Saga Communications Q3 2023 Earnings Call Transcript

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November 2, 2023

There are 3 speakers on the call.

Operator

Good day, and welcome to the Saga Communications Inc. 3rd Quarter Earnings Release and Conference Call. It is now my pleasure to turn the floor over to your host, Chris Forghay, President and CEO. Sir, the floor is yours.

Speaker 1

Thank you, Paul, on track. And thanks to all of you who have taken the time to join Saga's Q3 earnings call. We appreciate your continued interest and participation in Saga Communications. We've got a lot to talk about today. For starters, we're pleased to report the addition of our people, resources and on renewed focus in specific opportunistic growth areas is starting to impact our revenue in a real positive way.

Speaker 1

On. I'm pretty certain you won't hear some of these things on other earnings calls you might be participating in over the next few days. For the quarter, on. National was up 1%. This is in a sector that's down in national business double digits amongst our brethren.

Speaker 1

On. Digital was up 34% for the quarter and continues to grow with a great deal of headroom, and we do it differently than most. And finally, NTR, the selling of events, is up 7.7 points for the quarter. And year to date, national on. Ready for this, 6.9 percent.

Speaker 1

Interactive is up 21% and NTR or the selling of events is up 11 on. 1%. Our other areas of focus, e commerce, which is the selling of certificates over the past trailing 12 months, on. This totaled $1,300,000 and is still growing. We are still in the process of deploying our online news on and information service in several of our Saga markets and have multiple markets in queue for installation this year and next.

Speaker 1

You may also on refer to this or be familiar with this as metaphorically Clarksdale now. We also continue to perform really well in targeted categories. On. Number one category continues to be home improvement, which includes HVAC, plumbing, roofing, insulation, on Invisible Fence companies and things like that. And that too is still growing.

Speaker 1

Automotive has made a surge and moves into our number 2 category of business. On and professional services has moved to number 3, which is things like aesthetic plastic surgery, cosmetic dentistry and weight loss. On. So Sam, I think they call that a tease on the air when our on air personalities just give a little look inside. So I'm going to Send it back to Sam for some more performance news.

Speaker 2

Thank you, Chris. And that tease was very nicely done. Now I do have to read the obligatory. This call will contain forward looking statements about our future performance and results of operations the call. That involves risks and uncertainties that are described in the Risk Factors section of our most recent Form 10 ks.

Speaker 2

This call will also contain a discussion of certain non GAAP financial measures. On track. Reconciliation for all the non GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data tables to our press release. So now the fun part for the quarter. Ended September 30, 2023, net revenue decreased 2.8 percent to 29,200,000 compared to $30,000,000 last year.

Speaker 2

Political certainly impacted this year's performance. As for the quarter, we had $234,000 in gross political revenue this year compared to $858,000 for the same period last year. Without political, our overall revenue for the quarter would have been down less than 1% from year. Station operating expense increased 2.1 percent to $22,800,000 for the 3 month period. As discussed in the Q1 conference call, after a number of years of giving our employees little to no compensation increases, we made the strategic decision to give our remarkable on staff pay increases in recognition of the tremendous work they do.

Speaker 2

These pay increases and related payroll taxes amounted to an estimated 331,000 on track. Are approximately 71% of the increase in the 3rd quarter station operating expense and $1,200,000 or approximately 55% on track to date increase. Similar to previous quarters, other smaller but still meaningful increases in our station operating expenses included increased health insurance, on. Utility expenses, music licensing fees, programming rights and sales surveys. I can assure you that Chris and I and the whole staff here are always watching expenses and making sure that we're making good solid decisions on where expenses increase and where they decrease.

Speaker 2

For the 9 month period ended September 30, 2023, net revenue decreased 1.3% to $83,600,000 compared to $84,800,000 last year. Adjusting for political for the 9 month period, gross revenue was flat for the same period last year. Gross political revenue year to date was $538,000 for the 9 months this year compared to $1,800,000 for the same period last year. Keep in mind that our Q3 and 9 month results for 2022 were impacted by the one time expense of $3,800,000 related to Ed Christian's passing. On track.

Speaker 2

These expenses were reported in more detail in our previous calls and filings. Capital expenditures for the quarter ended on track. September 30, 2023 was $760,000 compared to $1,200,000 for the same period last year. For the 9 month period, capital expenditures were $3,400,000 this year compared to $4,700,000 last year. We currently expect to spend between $4,500,000 and 5 on for capital expenditures during 2023.

Speaker 2

As Chris said, we continue to see growth in gross national, which was up 1.9 percent Gross interactive, which was up $695,000 or 34% and gross nontraditional revenue, which was up 150 on track. 1,000 or 7.7 percent for the quarter. And as Chris said, 6.9%, 21.1% and 11.1%, respectively for the 9 month period ended September 30, 2023. While local revenue was down for the quarter, it's important to note on. E commerce, which gets recorded as local direct revenue, increased 77% to $459,000 for the quarter on and 44% to $952,000 for the 9 month period.

Speaker 2

Trailing 12 month, as Chris teased earlier, e commerce gross revenue is on. We believe that there is still significant growth to be achieved in these areas as well as our continued digital effort. On. We continue to plan on utilizing our financial strength to strategically invest in our operations, both at a market and corporate level as we work to grow specific revenue types, on track. As discussed in our Q2 earnings call, due to the SEC's renewed focus on the reporting of non GAAP financial measures on track.

Speaker 2

In their review of our filings, we have adjusted our quarterly press releases starting with our Q2 earnings press release to include a complete statement of cash flows as opposed to the abbreviated statement that we historically have included in our Form 10 Q. We continue to include the reconciliation of GAAP operating income on track to station operating income, which is a non GAAP measure, but now also include an other financial data table, which allows the users our press release and filings to make direct comparisons to data reported in previous press releases and filings. The company will pay a $0.25 per share quarterly dividend tomorrow, on. November 3, to shareholders of record as of October 11, 2023. We have now returned dividends of over $111,000,000 to our shareholders since the since the first special dividend was paid in 2012.

Speaker 2

Every time I speak to this, I find this to be an amazing return to our investors on. Great statement of confidence of what we believe the future looks like for Saga having returned $111,000,000 over the past 11 on. All said, we believe Saga is in a strong financial position to continue to return value to our shareholders through our quarterly, special and variable dividends. The call. The special dividends declared in 2022 were in line with the goal of maintaining our ongoing cash and short term investment balances at between $30,000,000 to $35,000,000 prior to future cash flows being recognized.

Speaker 2

The Board continues to have discussions relative to the right level of cash to maintain on our balance sheet, and this may change based on global, national and local economic conditions, changes in the radio industry and potential for strategic acquisitions. The company's balance sheet reflects $41,700,000 in cash and short term investments as of September 30, 2023 on track and $41,900,000 as of October 30, 2023. Pacing for the 3rd quarter continues to be variable. We booked $1,900,000 in gross political revenue during the Q4 last year. It still continues to be an unsettled advertising market given the uncertain economy, on the Fed's interest rate policy, the ongoing inflationary environment in addition to other worldwide issues.

Speaker 2

We currently expect that our station operating on track. In addition to the inflationary environment, this significantly driven by investments in our staff, sales training and ongoing interactive developments. We anticipate the annual corporate, general and Administrative expense will be approximately $10,500,000 to $11,000,000 for 2023. Our tax rate is expected to be 27% to 30% with a deferred tax on 5% to 8% going forward. And with that, I will turn it back over to Chris.

Speaker 1

Wow, Sam, you are very active today. On. Thank you for that. And thank you, Sam. So as you can see, Saga continues to be a well run successful company in spite of what some think on the call about the sector being in melting iceberg.

Speaker 1

And today, we're just going to give you just a little peek behind the curtain to show you a few of the things that make Saga different and special. As we see it, they are leadership, character, culture on people. We teach and preach that leadership is an action, not a position. In leadership, you create a vision, you gain acceptance of that vision and then it's a matter of empowering and inspiring your people to lead, to be a champion for change on and to grow themselves and to grow the organization. If character is what an individual does when no one's looking, then culture is what an organization does when no one's looking.

Speaker 1

Culture is the character of the organization. So the different special and on track. Different and special attributes of Saga I mentioned earlier are strong character, unwavering culture, innovative leadership on and great people. And by the way, as Sam shared, these elements translate into a strong balance sheet, dollars 40 plus 1,000,000 in cash and no debt. On the best run companies are the most profitable companies.

Speaker 1

The other day, I was talking with one of our investors who said, and I quote, and he's right. He said Saga is an undervalued company and is an undervalued stock. These are the messages that you should be getting out to the investment community. On. He said Saga is a well run company and is financially solid and the high consistent dividend Saga pays are safe.

Speaker 1

On track. We, Saga, I believe, get punished for the sins of our radio brethren on track. Who are getting delisted and are in perilous financial condition because of their high debt and revenue decline, which causes investors who may not be all that knowledgeable or informed on the sector to make negative generalizations about the entire sector. Thus, there is an unfairly cloud unfairly casted cloud over the whole industry. On track.

Speaker 1

And that's just not Saga. We behave differently. Our balance sheet shows it. Okay, on. Back to looking behind the curtain as I mentioned to you.

Speaker 1

I was in the hospital recently and on. Prior to that, I had planned, organized and curated a Saga Leadership Conference, which would have been the first one that we had in 5 years. I was to lead our leaders through a day and a half of innovation and growth. We had all of our new people acquisitions lined up and ready to install the vision with the entire group. Well, unfortunately for me, the call.

Speaker 1

The day before the conference, I became ill and wasn't able to be there for this very important event. And by the way, this was on. Without question, my greatest disappointment in my career thus far. I was devastated. On.

Speaker 1

As I was lying in my hospital bed feeling sorry for myself, I began to receive emails and texts from those who were in attendance at the conference on. And they read things like this. Even though you're not here physically, your presence is definitely felt everywhere. On. Your corporate leadership team is really stepping up and leading the conference.

Speaker 1

You would be proud. On track. Managers that have been with Saga for over 20, maybe 25 years were saying things like this is the best managers meeting we've ever had. On track. I quickly realized this isn't about me.

Speaker 1

It was about the character and the culture of our people that we had built and the leaders we had developed in order for them to step up and behave as they did when I wasn't able to be there. On track. Saga corporate leadership team showed who they are and who we want them to be. And it manifested itself right there in front of the entire Saga group of GMs and sales managers. They practice what we've preached and I was proud.

Speaker 1

The Saga Leadership on the conference was so successful because our Saga leadership decided it was going to be. I don't believe this could have happened or would have happened on track in many of the other companies in the broadcast sector. Then about, I don't know, a couple of 3 weeks later, I received a call from on. Phil Zachary, our GM in Portland, Maine. And he called me after the leadership conference.

Speaker 1

And by the way, he and I often talk in sports analogies.

Speaker 2

And I

Speaker 1

think it's timely because the World Series just happened. Congratulations to the Texas Rangers. And Phil said to me, you know, if I was in the World Series on the line. And I was the pitcher. And I was in game 7.

Speaker 1

And I had to stand at the mound and look down on the base path and see the murderers row of people that you all have established or we've established in the company. He said, I wouldn't want to go to the mountain pitch. People like Sam Bush, Kathy Bobinsky, on track. Wayne Leland, Eric Christian, Angela Parks, Katie Gamble, Matt Burgoyne, on track. Andrew Schultz, Mario Cristino and Pat Paxton, and of course, Tom Howe and Bruce Warner, who head up our

Speaker 2

national sales. On. And there

Speaker 1

are others who weren't at the leadership conference and are really the gas that makes the saga engine go and enable us to do all of the new things that our team on. Our teams of engineers and engineering, IT, administration, on. Digital, Accounting and Human Resources. So Phil is correct. I've said it frequently.

Speaker 1

Some of the many things that make Saga different and special on the line. It's our culture, our leadership and our people. We love what we do and we love each other. So I'll leave you with this. My daughter several months ago sent me a text that I still carry on my phone.

Speaker 1

On. And my daughter, Sarah Beth, who lives in Columbus. It really sums up our discussion and it said, when I talk to managers, I get the feeling they're important. On track. When I talk to leaders, I get the impression that I'm important.

Speaker 1

Thank you all again for your interest in Saga Communications. We appreciate your time on and attention during this call. And Sam and I are always here for questions, comments and even sarcastic comments, on track if you'd like to make them. So we'll look forward to talking with you all next month. And thank you again for your time.

Operator

Thank you. This does conclude today's conference and you may disconnect your lines at this time. Have a wonderful day and thank you for your participation.

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Earnings Conference Call
Saga Communications Q3 2023
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