Earnings call transcript Q2 2023

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Operator

Thank you for standing by. My name Ajeeb and I will be your conference operator today. At this time, I would like to welcome everyone to the Salem Media Group Incorporated 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

like Financial the Officer. now Evan over Masyr, Chief to would call turn to I

Evan Masyr

call. Welcome today Group's earnings for thank Salem and you Media second for quarter joining us XXXX

at done, line our Officer. As Securities forward-looking the plans, Executive future advised call David how any with in as statements Reform a a Officer; remarks. questions. listen website with conference and the on our call We'll Evans, this Litigation we operator will just the are www.salemmedia.com. of XXXX. are Act from you to moment be to to events, David defined me reminder, get come today or under back time, financial Please that can is begin dial Once if the in you prepared on relate on statements results, back In made instruct room Operating prospects Private you that at Chief performance disconnected Santrella, submit Chief or

Relations non-GAAP station the is regulation EBITDA. specifically This the Regulation on These also adjusted including based company's on of financial performance, non-GAAP reported contains information. and with information obligation our from at be differ G, within not available forward-looking future new We statements income, may potential EBITDA considered acquisitions. of of statements, meaning Investor future do call available to salemmedia.com. markets, from those to and conference markets, G, the website not future of should growth growth the no performance. results measures accompany forward-looking conformity existing the intend or potential financial are indication Actual forecasts materially measures or disclosure of portion anticipated of undertake results an In the required and the update operating currently for opening of SOI,

the with Santrella. to now I will Dave over And that, call turn Dave?

David Santrella

done, of include the to second joining remarks Once webcast. the financial and Evan, our on provide and quarter. quarter financial performance assets third back turn on on the and the call discussion about will thanks performance, more debt a talk My Salem Thanks, for us review I'll some in second give call the quarter sales. prepared to of a guidance the to everyone for I'm Evan and details

While headwinds we and face continue second and quarter revenue some X.X% in the EBITDA. high a from rates, decline to expenses economy resulted This tough increased for interest X.X%. a XX.X% declined adjusted in total

banning are the not cutting the on the we we to in travel, these general we have million Accordingly, While restructure all with are manager taken results. our happy with $XX pay guidance further these sales some been cuts have amount positions, approximately organizations match taken line a of savings. elimination total and In provided numbers these non-essential last by cost and annual XXX(k) in management. of call, our including senior cuts measures,

We as navigate continue to economy. challenging look for efficiencies we the additional

second Network, Podcast $XX.X Salem revenue. the the total Digital of Salem digital total National our Salem our like assets in from revenue revenue in Surround, revenue I overlooked digital I always our Broadcast each When is total the digital often because on which the – earnings call division, includes investors. we the take of News our Channel, million and division, the to think XX.X% efforts This and was includes represents by like summarize quarter. this the

up and in believe X.X% the still quarter, in important growth has we Salem's digital represents digital was While opportunity. only the growth slowed that most

of the national Revenue the in decline last performance second I'll Broadcast review to $X.X quarter, million the declined spot decline due in $X.X in last Now revenue, is division for quarter is the biggest the spot in each quarter. quarter which spot X.X% of to the half down division political to million down compared with More second was XX.X% financial the quarter. local XX.X%. year. and the from the of driver Similar than revenue second

of of scheduled noting in later anticipate Excluding presidential political, first worth impact debates second pace Republican quarter. the in declined Broadcast this the we the for political revenue year. It this X% month, in is revenue the an the half that of the increase of is

from economy. Aside is the the traditional decline revenue political reduction advertising the to continued pullback in and revenue response overall spot advertiser to in in the due

digital Broadcast saw the quarter. which also the revenue division, up pace revenue X.X% from a We in the the was the Revenue national of X.X% growth slowing in quarter. programming increased in of in block

our of block know, Many our XXXX. long-term. most of QX of are were Now finalized as block in programming newer deals you deals programming

the to as feeling the impact the quarter. of grow, pleased see So to surprisingly, – that a pace slower the see months. not we're previous albeit Therefore, growth we Network X.X% tough XX is decreased in continue that at as than slowdown. revenue, it anniversary, economy place we a

last However, this network revenue and both QX X.X%. year, excluding increased in revenue year political actually

of growth to expenses as the including in expenses to quarter initiatives, in Salem Channel. expenses News the we XX.X% in Broadcast comparison, a as last our pace The second make quarter, Broadcast digital decline By increased continue X.X%. increased Broadcast investments in QX compared reminder many of

challenges an marketing cost from division services. the investments This Facebook cookie. the third-party Revenue made to of at primarily business taken. changes measures quarter these Digital the declining and increased in due sales the National pace division various digital face increased professional While part algorithm expenses National future, X.X% and and we cutting believe in the by In to are cost continues of increased X.X% reduced use QX. larger we've that we the play in still even as the Salem's reflects expenses making will Digital

by quarter. Church decreased Eric American Hope titles by Book sales last of quarter was in year. to the The allowance compared net QX Book second Vincent. about Publishing the Metaxas Josh quarter bestselling to X.X% the returns second revenue the of estimated were in Letter in flat Overture and Isabel just of Hawley, by the Manhood

an Voddie releasing Guide we’re Bee obsolescence by due XX.X%, increased inventory quarter, Book Truth Baucham third Publishing Ever-Loving up Babylon The were Gender. and reserve. the to division to in the Expenses primarily The In

we activity, have M&A of for sales KLFE-AM on Seattle, asset the month, Last to report. $XXX,XXX in $XXX,XXX. we closed KNTS-AM and two to few stations sale Turning for a

into agreement that XX, Additionally, KSAC-FM Sacramento and early to entered sell October. close on for in an June to transaction in we $X.X million expect

and And with to quarter. on back the turn call details for third quarter’s over that, for the I’ll guidance the Evan more performance

Evan Masyr

Thank you, Dave.

quarter, to decrease total operating to decreased $X.X a decreased to and increased revenue X.X% EBITDA X.X% station recurring resulting million Compared second $XX.X $XX.X to decreased of million. expenses expenses on million, and broadcast net million. in increased X.X% the XX.X%. broadcast adjusted income of For $X.X $XX.X year, million to million basis Operating a revenue X.X% to last operating $XX.X

from a results These revenue broadcast revenue Same include net basis, represents broadcast XXX to Same and of Station of XX.X% decreased which radio $XX.X X.X% $X.X XX.X% million. On SOI revenue. operations, the stations broadcast Station million. our net And to XX our decreased network

fixed we June had XX, Loan ratio XXXX of covenant. $X.X were coverage Notes, we on million composed a our the revolver test quarter, total of Based on million during Because million Facility. was $XXX.X debt and less charge required to outstanding than against As Asset million $XXX.X available $XX.X the of X.XXX%

with declining Wells to they a Yesterday, August. Fargo the forbearance Unfortunately, free adjusted the that during not we month covenant. of and exercise agree with we in on cash due to whereby Bank compliance EBITDA signed not default flow, remedies were

amount the million. reduced required availability revolver Additionally, with $X was $XX notional of million million to the of $XX from minimum a

forbearance. increased by the revolver the rate the interest through X July X of with the associated date Finally, points effective percentage effective

the company are reasonable a bank we’re amendment waiver we optimistic and longer-term reach a that working The and and toward mutually will outcome.

decline total X% quarter is and $XX.X of XXXX, X% from XXXX, revenue million. forward to Looking third between the revenue for total quarter of Salem projecting third

between impact estimated Excluding the political expenses legal on X% changes increase also to total X% third compared million. and compensation operating of fair XXXX a non-GAAP the value project revenue would X% the of an expense between and expense of consideration depreciation gains Salem projecting quarter disposal company decrease before contingent losses revenue, $XX.X settlement, of is expenses expense, earnout be of and the amortization operating sale in assets, XXXX impairments, stock-based to decline X%. of of or to

this poll for to remarks we like now that, answer with And operator would back our questions. And any the I and concludes will questions. to to prepared turn it

Operator

you. Thank Okay. [Operator Instructions]

first line go question from Please of Capital Your the comes Michael from Markets. Kupinski ahead. NOBLE

Michael Kupinski

Thank you. Good afternoon, everyone.

can the we’re trend at you give looking if So numbers expenses, initiatives was at can growth and be but it’s looks about growth us line expense revenues sense you that understand over as to the of what a XXXX, up reported in years, where like, you're of wondering like of roughly forward. seen of of you're that there see, we terms couple see that anticipate. – the going of investments reduction going ways can like of if being paired Are you and seems where I spent in of look to could just I type of look there XXXX, we at flat what just what digital. expense that’s last kind what for in we the ways of kind to if initiatives kind the $XX you are as we’ve the then the and the million. that I some out look some I'm line trend course wondering

David Santrella

Yes.

increased is, in digital, So primarily I what mean, seeing from right, places. expenses two you're Michael, in

operated we're off, of we much when own than and sell reduce have something sell and costs, operated people a bringing we First we doing digital And more on right? cost when that we're to where assets, third-party more profitable we us something of digital for own sell here goods. marketing with those expertise. and So sales our or websites in-house it it's

And in those curve so you're having of in become, kind by kind doing of will middle inside, respects where the that, in better are eventually is margins that when many you're we can the right people but the now. the there's control which when we of – that more that

investing and advertising, in margin greater expense. so and marketing as digital lower sell of that a with more comes course, personnel, we And – a we've direct services, digital we're

Michael Kupinski

there forward of of then that may terms Got bit in the that of were it the maybe publishing pulled the for. books. you. was in – Were timing looking a what of aspect little revenues, the just around expenses and some marketing been at publishing than because just publishing was have I looking And better

would slower because So just there I'm if in the like be forward growth or that wondering was any… third to looking quarter, of expense

David Santrella

in kind of the than just really that's I of the publishing kind there revenue the larger we is in in increase expense a increase quarter, two which increase were guess, the in reserve our And the second flat. did inventory obsolescence expenses, is being publishing why reserve. an

QX. that impact have or So wouldn't any QX on

Michael Kupinski

you do any, general, in just in have I'm then And Okay. sorry…

David Santrella

QX, and our are QX So QX. biggest titles

looking vast QX, big published. are we've Ted Paul, ahead, will Tulsi Rand got as but Gabbard and Maybe majority will QX. some the Cruz, get So that ship three books books

what you opportunities. So yeah, year should expect that's rest for those really yes, of the is, the

Michael Kupinski

or you'll have And that very what for Gotcha. have number for sense that's year know XXXX, do of titles that big the the a you you. a I of titles because

David Santrella

but to in would titles it XX We it’s kind for political are little on XXXX, a is by really a to driven be But still say, that. I it's sign? comment too signing we'll we And big early able year. really total. titles titles to are But of what targeting XX

for numbered reason years. are even that better years typically odd So numbered

Michael Kupinski

even that a number? is In year typical titles, yeah, XX for, XX to

David Santrella

Yes, really years changed titles numbered we years. even to numbered from number don't the of odd

bigger tend the titles kind even published political of get to, in yes, the years. yes, Just, numbered

Michael Kupinski

there little you. that a is can expenses, looking were guys And in going of an Because terms or there you bit also the in like I invest another then in. to movie movie think you're talk a about investments was that? you Got

David Santrella

made movie Dinesh it's and the once another We've the sitting initial would sheet. investment revenues for contract that recorded and investment that all associated balance under we're – with be on Yes, movie. our And that of released. yeah, expenses D'Souza

dollars a few balance hundred I believe. sheet, there's on thousand the So sitting

Michael Kupinski

the terms in to say roughly Can know spot just the scatter flat, bit Got the as market, you reported, environment, you of the let's I you. then tone of about of QX? market in know, look a talk you kind broadcast market, of And advertising kind little you results.

David Santrella

been it's spotty, say would – don't follows at and sluggish right local I At my you know I mean, national. still Michael, typically that's it's least experience. now. best Yes. I

cash been sector hard as national's – the well. when hit and their So they're mom competitors tend to guys the and big particularly spending across smaller on smaller aren't pop our sit money,

least at way think see, to right now. pacing the I we’re would going and So me tell

see quarter I a to think perspective. third spot we’re going a challenging from

Michael Kupinski

savings million that terms kind that austerity annualized of QX? it’s it third recent said does or quarter the through? of basis. the that fully made, have the Does an you moves in When XX the question, in begin is bulk come you guys Final on of that really affect

David Santrella

we in what you’ll hitting place, QX and of put continuing into QX. Most in see

So up some impact on. in, it two. we’ll will down QX see we’ve in guidance that you most it and one And but already of see you’ll the on phase action taken low that’s is on the of high side side – expense our why

Evan Masyr

But QX, impact on on a July, a impact example. it’s partial little only very for

Michael Kupinski

you. Got

you. others right. ask Thank questions. All let I’ll Okay.

David Santrella

Thanks, Michael.

Operator

from [Operator Research. comes Instructions] Your final David David, Marsh question Singular ahead. the line go of from

David Marsh

And any me of in terms on political? tell Hi seen of guys. are going taking you revenue front to the you in political, of that’s terms as to Thanks for have start pick from Could up? guys what hearing when today that you just questions.

Evan Masyr

late anticipate year a all do be us. QX, to to that we’ll big I revenue on having We’ve QX, conversations – about QX. late we’re to our mentioned point But contacts, little political X.X, see I really different would a it’s I start in see political, almost with $XXX,XXX, far start a political nothing. just is year seen I political so David, next you? for political, zero with agencies based we political think, do think some going which is bit, little so you’ll think some what But QX, of

David Santrella

bit being Just more specific. a

example, three radio I think have for those four three There Republican states, spending however, that in there stations. states, have primaries, are Iowa. aren’t those four maybe is where early or we states

up small we the for So But not states. relatively we we But affiliate. they’re in states a presence dollars a little that’s that bit has we spending where have the of or a primary digital business early those radio political have picking where are there radio us in. started have because presence a

David Marsh

Okay. And would in XXXX? going XXXX? it’s line the political top that there to grow it could assume from what was you remind to of us of contribution be safe probably in And

Evan Masyr

believe I our that. our number grow in look, million, biggest year. XXXX political was which would $X.X year you I from to next was political think Yes, expect And

David Marsh

identified station as sale that assets lastly in for Okay, then the me. a that Any and makes lot Congrats classified And assets, or on the quarter. of sense. just other sales sales have could to this potential some point, or a and any sell in at balance little assets sheet an the particular there help that other is maybe bit? significant interest perhaps de-leverage where asset you been

Evan Masyr

we Yes, others a we David, are we’ll some premature those know. deals of assets But transactions It’s too soon locked them. to along signed. on discuss a further you sales, until working as let we’re those have than as have number certainly little in,

David Marsh

expect So you year? would wouldn’t assume to fiscal any this close safe other it then that be to sales

Evan Masyr

agree No, on with not that. I would you

David Marsh

Okay.

sounds it with bank. the things right, All are good. that’s well, No, like along Okay. moving

the announcement the you political I on quarter and term the hopefully there the you well wish right the that. balance an here things well to nice of wish near and direction. kicking moving for starts amendment starts of in a forward Look in So and

Evan Masyr

you. Thank

David Santrella

Yes, thanks Dave.

David Marsh

All right guys. Thanks.

Operator

turn to now call Chief David Executive I’ll Officer. the David? over Santrella, back

David Santrella

of quarter. Okay, you for thanks to being call. We’ll the a Bye. talk Thanks again part next everybody operator.

Operator

for all joining. you Thank call. today’s concludes that gentlemen, and Ladies

You may now disconnect.

Salem Media (SALM) 8 Aug 232023 Q2 Earnings call transcript