictions, and in some cases, the weather which can affect attendance. While pandemic restrictions have eased, we continue to offer some virtual events as conditions warrant.

On a Same Station basis, net broadcast revenue increased $5.7 million, which reflects these items net of the impact of stations acquisitions, dispositions, and format changes.

Net Digital Media Revenue


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Net Digital Media Revenue	$	10,339	$	10,804	$	465		4.5	%		16.2	%		15.7	%

The following table shows the dollar amount and percentage of net digital media revenue for each digital media revenue source.


	Three Months Ended June 30,
	2021				2022
	(Dollars in thousands)
Digital Advertising, net	$	4,393	42.5	%	$	4,549	42.1	%
Digital Streaming		862	8.3			897	8.3
Digital Subscriptions		3,299	31.9			3,191	29.5
Digital Downloads		1,694	16.4			2,047	19.0
Other Revenues		91	0.9			120	1.1

Net Digital Media Revenue	$	10,339	100.0	%	$	10,804	100.0	%

Digital advertising revenue net of agency commissions, or national net digital revenue, increased 3.6%, or $0.2 million, including a $0.3 million increase from Salem Web Network and a $0.1 million increase from Townhall Media, which was offset with a $0.2 million decline from Eagle Financial Publications. These changes were driven by the number of advertisements placed with no significant changes in rates as compared to the same period of the prior year.

Digital streaming revenue increased $35,000 based on increased demand for content available from our Christian websites. There were no significant changes in sales volume or rates as compared to the same period of the prior year.

Digital subscription revenue decreased 3.3%, or $0.1 million, including a $0.4 million decline from Eagle Financial Publications that was offset with a $0.2 million increase from Townhall VIP and a $0.1 million increase from Salem Web Network. The decline in new subscriptions for Eagle Financial Publications reflects the impact of the sale of Hilary Kramer newsletters. There were no significant changes in rates as compared to the same period of the prior year.

Digital download revenue increased 20.8%, or $0.4 million, due to a higher volume of downloads from our church product websites with no significant changes in rates as compared to the same period of the prior year.

Other revenue includes revenue sharing arrangements for mobile applications and mail list rentals which increased slightly in volume with no changes in rates over the same period of the prior year.

Net Publishing Revenue


	Three Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Net Publishing Revenue	$	6,660	$	5,426	$	(1,234	)		(18.5	)%		10.4	%		7.9	%

The following table shows the dollar amount and percentage of net publishing revenue for each publishing revenue source.


	Three Months Ended June 30,
	2021					2022
	(Dollars in thousands)
Book Sales	$	6,212		93.3	%	$	3,643		67.1	%
Estimated Sales Returns & Allowances		(1,918	)	(28.8	)		(609	)	(11.2	)
Net Book Sales		4,294		64.5			3,034		55.9
E-Book Sales		453		6.8			338		6.3
Self-Publishing Fees		1,550		23.3			1,652		30.4
Print Magazine Subscriptions		104		1.6			—		—
Print Magazine Advertisements		54		0.8			—		—
Digital Advertising		70		1.1			—		—
Other Revenue		135		2.0			402		7.4

Net Publishing Revenue	$	6,660		100.0	%	$	5,426		100.0	%

Net book sales declined 29.3%, or $1.3 million, including a $1.1 million decline from Regnery Publishing, as book sales reflect a 6% decrease in the average price per unit sold, a 39% decrease in volume and a $0.2 million decline from Salem Author Services. Book sales through Regnery Publishing are directly attributable to the number and popularity of titles released each period and the composite mix of titles available. Revenues vary significantly from period to period based on the book release date and the number and popularity of titles. The decline of $1.3 million in estimated sales returns and allowances reflects a lower number of print books sold through Regnery Publishing. The decline in book sales from Salem Author Services was due to a reduction in the number of books sold with no significant changes in sale prices.

Regnery Publishing

e-book

sales declined 25.4%, or $0.1 million, due to a 47% decrease in sales volume what was offset by a 41% increase in the average price per unit sold.

E-book

sales vary based on the composite mix of titles released and available in each period. Revenues can vary significantly based on a book release date and the number of titles that achieve placement on bestseller lists, which can increase awareness and demand for the book.

Self-publishing fees increased 6.6%, or $0.1 million, due an increase in the number of authors with no significant change in fees charged to authors.

There have been no sales of print magazine subscriptions and print advertising revenues following the sale of Singing News Magazine on May 25, 2021. Digital advertising was not significant to Publishing and is no longer sold.

Other revenue includes change fees, video trailers and website revenues and subright revenue for foreign translation and audio books for original published titles from Regnery

Publishing. Subright revenue increased $0.3 million due to higher volume. There were no significant changes in rates as compared to the same period of the prior year.

Broadcast Operating Expenses


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Broadcast Operating Expenses	$	36,162	$	42,489	$	6,327		17.5	%		56.7	%		61.9	%
Same Station Broadcast Operating Expenses	$	36,081	$	42,402	$	6,321		17.5	%

Broadcast operating expenses increased 17.5%, or $6.3 million, including a $5.0 million increase from broadcast stations, a $0.9 million increase from Salem Surround, and a $0.4 million increase from Salem Podcast Network. The increase in expenses associated with Salem Surround and Salem Podcast Network are consistent with the growth of these entities in expanding digital product offerings through our broadcast division. The increase of $5.0 million from our broadcast stations includes a $1.9 million increase in payroll costs primarily driven by an increase in commissions and the January 2022 reinstatement of the company 401(k) match, a $1.6 million increase in professional services, a $0.7 million increase in travel and entertainment, a $0.4 million increase in advertising and event costs, a $0.2 million increase in facility-related expenses and a $0.1 million increase in production and programming costs.

On a same-station basis, broadcast operating expenses increased 17.5%, or $6.3 million. The increase in broadcast operating expenses on a same station basis reflects these items net of the impact of station acquisitions, dispositions, and format changes.

Digital Media Operating Expenses


	Three Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Digital Media Operating Expenses	$	8,338	$	8,273	$	(65	)		(0.8	)%		13.1	%		12.0	%

Digital media operating expenses declined 0.8%, or $0.1 million, including a $0.2 million decrease in software and streaming costs, a $0.1 million decrease in costs of sales, a $0.1 million decrease in bad debt expense and a $0.1 million decrease in royalties, which were offset by a $0.4 million increase in employee related costs including $0.1 million associated with the reinstatement of the company 401(k) match effective January 1, 2022.

Publishing Operating Expenses


	Three Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Publishing Operating Expenses	$	6,426	$	5,432	$	(994	)		(15.5	)%		10.1	%		7.9	%

Publishing operating expenses declined 15.5%, or $1.0 million, including a $0.6 million decrease in royalty expense consistent with lower revenue, a $0.4 million decrease in the cost of sales and a $0.1 million decrease in payroll costs due to the sale of Singing News Magazine in May 2021, that was partially offset by a $0.1 million increase in bad debt expense. The decrease in cost of sales includes a $0.2 million reduction from the number of print books sold by Regnery

Publishing, a $0.1 million decrease in Salem Author Services and a $0.1 million decline from the sale of Singing News Magazine. The gross profit margin for Regnery

Publishing declined to 38% from 50% as sales volume decreased. Regnery

Publishing margins vary based on the volume of

e-book

sales, which have higher margins due to the nature of delivery and no reserve for sales returns and allowances. The gross profit margin for Salem Author Services improved to 79% from 74%.

Unallocated Corporate Expenses


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Unallocated Corporate Expenses	$	4,192	$	4,781	$	589		14.1	%		6.6	%		7.0	%

Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax, and treasury, which are not directly attributable to any one of our operating segments. The increase of 14.1%, or $0.6 million, includes a $0.3 million increase in travel and entertainment, and a $0.2 million increase in employee related costs associated with executive bonuses and the reinstatement of the company 401(k) match effective January 1, 2022.

Debt Modification Costs


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Debt Modification Costs	$	—	$	20	$	20		—	%		—	%		—	%

We recorded additional debt modification costs of $20,000 during the first quarter of 2022 associated with the refinance of $112.8 million of the 2024 Notes for $114.7 million of the 2028 Notes.

Depreciation Expense


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Depreciation Expense	$	2,741	$	2,858	$	117		4.3	%		4.3	%		4.2	%

Depreciation expense increased slightly due to acquisitions of property and equipment, including capital projects that were delayed due to the pandemic. There were no changes in our depreciation methods or in the estimated useful lives of our asset groups.

Amortization Expense


	Three Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Amortization Expense	$	545	$	332	$	(213	)		(39.1	)%		0.9	%		0.5	%

The decline in amortization expense reflects the impact of fully amortized domain names, customer lists and contracts, and subscriber base lists that have estimated useful lives from three to five years. These assets were fully amortized by early 2021, with a lower level of acquisition activity in recent years, resulting in lower amortization expense. There were no changes in our amortization methods or the estimated useful lives of our asset groups.

Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill	$	—	$	3,935	$	3,935		—	%		—	%		5.7	%

We performed an interim review of broadcast licenses for impairment at June 30, 2022. Based on our review and analysis, we determined that the carrying value of broadcast licenses in seven of our market clusters were impaired as of the interim testing period ending June 30, 2022. We recorded an impairment charge of $3.9 million to the value of broadcast licenses in Columbus, Dallas, Greenville, Honolulu, Orlando, Portland, and Sacramento. The impairment charges were driven by an increase in the WACC that was partially offset with improvements in revenue growth rates over those used in the

year-end

valuation forecasts.

Impairment of Goodwill


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Impairment of Goodwill	$	—	$	127	$	127		—	%		—	%		0.2	%

As a result of changes in macroeconomic conditions and rising interest rates that increase the WACC, we performed an interim review of goodwill for impairment at June 30, 2022. Based on our review and analysis, we recorded an impairment charge of $0.1 million to goodwill in one of our broadcast markets at June 30, 2022.

Net (Gain) Loss on the Disposition of Assets


	Three Months Ended June 30,
	2021			2022			Change $			Change %			2021			2022
	(Dollars in thousands)												% of Total Net Revenue
Net (Gain) Loss on the Disposition of assets	$	(263	)	$	(6,893	)	$	(6,630	)		2,520.9	%		(0.4	)%		(10.0	)%

The net gain on the disposition of assets of $6.9 million for the three-month period ending June 30, 2022 reflects a $6.5 million

pre-tax

gain on the sale of land used in our Denver, Colorado broadcast operations and a $0.5 million

pre-tax

gain on the sale of our radio stations in Louisville, Kentucky that was offset with $0.1 million of net losses from various fixed asset disposals.

The net gain on the disposition of assets of $0.3 million for the three-month period ending June 30, 2021 includes a $0.5 million

pre-tax

gain on the sale of Singing News Magazine and Singing News Radio that was offset by an additional $0.1 million loss recorded at the time of closing on the sale of radio station

WKAT-AM

and FM translator in Miami, Florida as well as various other fixed asset disposals.

Other Income (Expense)


	Three Months Ended June 30,
	2021			2022			Change $			Change %			2021			2022
	(Dollars in thousands)												% of Total Net Revenue
Interest Income	$	—		$	149		$	149			—	%		—	%		0.2	%
Interest Expense		(3,935	)		(3,389	)		(546	)		(13.9	)%		(6.2	)%		(4.9	)%
Gain (Loss) on Early Retirement of Long-Term Debt		—			35			35			—	%		—	%		0.1	%
Earnings from equity method investment		—			3,913			3,913			—	%		—	%		5.7	%
Net Miscellaneous Income and (Expenses)		63			(1	)		(64	)		(101.6	)%		0.1	%		—	%

Interest income represents earnings on excess cash, interest due under promissory notes and interest earned from our equity investment in OPA.

Interest expense includes interest due on outstanding debt balances, and

non-cash

accretion associated with deferred installments and contingent

earn-out

consideration from certain acquisitions. The decrease of $0.5 million reflects the lower outstanding balance of the Notes, the lower outstanding balance of the ABL Facility, and finance lease obligations outstanding during the three-months ended June 30, 2022.

The gain on the early retirement of long-term debt for the three months ended June 30, 2022, reflects $13.0 million of repurchases of the Notes at prices below face value resulting in a

pre-tax

gain of $35,000.

We recorded $3.9 million of earnings from our equity investment in OPA, an entity formed for the purpose of developing, producing, and distributing a documentary motion picture. The motion picture

, 2,000 Mules

, was released in May 2022.

Net miscellaneous income and expenses includes

non-operating

receipts such as usage fees and other expenses.

Benefit from Income Taxes


	Three Months Ended June 30,
	2021			2022			Change $			Change %			2021			2022
	(Dollars in thousands)												% of Total Net Revenue
Benefit from Income Taxes	$	(488	)	$	(1,082	)	$	(594	)		121.7	%		(0.8	)%		(1.6	)%

We recognized a tax benefit of $1.1 million for the three months ended June 30, 2022, as compared to $0.5 million for the same period of the prior year. The benefit from income taxes as a percentage of income before income taxes, or the effective tax rate, was (13.5)% for the three months ended June 30, 2022, compared to (27.6)% for the same period of the prior year. The effective tax rate for each period differs from the federal statutory income rate of 21.0% due to the effect of the sale of business assets in various states, state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance. The effective tax rate of (13.5)% is primarily driven by projected utilization of operating loss carryforwards, along with certain expenses that are nondeductible for income tax purposes relative to

pre-tax

book income, and tax expense attributable to deductible amortization on indefinite lived assets for fully valued state jurisdictions for state jurisdictions in which a full valuation allowance has been recording against net operating loss carryforward.

Net Income


	Three Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Net Income	$	2,257	$	9,117	$	6,860		303.9	%		3.5	%		13.3	%

Net income increased $6.8 million to $9.1 million for the three months ended June 30, 2022, from $2.3 million during the same period of the prior year as described above.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

The following factors affected our results of operations and cash flows for the six months ended June 30, 2022 as compared to the same period of the prior year:

Acquisitions, Divestitures and Other Transactions

On June 27, 2022, we sold 9.3 acres of land in the Denver area for $8.2 million resulting in a

pre-tax

gain of $6.5 million.

On May 25, 2022, we sold radio stations

WFIA-AM,

WFIA-FM

and

WGTK-AM

in Louisville, Kentucky for $4.0 million with credits applied from amounts previously paid, including a portion of the monthly fees paid under TBA. We recorded a

pre-tax

gain of $0.5 million.

On May 2, 2022, we acquired websites and related assets of Retirement Media for $0.2 million in cash. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this entity as of the closing date within our digital media segment.

On February 15, 2022, we closed on the acquisition of radio station

WLCC-AM

and an FM translator in the Tampa, Florida market for $0.6 million of cash.

On January 10, 2022, we closed on the sale of 4.5 acres of land in Phoenix, Arizona for $2.0 million in cash. We recorded a

pre-tax

gain of $1.8 million on the sale.

On November 30, 2021, we sold approximately 77 acres of land in Tampa, Florida for $13.5 million in cash. We recognized a

pre-tax

gain on the sale of $12.9 million.

On July 27, 2021, we sold the Hilary Kramer Financial Newsletter and related assets for $0.2 million to be collected in quarterly installments over the

two-year

period ending September 30, 2023. We recognized a

pre-tax

gain on the sale of $0.1 million.

On July 23, 2021, we sold approximately 34 acres of land in Lewisville, Texas, for $12.1 million in cash. ~~The land was being used for as the transmitter site for company owned radio station~~

~~KSKY-AM.~~

~~We retained a portion of the land in the southwest corner of the site to continue operating the radio station.~~ We recognized a

pre-tax

gain on the sale of $10.5 million.

On July 2, 2021, we acquired the SeniorResource.com domain for $0.1 million in cash.

On July 1, 2021, we acquired the ShiftWorship.com domain and digital assets for $2.6 million in cash. The digital content library is operated within Salem Web Network’s church products division.

On June 1, 2021, we acquired radio stations

KDIA-AM

and

KDYA-AM

in San Francisco, California for $0.6 million in cash.

On May 25, 2021, we sold Singing News Magazine and Singing News Radio for $0.1 million in cash.

On March 8, 2021, we acquired the Triple Threat Trader newsletter. We paid no cash at the time of closing and assumed deferred subscription liabilities of $0.1 million.

On March 18, 2021, we sold radio station

WKAT-AM

and an FM translator in Miami, Florida for $3.5 million. The buyer began operating the station under a LMA in November 2020.

On September 15, 2020, we acquired the Hyper Pixels Media website and related assets for $1.1 million in cash. We paid $0.4 million in cash upon closing with deferred payments of $0.4 million due January 31, 2021 and $0.3 million due September 15, 2021.44

~~On April 6, 2020, we sold radio station~~

~~WBZW-AM~~

~~and an FM translator construction permit in Orlando, Florida, for $0.2 million in cash.~~

Debt Transactions

~~On September 24, 2021,~~During the six months ended June 30, 2022, we ~~repurchased $4.7~~completed repurchases of $15.5 million of the ~~6.75% Senior Secured~~2024 Notes ~~due 2024 (“2024 Notes”)~~ for ~~$4.7~~$15.4 million in cash, recognizing a net loss of ~~$56,000~~$18,000 after adjusting for bond issuance ~~costs.~~

costs as detailed in Note 11 – Long-Term Debt of our Condensed Consolidated Financial Statements included in Part 1 of this quarterly report on Form

10-Q.

~~On September 10,~~During the six months ended June 30, 2021, we ~~exchanged $112.8 million of the 2024 Notes for $114.7 million (reflecting a call premium of 1.688%) of newly issued 2028 Notes.~~

We received $11.2 million in aggregate principal amount of PPP loans through the SBA ~~during the first quarter of 2021 based on the eligibility of~~that were available to our radio stations and networks ~~as determined on a~~

~~per-location~~

~~basis.~~

Inunder the CAA. During July 2021, the SBA forgave all but $20,000 of the PPP loans. ~~The remaining PPP loan was repaid in July 2021.~~

During the nine-months ended September 30, 2020, we completed repurchases of $3.5 million of the Notes for $3.4 million in cash, recognizing a net gain of $49,000 after adjusting for bond issuance costs.

~~Equity Transactions~~

No distributions were declared or paid during nine-month period ended September 30, 2021, compared to distributions of $0.7 million ($0.025 per share) declared and paid during the nine-month period ended September 30, 2020 based upon our Board’s then current assessment of our business as detailed in Note 16 – Equity Transactions.

~~Table of Contents~~

~~Three months ended September 30, 2021 compared to the three months ended September 30, 2020~~

Net Broadcast Revenue


	Three Months Ended September 30,
	2020		2021		Change $		Change %			2020			2021			Six Months Ended June 30,
																2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue						(Dollars in thousands)									% of Total Net Revenue
Net Broadcast Revenue	$	45,391	$	49,591	$	4,200		9.3	%		74.9	%		75.2	%	$	90,831	$	100,884	$	10,053		11.1	%		73.8	%		76.8	%
Same Station Net Broadcast Revenue	$	45,095	$	49,113	$	4,018		8.9	%							$	90,653	$	100,477	$	9,824		10.8	%

The following table shows the dollar amount and percentage of net broadcast revenue for each broadcast revenue source.


	Three Months Ended September 30,
	2020				2021				Six Months Ended June 30,
									2020				2021
	(Dollars in thousands)								(Dollars in thousands)
Block Programming:
National	$	11,732	25.8	%	$	12,502	25.2	%	$	23,322	25.7	%	$	26,399	26.2	%
Local		5,771	12.7			6,299	12.7	%		11,773	13.0	%		12,049	11.9	%

		17,503	38.5			18,801	37.9	%		35,095	38.6	%		38,448	38.1	%
Broadcast Advertising:
National		3,635	8.0			3,447	7.0	%		7,118	7.8	%		7,700	7.6	%
Local		9,485	20.9			10,682	21.5	%		19,441	21.4	%		21,552	21.4	%

		13,120	28.9			14,129	28.5	%		26,559	29.2	%		29,252	29.0	%
Broadcast Digital (local)		7,754	17.1			8,805	17.8	%		14,797	16.3	%		18,087	17.9	%
Infomercials		214	0.5			220	0.4	%		462	0.5	%		373	0.4	%
Network		4,891	10.8			4,908	9.9	%		9,821	10.8	%		10,240	10.2	%
Other Revenue		1,909	4.2			2,728	5.5	%		4,097	4.5	%		4,484	4.8	%

Net Broadcast Revenue	$	45,391	100.0	%	$	49,591	100.0	%	$	90,831	100.0	%	$	100,884	100.0	%

Block programming revenue increased ~~by $1.3~~9.6% to $38.4 million ~~including a $0.8~~from $35.1 million, due to an increase in rates and higher demand from the expansion of existing programs and the launch of new programs. Our 2022 annual renewals with national programmers reflected an average increase of 2.6% in rates. National programming ~~and a $0.5 million increase in local programming. Our~~from our Christian Teaching and Talk format radio stations ~~generated a $0.5~~increased $2.8 million ~~increase in national programming revenue and a $0.4 million increase in local programming revenue~~ while our News Talk format ~~radio~~ stations ~~generated a~~increased $0.3 million. Local programming increased $0.2 million increase in national programming and a $0.2 million increase in local programming. These increases include the impact of the $0.2 million in early-payment discounts offered during the prior year and an increase in the number of programmers

~~on-air.~~

Advertising revenue, net of agency commissions, increased by $1.0 million, including a $1.2 million increase in local advertising that was offset with a $0.2 million decline in national advertising. Excluding political advertising, advertising revenue increased by $1.4 million, all in local advertising. The increase includes $0.6 million from our Contemporary Christian Music format radio stations, primarily in our Los Angeles, Atlanta and Nashville markets, $0.3 million from our News Talk format radio stations ~~$0.2~~and $0.1 million from our Christian Teaching and Talk format radio ~~stations, and $0.5~~stations.

Net advertising revenue increased 10.1%, or $2.7 million ($1.6 million net of political), to $29.3 million from ~~other radio station formats, that were offset~~$26.6 million, driven by an 8.2% increase in national spots and a 10.9% increase in local spots. Local spot sales increased $1.6 million excluding political revenue while national spot sales decreased $0.1 million excluding political revenue. The largest increase was $0.8 million from our News Talk format stations followed by a ~~$0.1~~$0.3 million ~~decline~~increase from our ~~Spanish~~ Christian Teaching and Talk format ratio stations and a $0.2 million increase from our CCM format radio stations. The ~~increases reflect the~~increase reflects a higher demand for ~~airtime associated with improving economic conditions~~advertising as pandemic restrictions ~~continue to~~ ease but remains below

pre-pandemic

levels. National spot advertising is impacted by advertisers that ~~can in turn result in higher spot rates for premium airtime spots. The decline from Spanish Christian Teaching and Talk format radio stations is due to the sale of radio station~~

~~WKAT-AM~~

~~in Miami, Florida,~~are limiting ad spending as concerns grow regarding inflation and the ~~reformatting~~overall state of ~~our remaining Spanish Christian Teaching and Talk format radio stations.~~the economy.

Broadcast digital revenue, net of agency commissions, or net digital revenue generated from our broadcast markets and networks, increased ~~by $1.1~~22.2%, or $3.3 million. The increase includes $0.6 million ~~due to growth~~of revenue generated from SalemNow, our

video-on-demand

service through Salem Consumer Products, which received distribution fees from

2,000 Mules

, the documentary motion picture we invested in ~~digital product offerings and the launch~~during 2022. We also saw increases of the Salem Podcast Network in January 2021. Salem Podcast Network is a highly specialized platform for conservative, political, news, family-oriented podcasts with talk show hosts including Dinesh D’Souza, Todd Starnes and Charlie Kirk. Salem Podcast Network joins Salem Surround, our multimedia digital advertising agency providing digital marketing services to our customers, and SalemNow, our transactional video

~~on-demand~~

streaming platform launched in the fourth quarter of 2020, along with our owned and operated station branded websites to offer an expanding line of digital products and services. Increases in broadcast digital revenue include a $1.2$2.0 million ~~increase in~~from digital marketing services through Salem Surround, a ~~$1.8~~$0.2 million increase from Salem Podcast Network, ~~and~~ a ~~$0.2~~$0.3 million increase in streaming revenue, and a $0.5 million increase in digital advertising revenue from our station websites that ~~was~~were partially offset by a ~~$2.1~~$0.2 million ~~decline in revenue~~decrease from ~~SalemNow due to the impact of two successful titles released during the prior year.~~our networks. There were no significant changes in digital rates as compared to the prior year.

~~Table~~We experienced a small decline in infomercial revenue of ~~Contents~~

~~There were~~$89,000 due to a lower number of infomercials aired during the period with no significant changes in rates as compared to the ~~number of infomercials aired and no significant changes in rates.~~prior year. The placement of infomercials can vary significantly from one period to another due to the number of time slots available and the degree to which the infomercial content is considered to be of interest to our audience.

Network revenue, ~~exclusive~~net of amounts reported ~~within~~as digital, increased ~~by $17,000 compared to the same period of the prior year due to~~4.3%, or $0.4 million, including a ~~$0.7~~$0.2 million increase in ~~revenue~~political advertising and a $0.2 million increase from our nationally syndicated host ~~programs that was partially offset by a $0.7 million decline in political advertising.~~programs.

Other revenue increased ~~by $0.8~~9.4%, or $0.4 million, ~~due to~~including a $0.6 million increase in event revenue ~~due to the~~

~~re-opening~~

~~of live events,~~that was offset with a ~~$0.1~~$0.2 million ~~increase~~decrease in ~~TBA fees associated with radio station~~

~~KBJD-AM,~~

~~Denver, Colorado and a $0.1 million increase in talent fees.~~listener purchase program revenue from lower half price tuition sales. Event revenue varies from period to period based on the nature and timing of events, audience demand, any applicable local pandemic restrictions, and in some cases, the weather which can affect attendance. While pandemic restrictions have eased, we continue to offer some virtual events as conditions warrant.

On a Same Station basis, net broadcast revenue increased ~~$4.0~~$9.8 million, which reflects these items net of the impact of stations ~~acquired, disposed of, or with~~acquisitions, dispositions, and format changes.

Net Digital Media Revenue

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)


% of Total Net Revenue
Net Digital Media Revenue
   $ 9,808
$
10,645

   $ 837    8.5 % 16.2 %

16.1
%


	Six Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Net Digital Media Revenue	$	19,958	$	21,104	$	1,146		5.7	%		16.2	%		16.1	%

The following table shows the dollar amount and percentage of net digital media revenue for each digital media revenue source.


	Three Months Ended September 30,
	2020				2021				Six Months Ended June 30,
									2021				2022
	(Dollars in thousands)								(Dollars in thousands)
Digital Advertising, net	$	5,213	53.2	%	$	5,053	47.5	%	$	8,806	44.1	%	$	9,088	43.1	%
Digital Streaming		843	8.6			873	8.2			1,706	8.5			1,798	8.5
Digital Subscriptions		2,387	24.3			3,155	29.6			6,072	30.4			6,343	30.1
Digital Downloads		1,244	12.7			1,464	13.8			3,173	15.9			3,645	17.3
e-commerce		53	0.5			65	0.6
Other Revenues		68	0.7			35	0.3			201	1.1			230	1.0

Net Digital Media Revenue	$	9,808	100.0	%	$	10,645	100.0	%	$	19,958	100.0	%	$	21,104	100.0	%

~~National digital~~Digital advertising revenue net of agency commissions, or national net digital revenue, ~~generated from our owned and operated Christian and conservative opinion websites, declined by~~increased 3.2%, or $0.2 million, ~~due to~~including a ~~lower number of advertisements on our conservative opinion websites within Townhall Media. Our conservative opinion websites experience lower demand and lower page views during~~

~~non-election~~

~~years. We also experience lower demand~~$0.5 million increase from advertisers who move advertising spending to digital programmatic advertisers, such as Facebook and Google, and we may lose advertisers who decide to reduce or eliminate advertising on political-content websites such as ours. We continue to acquire, develop and promote the use of mobile applications to reduce our dependency on page viewsSalem Web Network that was offset with a $0.3 decline from ~~digital programmatic advertisers. Because mobile page views carry fewer advertisements and tend to have shorter site visits as compared to desktop, our growth in mobile page views exceeds our growth~~Eagle Financial Publications. On a

year-to-date

basis, there were no significant changes in revenue from ~~the mobile applications.~~

~~Digital streaming revenue was consistent with that of~~Townhall Media. There were no significant changes in rates as compared to the same period of the prior ~~year with~~year.

Digital streaming revenue increased 5.4%, or $0.1 million, based on increased demand for content available from our Christian websites. There were no significant changes in sales volume or rates.

Digital subscription revenue increased ~~by $0.8~~4.5%, or $0.3 million, including a $0.4 million increase from ~~Christianjobs.com~~Salem Web Network and ~~Churchstaffing.com within SWN due to an~~a $0.3 million increase ~~in job postings,~~from Townhall VIP, that were offset with a ~~$0.2~~$0.5 million ~~increase~~decline from Eagle Financial Publications ~~due to an increase~~from a reduction in the number of ~~subscribers from increased marketing efforts, and a $0.2 million increase from Townhall Media’s launch~~new subscriptions generated. The decline in new subscriptions for Eagle Financial Publications reflects the impact of ~~Townhall VIP, a subscription service. There were no significant changes in rates over~~ the ~~prior period.~~sale of Hilary Kramer newsletters.

Digital download revenue increased ~~by $0.2~~14.9%, or $0.5 million, due to ~~increases in the number~~a higher volume of downloads ~~purchased~~ from our church product websites ~~and form the acquisitions of Centerline New Media in April 2021 and ShiftWorship in July 2021. There were no significant changes in rates.~~

~~Table of Contents~~

~~E-commerce~~

~~revenue includes~~

~~in-app~~

~~purchases that increased in volume~~ with no significant changes in ~~rates.~~rates as compared to the same period of the prior year.

Other revenue includes revenue sharing arrangements for mobile applications and mail list rentals which ~~declined~~increased slightly in volume with no ~~significant~~ changes in ~~rates.~~rates over the same period of the prior year.

Net Publishing Revenue

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Net Publishing Revenue
   $ 5,442
$
5,747

   $ 305    5.6 % 9.0 %

8.7
%


	Six Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Net Publishing Revenue	$	12,346	$	9,303	$	(3,043	)		(24.6	)%		10.0	%		7.1	%

The following table shows the dollar amount and percentage of net publishing revenue for each publishing revenue source.


	Three Months Ended September 30,
	2020					2021					Six Months Ended June 30,
											2021					2022
	(Dollars in thousands)										(Dollars in thousands)
Book Sales	$	4,310		79.2	%	$	4,561		79.4	%	$	10,513		85.2	%��	$	6,204		66.7	%
Estimated Sales Returns & Allowances		(1,322	)	(24.3	)		(1,212	)	(21.1	)		(3,011	)	(24.4	)		(1,444	)	(15.5	)

Net Book Sales		2,988		54.9			3,349		58.3			7,502		60.8			4,760		51.2
E-Book Sales		456		8.4			502		8.7			792		6.4			625		6.7
Self-Publishing Fees		1,407		25.8			1,556		27.1			3,174		25.7			3,379		36.3
Print Magazine Subscriptions		168		3.1			—		—			262		2.1			—		—
Print Magazine Advertisements		85		1.6			—		—			122		1.0			—		—
Digital Advertising		65		1.2			—		—			132		1.1			—		—
Other Revenue		273		5.0			340		5.9			362		2.9			539		5.8

Net Publishing Revenue	$	5,442		100.0	%	$	5,747		100.0	%	$	12,346		100.0	%	$	9,303		100.0	%

Net book sales ~~increased by $0.3~~declined 36.6%, or $2.7 million, ~~including~~which includes a ~~$0.2~~$2.5 million ~~increase~~decline from ~~Salem Author Services and a $0.1 million increase from~~ Regnery

~~Publishing. Book~~ Publishing, as book sales ~~through Regnery~~

~~Publishing~~ reflect a ~~10% decrease in volume with a 11%~~5% decrease in the average price per unit sold, ~~offset with~~ a ~~reduction~~38% decrease in volume and a $0.2 million decline from Salem Author Services. Book sales ~~returns and allowances resulting from lower print sales. Revenue is~~through Regnery Publishing are directly attributable to the number and popularity of titles released each period and the composite mix of titles ~~available that can~~available. Revenues vary significantly from period to period based on the book release date and the number and popularity of ~~titles that achieve placement on bestseller lists, which can increase awareness and demand for the book.~~titles. The ~~decrease~~decline of ~~$0.1~~$1.6 million in estimated sales returns and allowances ~~is based on~~reflects a ~~flat volume~~lower number of print books sold through Regnery

Publishing. The ~~$0.2 million increase~~decline in book sales from Salem Author Services ~~book sales~~ was due to ~~an increase~~a reduction in the number of books sold ~~as trade shows and events resumed~~ with no significant changes in sale prices.

Regnery

Publishing

e-book

sales ~~increased by $46,000 with~~declined 21.1%, or $0.2 million, due to a ~~6% increase~~5% decrease in sales volume and a 17% decrease in the average price per unit ~~sold from sales incentives and a 19% increase in sales volume.~~sold.

E-book

sales can also vary based on the composite mix of titles released and available in each period. Revenues can vary significantly based on ~~the~~a book release date and the number of titles that achieve placement on bestseller lists, which can increase awareness and demand for the book.

Self-publishing fees increased ~~$0.1~~6.5%, or $0.2 million, due an increase in the number of authors ~~publishing books~~ with no material change in fees charged to authors.

~~Declines in~~There have been no sales of print magazine ~~subscription revenues~~subscriptions and print advertising revenues ~~reflect~~following the sale of Singing News Magazine on May 25, 2021. Digital advertising was not significant to Publishing and is no longer sold.

~~Declines in digital advertising revenues reflect the sale of Singing News Magazine on May 25, 2021.~~

Other revenue includes change fees, video trailers and website revenues and subright revenue for foreign translation and audio books for original published titles from Regnery

Publishing. Subright revenue increased ~~$0.1~~48.9%, or $0.2 million, due to higher demand.

There were no changes in volume or rates.

~~Table of Contents~~

Broadcast Operating Expenses


	Three Months Ended September 30,
	2020		2021		Change $		Change %			2020			2021			Six Months Ended June 30,
																2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue						(Dollars in thousands)									% of Total Net Revenue
Broadcast Operating Expenses	$	34,283	$	37,463	$	3,180		9.3	%		56.5	%		56.8	%	$	69,505	$	80,610	$	11,105		16.0	%		56.4	%		61.4	%
Same Station Broadcast Operating Expenses	$	33,687	$	37,072	$	3,385		10.0	%							$	69,159	$	80,151	$	10,992		15.9	%

Broadcast operating expenses increased ~~by $3.2~~16.0%, or $11.1 million, including ~~a $1.9~~an$8.0 million increase from broadcast stations, a $2.1 million increase from Salem Surround, and a $1.0 million increase from Salem Podcast Network. The increase in expenses associated with Salem Surround and Salem Podcast Network are consistent with the growth of these entities in expanding new digital product offerings through our broadcast division. The increase of $8.0 million from our broadcast stations includes a ~~$1.0~~$3.0 million increase in payroll costs ~~including~~primarily driven by an increase in commissions and the January ~~2021~~2022 reinstatement of ~~company-wide pay cuts that were implemented in 2020,~~the company 401(k) match, a ~~$0.5~~$1.6 million increase in ~~health insurance costs,~~professional services, a ~~$0.3~~$1.0 million increase in advertising and event costs, a ~~$0.2~~$1.0 million increase in travel and entertainment, a $0.6 million increase in facility-related expenses, a $0.4 million increase in production and programming costs, a $0.2 million increase in ~~travel and entertainment~~health insurance costs, and a $0.2 million increase in professional services. These costs were partially offset with a $0.9 million decline in cost of sales from SalemNow consistent with the decline in revenue as compared to the prior year when SalemNow released two successful titles, a $0.3 million decline in bad debt ~~expense due to the impact of the~~

~~COVID-19~~expense.

~~pandemic on prior year reserves, and a $0.1 million decrease in rent and facilities related expenses.~~

On a same-station basis, broadcast operating expenses increased ~~by $3.4 million reflecting~~15.9%, or $11.0 million. The increase in broadcast operating expenses on a same station basis reflects these items net of the impact of

start-up

costs associated with acquisitions, station dispositions and format changes.

Digital Media Operating Expenses

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Digital Media Operating Expenses
   $ 7,144
$
8,269

   $ 1,125    15.7 % 11.8 %

12.5
%


	Six Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Digital Media Operating Expenses	$	17,011	$	16,746	$	(265	)		(1.6	)%		13.8	%		12.8	%

Digital media operating expenses ~~increased by $1.1~~declined 1.6%, or $0.3 million, including a ~~$0.5 million increase payroll and employee benefits expense, a~~ $0.4 million ~~increase~~decrease in software and streaming costs, a $0.3 million decrease in royalties, a $0.1 million decrease in costs of sales, a $0.1 million decrease in sales-based commissions and bonuses, a $0.1 million decrease in advertising and promotional expenses and a $0.1 million decrease in professional services, that were offset by a $0.7 million increase in employee related costs including $0.2 million associated with the reinstatement of the company 401(k) match effective January 1, 2022 and a $0.2 million increase in ~~sales-based commissions and bonuses and a $0.1 million increase in professional services, offset by a $0.1 million decrease in~~ bad debt expense. Increases in advertising and promotional expenses are driven by a new video initiative for Eagle Financial Publications that management believes to be beneficial for the business and overall gradual increase in adverting spending as the economy begins to return to

~~pre-pandemic~~

~~levels. The increase in payroll expenses reflects the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020.~~

Publishing Operating Expenses

Three Months Ended September 30,

   2020
2021
   Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Publishing Operating Expenses
   $ 5,814
$
5,213

   $ (601 ) (10.3 )%   9.6 %

  7.9
%


	Six Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Publishing Operating Expenses	$	11,631	$	9,899	$	(1,732	)		(14.9	)%		9.4	%		7.5	%

Publishing operating expenses ~~decreased by $0.6~~declined 14.9%, or $1.7 million, including a ~~$0.3~~$0.7 million decrease in the cost of sales, a $0.7 million decrease in royalty expense ~~reflecting~~consistent with lower revenues, a ~~decrease in the reserve for royalty advances based on flat book sales for Regnery~~

~~Publishing, a $0.2~~$0.4 million decrease in ~~professional services, a $0.1 million decrease in~~payroll costs of sales and a $0.1 million decrease in facility-related expenses that was offset by a $0.1 million increase in payroll expenses from the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020. Cost of goods sold decreased $0.1 million including a $0.1 million from Regnery

~~Publishing due to flat book sales and $0.1 million decline from Salem Publishing~~ due to the sale of Singing News Magazine in May 2021 partially offset by a $0.1 million increase in bad debt expense. The decrease in cost of sales includes a $0.4 million reduction from the number of print books sold by Regnery

Publishing, a $0.2 million decline from the sale of Singing News Magazine and a $0.1 million decrease in Salem Author ~~Services due to a higher volume of book sales.~~Services. The gross profit margin for Regnery

Publishing ~~improved~~declined to ~~52%~~41% from ~~42%~~55% as sales volume ~~remained flat while material costs~~ decreased. Regnery

Publishing margins vary based on the volume of

e-book

sales, which have higher margins due to the nature of delivery and no reserve for sales returns and allowances. The gross profit margin for Salem Author Services ~~remained flat at 74% due~~improved to ~~higher book sales offset by higher paper costs for print book sales.~~79% from 75%.

Unallocated Corporate Expenses

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Unallocated Corporate Expenses
   $ 3,849
$
4,284

   $ 435    11.3 % 6.3 %

6.5
%


	Six Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Unallocated Corporate Expenses	$	8,480	$	9,591	$	1,111		13.1	%		6.9	%		7.3	%

~~Table of Contents~~

Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax, and treasury, ~~that~~which are not directly attributable to any one of our operating segments. The ~~net~~ increase of ~~$0.4~~13.1%, or $1.1 million, includes a $0.6 million increase in ~~payroll expense due to~~employee related costs associated with executive bonuses and the ~~January 2021~~ reinstatement of ~~company-wide pay cuts that were implemented~~the company 401(k) match effective January 1, 2022, a $0.3 million increase in ~~2020 that was offset~~travel and entertainment, and a $0.2 million ~~decline~~increase in ~~professional service fees.~~facility-related expenses.

Debt Modification Costs

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Debt Modification Costs
   $ —
$
2,347

   $ 2,347    100.0 % —   %

3.6
%


	Six Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Debt Modification Costs	$	—	$	248	$	248		—	%		—	%		0.2	%

~~On September 10, 2021, we exchanged~~We recorded additional debt modification costs of $0.2 million during the first half of 2022 associated with the refinance of $112.8 million of the 2024 Notes for $114.7 million ~~(reflecting a call premium~~ of ~~1.688%) of~~the 2028 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with FASB ASC Topic 470 with $2.3 million of fees paid to third parties included in operating expenses for the period.

Depreciation Expense

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Depreciation Expense
   $ 2,677
$
2,788

   $ 111    4.1 % 4.4 %

4.2
%


	Six Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Depreciation Expense	$	5,330	$	5,800	$	470		8.8	%		4.3	%		4.4	%

Depreciation expense increased due to recent acquisitions of property and equipment, including assets of Centerline New Media in April 2021 and ShiftWorship.com in July 2021, in addition to an increase ~~was consistent with~~in capital expenditures for data processing equipment and computer software that ~~of the prior year.~~had shorter estimated useful lives as compared to towers or other assets. There were no changes in our depreciation methods or in the estimated useful lives of our asset groups.

Amortization Expense

Three Months Ended September 30,

   2020
2021
   Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Amortization Expense
   $ 751
$
427

   $ (324 ) (43.1 )% 1.2 %

0.6
%


	Six Months Ended June 30,
	2021		2022		Change $			Change %			2021			2022
	(Dollars in thousands)										% of Total Net Revenue
Amortization Expense	$	1,126	$	666	$	(460	)		(40.9	)%		0.9	%		0.5	%

The decrease in amortization expense reflects the impact of fully amortized domain names, customer lists and contracts, and subscriber base lists that had estimated useful lives of three to five years. These items were fully amortized at, or near the beginning of 2021, resulting in lower amortization expense. There were no changes in our amortization methods or the estimated useful lives of our ~~intangible~~ asset groups.

Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill


	Six Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill	$	—	$	3,935	$	3,935		—	%		—	%		3.0	%

As a result of changes in macroeconomic conditions and rising interest rates that increase the WACC we performed an interim review of broadcast licenses for impairment at June 30, 2022. Based on our review and analysis, we determined that the carrying value of broadcast licenses in seven of our market clusters were impaired as of the interim testing period ending June 30, 2022. We recorded an impairment charge of $3.9 million to the value of broadcast licenses in Columbus, Dallas, Greenville, Honolulu, Orlando, Portland, and Sacramento. The impairment charges were driven by increases in the WACC that were partially offset with revenue growth rates that improved over

year-end

forecasts.

Impairment of Goodwill


	Six Months Ended June 30,
	2021		2022		Change $		Change %			2021			2022
	(Dollars in thousands)									% of Total Net Revenue
Impairment of Goodwill	$	—	$	127	$	127		—	%		—	%		0.1	%

Net (Gain) Loss on the Disposition of Assets

Three Months Ended September 30,

   2020
2021
Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Net (Gain) Loss on the Disposition of assets
   $ 1,381
$
(10,607
)
$ (11,988 ) (868.1 )% 2.3 %

(16.1
)%


	Six Months Ended June 30,
	2021		2022			Change $			Change %			2021			2022
	(Dollars in thousands)											% of Total Net Revenue
Net (Gain) Loss on the Disposition of assets	$	55	$	(8,628	)	$	(8,683	)		(15,787.3	)%		—	%		(6.6	)%

The net gain on the disposition of assets of ~~$10.6~~$8.6 million for the three-month period ending ~~September~~June 30, ~~2021 includes~~2022 reflects a ~~$10.5~~$6.5 million

pre-tax

gain on the sale of land used in ~~Lewisville, Texas,~~our Denver, Colorado broadcast operations, a $1.8 million

pre-gain

on the sale of land used in our Phoenix, Arizona broadcast operations, and a ~~$0.1~~$0.5 million

pre-tax

gain on the sale of ~~the Hilary Kramer Financial Newsletter and related assets as well as~~our radio stations in Louisville, Kentucky that was offset with $0.2 million of net losses from various ~~other~~ fixed asset disposals.

The net loss on the disposition of assets of ~~$1.4~~$0.1 million for the ~~three months~~

six-month

period ended ~~September~~June 30, ~~2020~~2021 reflects the ~~estimated~~$0.5 million

pre-tax

gain on the sale of Singing News Magazine and Singing News Radio offset by $0.4 million additional loss ~~associated with~~recorded at closing on the ~~exit of the Miami broadcast market with the then pending~~ sale of radio station

~~WKAT-AM.~~WKAT-AM

and FM translator in Miami, Florida and various fixed asset disposals.

~~Table of Contents~~

Other Income (Expense)


	Three Months Ended September 30,
	2020			2021			Change $			Change %			2020			2021
																			Six Months Ended June 30,
	(Dollars in thousands)												% of Total Net Revenue						2021			2022			Change $			Change %			2021			2022
																			(Dollars in thousands)												% of Total Net Revenue
Interest Income	$	1		$	—			(1	)		(100.0	)%		—			—	%	$	1		$	149		$	148			14,800.0	%		—	%		0.1	%
Interest Expense		(4,024	)		(4,026	)		2			—	%		(6.6	)%		(6.1	)%		(7,861	)		(6,783	)		(1,078	)		(13.7	)%		(6.4	)%		(5.2	)%
Gain on the Forgiveness of PPP loans		—			11,212			11,212			100.0	%		—			17.0	%
Gain (Loss) on Early Retirement of Long-Term Debt		—			(56	)		(56	)		(100.0	)%		—	%		(0.1	)%		—			(18	)		(18	)		—	%		—	%		—	%
Earnings from equity method investment																				—			3,913			3,913			—	%		—	%		3.0	%
Net Miscellaneous Income and (Expenses)		1			2			1			—	%		—	%		—	%		85			—			(85	)		(100.0	)%		0.1	%		—	%

Interest income represents earnings on excess cash, interest due under promissory notes, and interest earned from our equity investment in OPA.

Interest expense includes interest due on outstanding debt balances, and

non-cash

accretion associated with deferred ~~installments.~~installments and contingent

earn-out

~~We received $11.2~~consideration from certain acquisitions. The decrease of $1.1 million ~~in aggregate principal amount of PPP loans through~~reflects the ~~SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a~~

~~per-location~~

~~basis. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000~~lower outstanding balance of the ~~PPP loans resulting in a~~

~~pre-tax~~

~~gain on~~Notes, the ~~forgiveness~~lower outstanding balance of ~~$11.2 million.~~the ABL Facility, and finance lease obligations outstanding during the

six-months

ended June 30, 2022.

The loss on the early retirement of long-term debt for the six months ended June 30, 2022, reflects ~~$4.7~~$15.5 million of repurchases of the ~~2024~~ Notes ~~for $4.7 million~~at prices below face value resulting in ~~cash, recognizing~~ a ~~net~~

pre-tax

loss of ~~$56,000 after adjusting~~$18,000.

We recorded $3.9 million of earnings from our equity investment in OPA, an entity formed for ~~bond issuance costs.~~the purpose of developing, producing, and distributing a documentary motion picture. The motion picture

, 2,000 Mules

, was released in May 2022.

Net miscellaneous income and expenses includes

non-operating

receipts such as usage fees and other expenses.

~~Provision for~~Benefit from Income Taxes

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Provision for Income Taxes
   $ 401
$
837

   $ 436    108.7 % 0.7 %

1.3
%


	Six Months Ended June 30,
	2021			2022			Change $			Change %			2021			2022
	(Dollars in thousands)												% of Total Net Revenue
Benefit from Income Taxes	$	(358	)	$	(1,293	)	$	(935	)		261.2	%		(0.3	)%		(1.0	)%

~~Our expense from income taxes increased $0.4~~We recognized a tax benefit of $1.3 million ~~to a $0.8 million provision~~ for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to $0.4 million for the same period of the prior year. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate was ~~3.7%~~(13.5)% for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~54.9%~~(16.1)% for the same period of the prior year. The change in the effective tax between the comparative three-month quarters is attributable to the current year forecasted income and related operating loss utilization coupled with the PPP loan forgiveness favorable tax adjustment relative to

~~pre-tax~~

~~book income for the period.~~ The effective tax rate for each period differs from the federal statutory income rate of 21.0% due to state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance. The effective tax rate of ~~3.7%~~(13.5)% is driven by certain expenses that are nondeductible for income tax purposes relative to

pre-tax

book loss, tax expense attributable to deductible amortization on indefinite lived assets for fully valued state jurisdictions and projected utilization of operating loss carryforwards.

~~Net Income (Loss)~~

Three Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Net Income (Loss)
   $ 329
$
22,094

   $ 21,765    6,615.5 % 0.5 %

33.5
%

~~Net~~At December 31, 2021, we had net operating loss carryforwards for federal income ~~increased by $21.8~~tax purposes of approximately $98.4 million ~~to $22.1~~that expire in years 2024 through 2038 and for state income tax purposes of approximately $607.7 million that expire in years 2022 through 2041. During the

six-month

period ending June 30, 2022, we utilized net operating losses of approximately $11.3 million and $5.6 million for ~~the three months ended September 30, 3021 compared $0.3 million during the same period~~federal and states respectively, resulting in ending federal net operating loss carryforward of ~~the prior year as described above.~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~

~~Net Broadcast Revenue~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Net Broadcast Revenue
   $ 130,041
$
140,422

   $ 10,381    8.0 % 75.7 %

74.3
%
Same Station Net Broadcast Revenue
   $ 129,022
$
139,482

   $ 10,460    8.1 %

~~Table of Contents~~

~~The following table shows the dollar amount and percentage of net broadcast revenue for each broadcast revenue source.~~

Nine Months Ended September 30,

   2020
2021



(Dollars in thousands)

Block Programming:

National
   $ 35,536    27.3 %
$
35,824

   25.5 %
Local
   18,211    14.0

18,072

   12.9 %






   53,747    41.3

53,896

   38.4 %
Broadcast Advertising:

National
   10,179    7.8

10,565

   7.5 %
Local
   28,630    22.0

30,123

   21.5 %






   38,809    29.8

40,688

   29.0 %
Broadcast Digital (local)
   17,702    13.6

23,602

   16.8 %
Infomercials
   750    0.6

682

   0.5 %
Network
   13,505    10.4

14,729

   10.4 %
Other Revenue
   5,528    4.3

6,825

   4.9 %






Net Broadcast Revenue
   $ 130,041    100.0 %
$
140,422



100.0
%

Block programming revenue increased by $0.1 million, including a $0.3 million increase in national programming revenue offset by a $0.1 million decline in local programming revenue. Our Christian Teaching and Talk format radio station increased $0.4 million, while our News Talk format radio stations increased $0.1$87.1 million and ~~our Contemporary Christian Music format radio stations increased $0.1~~state net operating loss carryforward of $602.1 million. ~~These increases include the impact of the $0.3 million in early-payment discounts offered during the prior year and an increase in the number of programmers~~

~~on-air~~

~~that were offset by a decrease of $0.5 million from our Spanish Christian Teaching and Talk format radio stations primarily from the sale of radio station~~

~~WKAT-AM~~

~~in Miami, Florida.~~

Advertising revenue, net of agency commissions, increased by $1.9 million, $2.4 million net of political, due to a $1.8 million increase net of political in local advertising revenue and a $0.6 million increase net of political in national advertising. Net of political, the increase includes $2.4 million from our Contemporary Christian Music format radio stations, primarily in our Atlanta, Dallas and Los Angeles markets and $0.7 million from other format radio stations, that was offset with a $0.4 million decline from our Spanish Christian Teaching and Talk format radio stations, a $0.1 million decline from our News Talk format radio stations, and a $0.1 million decline from our Christian Teaching and Talk format radio stations. The increases in Atlanta, Dallas and Los Angeles reflect an increase in demand for advertising as pandemic restrictions ease that in turn creates higher spot rates for premium airtime spots. The decline from our Christian Teaching and Talk format radio stations reflects the sale of

~~WKAT-AM~~

~~in Miami, Florida and the reformatting of our remaining Spanish Christian Teaching and Talk format radio stations.~~

Broadcast digital revenue, net of agency commissions, or net digital revenue generated from our broadcast markets and networks, increased by $5.9 million due to growth in digital product offerings and the launch of the Salem Podcast Network in January 2021. Salem Podcast Network is a highly specialized platform for conservative, political, news, family-oriented podcasts with talk show hosts including Dinesh D’Souza, Todd Starnes and Charlie Kirk. Salem Podcast Network joins Salem Surround, our multimedia digital advertising agency providing digital marketing services to our customers, and SalemNow, our

~~on-demand~~

~~pay-per-view~~

video streaming platform launched in the fourth quarter of 2020, along with our owned and operated station branded websites to offer new digital products and services. Increases in digital revenue include a $4.7 million increase from Salem Podcast Network, a $2.6 million increase in digital marketing services through Salem Surround, a $0.9 million increase in streaming revenue and a $0.9 million increase in digital advertising revenue from our station websites and an increase of $0.2 million from our networks that were offset by a $3.4 million decline in revenue from SalemNow that released two successful titles during the prior year. There were no significant changes in digital rates as compared to the prior year.

Declines in infomercial revenue were due to a reduction in the number of infomercials aired with no significant changes in rates as compared to the prior year. The placement of infomercials can vary significantly from one period to another due to the number of time slots available and the degree to which the infomercial content is considered to be of interest to our audience.

Network revenue, net of amounts reported as digital, increased by $1.2 million due to a $2.0 million increase in revenue from our nationally syndicated host programs that was partially offset by a $0.8 million decline in political advertising.

~~Table of Contents~~

~~Other revenue increased by $1.3 million due to a $0.6 million increase in event revenue due to the~~

~~re-opening~~

~~of live events, a $0.2 million increase in listener purchase program revenue from higher listener participation and half price tuition tickets sold as schools and businesses started to~~

~~re-open,~~

~~a $0.2 million increase in TBA fees associated with radio station~~

~~KBJD-AM,~~

~~Denver, Colorado , a $0.1 million increase in LMA fees associated with radio station~~

~~KGU-AM,~~

Honolulu, Hawaii and a $0.1 million increase in talent fees. Event revenue varies from period to period based on the nature and timing of events, audience demand, and in some cases, the weather which can affect attendance.

~~On a Same Station basis, net broadcast revenue increased $10.5 million, which reflects the above described items net of the impact of stations with acquisitions, dispositions and format changes.~~

Net ~~Digital Media Revenue~~Income

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Net Digital Media Revenue
   $ 28,355
$
30,603

   $ 2,248    7.9 % 16.5 %

16.2
%

~~The following table shows the dollar amount and percentage of net digital media revenue for each digital media revenue source.~~

Nine Months Ended September 30,

   2020
2021



(Dollars in thousands)

Digital Advertising, net
   $ 14,473    51.0 %
$
13,859



45.3
%
Digital Streaming
   2,611    9.2

2,579



8.4

Digital Subscriptions
   6,679    23.6

9,227



30.2

Digital Downloads
   4,291    15.1

4,637



15.1

e-commerce
   108    0.4

163



0.5

Other Revenues
   193    0.7

138



0.5







Net Digital Media Revenue
   $ 28,355    100.0 %
$
30,603



100.0
%

National digital revenue, net of agency commissions, or net revenue generated from our owned and operated Christian and conservative opinion websites declined by $0.9 million due to a lower volume of advertisements on our conservative opinion websites within Townhall Media. Revenues increased $0.1 million from Salem Web Network and $0.2 million from Eagle Financial Publications. Our conservative opinion websites experience lower demand and lower page views during

~~non-election~~

years. We also experience lower demand from advertisers who move advertising spending to digital programmatic advertisers, such as Facebook and Google, and we may lose advertisers who decide to reduce or eliminate advertising on political-content websites such as ours. We continue to acquire, develop and promote the use of mobile applications to reduce our dependency on page views from digital programmatic advertisers. Because mobile page views carry fewer advertisements and tend to have shorter site visits as compared to desktop, our growth in mobile page views exceeds our growth in revenue from the mobile applications.

Digital streaming revenue decreased compared to the prior year based on a slightly lower demand for content available from our Christian websites. There were no significant changes in rates as compared to the prior year.

Digital subscription revenue increased $2.5 million on a consolidated basis reflecting a $0.9 million increase in revenues from Eagle Financial Publications, a $0.9 million increase from Christianjobs.com and Churchstaffing.com within Salem Web Network due to increases in job postings as job markets start to

~~re-open,~~

and a $0.7 million increase in revenues from Townhall Media’s launch of Townhall VIP, a subscription service. Eagle Financial Publications saw an increase in the number of subscribers due to an increased investment in marketing with no significant changes in rates over the same period of the prior year.

~~Digital download revenue increased by $0.3 million from our church product websites, WorshipHouseMedia.com and SermonSpice~~

~~.com and the acquisitions of Centerline New Media in April 2021 and ShiftWorship in July 2021. There were no significant changes in rates as compared to the prior year.~~

~~E-commerce~~

~~revenue includes~~

~~in-app~~

~~purchases through Salem Web Network that increased in volume with no significant changes in rates over the prior year.~~

~~Other revenue includes revenue sharing arrangements for mobile applications and mail list rentals which remained consistent with no changes in volume or rates.~~

~~Table of Contents~~

~~Net Publishing Revenue~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Net Publishing Revenue
   $ 13,366
$
18,093

   $ 4,727    35.4 % 7.8 %

9.6
%

~~The following table shows the dollar amount and percentage of net publishing revenue for each publishing revenue source.~~

Nine Months Ended September 30,

   2020
2021



(Dollars in thousands)

Book Sales
   $ 9,701    72.5 %
$
15,074



83.3
%
Estimated Sales Returns & Allowances
   (2,852 )    (21.3 )

(4,223
)


(23.3
)






Net Book Sales
   6,849    51.2

10,851



60.0

E-Book
Sales
   960    7.2

1,294



7.2

Self-Publishing Fees
   3,860    28.9

4,730



26.1

Print Magazine Subscriptions
   519    3.9

262



1.4

Print Magazine Advertisements
   278    2.1

123



0.7

Digital Advertising
   216    1.6

132



0.7

Other Revenue
   684    5.1

701



3.9







Net Publishing Revenue
   $ 13,366    100.0 %
$
18,093



100.0
%

~~Net book sales increased by $4.0 million which includes a $3.7 million increase in Regnery~~

Publishing as book sales reflect a 76% increase in volume largely attributable to the reopening of bookstores and retail locations, offset by a 7% decrease in the average price unit sold and a $0.3 million increase in Salem Author Services. The increase in the number of print books sold through Regnery

Publishing resulted in a $1.4 million increase to the estimated sales returns and allowances. The increase in book sales from Salem Author Services of $0.3 million was due to books sold at tradeshows with events resuming in limited capacity as pandemic restrictions are lifted. There were no significant changes in sale prices for Salem Author Services as compared to the prior year.

~~Regnery~~

~~Publishing~~

~~e-book~~

~~sales increased $0.3 million with a 6% increase in the average price per unit sold from sales incentives and a 27% increase in sales volume.~~

~~E-book~~

sales can also vary based on the composite mix of titles released and available in each period. Revenues can vary significantly based on the book release date and the number of titles that achieve placement on bestseller lists, which can increase awareness and demand for the book.

~~Self-publishing fees increased $0.9 million due an increase in the number of authors and services provided with no change in fees charged to authors.~~

Declines in print magazine subscription revenues and advertising revenues reflect the sale of Singing News Magazine on May 25, 2021, and ongoing lower consumer demand and distribution levels prior to the sale.

~~Digital advertising revenue decreased $0.1 million due to the sale of Singing News Magazine on May 25, 2021 and Regnery~~

~~Publishing websites declined due to a lower demand due to the~~

~~COVID-19~~

~~pandemic and the ongoing closure of bookstores with rates comparable to the same period of the prior year.~~

~~Other revenue includes change fees, video trailers, and subright revenue for foreign translation and audio books for original published titles from Regnery~~

~~Publishing which remained consistent to the prior year.~~

~~Broadcast Operating Expenses~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Broadcast Operating Expenses
   $ 104,704
$
106,968

   $ 2,264    2.2 % 61.0 %

56.6
%
Same Station Broadcast Operating Expenses
   $ 102,708
$
105,970

   $ 3,262    3.2 %

~~Table of Contents~~

Broadcast operating expenses increased by $2.3 million, including a $4.2 million increase from expenses associated with Salem Surround and Salem Podcast Network, a $1.8 million increase in payroll costs including the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020, a $0.4 million increase in health insurance costs, a $0.4 million increase in advertising and event costs, a $0.4 million increase in production and programming costs, and a $0.4 million increase in professional services. These costs were partially offset with a $1.5 million decline in cost of sales from SalemNow consistent with the decline in revenue as compared to the prior year when they released two successful titles, a $3.2 million decline in bad debt expense due to the impact of the

~~COVID-19~~

~~pandemic on prior year reserves, a $0.4 million decline in employee benefits attributable to the suspension of the 401(k) match and a $0.2 million decrease in rent and facilities related expenses.~~

~~On a same-station basis, broadcast operating expenses increased by $3.3 million. The increase on a same station basis reflects these items net of the impact of~~

~~start-up~~

~~costs associated with acquisitions, station dispositions and format changes.~~

~~Digital Media Operating Expenses~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Digital Media Operating Expenses
   $ 23,123
$
25,280

   $ 2,157    9.3 % 13.5 %

13.4
%

Digital media operating expenses increased by $2.2 million, including a $1.2 million increase in advertising and promotional expenses, a $0.7 million increase in sales-based commissions and incentives, a $0.7 million increase in payroll costs and a $0.2 million increase in professional services that were offset by a $0.3 million decrease in bad debt expense, a $0.2 million decrease in costs of sales, a $0.1 million decrease in employee benefit costs due to the suspension of the 401(k) match, and $0.1 million decrease in royalties. Increases in advertising and promotional expenses are driven by a new video initiative for Eagle Financial Publications that management believes to be beneficial for the business and overall gradual increase in adverting spending as the economy begins to return to

~~pre-pandemic~~

~~levels. The increase in payroll related expenses reflects the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020.~~

~~Publishing Operating Expenses~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Publishing Operating Expenses
   $ 16,443
$
16,844

   $ 401    2.4 % 9.6 %

8.9
%

Publishing operating expenses increased by $0.4 million, including a $0.9 million increase in costs of sales, a $0.4 million increase in payroll costs due to the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020, a $0.2 million increase in royalty expense based on higher sales, and a $0.1 million increase in advertising and promotional costs that were offset by a $0.8 million decrease in bad debt expense, a $0.4 million decrease in facility related expenses due to the termination of a lease in Washington D.C., and a $0.1 million decrease in employee benefit costs due to the suspension of the 401(k) match. Cost of goods sold increased $0.9 million including a $0.9 million increase from print books sold by Regnery

Publishing and $0.2 million increase from Salem Author Services due to higher volume of book sales offset by a $0.2 million decline Salem Publishing due to the sale of Singing News Magazine. The gross profit margin for Regnery

~~Publishing improved to 54% from 41% as sales volume increased while material costs increased only slightly. Regnery~~

~~Publishing margins vary based on the volume of~~

~~e-book~~

sales, which have higher margins due to the nature of delivery and no reserve for sales returns and allowances. The gross profit margin for Salem Author Services improved to 75% from 72% due to higher sales volume while paper costs for print book sales increased only slightly.

~~Unallocated Corporate Expenses~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Unallocated Corporate Expenses
   $ 11,909
$
12,764

   $ 855    7.2 % 6.9 %

6.7
%

~~Table of Contents~~

Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax and treasury, that are not directly attributable to any one of our operating segments. The increase of $0.9 million includes a $1.3 million increase in payroll costs due to the January 2021 reinstatement of company-wide pay cuts that were implemented in 2020 that were offset by a $0.2 million decrease in travel and entertainment-related expenses due to the events that took place prior to the pandemic restrictions in early 2020, a $0.2 million decrease in professional services and a $0.1 million decrease in employee-related benefits associated with the cash surrender value of split dollar life insurance.

~~Debt Modification Costs~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Debt Modification Costs
   $ —
$
2,347

   $ 2,347    100.0 % —   %

1.2
%

On September 10, 2021, we exchanged $112.8 million of the 2024 Notes for $114.7 million (reflecting a call premium of 1.688%) of 2028 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with FASB ASC Topic 470 with $2.3 million of fees paid to third parties included in operating expenses for the period.

~~Depreciation Expense~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Depreciation Expense
   $ 8,108
$
8,118

   $ 10    0.1 % 4.7 %

4.3
%

Depreciation expense reflects the impact of prior year capital expenditures for data processing equipment and computer software that had shorter estimated useful lives as compared to towers or other assets and were fully depreciated during the current year. There were no changes in our depreciation methods or in the estimated useful lives of our asset groups.

~~Amortization Expense~~

Nine Months Ended September 30,

   2020
2021
   Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Amortization Expense
   $ 2,578
$
1,553

   $ (1,025 ) (39.8 )% 1.5 %

0.8
%

The decrease in amortization expense reflects the impact of fully amortized domain names, customer lists and contracts, and subscriber base lists that had estimated useful lives of three to five years. These items were fully amortized at or near the beginning of the 2021 calendar year resulting in lower amortization expense for this year. There were no changes in our amortization methods or the estimated useful lives of our intangible asset groups.

~~Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill~~

Nine Months Ended September 30,

   2020
2021
   Change $ Change % 2020
2021



(Dollars
in thousands)
% of Total Net Revenue
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill
   $ 17,254    $ —      $ (17,254 ) (100.0 )% 10.0 % —   %

~~We performed an interim review of broadcast licenses for certain markets during the first quarter of 2020 due to the~~

~~COVID-19~~

~~pandemic and the resulting~~

~~stay-at-home~~

orders that began to adversely impact revenues. We engaged an independent third-party appraisal and valuation firm to assist us with determining the fair value of our broadcast licenses. Based on our interim review and analysis, we recorded an impairment charge of $17.0 million to the value of broadcast licenses in Chicago, Cleveland, Louisville, Philadelphia, Portland, Sacramento and Tampa. We also recorded an impairment charge of $0.3 million to the value of mastheads. These impairments were driven by decreases in projected revenues due to the current estimated impact of

~~COVID-19~~

and an increase in the WACC. We believe that these factors are indicative of trends in the industry as a whole and not unique to our company or operations. There were no indications of impairment as of our interim review during the third quarter of 2021.

~~Table of Contents~~

~~Impairment of Goodwill~~

Nine Months Ended September 30,

   2020
2021
   Change $ Change % 2020
2021



(Dollars
in thousands)
% of Total Net Revenue
Impairment of Goodwill
   $ 307    $ —      $ (307 ) (100.0 )% 0.2 % —   %

~~We performed an interim review of goodwill for impairment during the first quarter of 2020 due to the~~

~~COVID-19~~

~~pandemic and the resulting~~

~~stay-at-home~~

orders that began to adversely impact revenues. We engaged an independent third-party appraisal and valuation firm to assist us with determining the enterprise value for certain entities. Based on our interim review and analysis in the first quarter of 2020, we recorded an impairment charge of $0.3 million. These impairments were driven by decreases in projected revenues due to the current estimated impact of

~~COVID-19~~

~~Net (Gain) Loss on the Disposition of Assets~~

Nine Months Ended September 30,

   2020
2021
Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Net (Gain) Loss on the Disposition of assets
   $ 1,494
$
(10,552
)
$ (12,046 ) (806.3 )% 0.9 %

(5.6
)%

~~The net gain on the disposition of assets of $10.6 million for the nine-month period ended September 30, 2021 reflects a $10.5 million~~

~~pre-tax~~

~~gain on the sale of approximately 34 acres of land in Lewisville, Texas, a $0.5 million~~

~~pre-tax~~

~~gain on the sale of Singing News Magazine and Singing News Radio, and a $0.1 million~~

~~pre-tax~~

~~gain on the sale of the Hilary Kramer Financial Newsletter and related assets, offset by a $0.4 million additional loss recorded at closing on the sale of radio station~~

~~WKAT-AM~~

~~and FM translator in Miami, Florida and various other fixed asset disposals.~~

~~The net loss on the disposition of assets of $1.5 million for the nine-month period ended September 30, 2020 includes a $1.4 million estimated~~

~~pre-tax~~

~~loss for associated with the plans to exit the Miami broadcast market with the then pending sale of radio station~~

~~WKAT-AM~~

~~and various other fixed asset disposals.~~

~~Other Income (Expense)~~

Nine Months Ended September 30,

   2020
2021
Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Interest Income
   $ 1
$
1

$ —   —   % —   %

—
%
Interest Expense
   (12,069 )

(11,887
)
(182 ) (1.5 )% (7.0 )%

(6.3
)%
Gain on the Forgiveness of PPP Loans
   —

11,212

11,212 100.0 % —

5.9
%
Gain (Loss) on Early Retirement of Long-Term Debt
   49

(56
)
(105 ) (214.3 )% —   %

—
%
Net Miscellaneous Income and (Expenses)
   (45 )

87

132 (2,93.3 )% —   %

—
%

~~Interest income represents earnings on excess cash and interest due under promissory notes.~~

~~Interest expense includes interest due on outstanding debt balances and~~

~~non-cash~~

accretion associated with deferred installments. The decrease of $0.2 million reflects the lower outstanding balance of the Notes, the lower outstanding balance of the ABL Facility, and finance lease obligations outstanding during the nine-months ended September 30, 2021.

~~per-location~~

~~basis. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a~~

~~pre-tax~~

~~gain on the forgiveness of $11.2 million.~~

The loss on the early retirement of long-term debt reflects $4.7 million of repurchases of the 2024 Notes for $4.7 million in cash, recognizing a net loss of $56,000 after adjusting for bond issuance costs. The gain on the early retirement of long-term debt reflects $3.5 million of repurchases of the 2024 Notes at prices below face value resulting in a

~~pre-tax~~

~~gain of $49,000 for the nine-month period ended September 30, 2020.~~

~~Net miscellaneous income and expenses includes~~

~~non-operating~~

~~receipts such as usage fees and other miscellaneous expenses.~~

~~Table of Contents~~

~~Provision for Income Taxes~~

Nine Months Ended September 30,

   2020
2021
   Change $ Change % 2020
2021



(Dollars in thousands)
% of Total Net Revenue
Provision for Income Taxes
   $ 31,180
$
479

   $ (30,701 ) (98.5 )% 18.2 %

0.3
%

Our provision for income taxes decreased $30.7 million to $0.5 million for the nine months ended September 30, 2021 compared to $31.2 million for the same period of the prior year. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate was 1.9% for the nine months ended September 30, 2021 compared to (119.0)% for the same period of the prior year. The change between the comparative nine-month quarters is attributable to the recognition of a valuation allowance against the net operating loss deferred tax assets for the period ended September 30, 2021 coupled with a change in forecasted income for 2021 impacting the utilization of operating losses along with favorable tax adjustment around the PPP forgiveness. The effective tax rate for each period differs from the federal statutory income rate of 21.0% due to state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance. The effective tax rate of 1.9% is driven by certain expenses that are nondeductible for income tax purposes relative to

~~pre-tax~~

~~book loss, tax expense attributable to deductible amortization on indefinite lived assets for fully valued state jurisdictions and projected utilization of operating loss carryforwards.~~

~~Net Income (Loss)~~

Nine Months Ended September 30,

   2020
2021
   Change $    Change % 2020
2021



(Dollars in thousands)
   % of Total Net Revenue
Net Income (Loss)
   $ (57,390 )
$
24,674

   $ 82,064    (143.0 )% (33.4 )%

13.0
%


	Six Months Ended June 30,
	2021		2022		Change $		Change%			2021			2022

	(Dollars in thousands)									% of Total Net Revenue
Net Income	$	2,580	$	10,856	$	8,276		320.8	%		2.1	%		8.3	%

Net income increased ~~by $82.1~~$8.3 million to ~~$24.7~~$10.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021 compared to a net loss of $57.4~~2022, from $2.5 million during the same period of the prior year as described above.

CRITICAL ACCOUNTING ~~POLICIES, JUDGMENTS AND~~ ESTIMATES

~~The discussion and analysis of our~~Our consolidated financial ~~condition and results of operations~~statements are ~~based upon our Condensed Consolidated Financial Statements, which have been~~ prepared in accordance with ~~GAAP. The preparation of these financial statements~~GAAP, which requires management to make estimates and ~~judgments~~assumptions that affect the reported amounts of assets, liabilities, ~~revenues~~revenue, and ~~expenses,~~expenses. These estimates require the use of judgment as future events, and the effect of these events cannot be predicted with certainty. The

COVID-19

pandemic created significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could materially impact our estimates related ~~disclosure~~to, but not limited to, revenue recognition, broadcast licenses, goodwill, and income taxes. As a result, many of ~~contingent assets~~our estimates and ~~liabilities.~~assumptions require increased judgment and carry a higher degree of variability and volatility.

Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements. We evaluate and update our assumptions and estimates on an ongoing ~~basis. We base our estimates on historical experience~~basis and ~~on various other assumptions that are believed~~we may consult outside experts to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results can be materially different from these estimates and assumptions.assist as considered necessary. There have been no significant and material changes in our critical accounting policies as compared to those disclosed in “Management’s Discussion and Analysis of Financial Conditions and Results of ~~Operations—~~Operations – Critical Accounting Policies and Significant Judgments and Estimates” in our most recent Annual Report on Form

10-K,

as filed with the SEC on March 4, ~~2021.~~2022.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds are operating cash flows, borrowings under credit facilities, and proceeds from the sale of selected assets or businesses. We have historically funded, and will continue to fund, expenditures for operations, administrative expenses, and capital expenditures from these sources. We have historically financed acquisitions through borrowings, including borrowings under credit facilities and, to a lesser extent, from operating cash flow and from proceeds on selected asset dispositions. We expect to fund future acquisitions from cash on hand, borrowings under our credit facilities, operating cash flow, and possibly through the sale of income-producing assets or proceeds from debt and equity offerings.

~~The~~

~~COVID-19~~

~~stay-at-home~~

~~Table of Contents~~

~~While we see progress being made in revenue returning to~~

~~pre-pandemic~~

~~levels, the~~

~~COVID-19~~

~~right-of-use assets.~~

During 2020 we implemented several measures to reduce costs and conserve cash to ensure that we had adequate ~~cash~~liquidity to meet our debt servicing ~~requirements, including:~~

~~limiting capital expenditures;~~

~~reducing discretionary spending, including travel and entertainment;~~

~~eliminating open positions and freezing new hires;~~

~~reducing staffing levels;~~

~~implementing temporary company-wide pay cuts of 5%, 7.5% or 10% depending on salary level;~~

~~furloughing certain employees;~~

~~temporarily suspending the company 401(k) match;~~

~~requesting rent concessions from landlords;~~

~~requesting discounts from vendors;~~

~~offering early payment discounts to certain customers in exchange for advance cash payments; and~~

~~suspending the payment of distributions on our common stock indefinitely.~~

requirements. As the economy ~~continues~~began to show signs of recovery, ~~many~~we reversed several of these cost reduction initiatives ~~were reversed~~ during 2021. We continue to operate with lower staffing levels where appropriate, we have not ~~reinstated the company 401(k) match and we have not~~declared or paid equity distributions on our common ~~stock.~~stock, and the company 401(k) match was not reinstated until January 2022.

The Coronavirus Aid, Relief, and Economic Security Act ~~(the “CARES~~(“CARES Act”) ~~was signed into law on March 27, 2020. The CARES Act~~ provided emergency economic assistance for individuals and businesses impacted by the

COVID-19

pandemic, including opportunities for additional liquidity, loan guarantees, and other government programs. ~~On December 27, 2020, Congress passed the~~The Consolidated Appropriations Act (“CAA”) ~~that~~ included a second relief package, which, among other things, provides for an extension of the Payroll Support Program established by the CARES Act. We utilized certain benefits of the CARES Act and the CAA, including:

weWe deferred $3.3 million of employer FICA taxes from April 2020 through December 2020, ~~with~~of which 50% was paid in December 2021 and the remaining 50% is payable in December ~~2021 recorded in accrued compensation and related expenses and 50% payable in December 2022 recorded in other long-term liabilities;~~2022;

A relaxation of interest expense deduction limitation for income tax purposes;

weWe received Paycheck Protection Program (“PPP”) loans of $11.2 million in total ~~through the SBA~~ during the first quarter of 2021 through the Small Business Association (“SBA”) based on the eligibility as determined on a

per-location

basis; and

In July 2021, the SBA forgave all but $20,000 of the PPP loans, with the remaining PPP loan repaid in July 2021.

During 2020 we began to keep higher balances of cash and cash equivalents

on-hand

to meet operating needs due to the adverse economic conditions of the

COVID-19

pandemic. Historically, we kept the balance of cash and cash equivalents

on-hand

low in order to reduce the balance of outstanding debt. Our ABL Facility automatically covers any shortfalls in operating cash flows such that we are not required to hold excess cash balances on hand. Our cash and cash equivalents decreased $17.3 million to $2.5 million at June 30, 2022 as compared to $19.8 million at June 30, 2021. Working capital decreased $17.5 million to $(8.5) million at June 30, 2022 compared to $9.0 million at June 30, 2021 due to the ~~SBA forgave all but $20,000 of these loans with the remaining PPP loan repaid~~$17.3 million decrease in ~~July 2021.~~

cash and cash equivalents.

Operating Cash Flows

Our largest source of operating cash inflows are receipts from customers in exchange for advertising and programming. Other sources of operating cash inflows include receipts from customers for digital downloads and streaming, book sales, subscriptions, self-publishing fees, ticket sales, sponsorships, and vendor promotions. ~~The adverse economic impact of the~~

~~COVID-19~~

pandemic negatively impacted our revenue and cash receipts from customers. Advertising revenue continues to improve over the lowest levels that were experienced during April and May of 2020 but remains significantly below prior years. The exact timing and pace of the economic recovery has not been determinable due to varying degrees of restrictions and resurgences. A majority of our operating cash outflows consist of payments to employees, such as salaries and benefits, ~~and~~ vendor payments under facility and tower leases, talent agreements, inventory purchases and recurring services such as utilities and music license fees. Our operating cash flows are subject to factors such as fluctuations in preferred advertising media and changes in demand caused by shifts in population, station listenership, demographics, and audience tastes. In addition, our operating cash flows may be affected if our customers are unable to pay, delay payment of amounts owed to us, or if we experience reductions in revenue or increases in costs and expenses.

5650

~~Table of Contents~~

Net cash provided by operating activities during the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021,~~2022 decreased ~~by $8.4~~$2.4 million to ~~$14.7~~$7.8 million compared to ~~$23.1~~$10.2 million during the same period of the prior year. ~~Cash~~The decrease in cash provided by operating activities includes the impact of the following items:

~~The favorable impact of~~

~~non-cash~~

~~items on the prior year, including a $17.3 million impairment of indefinite-lived assets and a $31.0 million deferred income tax charge combined with;~~

Total net revenue increased ~~by $17.4~~$8.2 million;

Operating expenses ~~decreased by $22.6~~exclusive of depreciation, amortization, changes in the estimated fair value of contingent

earn-out

consideration, impairments and net gain (loss) on the disposition of assets, increased $10.2 million;

Trade accounts receivables, net of allowances, ~~did not change significantly~~increased $3.6 million compared to ~~a decrease~~an increase of ~~$6.6~~$0.1 million for the same period of the prior year;

Unbilled revenue ~~increased $0.1~~decreased $0.4 million;

Our Day’s Sales Outstanding, or the average number of days to collect cash from the date of sale, decreased to 5352 days at ~~September~~June 30, ~~2021,~~2022 from 5958 days in the same period of the prior year;

~~Deferred income tax liabilities~~Net accounts payable and accrued expenses increased ~~by $0.4~~$9.4 million ~~compared~~ to ~~an increase of $31.0~~$33.6 million ~~during the same period~~from $24.2 million as of the prior year; and

Net ~~accounts payable and accrued expenses~~inventories on hand increased ~~$1.4~~$0.6 million to ~~$24.7~~$1.5 million ~~from $21.9~~at June 30, 2022 compared to a $0.2 million asincrease to $0.7 million for the same period of the prior year.

Investing Cash Flows

Our primary source of investing cash inflows includes proceeds from the sale of assets or businesses. Investing cash outflows include cash payments made to acquire businesses, to acquire property and equipment and to acquire intangible assets such as domain names. While our focus continues to be on deleveraging the company, we remain committed to ~~explore~~exploration and ~~pursue~~pursuit of strategic acquisitions.

During the

six-month

period ending June 30, 2022, we invested an additional $3.5 million of cash in OneParty America LLC (“OPA”), an entity formed for the purpose of developing, producing, and distribution a documentary motion picture. We recorded our equity method investment at cost with subsequent adjustments to the carrying value for our share of the earnings or losses of OPA. Distributions received from the equity method investment were recorded as reductions in the carrying value of such investment and are classified on the unaudited condensed consolidated interim statements of cash flows pursuant to the cumulative earnings approach. Under the cumulative earnings approach, distributions received are accounted for as a return on investment in cash inflows from operating activities unless the cumulative distributions received exceed the cumulative equity in earnings recognized from the investment. When such an excess occurs, the current period distributions up to this excess are considered returns of investment and are classified as cash inflows from investing activities. We received our total investment of $4.5 million from OPA during the second quarter of 2022 that is reflected as investing cash inflows. All other receipts from OPA are reflected in operating cash flows representing our share of revenue from the documentary motion picture.

We undertake projects from time to time to upgrade our radio station technical facilities and/or FCC broadcast licenses, expand our digital and

web-based

offerings, improve our facilities, and upgrade our computer infrastructures. The nature and timing of these upgrades and expenditures can be delayed or scaled back at the discretion of management. Based on our original ~~2021~~2022 budget, we ~~expect~~plan to incur additional capital expenditures of approximately ~~$1.6~~$4.4 million during the remainder of ~~2021.~~2022.

We plan to fund any future purchases and any future acquisitions from cash on hand, operating cash flow or our credit facilities.

Net cash ~~provided by~~flow from investing activities increased ~~$4.7~~$11.5 million to ~~$2.8~~$8.3 million net cash provided during the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021,~~2022 from net cash used of ~~$1.9~~$3.2 million during the same period of the prior year. The increase in net cash ~~provided by~~flow from investing activities was the result of:

~~Receipts from asset sales provided $15.8 million of cash during the nine months ended September 30, 2021, compared to $0.2 million during the same period of the prior year;~~

~~We paid $4.6 million in cash for acquisitions during the nine months ended September 30, 2021, compared to $0.4 million during the same period of the prior year;~~

Cash paid for capital expenditures increased ~~$3.4~~$2.2 million to ~~$6.9~~$6.2 million from $4.0 million;

Cash paid for investments was $3.5 ~~million;~~million in the current year;

Cash received from return of investments was $4.5 million in the current year;

We received $14.2 million of cash from the sale of assets during the six months ended June 30, 2022 compared to $3.6 million of cash during same period of the prior year; and

~~We collected $2.4~~Cash paid for acquisitions was $0.7 million ~~in cash from~~for the ~~surrender~~six months ended June 30, 2022 compared to $1.9 million during the same period of ~~split dollar life insurance policies in 2020.~~the prior year.

Financing Cash Flows

Financing cash inflows include borrowings under our credit facilities and any proceeds from the exercise of stock options issued under our stock incentive plan. Financing cash outflows include repayments of our credit facilities, the payment of ~~any~~ equity distributions and ~~any~~ payments of amounts due under deferred installments, and contingency

earn-out

consideration associated with acquisition activity.

~~In April 2021, we filed a prospectus supplement to our shelf registration statement on Form~~

~~S-3~~

~~with the SEC covering the offering, issuance and sale of up to $15.0 million of our Class A Common Stock pursuant to an~~

~~at-the-market~~

~~facility, with B. Riley Securities, Inc. acting as sales agent. No Common Stock transactions have taken place under the facility.~~

5751

~~Table of Contents~~

During the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021,~~2022, the principal balances outstanding under the ~~2024 Notes, 2028~~ Notes and ~~the~~ ABL Facility ranged from ~~$216.3~~$158.9 million to ~~$218.2~~$174.5 million. Additionally, during the first quarter of 2021 we received $11.2 million in aggregate principal amount of PPP loans through the SBA available to our radio stations and networks by location under the CAA. The SBA forgave all but $20,000 of the PPP loans during July 2021 resulting in a

~~pre-tax~~

~~gain on the forgiveness of $11.2 million. The remaining $20,000 PPP loan was repaid in July 2021. The~~These outstanding balances were ordinary and customary based on our operating and investing cash needs during this ~~time~~time.

Our sole source of cash available for making any future equity distributions is our operating cash flow, subject to our credit facilities and Notes, which contain covenants that restrict the payment of dividends and equity distributions unless certain specified conditions are satisfied. On May 6, 2020, our Board of Directors voted to discontinue equity distributions until further notice due to the adverse economic impact of the

COVID-19

pandemic on our financial position, results of operations, and cash flows.

Net cash ~~used in~~flow from financing activities decreased ~~$1.8~~$21.9 million to ~~$0.1~~$15.4 million net cash used during the ~~nine-month~~

six-month

period ended ~~September~~June 30, ~~2021, compared to $1.9~~2022 from net cash provided by $6.5 million during the same period of the prior year. The decrease in net cash ~~used in~~flow from financing activities includes:

~~A $1.9~~Proceeds of $11.2 million ~~increase in~~under PPP loans were received during the ~~book overdraft from the prior year;~~

We exchanged $112.8 million of our Senior Secured Notes due 2024 (the “2024 Notes”) for $114.7 million (reflecting a call premium of 1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (the “2028 Notes”);three-months ended March 31, 2021;

We ~~received $11.2~~used $15.4 million ~~in aggregate principal amount~~ of ~~PPP loans through the SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a~~

~~per-location~~

~~basis. During July 2021, the SBA forgave all but $20,000 of the PPP loans with the remaining PPP loan repaid in July 2021;~~

~~We used $4.7 million in~~ cash to repurchase ~~$4.7~~$15.5 million in face value of the 2024 Notes ~~compared to $3.4 million in cash to repurchase $3.5 million in face value of 2024 Notes~~ during the ~~same period of the prior year;~~

six-months

ended June 30, 2022; and

Net repayments on our ABL Facility ~~were~~of $5.0 million during the ~~nine-months~~

six-months

ended ~~September 30, 2021, compared to net borrowings of $4.2 million during the same period of the prior year.~~

March 31, 2021.

Long-term debt consists of the following:


	December 31, 2020			September 30, 2021			December 31, 2021			June 30, 2022

	(Dollars in thousands)						(Dollars in thousands)
7.125% Senior Secured Notes	$	—		$	114,731
2028 Notes							$	114,731		$	114,731
Less unamortized discount and debt issuance costs based on imputed interest rate of 7.64%		—			(4,048	)		(3,844	)		(3,549	)

7.125% Senior Secured Notes net carrying value		—			110,683
2028 Notes, net carrying value								110,887			111,182

6.75% Senior Secured Notes		216,341			98,815
2024 Notes								60,174			44,685
Less unamortized debt issuance costs based on imputed interest rate of 7.10%		(2,577	)		(939	)		(480	)		(272	)

6.75% Senior Secured Notes net carrying value		213,764			97,876
2024 Notes, net carrying value								59,694			44,413

Asset-Based Revolving Credit Facility principal outstanding (1)		5,000			—			—			10
SBA Paycheck Protection Program loans		—			—

Long-term debt less unamortized discount and debt issuance costs	$	218,764		$	208,559		$	170,581		$	155,605

Less current portion		(5,000	)		—			—			(10	)

Long-term debt less unamortized discount and debt issuance costs, net of current portion	$	213,764		$	208,559		$	170,581		$	155,595

(1)	As of ~~September~~June 30, ~~2021,~~2022, the Asset-Based Revolving Credit Facility (“ABL”), had a borrowing base of ~~$24.6~~$24.3 million, no outstanding borrowings of $10,000, and $0.3 million of outstanding letters of credit, resulting in a ~~$24.3~~$24.0 million borrowing base availability.

Our weighted average interest rate was ~~6.65%~~6.99% and ~~6.94%~~7.01% at December 31, ~~2020~~2021, and ~~September~~June 30, ~~2021,~~2022, respectively.

~~Table of Contents~~

In addition to the outstanding amounts listed above, we also have interest ~~payments~~obligations related to our long-term debt as follows as of ~~September~~June 30, ~~2021:~~2022:

$114.7 million aggregate principal amount of 2028 Notes with semi-annual interest payments at an annual rate of 7.125%;

$~~98.8~~44.7 million aggregate principal amount of 2024 Notes with semi-annual interest payments at an annual rate of 6.75%; and

Commitment fee of 0.25% to 0.375% per annum on the unused portion of the ABL Facility.

~~7.125% Senior Secured~~2028 Notes

On September 10, 2021, we ~~exchanged~~refinanced $112.8 million of the 2024 Notes for $114.7 million (reflecting a call premium of 1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (“2028 ~~Notes.”~~Notes”). Contemporaneously with the refinancing, we obtained commitments from the holders of the 2028 Notes to purchase up to $50 million in additional 2028 Notes (“Delayed Draw 2028 Notes”), contingent upon satisfying certain performance benchmarks, the proceeds of which are to be used exclusively to repurchase or repay the remaining balance outstanding of the 2024 Notes.

SBA PPP Loans

We received $11.2 million in aggregate principal amount of PPP loans through the SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a

per-location

basis. The PPP loans were accounted for as debt in accordance with FASB ASC Topic 470. The loan balances and accrued interest were forgivable provided that the proceeds were used for eligible purposes, including payroll, benefits, rent, and utilities within the covered period. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a

pre-tax

gain on the forgiveness of $11.2 million. The remaining PPP loan was repaid in July 2021.

~~Table of Contents~~

~~6.75% Senior Secured~~2024 Notes

We recorded debt issuance costs of $6.3 million as a reduction of the debt proceeds being amortized to

non-cash

As described above within the 2028 Notes, on September 10, 2021, we exchanged $112.8 million of the 2024 Notes for $114.7 million of newly issued 2028 Notes, reflecting a call premium of 1.688%. Bond issuance costs of $1.1 million associated with the $112.8 million of the 2024 Notes are being amortized as part of the effective yield on the 2028 Notes.

~~On September 24, 2021, we repurchased $4.7 million of the 2024 Notes for $4.7 million in cash, recognizing a net loss of $56,000 after adjusting for bond issuance costs.~~

We incurred debt issuance costs of $4.2 million, of which $2.3 million of third-party debt modification costs are reflected in operating expenses for the current period, $0.8 million is deferred with the Delayed Draw 2028 Notes, and $1.1 million, along with $3.0 million from the exchanged 2024 Notes, is being amortized as part of the effective yield on the 2028 Notes.


Date	Principal Repurchased		Cash Paid		% of Face Value			Bond Issue Costs		Net Gain (Loss)
	(Dollars in thousands)
June 13, 2022	$	5,000	$	4,947		98.95	%	$	35	$	18
June 10, 2022		3,000		2,970		99.00	%		21		9
June 7, 2022		2,464		2,446		99.25	%		17		1
May 17, 2022		2,525		2,500		99.00	%		18		7
January 12, 2022		2,500		2,531		101.26	%		22		(53	)
December 10, 2021		35,000		35,591		101.69	%		321		(912	)
October 25, 2021		2,000		2,020		101.00	%		19		(39	)
October 12, 2021		250		251		100.38	%		2		(3	)
October 5, 2021		763		766		100.38	%		7		(10	)
October 4, 2021		628		629		100.13	%		6		(7	)
September 24, 2021		4,700		4,712		100.25	%		44		(56	)
January 30, 2020		2,250		2,194		97.50	%		34		22
January 27, 2020		1,245		1,198		96.25	%		20		27
December 27, 2019		3,090		2,874		93.00	%		48		167
November 27, 2019		5,183		4,548		87.75	%		82		553
November 15, 2019		3,791		3,206		84.58	%		61		524
March 28, 2019		2,000		1,830		91.50	%		37		134
March 28, 2019		2,300		2,125		92.38	%		42		133
February 20, 2019		125		114		91.25	%		2		9
February 19, 2019		350		319		91.25	%		7		24
February 12, 2019		1,325		1,209		91.25	%		25		91
January 10, 2019		570		526		92.25	%		9		35
December 21, 2018		2,000		1,835		91.75	%		38		127
December 21, 2018		1,850		1,702		92.00	%		35		113
December 21, 2018		1,080		999		92.50	%		21		60
November 17, 2018		1,500		1,357		90.50	%		29		114
May 4, 2018		4,000		3,770		94.25	%		86		144
April 10, 2018		4,000		3,850		96.25	%		87		63
April 9, 2018		2,000		1,930		96.50	%		43		27

	$ 97,489		$ 94,949					$ 1,218		$ 1,322

Asset-Based Revolving Credit Facility

The ABL Facility is a ~~five-year~~ $30.0 million revolving credit facility due March 1, 2024, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans. All borrowings under the ABL Facility accrue interest at a rate equal to a base rate or LIBOR plus a spread. The spread, which is based on an availability-based measure, ranges from 0.50% to 1.00% for base rate borrowings and 1.50% to 2.00% for LIBOR borrowings. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then reborrowed at our discretion without penalty or premium. Additionally, we pay a commitment fee on the unused balance from 0.25% to 0.375% per year based on the level of borrowings.

On October 20, 2020, we entered into a fourth amendment to our ABL Facility that provides a

one-time

Availability under the ABL Facility is subject to a borrowing base consisting of (a) 90% of the eligible accounts receivable plus (b) a calculated amount based on the value of certain real property. As of ~~September~~June 30, ~~2021,~~2022, the amount available under the ABL Facility was ~~$25.0~~$24.0 million of which ~~none~~$10,000 was outstanding. The ABL Facility has a first-priority lien on our and the Subsidiary Guarantors’ accounts receivable, inventory, deposit and securities accounts, certain real estate and related assets, ~~(the “ABL Facility Priority Collateral”)~~ and by a ~~second-priority~~second- priority lien on the Notes Priority Collateral. There is no direct lien on our FCC licenses to the extent prohibited by law or regulation ~~(other~~other than the economic value and proceeds ~~thereof).~~thereof.

The Credit Agreement provides for the following events of default: (i) default for

non-payment

~~Table of Contents~~

non-cash

Maturities of Long-Term Debt

Principal repayment requirements under all long-term debt agreements outstanding at ~~September~~June 30, ~~2021~~2022 for each of the next five years and thereafter are as follows:


	Amount		Amount
For the Year Ended September 30,	(Dollars in thousands)
2022	$	—
For the Year Ended June 30,			(Dollars in thousands)
2023		—	$	10
2024		98,815		44,685
2025		—		—
2026		—		—
2027				—
Thereafter		114,731		114,731

	$	213,546	$	159,426

Impairment Losses on Goodwill and Indefinite-Lived Intangible Assets

We have incurred significant impairment losses with regards to our indefinite-lived intangible assets. ~~We believe that~~If overall market conditions or the ~~impairments are indicative~~performance of ~~trends in~~ the ~~industry as a whole and are not unique to~~economy deteriorates, our ~~company or operations. While impairment charges are~~

~~non-cash~~

~~in nature and do not violate the covenants on our debt agreements, the potential~~operating results could be negatively impacted, including expectations for future ~~impairment charges can be viewed as a negative factor with regard to forecasted future performance and cash flows.~~growth.

The valuation of intangible assets is subjective and based on estimates rather than precise calculations. The fair value measurements of our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. The

COVID-19

pandemic increases the uncertainty with respect to such market and economic conditions and, as such, increases the risk of future impairment.

Given the current economic environment and uncertainties that can negatively impact our business, there can be no assurance that our estimates and assumptions made for the purpose of our indefinite-lived intangible fair value estimates will prove to be accurate. While impairment charges are

non-cash

in nature and do not violate the covenants on our debt agreements, the potential for future impairment charges can be viewed as a negative factor with regard to forecasted future performance and cash flows.

OFF-BALANCE

SHEET ARRANGEMENTS

~~At September~~

Standby Letter of Credit

As of June 30, ~~2021,~~2022, we have an outstanding standby letter of credit of $0.3 million. The standby letter of credit is deducted against our unused revolving loan commitment under our ABL and reduces the amount available for withdrawal.

Equity Method Investment

We invested in OneParty America LLC (“OPA”), an entity formed for the purpose of developing, producing, and distributing a documentary motion picture. We reviewed OPA in accordance with the guidance within

Accounting Standards Codification (“ASC”) 810, Consolidation

. Based on our analysis using the variable interest model, we determined that OPA was a Variable Interest Entity (“VIE”), but because we did not have ~~any relationships~~a controlling financial interest, we were not the primary beneficiary of OPA. Accordingly, we accounted for our investment in OPA in accordance with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating

~~off-balance~~

ASC

323-30,

sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.Investments – Equity Method and Joint Ventures

ITEM 3.

~~ITEM 3.~~ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies

~~Table of Contents~~

ITEM 4.

~~ITEM 4.~~ CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Our management, including our principal executive and financial officers, have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Rules

13a-15(e)

and

15d-15(e)

of the Exchange Act, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial ~~Reporting~~Reporting.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule

13a-15(d)

and

15d-15(d)

of the Exchange Act that occurred during the quarter ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We and our subsidiaries, incident to our business activities, are parties to a number of legal proceedings, lawsuits, arbitration and other claims. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance. We maintain insurance that may provide coverage for such matters. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters. We believe, at this time, that the final resolution of these matters, individually and in the aggregate, will not have a material adverse effect upon our annual consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS.

Not required for smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

See “Exhibit Index” below.

~~Table of Contents~~

EXHIBIT INDEX


Exhibit Number	Exhibit Description	Form	File No.	Date of First Filing	Exhibit Number	Filed Herewith
31.1	Certification of ~~Edward G. Atsinger III~~David P. Santrella Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act.	-	-	-	-	X

31.2	Certification of Evan D. Masyr Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act.	-	-	-	-	X

32.1	Certification of ~~Edward G. Atsinger III~~David P. Santrella Pursuant to 18 U.S.C. Section 1350.	-	-	-	-	X

32.2	Certification of Evan D. Masyr Pursuant to 18 U.S.C. Section 1350.	-	-	-	-	X

101	The following financial information from the Quarterly Report on Form 10Q for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, formatted in ~~iXBRL (Inline Extensible~~XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Balance Sheets (ii) Condensed Consolidated Statements of Operations (iii) the Condensed Consolidated Statements of Cash Flows (iv) the Notes to the Condensed Consolidated Financial Statements.	-	-	-	-	X

104	The cover page of this Quarterly Report on Form 10-Q, formatted in inline ~~XBRL.~~XBRL	-	-	-	-	X

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~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Salem Media Group, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SALEM MEDIA GROUP, INC.
~~November~~August 4, ~~2021~~2022
	By:	/s/ ~~EDWARD G. ATSINGER III~~ DAVID P. SANTRELLA
		~~Edward G. Atsinger III~~David P. Santrella
		Chief Executive Officer
		(Principal Executive Officer)
~~November~~August 4, ~~2021~~2022
	By:	/s/ EVAN D. MASYR
		Evan D. Masyr
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

6458


		December 31, 2020 (Note 1)				September 30, 2021 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	6,325			$	23,781
Trade accounts receivable (net of allowances of $14,069 in 2020 and $11,680 in 2021)			24,469				24,429
Unbilled revenue			3,192				3,300
Other receivables (net of allowances of $124 in 2020 and $455 in 2021)			1,122				1,589
Inventories			495				907
Prepaid expenses			6,847				7,970
Assets held for sale			3,346				1,875

Total current assets			45,796				63,851

Notes receivable (net of allowance of $461 in 2020 and $996 in 2021)			721				364
Property and equipment (net of accumulated depreciation of $180,336 in 2020 and $185,127 in 2021)			79,122				78,425
Operating lease right-of-use assets			48,203				44,100
Financing lease right-of-use assets			152				121
Broadcast licenses			319,773				320,008
Goodwill			23,757				23,986
Amortizable intangible assets (net of accumulated amortization of $58,897 in 2020 and $57,769 in 2021)			4,017				2,785
Deferred financing costs			213				895
Other assets			2,817				3,678

Total assets		$	524,571			$	538,213

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	2,006			$	2,180
Accrued expenses			11,002				11,740
Accrued compensation and related expenses			10,242				10,752
Accrued interest			1,225				2,750
Contract liabilities			11,652				11,561
Deferred rent income			147				114
Income taxes payable			563				626
Current portion of operating lease liabilities			8,963				8,604
Current portion of financing lease liabilities			60				59
Current portion of long-term debt			5,000				0

Total current liabilities			50,860				48,386

Long-term debt, less current portion			213,764				208,559
Operating lease liabilities, less current portion			47,740				43,180
Financing (capital) lease liabilities, less current portion			107				79
Deferred income taxes			68,883				69,287
Contract liabilities, long-term			1,869				2,081
Deferred rent income, less current portion			3,864				3,795
Other long-term liabilities			2,205				2,248

Total liabilities			389,292				377,615

Commitments and contingencies (Note 14)	0				0
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,447,317 and 23,639,824 issued and 21,129,667 and 21,322,174 outstanding at December 31, 2020 and September 30, 2021, respectively			227				229
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2020 and September 30, 2021, respectively			56				56
Additional paid-in capital			247,025				247,668
Accumulated deficit			(78,023	)			(53,349	)
Treasury stock, at cost (2,317,650 shares at December 31, 2020 and September 30, 2021)			(34,006	)			(34,006	)

Total stockholders’ equity			135,279				160,598

Total liabilities and stockholders’ equity		$	524,571			$	538,213

See accompanying notes


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2021			2020			2021
Net broadcast revenue	$	45,391		$	49,591		$	130,041		$	140,422
Net digital media revenue		9,808			10,645			28,355			30,603
Net publishing revenue		5,442			5,747			13,366			18,093

Total net revenue		60,641			65,983			171,762			189,118

Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $447 and $480 for the three months ended September 30, 2020 and 2021, respectively, and $1,313 and $1,369 for the nine months ended September 30, 2020 and 2021, respectively, paid to related parties)		34,283			37,463			104,704			106,968
Digital media operating expenses, exclusive of depreciation and amortization shown below		7,144			8,269			23,123			25,280
Publishing operating expenses, exclusive of depreciation and amortization shown below		5,814			5,213			16,443			16,844
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $18 and $0 for the three months ended September 30, 2020 and 2021, respectively, and $198 and $5 for the nine months ended September 30, 2020 and 2021, respectively, paid to related parties)		3,849			4,284			11,909			12,764
Debt modification costs		—			2,347			—			2,347
Depreciation		2,677			2,788			8,108			8,118
Amortization		751			427			2,578			1,553
Change in the estimated fair value of contingent earn-out consideration		(10	)		—			(12	)		—
Impairment of indefinite-lived long-term assets other than goodwill		—			—			17,254			—
Impairment of goodwill		—			—			307			—
Net (gain) loss on the disposition of assets		1,381			(10,607	)		1,494			(10,552	)

Total operating expenses		55,889			50,184			185,908			163,322

Operating income (loss)		4,752			15,799			(14,146	)		25,796
Other income (expense):
Interest income		1			—			1			1
Interest expense		(4,024	)		(4,026	)		(12,069	)		(11,887	)
Gain on the forgiveness of PPP loans		—			11,212			—			11,212
Gain (loss) on the early retirement of long-term debt		—			(56	)		49			(56	)
Net miscellaneous income and (expenses)		1			2			(45	)		87

Net income (loss) before income taxes		730			22,931			(26,210	)		25,153
Provision for income taxes		401			837			31,180			479

Net income (loss)	$	329		$	22,094		$	(57,390	)	$	24,674

Basic income (loss) per share data:
Basic income (loss) per share	$	0.01		$	0.82		$	(2.15	)	$	0.92
Diluted income (loss) per share data:
Diluted income (loss) per share	$	0.01		$	0.81		$	(2.15	)	$	0.91
Basic weighted average shares outstanding		26,683,363			26,870,664			26,683,363			26,825,483

Diluted weighted average shares outstanding		27,791,353			27,280,949			26,683,363			27,217,382


See accompanying notes

Acquisition Date	Description	Total Consideration
		(Dollars in thousands)
July 2, 2021	SeniorResource.com (asset acquisition)	$	80
July 1, 2021	ShiftWorship.com (business acquisition)		2,600
June 1, 2021	KDIA-AM and KDYA-AM San Francisco, California (business acquisition)		600
April 28, 2021	Centerline New Media (business acquisition)		1,300
March 8, 2021	Triple Threat Trader (asset acquisition)		127

		$	4,707

		Net Broadcast Assets Acquired		Net Digital Assets Acquired			Total Net Assets

		(Dollars in thousands)
Assets
	Property and equipment	$	361	$	3,221		$	3,582
	Broadcast licenses		235		0			235
	Goodwill		4		225			229
	Customer lists and contracts		0		789			789
	Domain and brand names		0		66			66

		$	600	$	4,301		$	4,901

Liabilities
	Contract liabilities, short-term		0		(194	)		(194	)

		$	600	$	4,107		$	4,707

	Nine Months Ended September 30, 2021
	Broadcast		Digital Media		Publishing		Consolidated

	(Dollars in thousands)
By Source of Revenue:
Block Programming – National	$	35,824	$	0—	$	0—	$	35,824
Block Programming – Local		18,072		0—		0—		18,072
Spot Advertising – National		10,565		0—		0—		10,565
Spot Advertising – Local		30,123		0—		0—		30,123
Infomercials		682		0—		0—		682
Network		14,729		0—		0—		14,729
Digital Advertising		18,415		13,859		132		32,406
Digital Streaming		3,559		2,579		0—		6,138
Digital Downloads and eBooks		509		4,637		1,294		6,440
Subscriptions		828		9,227		262		10,317
Book Sales and e-commerce, net of estimated sales returns and allowances		289		163		10,851		11,303
Self-Publishing Fees		0—		0—		4,730		4,730
Print Advertising		2		0—		123		125
Other Revenues		6,825		138		701		7,664

	$	140,422	$	30,603	$	18,093	$	189,118

Timing of Revenue Recognition
Point in Time	$	138,540	$	30,603	$	18,093	$	187,236
Rental Income (1)		1,882		0—		0—		1,882

	$	140,422	$	30,603	$	18,093	$	189,118

	Nine Months Ended September 30, 2020
	Broadcast		Digital Media		Publishing		Consolidated

	(Dollars in thousands)
By Source of Revenue:
Block Programming – National	$	35,536	$	—	$	—	$	35,536
Block Programming – Local		18,211		—		—		18,211
Spot Advertising – National		10,179		—		—		10,179
Spot Advertising – Local		28,630		—		—		28,630
Infomercials		750		—		—		750
Network		13,505		—		—		13,505
Digital Advertising		10,676		14,473		216		25,365
Digital Streaming		1,981		2,611		—		4,592
Digital Downloads and eBooks		3,049		4,291		960		8,300
Subscriptions		868		6,679		519		8,066
Book Sales and e-commerce, net of estimated sales returns and allowances		1,128		108		6,849		8,085
Self-Publishing Fees		—		—		3,860		3,860
Print Advertising		1		—		278		279
Other Revenues		5,527		193		684		6,404

	$	130,041	$	28,355	$	13,366	$	171,762

Timing of Revenue Recognition
Point in Time	$	128,157	$	28,319	$	13,366	$	169,842
Rental Income (1)		1,884		36		—		1,920

	$	130,041	$	28,355	$	13,366	$	171,762


	Short-Term			Long-Term

	(Dollars in thousands)
Balance, beginning of period January 1, 2021	$	11,652		$	1,869
Revenue recognized during the period that was included in the beginning balance of contract liabilities		(7,770	)		0—
Additional amounts recognized during the period		19,742			883
Revenue recognized during the period that was recorded during the period		(12,734	)		0—
Transfers		671			(671	)

Balance, end of period September 30, 2021	$	11,561		$	2,081

Amount refundable at beginning of period	$	11,607		$	1,869
Amount refundable at end of period	$	11,549		$	2,081

	Amount
For the Twelve Months Ended September 30,	(Dollars in thousands)
2022	$	11,561
2023		979
2024		787
2025		238
2026		77
Thereafter		0

	$	13,642

	Nine Months Ended September 30, 2021
	(Dollars in thousands)
Amortization of finance lease ROU Assets	$	48
Interest on finance lease liabilities		6

Finance lease expense		54
Operating lease expense		9,656
Variable lease expense		430
Short-term lease expense		444

Total lease expense	$	10,584

Broadcast Licenses	Twelve Months Ended December 31, 2020			Nine Months Ended September 30, 2021

	(Dollars in thousands)
Balance before cumulative loss on impairment, beginning of period	$	435,300		$	434,209
Accumulated loss on impairment, beginning of period		(97,442	)		(114,436	)

Balance after cumulative loss on impairment, beginning of period		337,858			319,773

Acquisitions of radio stations		—			235
Dispositions of radio stations		(1,091	)		—
Impairments based on the estimated fair value of broadcast licenses		(16,994	)		—

Balance, end of period after cumulative loss on impairment	$	319,773		$	320,008

Balance, end of period before cumulative loss on impairment	$	434,209		$	434,444
Accumulated loss on impairment, end of period		(114,436	)		(114,436	)

Balance, end of period after cumulative loss on impairment	$	319,773		$	320,008

Goodwill	Twelve Months Ended December 31, 2020			Nine Months Ended September 30, 2021

	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment,	$	28,454		$	28,520
Accumulated loss on impairment		(4,456	)		(4,763	)

Balance, beginning of period after cumulative loss on impairment		23,998			23,757

Acquisitions of radio stations		66			4
Acquisitions of digital media entities		—			225
Impairments based on the estimated fair value goodwill		(307	)		—

Ending period balance	$	23,757		$	23,986

Balance, end of period before cumulative loss on impairment		28,520			28,749
Accumulated loss on impairment		(4,763	)		(4,763	)

Ending period balance	$	23,757		$	23,986

	December 31, 2020

			Accumulated
	Cost		Amortization			Net

	(Dollars in thousands)
Customer lists and contracts	$	24,012	$	(22,533	)	$	1,479
Domain and brand names		20,350		(19,127	)		1,223
Favorable and assigned leases		2,188		(1,943	)		245
Subscriber base and lists		9,886		(8,974	)		912
Author relationships		2,771		(2,765	)		6
Non-compete agreements		2,041		(1,954	)		87
Other amortizable intangible assets		1,666		(1,601	)		65

	$	62,914	$	(58,897	)	$	4,017


	Nine Months Ended September 30,
	2020		2021		Change $		Change %			2020			2021

	(Dollars in thousands)									% of Total Net Revenue
Net Broadcast Revenue	$	130,041	$	140,422	$	10,381		8.0	%		75.7	%		74.3	%
Same Station Net Broadcast Revenue	$	129,022	$	139,482	$	10,460		8.1	%