SALM - Earnings call transcript Q3 2018

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Evan Masyr

[Call Started Abruptly] Thank you, Adam, and thanks all of you for joining us today for Salem Media Group’s Third Quarter 2018 Earnings Call.

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

Edward Atsinger

and thanks Evan, for of all the call you, Thank today. joining us you for to

begin discussion performance. drill include division. activity financial down look little overall, resulted And a who I’ll the guess, I Evan and update revenue appropriate third call at overall adjusted third quarter total more more to X.X%, I’ll quarter dividend provide M&A quarter will brief information Well, were If further performance growing turn with and it. X%. in X.X%. to and guidance on then detailed or for on me which recent Expenses by remark a we EBITDA back distribution, increased cash last an provide down an then the QX of XXXX. on of also – for XXXX, Let policy would call be

X.X% was for quarter. revenue Broadcast up Our the

in Broadcast dispositions, station increase on up Broadcast X.X%. the resulted marks a X.X% to and quarter we an increase quarter the increases the and of $X.X income acquisitions only of perspective. impact X.X%. revenue of revenue in in last of the expenses to excluding in revenue quarter $XXX,XXX However, from operating third million only We were basis, was of consecutive operating This recent a quarter compared had recorded income. a a same nice third station limited in station political year. And

through the months what fact, we’ve than nine months, $X political which through elections. we nine in revenue, last In during had is XX% had midterm million higher

us, the able the revenues Our revenue. quarter, of network grow our We’ve slate in of our political more over of personalities count now affiliate crossed X,XXX affiliates largest for Hugh have, and with syndicated the XXX continues up our show well popular. as We become X.X% recently Hewitt, to including very been affiliates, mark. perform to steadily number affiliate in example, for increasingly fact,

is based saw was Kaplan. and in revenue at growth a also revenue, much radio Miller This our ministry reports fairly for basis, look National nice Christian local review upon programming some local On quarter. consistent from is down up the We X.X% combined of we with our of spot programming, the block X.X%. industry if block which

digital digital, we’re Facebook. this, growing extensive We’ve to on rollout focusing a including January. to lose continue recognized in local fairly We customers and with strategic revenue

we’ve in growing we as has this customers so Broadcast division and our XX.X% – digital digital Similar products our been promising in with revenue well. local division, digital far a We variety been advertising hired the capability we X.X%. can the On offer as what Local are revenue our quarter. for national position, to declined up losing to digital facing local a Facebook now agency. to VP Digital, a example, result For customers. of we’re and services This of

on of greater to Facebook’s emphasis offset, a of caused revenue Hilary however, These acquisitions we in at on reliance despite expenses our Feed recent e-commerce Facebook has income News the operating and by reduce on were represent opportunities the to expenses and mentioned. in an quarter. X.X% acquisitions digital Childrens-Ministry-Deals.com. investment X.X% declines just revenue. to Report, results the changes effort the our I largely further declines in the Additionally, Intelligence digital able manage decline with some national acquisitions These Kramer’s algorithm newsletters increased revenue down in were advertising-related Digital division. increase a from recent for Even revenue, were

which our Finally, Publishing XX.X% Services, for Salem revenue self-publishing the declined X.X%. Author is quarter. entirely to down business, related was The decline

Looking key the continues in forward, revenues increase division. is pipeline our to to this build, which

around So of turn soon. by decline declining release Publishing, revenue The our trend book we to book the publisher, growth offset partially expect a due schedule. at to was traditional Regnery stronger revenues our that

were that, KDXE in XXX.X. with And in activity, other late quarter Sean this Francisco Jesus began during the made On Publishing for in those authors the I XXX.X a David on quarter San respect a Spicer, And The on Rock, Is for to $X.X the then September. quarter. Little small year compared In companion to were market. small in on a acquisition XX, closed closed of $XXX,XXX revenue, with several in the we loss on acquisition despite we total we division best-selling M&A Again, And which one Our KZTS-AM, we on the announced decline previously shipping Briefing; as Risen, KTRB-AM July of assets both and think Limbaugh, the paid two million. September translators, closed ago. in the profit the transactions during the Arkansas and cash. along XX, formerly

for agreement XX, and operating for broadcasting of an Childrens-Ministry-Deals.com our station, station we’re We talk motivation on acquisition. and have principal the that the the also On since related the acquired businesses million. XXXX, been July that July LMA we under news website was $X.X format of and

$XXX,XXX with X, for acquired benchmarks. August over of the earnout cash, paid upon of churches. curriculum next two contingent achievement to the be On consideration JustXWord to additional sells digital we $XXX,XXX Childrens-Ministry-Deals years certain based Our an to Sunday school revenue up

and with over formatted we and an earnout text revenue certain On languages Kramer’s reader Newsletter of versions multiple X, is the the a franchise additional consideration Financial to to be August up two next fully paid $XXX,XXX bible of with achievement acquired Hilary based contingent JustXWord $XXX,XXX, for available. years on benchmarks.

we August for of exited we million. On the Omaha Omaha $X.X Finally, KCRO-AM on October market. KGBI sale and closed the in KOTK-AM the sale million. on we of X, XX, $X.X On for closed

transactions. conveyed with So essentially now, there our those in But we’ve now exited of were that were operations. Omaha also market essentially, translators all some the

comment I as appropriately, more a cash just final about our me our Let or dividend, make said, distribution.

return characterize the you Evan? XXXX. want some Evan We $X.X Our attractive a back of more to dividend dividend for million capital and additional And details yield, characterized yield guidance quarterly to capital, quarter as represents of per of annually. of or it, X.X% however that, paid the the quarterly I’ll $X.XXX on upon based or fourth This distributions share have a turn the share to price. September current quarter an tax return treatment. XX, call with on per stock for provide favorable are $X.XX therefore,

Evan Masyr

Ed. you, Thank

programmed million, in to our an format. $XX.X the and our operating same radio These $XX.X XXX of $XX.X of increased and to Broadcast stations foundational increase recurring operating X.X% Christian on revenue. On I stations of radio X.X% strategic X.X% adjusted operations and Broadcast third SOI of million, increased Net net contributed expenses our are increased to a station and X% in of review $XX.X Broadcast resulting decreased station performance to include stations XXX income basis, $XX.X increased in talk million. teaching million, revenue increased X.X% network our X.X%. million, XX Broadcast same $XX.X million, These will revenue the operating X.X% of quarter, a of increased basis represents net XX% to million. X.X% for our expenses to broadcasting station revenue $XX.X results XX% our briefly and our formats. EBITDA revenue from and For X.X% quarter. Broadcast revenue total to million $XX.X revenue increased

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

Our Revenue decreased total and XX% the stations XX Broadcast news contemporary music total Christian had for stations contributed quarter, revenue quarter. the revenue. XX stations X% of of increase for revenue and talk our of XX% in X% from contributed Broadcast an these

of Our represents and network revenue Broadcast revenue. quarter businesses XX% from increased Revenue million total revenue. decreased our X.X% Media Digital represents our and for total $XX.X the to XX% X.X% of

revenue. X.X% $X.X of total decreased and revenue our Publishing Our represents million XX% to

on we XXXX, XX, million $XX.X million September of $XXX our under the bonds revolver. outstanding outstanding had As and

however, guidance, Miami. of X.XX. revenue Omaha in the quarter of WBIX-AM ratio fourth was for projecting cluster between of radio X% flat And we’re revenue stations be Boston the fourth Our XXXX, total sale quarter total of of sale XXXX WKAT-AM the and million. in and and $XX.X a This decrease to from our leverage reflects

we impact revenue of the from be schedule overall for digital advertising and Broadcast reflects Excluding book sales, between a ongoing weakness to dollars. increase these lighter and revenue X%. competition X% The projecting publishing would

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

will I call turn So questions. poll the Adam? for Adam over to to back

Operator

the first Please question go line of Wells ahead. [Operator from Hebert from Instructions] Fargo. comes Our Davis

Davis Hebert

I wanted trajectory? plus on a the on the quarter increase you for Hi, us for taking X% ask fourth that give the plus the Can everyone. color first operating more X%. guidance on bit Thanks little questions. expense to to of

Evan Masyr

expenses that have you’ve better Certainly, the than Yes. year. our as seen, been throughout

we’re we the a our fourth Last reversed fourth challenges performance. that we is accrual quarter senior have based on difficult bonus of quarter, management into running the in comp. One for

point, we, at in an And so this still accrual there. have this year,

a creates of couple so variance itself. point of that And in percentage and

Davis Hebert

parts. a And lot then seems like Okay. it of moving there’s

Broadcast. I’m plus the on station sales, You said to without that sorry, with X% X% plus you’re – just Correct?

Evan Masyr

That’s correct.

Davis Hebert

think how we a the sales, in looking should if leverage – about we fourth about assets especially quarter, we’re coming EBITDA? in so think at with decline should then in from And those how proceeds Okay. the

Evan Masyr

we have will question. in year in bit, QX great up But a QX. bond because that only interest more we EBITDA. partly Leverage importantly, a the a go twice of payments decline and That’s make adjusted little probably

that to by don’t leverage lower So make themselves, have to we ratios QX and because tend QX just interest payment. have,

the we However, we the working some and asset the was these that to sales benefit had, $XX.X of be that at million we’ve will reduce revolver – quarter. from end will get from cash

We’re going off. to focus paid on getting that

Davis Hebert

up end have the versus your up the political election how imagine end hand through. in did I And – now did then Okay. you political for day’s expectations the year? How numbers

Evan Masyr

this Well, $X were last we handle ahead a pretty don’t a have year. yes, numbers Ed think had it’s mentioned, like were of at $X.X political up north political Through nine midterms. ended through months of – million we at a little where XXXX, were We it, $X on have million million. final of over revenue. bit And I I as I QX. certainly quite the months, nine nine good through months were on but we of

So our revenue biggest had. as that midterm as will this political be we’ve far

say pleased. would were we an I So standpoint, from expectation quite

Davis Hebert

fairly on look programming any there be that at XXXX, looking block different concern to to you’re from Okay. we be Should comment And any be straightforward? going prior will Is it that? years? renewals Any renewals. as

David Santrella

This is Dave Santrella.

So that’s well. far, going

into the process well now. right We’re renewal

unpleasant And haven’t surprises. seen any so far, we

Davis Hebert

Okay.

Thanks great. questions. for the Okay, taking

Operator

you. Instructions] Vance. Thank Eaton Our comes from question Leeman the of Raphael from next [Operator line

You are live. now

Raphael Leeman

questions. taking for my Thanks Hi.

onetime and/or the AM of that there’s X% on to was Anything et X% year, kind in I factored that QX? helpful coming of you and highlight cetera. the accrual reversal know mentioned expenses that Is as some the Or from road? you that’s the noteworthy else of there. might a a expenses conversion down So that is onetime in, previously in there expense? FM, last to kind

Evan Masyr

air, the Yes, that more impacted we And rent driving put expense year. us this onetime incremental FM forecasted biggest has the have the translators impact expenses. some that But change. clearly, we’ll we bonus on certainly accrual QX as is

Raphael Leeman

about having opposed quarter Okay. quarter? the reported that the The that total any And you current to third size guess. then proceeds more haven’t seen due the specific can size, you are cash in been I as in the – yet be

Evan Masyr

closed sale that two in cash Yes. The was And one proceeds, had under the we AMs Omaha. for million. just $X.X October in

The the other happened sales quarter. to end the had prior of

Raphael Leeman

Okay.

And cash so in already for the was those?

Evan Masyr

Correct.

Raphael Leeman

or if you general Is saying lower. just year zero you’ve down. be revolver mentioned will – I couldn’t you you moving end revolver basically were got saying the then the think to the were at get And of that Okay. working tell goal of if something that you by a

Evan Masyr

that the paying that Yes. be debt cash going be we have, balance not year I including XX. we’re on excess was that the at sale on will just what down commenting end focusing but with to of October on the closed we asset any

Raphael Leeman

Got David anything a but too says XXXX you. little about – to about And too guess, mean, renewals, again, demand year? see next I I into as soon soon bit

David Santrella

from process. Well, we’re renewing for our markets markets. business back also now seen even terms right little some that in that that in a like a Right say I I’ve radio. annual And in would to that levels annual – it not seem have now, that’s all our interest to is we’re companies, things, heard be while advertisers mean, from business the bit I of some the we anecdotally, across coming process of in of in spot good media although early our promising.

Raphael Leeman

Do in think – was and be the numbers half. my that better second Okay. expectation of the is you I but half kind feel you’d last was weak first question like – seeing this

quarter little you what half The worse. second the looks than expecting? looks better less a a but of this fourth quarter third Is improvement were bit

Edward Atsinger

digital a by amount and there’s the industry political Facebook. question adjusting election, the were whole platforms has ability – specificity While very last a the from new with primarily pricing been about this their quarters. The it the we is challenge, revenue target for of to digital is several but the encouraged no there’s of midterm that and it competition, to for

– a And erosion several This got it’s digital in effect. along we’ve And also our the also business, they Broadcast, response, So think think remains in in it’s radio for not back it a coming to tried every we very it’s these why think last full we be developing little and the traditional because in there will taken think our it’s media local a tend extent a then but divisions. that a appropriate related spot and new come I we while, advertisers to city just strategy, population the of we’re of It’s affected XX% least to capability on that medium. Its a that probably emphasis powerful disruptive we’ve in the every nicely. tremendous media. a audio. about It’s we’ve of but seen that spoken and this week. reach terms is year all to medium a reach continues of traditional major be implement to word advertising the agency American of digital very steps national

seeing to we’re beginning So I us. think back advertisers to come

would nice we in an into likely we period. been have QX for along continuing it revenue, than adjustment little with We’re And in probably been and had that a QX, impact not we are. the in – further political balance

a and station sold, stations, Boston station the three the in sold stations particularly the in in terms revenues, the competition those picture that Miami, adjust looks that in the adjusting Facebook’s quite industry remove stations something the better platform for and we’ve Omaha, But Now of is little comparisons. we’ve there’s no the few and is digital bit to. again, question a from

Raphael Leeman

you. Thank helpful. That’s

Operator

Thank you.

line of next Our the from Steve Calamos. Bassett comes from question

Steve Bassett

year, next that as do year company lines, this those expectations as were the acquisitive is next as you Along you about for you. year? think Thank anticipate you

Edward Atsinger

didn’t disposed we acquired. year, more we than of were I particularly this Well, think but assets acquisitive we probably

flat, nice eyes have net might a for open think we’re We you tuck-in our don’t I acquisitions. but balance, know. we – fairly So never on always so. probably

those to we’re will really that give leverage. going But plan our not our is improve acquisitions would make an can the focus so that hard actually we it’s advance. If exacerbate it in we’re convinced on leverage, that would to we acquisitions that be that such find attention asset those cash is Our enhance, delevering, flow to.

to progress, arise, have just them. if meet You we criteria, a opportunities look at take our as they – things

and focused. difficult question to balance no to more be So little improving going as predict be focused on There’s we’ve attack a And more sheet. I I on we’ll our we’ll – advance, the to the mentioned, target think to be but always it a have got that. And revolver, Evan out. target we’re that million $XX first plays will a the see the in little think just how little

Steve Bassett

flat? profitability do Should Okay. and acquired the And of numbers, the about specific a question businesses final the but just feel for it year? you looking sold for one other we roughly this as the versus lines along those businesses just not of think have profitability

Edward Atsinger

proved we No. very for Boston to we got able another at thought I it making a from of We AM purchase that very than just was I we’re it, on us. then Disney good for we Miami, to – to I station mean, terms for the the very a got time and sold in paid been It has in owned example, able an that not We of. hadn’t had We think revenue out think sense sale preserve was – sold the for money. We format it attractive businesses – were and that we proceeds XXXX, it more had that station, it, own we the $X.X the million, sold were for underperforming. We a we – been sale. it the acquisition. we’ve long. made dispose

additional was generating there. not us. moved good and And transmitter company of that transmitter also didn’t site a party for the view, a own revenue that very the for we miss site, that on bought long-term we which before. the case so from the to it It point beat move So was a

long was transaction. normally Omaha, that with that we of in is then So market we in. flow smaller positive that cash terms the price And Omaha all we improving a in like we all, The the think them. operate than in got. properties buyers, party one for They’re AMs translators had bought the FM and associated the that a the with We’ve time. preserving for with that two for those one formats. two different – were all

the staying we’ve describe and one continue buyer feature Word, news the use they’re that means trademark syndicated format. in talk in we particularly in way The And our Omaha, that the other there to the The that, fact, So our Answer, which the will station describe is format, we licensed way the content. and format; names, to

So us be today’s multiples, that in got was continue thought, we to a of we’ve attractive the on And they the and in of will sense. terms maintain positive made exited affiliates terms though the for that in market we we price market. even balance, lot

Evan Masyr

we on And focus And on a one buying, this and to station takes a a it we others, been from – like Childrens-Ministry-Deals get-go. take what it we’re in, with year buy depending of put is and it, year challenges has get we acquisitions of to But could the it radio have the profitable. acquisitions, the have what to reformat respect format digital. when the we some on months profitability XX

very what brought sold we we money for got positive businesses we versus So through in the feel we acquisitions. of exchange the about the

Steve Bassett

That’s helpful. great. Okay, Thank you.

Operator

question Instructions] [Operator comes a you. Christopher line Carson, of next from Investor. Our Private the Thank

now are You live.

Christopher Carson

strategy kind bound a calling me taking new the relate or whatever overview to wanted for cash to you’re to really may call the can my story. how just and that you of it. gentlemen, cash if high-level the it. Thanks ask give I management or your dividend appreciate Relatively on

Evan Masyr

of and in volume our recognition really After cash paying focus from dividend, March the actually this XXXX. the think of and of use our – good free our very rest the Well, shareholder a acquisitions marketplace. the since cash we’ve dividend the debt. or been free strategy flow, opportunistic either perspective flow management down a want We is to while, certainly to we increase Salem on pay of a it’s for cash

really focus good see earlier, to we XXXX. a this where us want that’s deleverage As on company, Ed mentioned of and you’ll

Christopher Carson

Thank you.

Operator

time. this closing to comments. no the in Mr. Ladies questions Edward queue like gentlemen, for back at over and you. to Thank Atsinger I’d we turn have further floor

Edward Atsinger

And us Thank QX. report for call. you visiting We’ll on as with you, you operator. the to again, all of forward we thanks joining for look to

Operator

today. and This our you, does Thank gentlemen. ladies teleconference conclude for

Thank You may your day. at a for and wonderful now time. your this line have you disconnect participation,

Salem Media (SALM) 10 Nov 182018 Q3 Earnings call transcript