SALM - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to Salem Media Group’s 2018 Second Quarter Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Evan Masyr, EVP and CFO.

Evan Masyr

Great. you. Thank all XXXX today earnings you Group’s Salem joining quarter second call. for thank for us Media And

with plans, As a from reminder, today Publishing, time, www.salemmedia.com. you both if the is you get call are will may made dial In financial instruct of in and disconnected under statements of report opening questions. information turn EBITDA results on conference XX-K David those back the other Edward Evans, or the forecasts Securities done, included of are Interactive the adjusted results, G, line future with materially and to markets, statements G, listen measures or financial may room Securities be Atsinger. our statements financial information flow. of Investor our affect with President Regulation at can of website station acquisitions. performance, meaning Form the the to are me the the These at have disclosure within be Please non-GAAP and at portion back any of filings the results potential listener markets not performance in call Atsinger, of Executive on based anticipated to intend Officer; measures they SOI, for Broadcast a website we the Act this Commission. that joining are reported Europe our are growth prospects annual our our We Once operating EBITDA, adjusted forward-looking business statements, including accompany of is and where on call from on submit should In of made contains prepared defined begin Chief non-GAAP public we risks update events, Actual call Private new indication currently are trip. company’s conformity how uncertainties moment performance. Relations More now and differ existing operator XXXX. future with information. the come a considered free and Regulation and as future in and on on an the Edward not to call or do available Media income just that to the future forward-looking Reform Litigation undertake required no the David our on Santrella, obligation results We’ll of from growth Exchange that forward-looking will over on I and from specifically remarks. President advised currently also available or financial Ed? you cash to conference www.salemmedia.com. potential relate This

Edward Atsinger

you line you, Dave river a a this. boarding I Germany of good Evan, it and participation, with Salem and joining a the have our call all ship for Germany, Santrella thanks Thank we connection. hope plan trip a very for on was a successful and to that’s We part been on actually are in today. of listener both

into XXXX. dividend to then guidance call will quarter turn remarks prepared see comment who for and Evan, on on that will can performance and also will conclude that provide our do. brief second activity. on a the M&A the and update also some with an I caveat, let’s go financial second we have quarter quarter recent So, with on back I’ll detail what performance focus more third include

second were X.X%, resulting in expenses revenue of operating compared was The a to let’s up quarter. EBITDA when station So, at look division X.X%, in tell increased quarter revenue X.X%, X.X%. decline Broadcast the let’s flat resulting income adjusted with expenses the an of look an interesting increased XXXX. that, Total at up second take story, the X.X%, those.

operating basis, income. last in about increased station compared second is same revenue of income Political might station the operating half the with made However, quarter And year. quarter revenue political during million the revenue $XXX,XXX on as growth that to quarter the I in X.X%. second same this $X.X we recorded of up consecutive add a increase, of

Our revenue X.X% we another national revenue during and and quarter also the Christian quarter ministry had growth. programming block strong spot network of increased national

national was On up our the up stations XX.X%. hand, revenue on other network spot was revenue XX.X% local our and

two $XXX,XXX X.X%. calls, least we about half weakness this weakness done, towards or local developing local had digital believe our significant infrastructure beginning That experience ad begun advertisers we to two spot dollars that discussed local fruit. the local our in resources of that Even the We commitment some of revenue. local local robust categories, did is a and these up construction number revenue in spot digital. though we is down was nearly to program revenue local our a devote of However, bear shifting to the previous own result Combine XX.X%. now of of quarter at we’re is fact for strategy. that digital On

completing for contributors broadcast which our were see significant was up expect on this completely the Broadcast two increase. the are fully functional, end. it the way digital X.X%. Obviously, expenses, There program. buildout to well to least the increase that by functional the at are in division infrastructure problem we local to biggest in We year’s And

factors business And higher in digital higher margins. operating costs. was the local of operating that our costs and therefore First, that profit one resulted have lower

FM we operating. been of to we XX have translators, and advantage we’ve granted, been for translators. as XX unique very on now are AM invitation applications taking calls, the Secondly, which aggressive in of constructed FCC’s previous filed opportunity allow to Today the mentioned acquire stations

we construction. permits associated expense do have X. also modest cost these bills, translators finally, been that again limitation. typically an then expenses. Remember, expenses X, really are small. these are limited to investments, are on as And are have investments, are additional but the there translators But additional height is operating a also granted most usually have which watts, rents these under lease no engineering ongoing while power will a utility We start-up an construction translators, The modest and of with XXX small we matter, awaiting some for for we not

can that quite effective coverage. terms be of in So,

over We’re to revenue the those scheme assets value. not it things, these of signals. the quarters. to monetizing course, happen minor new absorbing of FM of total process increases we’re next take get profitability, expenses lot the a in valuable the several our Because of expect and overall to expenses to acquiring them are we and contribute that And relatively the in won’t asset

last is is National declined X.X% not national from or our our XXth from positive the first timing conservative digital revenue our thing. that Products opinion attributed Easter associated division quarter. the on our XX.X%. Church with and and local CPMs was April $XXX,XXX. vast was of directly digital. year, options we’ve in our digital to Local directly really of and stations with revenue down to the national news Digital the division, Easter. of bigger bulk revenue be have was generating our to our to both year. So, primarily largest we on Easter media We websites, see local April radio is a it the in in holiday our decline this other an was by our fell than websites. as our caused for differentiate a discussed previous Last with is Easter which increase very -- that the division, quarter. This Church This due for Christmas. can only majority by calls. X% revenue Revenue lower associates therefore digital than general media down Easter More way $XXX,XXX largely the our In in websites digital Traffic Thanksgiving year, Xst, digital Townhall the of meant second Products

to down the Facebook, Salem advertisers Web number of digital revenue loss of was again Finally, to Network a from due options. X.X%

the traffic that our softer last were anticipating X.X% Expenses the However, digital was revenue X% on websites cost SWN environment. station the only focused a in we and year. over up apps to savings,

or X.X% $XXX,XXX. Finally, revenue our Publishing declined

Services take with business uncertainty an always of fourth seems Salem XX.X% the was due down self-publishing $XXX,XXX when that books or It from takes the process back new XX and Author revenue. record sign election. a up the there to that complete around quarter associated presidential Our months time XXXX a X is really months relates to in-pipeline we to author the to place of until we

has book acquisitions work submissions been that XXXX. approximately on since of XX% up pipeline we quarter fourth in is Our rebuilding to as The new the the that that news time, pipeline. good quarter continue the down is around

the the and Rational also up Regnery, Host, publisher. stronger book XX.X% Dennis with schedule, biggest some Exodus title our being Revenue to book Salem at good traditional by We Prager. news our at Radio was Bible: Regnery had due

X.X%. performance the -- The We print of I financial released expenses. were recognition auditing to before me place directly in also of fees related related as David on corporate due two do, the We’re third the looking expenses was Limbaugh’s directly active with mid-July implemented want in mention to Briefing, revenue let October of be the to standards. which than of the accounting released up new on and one-off front. were growth released books but comment to Risen increased expense, taking in new I me being go implementation QX More it is This Jesus having Corporate quarter, Is M&A, but XXXX. to should those shipments be standards. let associated to a half early Spicer’s I forward half is M&A and briefly that Sean just said, with that during

exiting for agreement into for During in result quarter, X. million. on sell we to transaction million. XX, will separate Omaha, entered August into sell our Monday KOTK-AM a to that two July transactions Omaha closed and Nebraska we KCRO-AM our separate into May entered Omaha market. Again, the $X.X KGBI-FM stations, on an agreement $X.X entered the On combined two This we to XX, in remaining

close the two way. sale by XX, expect it We closed the October. June on KZTS-FM. AMs we the early the We of changed On in to X:XX:XX.X of acquisition

than The purchase exercise population our option. station signal LMA and for we to KHTE a significant relaunch for able covers it did KDXE of did that were at not under that on $X.X Francisco it’s will entered agreement LMA an LMA We’ve since million. $X.X million. Now a and XX previously million, operating under talk an another a an station. KDXE we agreement KHTE-FM, format purchase We this under are on format for for to started April broadcasting that that allot on on which X as our a $XXX,XXX broadcasting LMA San less. July into On stations long-term acquire XXXX. to we station been We July with XX, an KTRB-AM under news April that had and terminated agreement known option $X.X for frequency we were in operating

expect We in that an Financial Kramer’s to for XX, Newsletter acquisition acquire Hilary On third entered the July quarter. to late we $XXX,XXX. into close agreement franchise

Products the next on transaction On two integrated into up Church division. Digital and this related we acquired earnout $XXX,XXX Childrens-Ministry-Deals.com cash million. and certain to month. to will acquired of Childrens-Ministry-Deals $XXX,XXX of an be we School Curriculum of of contingent in expect website years course July On XX, to based for achievement a July over for We consideration this be and sells JustXWord business to $X.X the addition revenue churches with close benchmarks. of our X, Sunday paid

reader bible versions in and is text formatted languages a JustXWord available. multiple with fully

XXXX. a per dividend represents actually dividend, attractive based dividend regard remember share $X.XXX $X.X your dividend. the and that, Finally, but of And a current provide also per our yield activity, paid a will With the share $X.XX million Evan turn. we additional on describe I annually. to a to on it’s it turn for XX, call it’s guidance quarter That capital, stock to price. an quarter’s or of third performance quarterly of best detail for on I’ll X.X% not guess the return June the with back it’s Evan dividends is Evan,

Evan Masyr

Great. Thank you, Ed.

and $XX.X X% recurring to increased resulting operations, stations million. second teaching Net $XX.X EBITDA format. I’ll radio the million less operating $XX.X strategic million, contributed million. same decreased XX% X.X% increased million. X.X% These to broadcast revenue. from XXX On our $XX.X a broadcast Operating XXX revenue the radio station include to our and decreased $XX.X briefly $XX.X of formats. revenue expenses adjusted quarter. increased representing stations to quarter, station a to stations same our These increased broadcast programmed talk our income net revenue our $XX.X of X.X% X.X% basis, review million. SOI network XX operating of total million. of are revenue radio to of results station basis in expenses to net foundational performance for than our X.X% and X.X% $XX.X on Christian and revenue XX.X% increased broadcast in increased of And million total X% in broadcast broadcast For revenue

Ed national block ministry As quarter. increased previously our programming the in mentioned, revenue X.X%

talk had news increase stations X% an revenue for XX stations revenue. broadcast the quarter. XX% total contributed these Overall, Our in of of

music, and broadcast contributed contemporary revenue in they we X% third have the quarter. of stations that Our format, programmed total format Christian and strategic XX% increased for XX

network revenue and Media our $XX.X revenue. businesses broadcast to Our X.X% total million of revenue. represented Digital represents and increased XX% XX% from XX.X% total decreased our Revenues of

And an X.XX% our And at in to the and Our resulting second under had revolver. revenue during outstanding XXXX, and $XX.X as million bought on bonds quarter, open average $X.X decreased price thereby our X.X% the $XX.X, Publishing $XX of principal June total of of market outstanding X% million savings of revenue. we $XXX XX, of $XXX,XXX. back million notes therefore, in we million the represents

an Our of ratio are million. of we XXXX X% total quarter the from And flat be total and was increase $XX.X leverage X.XX%. revenue revenue projecting third quarter, to between third for

now also disposal fair between, prepared estimated million. operating earn-out and losses before that to decline and third our answer expense amortization or impairments, we’d gains an of on non-GAAP the of be with X% anyone a value consideration, of expenses operating quarter sale any expenses has. and of of to contingent changes assets, expense, XXXX projecting compensation like stock-based questions X% We’re remarks, expense concludes to compared increase the that depreciation in $XX.X of And

So, back I’ll to turn over the operator. call the

Operator

session. a comes Our first At Instruction] Kupinski the Financial. proceed Please Noble this of question. line time, question-and-answer question your be conducting with we from will [Operator Michael from

Michael Kupinski

you. Thank

I a a be and should second well little like in bit in wide business be third would just The look more saw election the should are given maybe. your variance political it be broadcasting third terms the you -- think broadcast seems there, did that business thoughts the second of it wondering, third of in seeing might it’s something, a into are is, of for on give give there be a quarter, quarter little must you quarter what would quarter getting side, you can on getting just third your we outlook digital be The bit And that through -- guidance traffic what us quarter? maybe change of and the you the not your quarter pretty was political following political kind tone one some if here that broadcast X:XX:XX.X the advertising you like, little on third business in the advertising your and quarter? color seem a the little in the may

David Santrella

of got our I category pleased Santrella. bit, Dave the spot the it’s for to I side, It little pretty Michael, sixth gist on think the we broadcast a I with. political breaking was you’re revenue question. have were your perspective was largest revenue up but confess, from a quarter. Yeah,

place strategy years a had people for with have many dedicated in that business. We for

can is depends a much So, successful. after stations. we we on really going race of this, that from on just for the and impact we radio and coming and us, in wherever aggressively that so strategically, markets I typically big stock that money we off those in you and where that specific are, valid from the the see side there usually national the We are pays go it that pack is, network initiatives are continuing and QX. paid where are it off are assure race just have us local nicely for where to big

Edward Atsinger

to In Michael, be as think the business, QX’s continues reported digital I terms area QX in biggest guidance of actuals. our of softness

results seeing on continue seeing And to reallocated share are that very unfortunately, in Facebook. We have our Number to we strong expect of that particularly they’re reported have shifts, X:XX:XX.X. advertisers Facebook budget to and Facebook.

this some point. progress they’re We to sponsor, in work but initiatives have at initiated to respond

challenge. is So, a that

revenue. point again, number from speaking in than politically-charged on we place stop not Trump-related of seen our standpoint, are we’re of have challenges other programmatic we’ve at that’s we But stop continue. And seeing. that so is this content of coming that the their digital buyers we Yes, a competitive revenue political that protocols expect head through, from programmatic advertising, running websites, more websites to QX. that more should QX to an The experiencing agencies offset challenge in see sufficient put time, on lots in in President have the advertising and a and impact digital

Michael Kupinski

seems little they and other as on digital HDX few radio broadcasters Thank bit channels a competition their more stations, things on launching maybe from Are stations more that? well. but you a It like any becoming stations you. [ph] are are seeing Christian like aggressive

Edward Atsinger

No, Michael.

not -- it, is radio for broadcasters haven’t done We’re that many a specifically it Christian QX strategies. exited QX quite we seen or of There and quickly out changed pretty news few in moving stations. formatted and too really frankly, have

experimenting bit that. We’re it from with Columbus. a haven’t we a seen perspective, little really competitive in But

Michael Kupinski

smaller Does the of one ownership initiative environment support a owner, are the hotel-owned radio maybe thoughts NAD on X:XX:XX.X station limits and markets? the lift to your the company what stations in power

Edward Atsinger

today work to fine They and From prefer it also opposed have it’s the somewhat, for has changed. all are small perspective, for be what an to they that the and commission but are market and generally, us. market, Yeah. one that impact, and we they generally there some see with comments And and don’t but example regulation, handful -- when opposed an idea sub-caps of the idea. oppose opposing to really companies keep other affect good does. company sub-caps a see even it’s need I won’t the our doesn’t they that we station good out have on it, we liberalized lot Well, opposed it own FCC we companies think of a to us. eye maybe don’t seem the be in allow We’ll iHeart this they their Generally, liberalization. of would eliminate companies not it Salem’s to filed one good immediate are to are mean a large think stations it a number rolled We to sub-caps like idea. eliminated of might it. the point, at it, don’t think

Michael Kupinski

Great. Thank you.

Operator

Our next Davis Hebert line Please Fargo. of question comes Wells from the with from your question. proceed

Davis Hebert

$XX Hi, repurchased the good I remarks. in heard the taking afternoon, saw bonds everyone. question. quarter I in purchased, million Thanks your you of prepared for and that

more was a sort that think to bonds? you you what are of curious but do or capacity bandwidth I in of just to purchasing RP have interested or smart more that move,

Evan Masyr

Yeah.

have competing other buy flow, will cash adequate be capacity of uses our free revolver as We availability to it capital. acquisition on based as a opportunities on far more, decision and

Davis Hebert

next third quarter And would So, quarter seasonally quarter? for you would light in interest generate correct? cash be Understood. expense, a

Evan Masyr

expense, no, Interest but interest payments, yes.

Davis Hebert

Interest that’s payments, I meant, yeah. what

Evan Masyr

pay Yeah, the December. Correct. and we June in payments bond

Davis Hebert

Right.

EBIDTA second a political And the Would color thank coming and half, QX QX Okay, picture focus. should in on guidance we I your with kind and of want growth the then guidance. the more QX it. got in just that aggregate? QX, anticipate year-over-year for say you in for big you

Edward Atsinger

Evan, and take go ahead that.

Evan Masyr

you and will in up EBITDA. Certainly, I EBIDTA. a we which assume midpoint would same adjusted X revenue neighborhood. is for guidance you X give that of gave adjusted guidance flat in take nice on gets that X. typically the down on don’t somewhere the The We to QX growth be expenses, numbers if up Yeah. today, that

Davis Hebert

about doing quick That’s been outflow. cash the guys like on just EBITDA slight math. maybe -- Okay. on in my on terms be And impact of to acquisitions? net maybe impact outflow, you But flow M&A, fairly have It for what look fairly the close could neutral cash for a it the EBITDA would you was helpful. talk those busy, a

Evan Masyr

acquisitions. positive that of up the versus flow the me, have be I sales this. EBITDA we the I you that number all we front when we tell respect for were The you in to up of cash to tally net can giving on expect with the cash the expect flow don’t acquisitions,

Davis Hebert

Okay, much. you great. Thank so

Edward Atsinger

With respect acquisitions tuck-in they’re cash to all digital with acquisitions, flow.

be three immediately all accretive. So, should of those

Davis Hebert

you Thank so it. much. Got

Edward Atsinger

welcome. You’re

Operator

Instructions] Lisa live. Springer line [Operator the with next Springer, Research. your from is proceed question your Please from line comes Our question. Singular of Lisa

Edward Atsinger

Lisa, are you there?

Operator

will from we Okay. Ms. EAdvance question, next Springer of from your [ph]. line proceed is the which Fleeman Please question. not Ray take with responding, so our comes

Unidentified Analyst

for your that’s reaching of last I wondering, just timing could you that’s and might the you the target Thanks Hi. consistent was over remind recently few leverage for target or if question. be my and taking that what quarters? me think if still changed

Evan Masyr

Yeah.

I’ll If do And you free you some to want want, color afterwards, add so. Ed, feel to start. if

ago. leverage which long under target Our over a range again need little year I would say, four. we is there by to a get refinance to be to when we time just we’d like bit refinanced

So, that’s to where we’d like be.

target five, next under goal the to leverage that the the see we really is three. for is get long-term with something company Our begins to but want

Unidentified Analyst

And Okay. any...

Edward Atsinger

Yeah. I think… And

Unidentified Analyst

Go ahead.

Edward Atsinger

to it’s year say, refi we’ve ago I year in want May, facility. a -- we’ve a seven got just just

that and to that certainly in manageable four that to to issue we and goal hope pleased hope very very direction. this facility before on pricing has we of but with refi significant think again, it’s we get the progress be close under We’re to make

to first is objective below the get As said, five. Evan

that But get were we’re near the the a and of recent kick five moving in future. we’d it would. in we feel that more, little good on of below refi progress five, pretty very Now bit up would I we we we which were direction, below making expect quickly terms things knew

Unidentified Analyst

Thanks much. very

Operator

And the I remarks. back have Atsinger to closing Ladies for of we gentlemen, would turn question-and-answer and to the like reached end Edward call the session.

Edward Atsinger

again quarter call. we the Thank -- visiting as you, third for give operator, of we our thanks results. forward when and again We to joining you give look with to you all

Operator

concludes today’s conference. This

this time. Thank your your for disconnect may you lines participation. at You

Salem Media (SALM) 12 Aug 182018 Q2 Earnings call transcript