Q2 2021 Saga Communications Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the Saga Communications second quarter 2021 earnings Conference call.
At this time, all participants are on a listen only mode.
It's now my pleasure to turn the floor over to your host Ed Christian Sir the floor is yours.
Thank you very much for starting to sell price from the shrimp interest in conference call, we should have a day.
Well that is starting to suck on here, but I was just the.
Talking to some of your minutes ago about the story that I remembered as we're going through some items before the call.
Yeah.
Years ago sort of.
On your plus years ago, when we started the charter communications we are actually.
The first find ourselves from 1 of FM station in <unk>.
The New York.
And the.
1 we did.
We saw the 2 of 2 young Virginia.
How did your burden of ours.
And.
They were the they went to a range the beauty with the 2 different banks, the commodity and attract minimal budget for the answered.
And the shared on the conference room with the banks.
At the beginning of the rating there. So do you mind, if we just run a few numbers by any of them.
And the bankers on.
No not at all because I do have you run a few numbers by a sense of the bankers are opening their airports on everything and started taking notes on this.
And it's true young entrepreneur, so on and you're ready.
Go for it.
So there are many ways on up and figure out spreadsheets and went around the table and say we're running numbers around here.
Well the happened I think of as much the clever story in the <unk>.
World.
Fortunately the banks have been quiet.
React that way and as a result, there were probably some of the shortest operators of radio stations. So normally I would say the Sam take it and run and run a few numbers playoffs, but in that respect I think shy of won't be on much more cogent speaker when it comes through explaining exactly what we have we got on 1 of the things you talked about today. So.
Low.
Let's start with Sam and also joining us on this call from 2 words.
On a couple of areas would be crisp worthy, Chris Who's our senior Vice President of operations.
Ah is a very important part of our Oh, what on small group of bad here in women that are.
Fight the ever of Western Battle of Big Radio broadcasters more of that true on a few minutes Sam it's up to you.
Thank you Ed and I will talk about the numbers, but I will not run them around the room. This call will contain forward looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the risk factors section of our most recent form 10-K. This call will also contain a discussion of certain non-GAAP financial measures.
The Asian for all of the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data tables.
Sorry, the second quarter results show significant improvement as the economy continues to recover from the market uncertainties that are attributable to the COVID-19 panic and related economic issues. It is important to note that these uncertainties are ongoing and may increase with the recent uptick in the delta strain and its ensuing.
Ex that.
That said net revenue for the second quarter increased a healthy 66, 3% to 28 million free cash flow was $4.2 million for the quarter. During this time, we continue to manage the business at every level station operating expenses were up $2.4 million with over half of the of the increase being in sales commissions and music.
Licensing fees that are directly related to the growth in revenue operating income was $4.6 million last year's second quarter was the only quarter during the pandemic that both of our operating income and free cash flow were negative as bad as things got beginning in mid March last year, we returned to both the positive operating income and free cash flow in the third.
Quarter, ending cash continued with positive results up to and including this quarter net income was $3.3 million or 54 cents per fully diluted share.
Gross political revenue for the quarter was 430000 in 2021 compared to 289000 for the same period in 2020, we expect political revenue to be lower in 2021 due to the normal election cycle and the significant amount of political revenue we did in 2020.
In each of the individual months of April plus 83% May plus 74% and June plus 47% revenue was significantly up over the comparable periods in 2020.
Internally, while we don't expect of returned to 2019 revenue levels for the full year in 2021, we are pushing to get close to the 2019 monthly revenue levels as we approach. The later part of the year.
Net revenue for April and May were both approximately 15% to 16% below 2019, while June was only down approximately 7%.
Third quarter of 2021 is currently pacing ahead of the same period last year by 21% and below the third quarter of 2019 by 9%. Our strength continues to be local direct revenue is when just that category for the third quarter as compared to 2019, we are showing an increase of a little over 1% non.
Not earth, shattering, but a solid improvement as a further comparison of the improvement in quarterly performance in 2021 compared to 2019 net revenue in the first quarter of 'twenty 'twenty..1 was behind the same period in 2019 by 20% while the second quarter of this year as comparison to 2019 was behind 13% with our current pacing for the.
Third quarter, showing us being behind 2019 by 9% we are continuing to see improvement of course, as I mentioned before the third quarter and future pacings exclude the potential impact of ongoing events related to the Delta variant.
For the 6 months ended June 30 of 2021 net revenue increased 17, 3% to $53 million. This reflects the January and February in the first half of March were getting the year of 2020 off to a very good start until the bottom fell out with the Covid impact operating income was $5.5 million and station operating expense was 30.
$9.9 million for the 6 months period ended June 30 of 2021.
Free cash flow was 6 million for the period compared basically to no free cash flow for the same period in 2020, we had $59.4 million in cash on hand as of June 30 of 'twenty 'twenty..1 currently we have $59.6 million of cash on hand, I also want to reiterate that saga is very proud of reinstating its quarterly dividend with the declaration of 16 cents per share.
Dividend, which was paid on July 16th I'm fairly sure. We are the only broadcaster can make this statement. This brings the total of all dividends paid since the first special dividend was paid in 2012 to over $72 million, a very respectable number add with that I will turn the call back over to you.
Thank you Jeremy I think that that was better than any of you run a few numbers around those.
So we were good on that respect.
No.
This is a kind of a hard call true really.
Adjusted and coming through.
Speaking points that are are are real because.
Some companies from and they just reported 'twenty 'twenty to 'twenty to 2020, 1 and then rave about how they were doing bad at the end of year that was just a miserable year for our business in general.
And than others of what took 19 in 2020..1 so it's it's hard for us to really get out of the hands on numbers from nowhere, we're going especially with the changes that are going out of the industry are by the way partners, but there is from.
From allergies growing around up here in Michigan, right now and so if I sound like I'm, losing my voice.
Yeah.
But we'll get back to that so with the said mice.
Let's talk a little bit about what's going on in the industry and why we feel that we're in a really good position for what we're doing.
It Amazes me as I look over over the last couple of years of how radio companies strong radio companies have decided that 1 of the easiest ways to try and true of change the paradigm is true.
The change of name from radio.
And I don't quite understand that part of why.
Would take.
An identifier that is so highly recognized.
Is radio and said, we're not bad anymore of our audio and that's a very difficult thing that day to go out and tell people what do you do fairly well I ran the audio.
Oh.
Or would you say on the radio really you're on the radio how what are you doing in radio show.
We stick with it.
Because that's part of the recognition that we have and it can be introduced on what's the reserve.
And we would not change our name or go into audio at all.
That's almost of the trail.
2 of the cycle of second nature of the of industry itself from the word spread in the last hundred years.
And that's just us.
Just doesn't happen to us.
You know it.
It makes no sense.
And we've talked about it when the other companies start doing things like that.
They say.
Well, you know you gotta get with it.
Got it of contemporary you Gotta changed her name.
The change of your name doesn't change the events of what you're doing in the marketplace.
And especially as I said in the way the markets, we serve which are the.
Medium sized true.
Not on the top 50 markets, but from market 50 yard up.
Wherever you look.
Because that's 1 of the community side of it we serve.
Yep.
I just don't.
I don't get it.
And I was thinking outside of a few minutes ago.
And that's why I say I wrote in the journal this morning that the auto show.
It has been cancelled.
The New York City.
And what are the doctor that in the second but they haven't of every synchronized from okay. So.
Wait a minute.
They used to be automobiles veterans in the autumn.
Auto show.
And then the room, a clock where cobalt.
Me.
It was into cars.
But I've never yet been able to figure out how cars are related to automobiles ex after it became that and that's that sort of place. So what do we do now now that we've made this statement.
The statement that by 2030, we're gonna be 50%.
And the electric cars.
And they're gonna change them through something like 2 minutes and the way where she was a quality of moving of fishing through transporters.
So where do you go there with that dealer.
Well, because we wanted to the hip we wanted to be in through it and we can't call them cars anymore, because of that really cars or Q minutes.
And what happens there.
Or any way we are we are radio we're not going to change the name.
And that's how we are as I said identified in the smaller communities.
And a lot of people say to us all of how come Youre doing the smaller.
From a speed very difficult to do.
And it's not.
Actually that's kind of wood sales are baked in in the last couple of years in some respect where we brought the heavier into that.
Arena.
And Chris are you running line.
Greg, Okay, Chris Sotos through words and on.
So all of that just identifies thanks, Chris.
Yes, you are so welcome.
There's 5 words.
So I started talking about this earlier.
A number of years ago, we really started identifying where our businesses and that's in the local.
The businesses.
On the marketplace and maybe you can speak for a few seconds or minutes or whatever.
But what we've done there in the last couple of years.
As you are.
Look over the numbers every single day as to what's coming on and what's happening on that in terms of how our business has been changed and what the effect is and how it has helped us really kind of survive the pandemic.
And then the carrier.
And I'll do that all of a few seconds.
So to your point, we're not distancing ourselves from the word radio we're actually embracing it.
And had been for some time and we'll continue to do so.
You know you've heard digital first and radio first of all we're customer first and it's all on how you approach. Your business. For example, you know over the just quarterly of talking from a quarterly perspective through our live and local initiative, it's really paid off our local direct in the Q2 represented 50% of our total revenue.
For that period, and we averaged a $1.8 million more per month and local direct revenue than we did in local agency revenue.
And that is greatly due to our non negotiable on.
The <unk> commitment to the use of spec spot selling in the process of selling.
And also focusing on new emerging categories that here of 2.4 really haven't been involved in radio and and as as the region as a result.
And in Q2, we produced it created.
Almost 5500 spec spots over the quarter.
And our interest you.
I wanted to explain exactly where the spec spot is yeah. So of spec spot would be of spec stands for speculative. So in other words, what we would do is make some assumptions about the client that we're gonna be talking to also have a queue of Q&A or C. N. A the customer needs analysis with them spend some time to find out exactly.
Now where they are where they want their business to go then we would come back take that information and get with our creative team right of commercial and then have the produced with the clients' information on it.
And we have standard operating procedure of taking.
Things like and I mean, this literally boom boxes or of very nice the audio playback that we can really make it sound big and we take the commercial back in and that's that's 1 of the biggest pieces that we use in terms of trying to move the business forward is giving them a sample of what their their commercial and their messaging, which sound like should they be.
Looking to our audiences.
And even.
Even more than that and I think to me the value of of.
Of the spec spots and such is that when you walk in the.
To talk through.
The customer even if it's cold call and you'll have something of this here. Let me play this for you.
That you'd already made an investment in his business.
And that's the 1 on 1 of.
Tacked on.
Glue the 2.
You have with the client we were able to figure this out let me let me play. This for you know, whether it's right or wrong, but it does show is that we've made the investment and taking the time to worried about the client.
That jumpstarts ours people or the others from the market and I'll get back from that in the second go ahead, Chris I'm, sorry, Yeah. No. That's great. That's of great. That's great input and we've had that happen on awful lot of them because they in essence, what the customer would typically say no too if they would say no it's not to us but to the idea. So we have an opportunity to get.
Feedback from the customer make the changes on the spec spot and then make it even more effective for them, but as I mentioned on.
Also focusing not only on specs a lot of activity and product just productivity there, but also the types of categories of business that we approach you would typically think of it in traditionally automotive as the number 1 category followed by banks and insurance and finance as those of you typically our 2 largest categories, but in saga on particularly in Q2.
Our 2 largest categories were home improvement and professional services professional services includes things like plumbing H V a C and alike.
And if I could and there was 1 example that happened in Columbus, and I think really tells the story.
On 1 of our markets in Columbus, Ohio tells the story about how you approach the business affects how you get the business and the thought process processes that you use to try to win business from the from Advertiser, We gotta had on avail of that came from the.
Kentucky Board of Tourism and you know, it's the typical of Vale from an advertising agency out of town in Indiana in this case and the El came through and it was the 30 to 45 day lead time on it.
The went out to all TV and radio it was a winner take all of basically for.
Our budget over 2 months period of time for $65000.
So when the Columbus Group got this of Vale, They Didnt do what most companies would do and most broadcasters would do and that's react to the Vale give the pricing fax it back email it back.
The respond to the buyer of that way and then wait for an answer what they did is they went into a room basically of war room and with their creative team build of strategic plan, that's based around live and local radio.
Dealing with social our social media websites jockeying of era of air personality of Jock interaction.
On radio itself.
And parenthetically the general manager of the of the market was is the Kentucky graduate he had just taken the 7 day staycation in the state of Kentucky.
So he had all of his pictures the chronicle of his his trip there. So they put together this idea with pictures and and and the whole thing spec spots promotional announcements when they might sound like which also is another way of producing of spec spot.
And they didn't approach dislike of normal agency avail of the approached it like of local direct account would be approached as we do in <unk>.
On all the time with our advertisers and walked away with a 60000 and $600 of the $65000 by for 2 months. So we didn't have a transactional thought process and towards the piece of business. It was at the local direct and that's kind of the the thought process, that's being coached and taught to all of our leaders and our company is.
To approach every account as if it is a local direct accounts, because we'll find out more and we'll be able to better benefit the advertiser and the and so that's why I say were more customer first and digital first or even radio first.
Well.
I think it is.
He's also the.
The important for us to mention that we have through this process, we've been going through this.
Trains and the way we're working on things that we have discovered so many businesses that have net.
Ever been approached before and what are the the the quality of that Theyre coming in with and the difference was.
Starting with the I saw in the Ocala, where.
We just signed a new customer as the.
Archery school no not at all.
Sorry, excuse me and the axe throwing ex thrilling.
Yep.
Frankly, I Gotta go low.
And I say goodbye the type of I'm sorry.
The process it and.
Maybe that's perfect in Ocala, I don't know of how it plays here in Michigan, so much but again the sales person and never been total don't go to any extra wearing schools.
And we're out there with the commercial and made the pitch.
Got it and then kind of renewal on the order of getting through what are the invitation to come on back of the work.
Throw axes.
Think of it that's where we're doing very well in a lot of respect.
Is adding the new new categories.
And with the.
Change in the industry.
We're getting away from saying the.
Radio you're also seeing the.
The.
Degradation of the sellers and the.
On the business.
The other day, we were talking about the.
A radio company that is kind of downsizing and some of their locations maybe more than some.
And we were talking about the fact that the.
They were they had initially 20 of cubes and in the business and the building there where the sellers.
And they'd go out of it within a few years.
On the 20th settlers down to 3 hours.
And for Us where more.
If you add people because we have more a need.
All of the smaller marketplace and that's what's really helping us out on a lot of things that we're doing.
There was 1 of the other category, we wanted to bring up that we've been.
Of course, you're going to change from where we were a couple of years ago and of course, you can speak to that for saga.
Yeah, and you know again, we are a radio customer first radio first company, but we also recognize the value.
Of digital to complement what what our core businesses and.
We're continuing to show rather nice gross nice growth there you know now.
Now digital represents about 6% of our total revenue.
But what's happening most recently as I think whats most exciting if you look at just Q2 alone again, the streaming ran well she's my streaming revenue alone totaled in excess of $350000 and that's just for the quarter and year to date, we've written over $1 million of streaming revenue compared to just 400.
The 60 and all of 2019 so of.
The significant changes are taking place and theyre starting to.
We're starting to see the the results of of our efforts and then from a digital partner standpoint, which is targeted display and audience extension.
The year to date that actual revenue categories also eclipsed the entire year of both 2019 and 2020 and we're only 6 months in this case 6 months into the year. So we're seeing some nice nice growth there.
It's additive.
It's it's not it's not dilutive from our core competency in radio.
Right and the other words, youre, not saying, okay and sort of thing 80 cents on the dollar.
The for radio and 20% for the other we're still getting out of hundreds of cents on the dollar and then adding more in digital.
Because it's different.
The genre of per se.
Yes.
That's that's where it's helping a lot of their gross thanks youre.
Youre welcome.
Do you have any questions from any Chris while you're on.
You know what type of as lunch.
Did you get lunch.
Okay. Thanks, Chris Okay Youre welcome.
So think of Starbucks, Okay I used to.
The hearing from you there.
Thank you on the hallway here.
Anyway, I think that's you know somebody of important things we're looking at.
Part of what we're talking about it as is the tradition of radio we're talking about the fact that the the.
People that are inside of the stroke care about what they're doing in terms of this net cutting not trying to find the quick ways to pretend that the serving the community, but doing what we're doing and the.
That's so important to us 1 of the things we're doing now for instance.
We've got from advertising going up where we're watching the higher.
The number but it's quite a few.
New.
Our broadcast.
Newspersons Newspeople Newsperson Newspeople and 1 of the kind of also cross pollinate from being on the errors is of good news reporter.
But then kind of also buys you go over sort of the morning show or whatever else and segue right out of the newest class Andrew of conversation, where the morning show that again shows this whole infrastructure that we're trying to build the is 1 thing for the community.
They weren't Wifi news when they want to find whatever else is going on when they want to be entertained when they wanted to know.
What's happening to the.
This local sports theme of whatever we can deliver that and that's what's leaking out of <unk>.
Radio today, and even as the rate continues to go faster and faster and at West of there is a bunch of little Dutch boy He's out there where the fingers in the day of we.
We could be in trouble, but we won't be a lot of other people could be in trouble.
And that's what we kind of look out on that.
Sure Mike.
Kind of getting close to being over.
What else from sure we talked about.
Of the only thing we had come in and we had a few questions come in but they're all basically the same questions and 1 I think you've already talked about it a little bit and I'll just address briefly as you know.
The fact that we do believe radio advertising.
As Chris pointed out is very effective with what we're doing the spec spots and so forth and is very competitive with digital advertising. We hear on you know every newscast every entertainment cashed about digital digital digital digital well, that's great, but it works so much better in conjunction with radio advertising and.
And we feel very competitive and very strongly that our stations will be able to continue to compete.
With the googles of the world the Facebooks of the World because we are live and local and we do it online we do it on air we do it on site and I think that's very important and then the other question again came in from the <unk>.
Several people, but it's the question. We we talk about we've been very conservative to a degree anyway with our cash balances during the downturn and building cash during the downturn.
In anticipation for the future and the question becomes your thoughts at this point about our plans for the cash position relative to acquisitions relative to stock buybacks relative to dividends.
On the dividends first because I know that comes up a lot.
And.
The waiver here was difficult and the 'twenty 'twenty when we had to.
Stop the the dividend airport.
Or just part of all of it for a temporary period of time.
There was nothing at all of that where you like doing but we have no idea because we didn't have any visibility into the future and we didn't know of down it would be so we wanted to maintain the fact, we've always had the fact that we have a great deal of cash liquidity and the <unk>.
Company and it makes me think of golf.
For us through.
Analyze that we sat down and we said all right.
The increase of the half of what it was.
As the board of directors.
What is true. This show that we then have the ability to watch and see how we can build this point back up to where it was historically and that's something that certainly is high on our screen here's the use our cash to reward the shareholders.
Who had been very very understanding of the company.
In good times of Bad times, So that's important for a third of its the have the second wave of.
I feel that in the next couple of years Youre going to choose from really good opportunities in the markets in which we serve through acquire and build or even the markets, where we don't currently serve but the markets that are the very.
The fine criteria that we use for working for radio stations.
And that is and when I tell you up and sort of tough criteria, because we're not out there just adding stations for the sake of of adding them. We're not about to sales. While we just want a cluster of 12 radio stations.
They have the fit.
On the 5 or 6 criteria that we have in place and if they don't the then.
It's not it's not a factor of course, but I think of it can be some very good ones and some companies get.
Tapped out.
And right now that we know that if have you had to go back into the marketplace.
And borrow money, you're looking at 6% to 8%.
And that's that's a lot of scrutiny of woody's going out the door and there. So we're trying to keep money available to us if we decided we're going to buy something and the other we still have a good line.
And on.
On that but we are reviewing that and we certainly understand the fact that people are working on it. So you got too much faster on hand.
Well I don't know if there's ever too much cash I'm the way there as a point or.
Going into the selling season.
On that but we're looking at the fact that you know could we go out into 'twenty of $30 million or more in the acquisition yeah.
They're right now no on when I tell you that the the broadcast market is in terms of the trading market interest out there.
If you go on out and talk through any of it.
Any person in that market are any broker.
They'll tell you with or like the Maytag repairman.
Sitting there waiting for the phone of rig and hopeful that somebody will call it and I ask on an appraisal well or credit hedge part of appraisal, but that's just hard work on our.
I've got somebody I want to buy something at this point in time.
Well, what I tried to have we done anything yeah. We've done a couple of small acquisitions in our markets and they were very certain wages.
The client plants in terms of what we're doing.
There are 2 markets come up where we picked up of am FM stations are there.
It is essentially a news talk station.
And 1 of the markets in the second market, we haven't it outside of the upfront. It will also be of plans to do that and enhance that in the marketplace.
Because radio boy very strongly.
Talk radio and more of us having the talk switch over from 8 am to F M and we need those are acquisitions there.
But in terms of the cod of the pricing on all of the.
The stock buyback.
I got on something in Wisconsin, we brought up in the in the board meeting and if we got to that point in time, where we did have excess cash on cash on cash.
Cash on hand.
That's another area of the way, we consider over the year of Sam how much of it.
I'll get back in stock.
I don't know.
With me, but it's been a sizable number in the in the tens of millions of dollars.
The way I might say 72 or something like yeah that 72 is the total dividends. We paid since we started the dividend of 2012 and I've actually got the the total stock repurchase spend my office, but I don't have it right here with me.
I was just hoping to see if all of it over the years sort of it's been.
The same quickly Russia sort of his.
Reams of paper on actually Okay here I've got it actually do have it here with me.
The total purchases since the inception of the plan, which goes back. Many many years is 50 almost $57 million.
The dollars in star of ours is too far off yeah. Okay.
And dividends Boy, Sam that was really that's the fast catch right there I got a day.
Thank you for that I was running again at I was running average.
All said I missed the no I think that's of good coverage and it was good to have Chris on the line with us today.
Well, we got to introduce them every now and then.
I mean, he's going to bring Chris out of them.
On the chance of staying on the edge of the stage and say Hi, I'm, Chris The Actuary Christmas has been with us for a number of years. He was our general manager in Columbus.
You brought up here on a several years ago.
And 1 of war and a lot of retired on Chris.
This has been just wonderful for us and the team here.
We just thought we'd bring them from behind the.
The the stage and the government's.
During the first few words on the I'm a big Mark here. So thank you Ed and thank you Sam.
So he speaks again alright that's of interest.
And I, thank everybody for being on the call today, it wasn't sanmina and even Chris who would be available to talk to anybody and we're here on the office of.
Please feel free we've always been accessible.
We don't have scripted material.
We use of.
Our hearts interfering in out of love for the radio and.
Though we've had to make some modifications and how we do it we know that believe me radio is still an integral part of.
All of America.
And you'll never find us using the word calling us where audio.
All of of Reuters.
I like that that's pretty good like that.
Good audio Proliferators.
Yes, okay write that down.
All right everybody. Thanks, so much for joining.
Joining me on it on the call today and again.
We're ready to go on to the Doctor was we love to talk about the radio.
After the and we'll turn it back over to you to wrap it up.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone line at this time and have a wonderful day. Thank you for your participation.
Thanks Catherine.
Yeah.