Q2 2020 Salem Media Group Inc Earnings Call
This revenue sources very stable and.
Many of these advertisers in programs have been with us for decades.
Recently, we made investments in digital including Salem surround they multimedia advertising agency with a focus on digital advertising.
And we launched save them now.
Recently and on demand pay per view video streaming platform.
Together both of these are provided results that help that they've helped us provide results that help us outpaced the industry in Q2.
National Christian Ministry Block programming revenue, which represents approximately 30% of broadcast revenue was down less than 2%, providing an important foundation for our broadcast business.
And we had another good quarter of growth in our local digital business, primarily because of salem's around.
Local digital was up 54% or $2 million.
We're pleased with this growth, especially in these challenging times.
And we're encouraged by the importance of both Salem surround and say well now both are certainly contributing to our overall revenue mix.
Local spot revenue was down 42.8% of the quarter national spot revenue was down 36.7%.
Are these declines of course are related to the pullback in advertising revenue that the entire industry as experienced.
Political revenue did not play a significant factor in the quarter. We recorded 600000 political revenue in the second quarter, but this year.
And 400000, the second quarter of last year.
Additionally, miscellaneous revenue declined 45.1% principally due to the absence of life advance most of the miscellaneous revenues associated with live events, if one kind or another.
Broadcast expenses were down 12.2%.
Due to lower commissions and of course, the cost control measures that I mentioned earlier.
Revenue in our National Digital Division declined 5.2%.
This decline is entirely related to our Christian web sites, which experienced a 16.5% reduction revenue due to lower advertiser demand and lower programmatic advertising rates.
Revenue in town Hall media, our collection of Conservative news and opinion web sites actually increased 19.2%.
Due to the revenue from the Townhall VIP subscription product, which was launched in November of last year.
Expenses in the digital division increased 0.1% minor increase due to increased expenses associated with the rollout of town won't VIP much of which was offset by the previously mentioned expense savings.
Finally revenue from our publishing division was down 29.8%.
This can be attributed to the fact that the majority of book stores in the country were closed.
And Amazon be game began making decisions to prioritize the shipment of a central products and delayed the shipment of books.
In terms of Ourself publishing book sales they were down as many authors chose not to buy books, which they typically buy from us on demand as they could not promote their books that live events. So publishing expenses were down 3.6%, but certainly not enough to offset the decline in revenue.
Additionally, corporate expenses were down 11.1%.
And with that the Evan I'm going to turn the call back to you for additional details on the quarter.
Great. Thank you Adam.
Second quarter total revenue decreased 18.3% to $52.9 million.
Operating expenses on a recurring basis decreased 8.2% just $50.1 million.
This resulted in a 72.4% decreasing adjusted EBITDA to $2.8 million.
Yeah broadcast revenue decreased 19.6% to $39.5 million in broadcast operating expenses.
Decreased 12.2% to $33.1 million.
Opinion station operating income of 6.4 million a decline of 43.9%.
On a same station basis net broadcast revenue decreased 17.4% to $38.7 million in Sri decreased 43.9% to $6.5 million.
These same station results include broadcast revenue from 95 of our 99 radio stations in our network operations and represents 98% of our net broadcast revenue.
I will briefly review revenue performance of our strategic formats.
37 or radio stations are programs in our foundational Christian teaching talk format. These stations contributed 42% of total broadcast revenue and decreased 14.4% for the quarter.
I was 32 news talk stations had a decrease of 19.7% revenue for the quarter.
And overall these stations contributed 17% of total broadcast revenue.
Revenue from our 12 contemporary Christian music stations contributed 13% of total broadcast revenue decreased.
47.8% for the quarter.
Our network revenue decreased 14.7% for the quarter and represents 11% of total broadcast revenue.
Revenue from our National digital media businesses decreased 5.2% to $9.4 million and represents 18% of total revenue.
And our publishing revenue decreased 29.8%, Jeff $4.0 million in represent 70% of our total net.
As of June Thirtyth, we have 216.3 million bonds outstanding in $19 million drawn on the revolver.
We also had $19 million in cash.
Our leverage ratio was 8.96.
As Ed mentioned due to the continued uncertainty surrounding the current economic environment due to current 19, we will not be providing guidance for the third quarter.
But while we're still closing the books for July I can tell you where total revenue looks like it'll be it should be down around 2%.
Broadcast revenue in total.
Yes, essentially flat and even up a little bit on a same station basis.
Local spot advertising was down 19% and national spot advertising was down 9%.
Local programs were down 22%, while national programs were down 2%.
Local digital revenue was up 132%.
Our broadcast division results were aided by strong sales at Salem now.
Revenue in our National Digital Division increased 2% in publishing revenue declined 28%.
And this concludes our prepared remarks, and we'd now like to answer any questions with that I'll turn call back over to the operator to facilitate that operator.
Thank you, Sir if you'd like to ask a question at this time. Please signal by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure that short mute function is turned off to allow your signal to reach our equipment.
Once again that is our one if you'd like to ask your question.
We will first go to Mike Kupinski with noble capital markets.
Thank you for taking your question a couple of questions here.
First of all the revenues were a little bit better than expected in.
I know that it's been a sacrifice on all of you guys. There in terms of your employees going through this crisis EBITDA hats off to you guys to manage through.
Crisis.
And hopefully we are on largely on the back end of this now.
But I did have a couple of questions regarding your block programming. How are the ministry is doing in this environment do you think that I know that you have typically regular rate increases as you cycle into next year.
Think that they're healthy are they doing okay or do you think that there might be some concessions as you need to go forward here within just kind of just the general outlook for that pushes a block programming.
I can certainly take part of that as you might want to speak into it as well Michael but.
We check in with our ministries.
Quite regularly we have a great relationship with them and so on the phone with them weekly.
Most part most of the industries are reporting.
A relatively stable donor base, even during this time.
And so none of them, they're kind of raise our hands and.
Expressed some real concern I think as we go into next year, we'll certainly need to be mindful and the environment Network then as we make decisions on what the proper rate increases would be for the coming year.
We did that back in 2010.
You know, we looked at things and decided to do a lower than normal ascom rate increase and we'll look at had environment again as we go into 2021, but the relationships are strong and so far.
They seem to be relatively stable.
And then in turn so Bob good publisher side.
It certainly that that portion of the business, even though the revenues were a little bit better than I expected in the quarter. It still looks like that business with kind of separating more than some of your other lines of business is reflective of the fact that maybe some of these offers are not give us.
No not buying the books, but are they just delaying the tidy up at all.
Is there any just given the weak market at this point that obviously, it's not the best environment to kind of watch. Your book are just kind of getting some general trends in terms of the outlook for the number of titles that you anticipate in the back half are they that same as you originally thought or you kind of delayed some of these goals.
Well certainly have themed books there lag.
We have.
Many many books bookstores kratos with Amazon Halliburton, prioritizing essential shipments and not taking delivery of books.
Was necessary to delay some resets.
Even the books that William base without political Tri Pointe it's.
Important to have publicity for those offers on these talk radio stations use TV stations and Weve cozad all of the Shilohs, 100% focused on because that crisis.
And really weren't interested in talking with offers on the books on other subjects. So it's kinda in Q2 is kind of a perfect storm or.
No traction on any of our books.
In terms of looking ahead to the rest of the year frankly, it remains unclear.
What's the rest TVN is going to look like and assume any book stores closed.
Yes, I'm certain that the election, it's going to get I want to contracts.
Election related books have yes.
Good prospects.
It really is.
Very dependent upon what happens with kind of it sort of.
To give you any feel for what the rest of year is going back.
Gotcha and then.
Other can you just.
Kind of reiterate what gives you said in terms of local digital how much was it up.
In July I don't know I got that number correct.
Sure the National Digital Division was up 2%.
And I wasn't sure if you're talking national or any local he was saying broadcast local was up 132%.
Okay, Thats, what I was.
Gets.
Thats, largely though the sale and surrounded now right that's reflected in that those numbers.
Correct.
And then I guess in terms of digital business are typically an election years, you'll get a little bit attraction traffic kind of picks up and of course. This is kind of a weird environment, where traffic to the linear sites were up anyway could you just kind of talked a little bit about the traffic trends.
July and how that you know now that you comedies are starting to open up part of the traffic trends still being pretty strong or what can you just kind of give us an outlook on.
How the traffic to your sites is performing.
Sorry traffic on the conservative sites is at record levels.
You know people.
I want to visit the use website to use opinion web sites because they want to know what's going on with codec Boise State Trust and then we've got the election at the same time. So all of our consensus opinion website traffic is fantastic and continues to be fantastic.
As that is offset of course by the fact that programmatic advertising rates have dropped substantially.
At the same time, so it's not all good news.
On the Christian aside the traffic is.
It's closer to flat.
It took a very nice bump up in April.
During the crisis first fit but it has come back down to more normal levels and Reits continued to be depressed.
Then just just a couple last quick question political advertising.
You have any visibility on how that shaping up is that being booked at this point.
Thats fair.
On the broadcast side I can tell you that it is picking up Michael we've seen from more political activity in the last.
Couple of weeks it was pretty quiet for a while we've seen a little bit more political activity.
Picking up both on the.
On the terrestrial broadcast side as well as even through our AD injected.
Streams.
Thank you.
Sorry, I missed.
I'm sorry go ahead David.
And the same is true on the digital side the political advertising has picked up in recent weeks.
And it is it presidential money or is it just mostly kind of steady house races, what we're where do you see the lion share the political powers.
I I, probably need to get back to you with a more accurate answer.
I'm not sure right now as such.
Much presidential money as it is.
Pac money amount of money, but I, Michael I can follow up later on for with fuel on that okay, perfect and I just have one final question listen kind of more of the macro thing I know that big Tech was before Congress.
You know recently about anti competitive practices and I know that there are some other countries that have measures in place where by many of these big tech companies have to pay for content and maybe a little bit more.
Competitive I guess I know that in the past, David you've indicated that we'd like to Facebook and then.
Heavy competitive how the direct traffic and so forth.
They are are you seeing a better environment as it relates to the because of their scrutiny or do you think that Congress is going to have to act or what are your thoughts in terms of just the competitiveness of the marketplace has it gotten better or worse.
[noise] Hasnt hasn't really changed in terms of kind of what we see.
In terms of traffic from Google and traffic from Facebook.
They continue to say issues and challenges in the in relation to I guess, what I'd call content censorship.
And certainly the algorithms continue to change yeah, I Wouldnt, yes, but I think.
Overall, the amount of traffic great getting is looking changed.
Gotcha.
Right. That's all I have thank you so much.
All right well take our next question from Lisa Springer with singular research.
Thank you.
Looking out beyond the scope of 90 thing I was very interested me.
Then just announced that you I wonder if you can talk about that little bit of terms, just strategically and where that might take your broadcasting business.
Release, I had a little trouble hearing you want to can you repeat that place.
Yes, I wanted to ask you about the Q you you deal and then in terms of strategy can tell that they tend to everything you're doing.
Yeah, well you know look I think the ER.
Radio needs to be as competitive visually as some of our audio competitors are you know the user experience on spotify or for that matter Sirius XM or Pandora.
Currently involved includes your album Art aired artist and title.
And so I think on radio or our ability to provide a better usual user experience on the dashboard visual experience from a dashboard.
It is important from a competitive perspective, and so certainly Q. You you are key irrs are called offers that depend on top of added it offers the ability.
To interface more with our advertisers show when we're running a spot for Mcdonald's.
At the same comment that spots running it can say across the bottom in the strain.
I'll skip to TJ Maxx for five Bucks, So five o'clock Tonight, and so we can reinforce the selling message if they're hearing on the radio and provide.
Just.
Better results for our clients and sell it better user experience better results for our clients that we can also charged them more to receive.
To me was a good idea and something that strategically from along for the long term I think I think all radio is going to need to get there.
And I know you're rolling them out in 28 stations. Initially how are you going to make sure. The success of this effort.
Well it is first of all rolling it out everywhere, we have where we have.
For market FM radio stations are not on half I'm translators, but I heard where were Salem hasn't FM radio.
Radio license radio station is where we're rolling it out because it's really a service only four.
You know for FM radio show.
So so from a testing perspective.
Once we roll it out.
And we have sales packages on the street, which will be synonymous with the rollout.
At that point, we'll start to measure the success of it and.
You know and.
Take it from there.
Okay. That's it.
All right and just another reminder, is star one if you'd like to ask a question. We'll next go to Michel them with New York Life.
Hi, good afternoon, Thanks for taking my question.
A quick one I am I doing a little late I'm not sure I don't everything.
And your liquidity you mentioned that 90 million, what's gone on them and involve are continuing and total commitment.
You are the inability on that.
Yes, we did you have some availability if it's a function as you know as our receivables and then some value debt on a real estate.
It's about 23.
$20 million to $23 million in total availability.
So we still have a little bit of excess.
Could draw on.
Okay, and then you generally have generated a lot of that and tashi during the quarter.
Matching it from working capital can you just can't qualities and bringing about how you were able to generate.
Cash during the quarter.
Yes, certainly one of things that we disclosed in our 10-Q, we have done too.
A couple of our largest ministry clients and had some.
Advanced payments from them, we offer them a small discount.
In lieu of or in exchange for getting payments early so they paid there may through December air time, Bill in the month of May needed that just to make sure we had ample liquidity for the June 1st interest payment.
And.
I have heard we have right now or at the ended the quarter. We had 19 million cash I can tell you as of today, we have 18 in half million dollars in cash so.
We seem to be holding our own on your liquidity perspective.
And.
What im seeing in terms of that cash flow.
About.
Kevin.
<unk> million of contract liability that's related to the minute cheap.
Yes.
I have to see what that number was in June as far as what they have an advance payments, but it was 8.3 million total.
We got in advance payments from the industry, So probably the energy and seeing that 7 million dollar range that make sense.
Okay and then.
My last question is what I'm asking Sam.
Yeah.
In previous quarters, and that you know valuable real estate assets from other assets you can potentially monetize.
Can you talk about you know.
Nothing on how that process is going or how.
How much it has been kind of delayed or post on driving drunk collyn.
And as soon as opportunities to monetize other aspect.
Bars, the real estate goes we got active about three or four locations that are.
Progressing there are.
In some cases entitlement issues that will maximize the value and will facilitate the transaction and so we've we've initiated a lot of those procedures, but there are at least two or three that are fairly far along in the process, where we are very active interest.
Where we can.
Where we can monetize a real estate asset without in any way diminishing our broadcast.
Capacity. So we don't I don't want to get into too many details barrels a little premature but there are at least.
Three that are progressing and that we that we feel fairly optimistic that within the next.
By the end of the year, we probably will be able to.
I have more clarity on it but I wouldn't be surprised on speculating that wouldn't be surprised of at least.
One or two of those are completed.
Would you be able to disclose sort of magnitude or.
Good day.
So yeah, I mean, I think it would be a little I think it would it would be a little premature I mean, we we have one side that are that.
We're working a situation where we can.
With a modest investment relocate our towers to one part of the property and then than the rest of it off and it shouldnt that something.
No.
Okay.
Thanks.
Six $7 million something in that category.
Thank you.
All right well to the next question from Howard Rosencrans with FDA.
Yes, hi, guys. Thank you very much I. Appreciate you taking the question I was trying to I just want I'd say, Evan I must tell.
Tailed off I didnt catch it if they just focused on the broadcast division is the other ones are kind of small, but what did you say about the broadcast for the month of July.
The broadcast division for the month of July was essentially flat.
But on a same station basis, it was up just a little bit.
Okay and what we.
A big number you gave out of 130, what what gives me a lot in Britain, 30% what business was bad.
That is the digital division or the digital revenue within broadcast division.
Okay, I was asking educational.
Pumping.
Salem now yeah.
Okay. So the.
Hi.
Okay. So.
Yeah. This is.
Have you started thinking Oh I know the first question I wanted to ask it was not the 18 staring can you give us an idea what the cadence was April May June. He said it was flat in July can you tell us how it ran April may June.
Yeah no apart.
I guess division the rest of the amount of tomorrow.
Correct.
Cast in April was down about 25%.
May was also down around 25% June was down 9%.
Okay and tell us how much of June or July was up is political.
If you were to go ex political how did those how did those months flow again, you can just ballpark it.
It's not significant certainly for now the second quarter, we only had 600000 political compared to 400000 in the second quarter last year. So.
Moving on that topic.
Okay. Okay. That's good okay, and how much political did you guys do in [laughter].
You probably have a pretty good idea drop you had amerigas.
How much political did you guys do win.
In.
Let's say August September October in the first few days of November in 16.
I don't have that funny, but I think I do have Q3 of 16, so but just looking out one quarter.
Q3, 16, do a $1.5 million in political okay, all right not that much okay.
Yeah, it's nice to get a million on happened not that much are there any hi.
So your leverage ratio is it in the eights and that getting that's is that batch trailing 12 months.
That's correct.
Okay. So is there so your leverage ratio is in all likelihood getting going to go up because unfortunately this thing never seems to.
Got a lot better but anyway.
Any any issues with the and you've got the advance Mike are you never know I mean, no covenants on 220 stop and.
And the revolver result, tied to some sort of receivables.
So we don't have to think about.
Anybody any banks or or so we don't have to think about that stuff is that fair to say.
That's correct. So the the bonds have incurrence test.
On leverage, but thats, if we want to take on any new debt.
As long as so there is no maintenance covenant, so we're not worried about that.
And the receivables.
And certain other assets secure the BRL and there's a fixed charge covenant test that's only applied if we borrow in excess of certain amounts.
Okay, So sounds like and what you.
You probably wouldn't be easy to go to market now so unless you guys went to market where we're okay.
That's why it sounds like I think I think there's a fair statement.
Okay, and I I didn't exactly catch what David said in terms of.
You mentioned there were few real estate project and it is it that collectively they're worth six or seven or or or they'll that lower or how we certainly want to them.
That was just one and I felt that there are three there or there are three that.
Our sort of.
Very very active stage of marketing the properties and we've got lots of interest, but did maximize them, we're taking steps to modify the zoning and and then bring them closer right maximum entitlement and but we have but we have interest now, but we want to maximize.
In some cases, where you're.
The one case I mentioned, we can reorient.
The towers, we have on the site in a way that maximize their efficiency doesn't diminish their coverage and allows us to.
Two.
Well off the bulk of a property.
Okay. That's we just wanted a property assuming you have another two am I did I hear you correctly.
Well, we haven't done okay raised the of different magnitudes one as it is.
Little for its going to take a few more months and and what is a smaller is smaller properties. It's available now we just.
We were taking a look at the entitlement to see if we can maximize the value.
Okay. So the biggest one is going six or 7 million dollar thing yes.
Yeah Yeah.
Well, there's other times out later I'm sorry.
I'd say there are others are that it but were approach that magnitude as well.
Okay, Okay, but those are not amongst the three.
No well.
We've got property all over the country I mean, one of the things about particularly am radio side, because they take a lot of real estate.
So I would like we have we have we have three sites in Dallas, three or four sites in Dallas 160 acres. Another one is that.
Yeah, we got big tracts of land that so.
The.
So it's always nice barrels from real estate it might give us a launches in the future.
Okay and.
It certainly good to hear it certainly good to hear.
The.
All right well.
Yeah, right I, certainly hope for you wouldn't per roller rush that to.
The environment.
Okay.
The starts to improve.
You guys are an integral part of the or the conservative roll them.
Like we see all Bobby.
Well the.
As you mentioned there is the strength of the listening audience like to see that hopefully start to get better reflected in the.
And the ad rates.
It it's.
How much of your business just sort of Programatic. These days and how much is I.
I guess the stuff that obviously the stuff that you have the that.
Wrapping the word they.
I have one part of the boot business, which is that the churches and the other part has been non churches, but.
How much is.
How much of your business closed so again just live in broadcast how much flows through programmatic and how much slower than in other areas.
A fair amount Howard <unk> of our business on our streams Sham extremes of our radio stations now.
Programatic so we're generating.
You know.
Tens of thousands of dollars Amman for now and had injected around I know.
On our with long on radio station streams, and perhaps mostly programmatic advertising.
Okay.
Hi, everybody and thank you so my congrats from Africa.
Programmatic as a percentage of total growth cost.
It's very small.
No.
Okay, I guess I missed a screen okay. Good moments since the end rates aren't very good them.
We'll worry about that less anyway. Thank you for all the data.
We've not trying to sell direct.
Right, so much higher when the deal directly with the advertisers.
Okay, and how much it and.
What would you say is the fall off.
Today vis-a-vis or mid July whatever time.
What would you say is the is the roll off now versus pre co bid.
Is that what sort of represented by the by the flattish year over year number that that having quoted is that is that sort of representative that.
I mean be pretty good or bad rates were sort of flattish year to year is is that so let me talk to the digital side of things because that's really what programmatic comes into play or not is on our digital division I would say and programmatic write downs.
Thanks, compared to procure but that's really affecting my vision. The digital division is relatively small him back in the context of everything it's it's the broader I asked it.
It's the broadcast headset, so it'd be able to look into broadcast division how would you say late saw year to year.
I think what rig rates for terrestrial radio right now Howard or down there down.
In general probably 15% demand.
But a again, what's what's helping Salem right now do better than.
Our competitors.
You know eight or two things foundation and ended.
And innovation and it took away. The company was founded was was on the assume.
Very stable block programming shales save a lot of direct sales to advertisers coupled with all the innovation through Salem surrounding sale now on those two things right now it's come together to help us to do significantly better than most broadcasters.
Got it.
Got it okay. Thank you for all the color I really appreciate and good luck. Thank you.
Thank you Howard.
So thats one of the questions. We have at this time, so I'd like to turn it back over to Mr. I figure for any additional or closing remarks.
Thank you operator, and again, thanks to all here for joining US we'll look forward to visiting with you on our next report when we give the results for the next quarter.
Thank you.
And that does conclude today's conference we thank everyone again for their participation.
[noise] [noise].
HM.
Hmm.
[noise].
Mhm.
Hmm.
[noise].
[noise] <unk>.