Q3 2021 Saga Communications Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Saga Communications, Inc. Q3 earnings Conference call. At this time, all participants have been placed on a listen only mode. It is now my pleasure to turn the floor over to your host Ed.
President and CEO, Sir the floor is yours.
And I was trying to trying to freak dropped by two one.
Thank you for holding and your partners will be with you so something big like that too.
Mike I Wonder if we really were a library that.
Hello, everybody and thank you for joining us on this call Sam Bush.
I'm always is here with me.
To discuss what were you have done and I will be here.
To discuss what we see.
Or do you like that.
What are you waiting.
Historical.
Having a futuristic person about us.
With that I'll be back in a few minutes after she finishes our reputation.
Very good thank you Ed.
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 reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data tables.
Sockets third quarter results continued to show significant improvement as the economy continues to recover from the market uncertainties that are attributed to the COVID-19 pandemic and related economic issues. It is important to note that there are still numerous uncertainties that are ongoing including the much talked about supply chain and employment issues.
That said net revenue for the third quarter increased 19, 5% to $28 8 million free cash flow was $4 million for the quarter station.
Station operating expenses were up $2 1 million with $1 7 million of that being due to increases in sales related expenses, including commissions sales surveys and advertising and promotion expenses.
Operating income was $4 6 million net income was $3 5 million or 58 cents per fully diluted share.
Gross political revenue for the quarter was 256000 in 2021 compared to $1 8 million for the same period in 2020.
Year to date through the end of the third quarter gross political was 894000 compared to $3 1 million for the same period last year without political gross revenue increased 26% for the third quarter and 21, 5% year to date.
While we don't expect to return to 2019 revenue levels for the full year in 2021, we are pushing to get close to the 2019 monthly revenue levels as we approached the latter part of the year net revenue for July and August were both approximately 10% below 2019, while September was only down approximately 3%, resulting in the third quarter being down.
Less than 8% when compared to the third quarter of 2019.
Fourth quarter of 2021 is currently pacing ahead of the same period last year by a little over 8% excluding political keep in mind that we had $3 8 million in gross political revenue during the fourth quarter of 2020, we are seeing some political in the fourth quarter. This year isn't in October we had a little less than 700000, but we don't expect much additional political in Nova.
In December.
Our strength continues to be local direct revenue was when just that category for the third quarter as compared to 2019, we are down a little less than 1%.
We are currently pacing approximately flat in local direct for the fourth quarter of this year compared to the fourth quarter of 2019 as a further comparison any improvement in quarterly performance in 2020, one compared to 2019 net revenue in the first quarter of 2021 was behind the same period in 2019 by 20%, while the second quarter of 2021 was.
Behind 2019 by 13%.
Of course, the current fourth quarter pacing numbers exclude the potential impact of ongoing advance as previously mentioned.
For the nine months ended September 32021, net revenue increased 18, 1% to $79 2 million.
Operating income was $10 1 million and station operating expense was $61 6 million for the nine months period ending September 32021.
Free cash flow was $9 9 million for the period compared to $2 5 million for the same period in 2020.
Net income for the nine months was $7 5 million or a dollar and 25 cents per fully diluted share.
Our balance sheet showed $62 2 million in cash on hand as of September 30th 2021 currently.
Currently we have $53 5 million of cash on hand, reflecting the $10 million pay down in bank debt on October 27th 2021.
I also want to reiterate that saga reinstated its quarterly dividend with the declaration of a 16 cent per share dividend, which was paid on July 16th 2021, followed up with another 16 cent per share dividend paid on October 22021.
This brings the total of all dividends paid since the first special dividend was paid in 2012 to over $73 million.
With that I'll turn it back over to you.
Thank you Sam.
I'm talking about a few things to that.
Hum.
I got to tell you there is there is.
A great deal of travelers meant that we've had.
And the last couple of years, we're not going to sit here and go back and go through everything that you know about.
Historical area of the company, where we've come from what we've done but we do have a couple of things that we're talking about today.
And.
Okay.
Let's talk about the general marketplace.
I'd tell you too many things that you already know.
But boy it's been.
World, where they are in terms of what's happening.
Because every time, we turn around and something new occurs in terms of global events or a local events or whatever it might be that makes us have to pivot.
And quickly pivot to find new ways of and patenting ourselves and in sales and marketing and we've had that.
And we never wanted to really talk about it a lot of complaints or anything like that in fact, I was just thinking about something in and worked with enough to make sure I was correct drying up of 1975, a Henry Ford.
At that time President of Ford Motor Company was.
It's supposed to be at a meeting in London, and instead was at a meeting.
California.
And there was a fire himself arrested by the.
Small police department right books, Oh, Santa Barbara.
And script actually spent a night.
It was released in the morning.
Leaked out and Santa Barbara.
Ford was being released from a small.
Jail, and as I said promo Santa Barbara.
And I'm sure when he came out there was a lot of bullish.
He spent a lot of our reporters.
Our radio T V news or whatever it might be there and we're gonna Iris fortress, Florida, Mr. Ford.
What can you tell us about and.
Went on to explain the situation and every four just scratch it all of it to reporters inside.
Never complain.
Explain.
And.
Got it a car and was driven away.
Well, we're kind of a segue here, we don't complain.
Wait a lot.
Right now sometimes when we what are the ideas out of the bag, a pretty mature way or even discuss it. It does create some problems for us with our competitors try.
Try to jump on it so we're a little guarded in how we explain the ideas and where we go through it.
Prove ourselves and times when they did their job and their.
There's there's no question that the supply chain is creating havoc.
Havoc for us.
With a lot of our marketplaces.
It's.
It's tough.
An example.
If you are right now trying to go to an appliance store and call on them and talk to everybody.
And then at a.
Through all of those and those are the homework, we don't have any high end appliances, especially washers and dryers. We just don't have them, but what would you do have is where it gets harder to really cheap ones.
They are cheap for a reason, but those.
Those are.
Gotcha.
But they they are not the most sufficient ones, but we're just trying to get the high end appliances.
Onto somebody else and you don't want it.
I talked to.
Uh huh.
Hi.
Right.
We all know this.
Story, there are a bunch of inventory that they don't have.
It goes into construction.
Who neighborhood, but.
You couple that with the fact of the lack of staff now there is a good side to that because when you're done.
Tremendous there'll either be advertising all four of our.
Our employees.
And that's where the big money money are there for us, but that kind of tells you. It's a sad story, one where you have to have merchants take their money that they would normally spend to try to promote their own.
Stores and they're trying to find staff to our popular micro store to try and great business for them and we go into and talk to them.
And one of the things that I would say is what.
We've had to cut back here, we've got a reader's ourselves.
Especially because of staff, where we can't do that so we're not going to advertise.
Maybe we will but certainly not to the level to where yours.
Maybe we'll take some of the money that we had and use it for recruiting staff for doing it.
Make sure they take off for us, but we're finding different ways.
Ways or finding ways around this difficulty.
Things.
Uh huh.
Usually for us during this period.
Can you give me an example, and we don't normally discuss our marketing ideas, especially in new ideas.
Primarily we talk with our market managers, our creative directors.
Our sales staffs.
We're getting an idea that.
When it comes to us from within the company and argument example of why they're just shows you how we've had to pivot to find new product categories, and new areas and there's lots of them, but as I said before we normally don't discuss a lot of the things we're doing before we do them or what have been successful in the past for us.
We are very close market when it comes to that with or without ourselves but.
I got it.
Eric Schmidt.
For coming up with a great idea and and.
Forward and going out and through most of your language our market manager in Manchester New Hampshire.
And basically Eric.
A.
Company.
That's actually.
Actually it's adapters.
That produces a product.
It stops.
Inhibits snoring.
Oh, great well, whereas it's going to add Rob.
It's really right now its about $4000 or much trust in Columbus with what's why bad this with the idea. So wuxi charted and came up with a complete marketing plan for this for our show worst or to wipe out I Miss and then forever in a day.
The complete pitch the idea the.
The whole background about it through our sellers and our managers and our other markets throughout the country.
No.
From what started from Eric finding out about one product or one pick up.
Through inhibit storing.
Which.
It is.
Essentially a mouse piece it was designed by this status.
Proves to be effective and now we have a number of sellers going out talking with their local tightest might not sound big but any.
As an example, and we should continue and sit here and I could give you a whole list of things during the day.
That would show you that where we are and try to.
Sure.
But that's part of the whole plan here is to say, okay. We understand that there are problems in the sports right, we're not going to complain.
Or explain because that's something that you already know and it's not anything we need to call attention to.
As I said the information that we have just started story right now.
As rates or wherever consumer profiles testimony.
But it really is what helps us through with that makes us different than the others and are you going to go ahead and say, yes sure Ed.
Everybody's got a client or a different but our idea is kind of the idea of factory.
Finding out things and finally got ways to market them.
You know I'm not going to go into my personal background, but I.
So a number of young years, while I was going through college, working 80 hours, a distraction and I actually I ended my career in Flint, Michigan and I realized that I had reached a level of excellence I'm here in Flint, Michigan and wouldn't do that.
I ended up writing copy and I Love words, and weird view, our own people with with words and ideas and.
And it comes from kind of my thinking about this is what sells it to the imagination.
Imagination there'd be creative in finding ways that eventually do it.
That was it and then I went into.
Radio sales were up.
I had a number of years and our sales and whatever but.
One of the things I do want to mention here.
Got it occurred to me as I was kind of thinking about this today one.
And that is when I was in my early twenties, when I was showing for W. C. A R radio in Detroit and I was talking with the owner of dysfunction, Hi, Robinson and high Robinsons.
So really during a difficult time by the way it was a little off the time in Detroit.
With Ah kind of a recession.
<unk> got a depression or everybody was recession because of.
The car business at that time.
And Arvind, let me tell you.
Sorry about that.
Meredith showed hotdogs.
I go off.
It's a story about the man who sold hotdogs it.
Sure.
Uh huh.
Dark stand, but he made just the best type dark ease.
Well, where did you meet your used everything was top of the line.
Special special recipe that he had four coming up where it's at and how to prepare and how to sell the hotdogs and they'll come on lunchtime or right. After work. There were lines of people are worried and goodbyes hotdogs and he is very well until one day is southern came home.
And show them that.
How much money you're spending on your product here and don't you know, there's a recession right now.
Others is really there is a recession.
Oh, yes.
I'm a college graduate I know that there is a recession about and are they.
<unk> father went out itself.
So the first thing they did was cut back on the type of mustard.
Had.
And then what about later he knows this business is down a little bit I'm, sorry, cutback on that type of bond that he had and reduce the quality of the pod.
Yeah.
The sales went down again.
And so don't even kept.
Stopped advertising start promoting of doing everything else right now and the lines getting smaller and smaller and then you took down the quality of the of the hot dog itself.
The lines, reducing red wash it out and then a sudden came home from college et cetera.
I see your business as you.
You said Youre right side.
There is a depression or recession going on right now.
Armstrong in short is you can't look at that and we try not to they're the reason for the fact that we are able to announce the numbers that we have and the progress that we have the.
Dividends are we have is it basically we focus very much in Taiwan.
What we're doing in the business itself.
Part of it is and we've said it time and time again.
Local local local Oh, it seems that a lot of people a lot of other broadcasters right now.
Gotten into it and Theyre trying to hide from the fact that they're not alone, but they say where local local local.
And just kind of give you just one example of what we're talking about.
And I invite you to listen to many of our stations or to go to any of our stations and spend.
Hours or a day, even with everybody's heard people, where the other ones and see how we operate in.
See what goes on there that gives us that little secret sauce that we are.
We have in our business here.
And.
I was sort of St. Louis station in Detroit here I was driving her out.
Romania during the day.
It was actually afternoon, there was like a three.
Three or four o'clock in the afternoon or something like that.
Turned out of local radio station full-power radio station, well named company and all of a sudden I heard this.
Jock come out of a record Oh, I'm, sorry, I should I use the term record but the.
The doctor about it.
Stops yet.
And he's already goes I was worried what God.
Darko show and where.
He likes to say hi to build a Buffalo Wild wings Cheyenne luxury a lot of money in Baton Rouge stay underwrite, a son and daughter in San Diego and of course.
Right here in our local pilot aftershock.
The Hot Dog Oscar Mayer.
I bet that we.
Made up the names obviously.
<unk>.
But.
There was no mention of Detroit.
And there was nothing there to say that I thought this isn't a life four o'clock in the afternoon.
And a big local radio right Radio station is pipe you can get in.
And if you ask any of the people ourselves sure where local yeah. Yeah. We do that we have a little local drops every now and then to tela bio defense it might be going on.
But the fact is with what saga, we haven't described.
Ray Smith of the communities.
And we try not to be specifically, we don't work at radio stations that are large markets. We were working on radio stations that are very defined and fit the parameters of everything that we talked about it and what we're doing this is the energy of the builds saga. This is the fact that we know in a compact area we.
Can serve as a community.
Serve them locally.
Our sellers are our local where other companies are reducing the number of local sellers and concentrating on national sales, where they can sell in bulk.
Like we do in schedules.
Sure.
A month or two months or even much longer than that and in some cases 52 weeks.
But to US it's building the relationship with our clients. It makes it so important for what we do and build out and help them and for the ones that are having trouble right now.
For us to try and work with them to create ways that they can see areas of their business. They can still be monetized.
There'll be advertised.
And that's kind of where we are what I will tell you right now that I don't think it's going to get any easier for a while now I'm not going to be anybody who's gonna say like others have which is going to be somewhere in 'twenty to 'twenty. Two so we'd go to supply chain fixed I don't think anybody really knows that.
All we know is we have to prepare for continued being creative.
Continue being local continue being relevant and what we do and continue to be a thinkers.
And where we are constantly show yourself, what's the next step where do we go what's the next wave.
Hence the existing core competency of our product.
And that's what makes saga what it is Sam read the numbers I kind of read them to you. All so that's not the focus that we have here.
This has to be creative I'm, sorry to say, but of course its numbers, but.
The focus is still has the day, where are we going what's going to happen how do we how do we zig and zag, how do we prevent this without getting to the point, where we're believing.
All of what you might find the French or the newscast I Miss how can we circumvent that.
To keep you as our shareholders and thank you for being there for you for being our investors.
And we're appreciative of how do we keep this business moving forward.
During unfashionable types.
That's a question that we think we've answered and you have our assurance that we will continue on and do that because that's the only thing we know how to do.
Sam I know I'm close to topping out herself if you do have any questions.
Prices are what they are.
Yeah, we did get a couple of questions by the way I agree with you that the numbers are historical and statistical, but what you're talking about is where the future comes from and that's the important part of the business from on an ongoing basis anyway. The questions. We got a we got a couple of them in there they're fairly similar to what we've had in the past and that is about capital allocation.
Relative to our.
What we're gonna be doing with the dividend relative to increasing it potentially back to the 32 cents a share that we are at one point got too early last year and into about potential use of capital for stock buybacks and.
And then three which we've already answered in our press release was why not pay down the long term debt with the excess cash and goes on to make a point that we believe in that companies with very low debt or no debt should be worth more than companies that are overleveraged.
The long and short of it is we have reported in the in the press.
A press release that we pay down the final $10 million and our outstanding debt on our revolver October 27th. So we are now officially debt free.
And I'll, let you talk about the dividend potential increases and stock buyback.
Well, we do all sorts of credit wire, we should say that just in case and that basically we have a lot of cash. Thank you, we're very happy about it.
Great.
We talked about this.
Months about well.
Actually a lager and why or why or where you're still carrying a scuttle about why don't we just write the check. So we don't have to worry about Mr. Bankers showing up at the proper time, if something went wrong I mean, that's.
That's a very.
Short statement through it not necessarily true because we do have good great banking relations with the ones that we did.
Consider them, our partners and friends for working at our future investments and by the way, we're not done with the acquirer and were watching it that that's an ongoing task for us is to find those opportunities.
That makes sense for us even in even in somewhat difficult times.
But we intend to continue to grow the business and proper defined ways that makes sense for us.
Radio broadcasters, who will say it's radio broadcasters.
And those are areas that are important for us.
You know, we will where he talked about dividends.
Did you acquire one of which we felt was appropriate for where we were in terms of revenue, it's still somewhat of an uncertainty going on.
Believe me with my.
My commitment to saga communications and.
And the dividends that I've got I'm sure like to see them coming in.
Continue to increase.
And so do our managers, who will have to have stock of the company and other people here. We are the Golar is certainly build back through.
Apples of revenue or levels of earnings, which will support it never compromise.
The business, which is why we find we shut that will come out or whatever it is tens of millions of dollars of just pay it off and be done with it and actually one of our investors et cetera, Okay fine.
Just pay off and pay off this.
A $10 million and we appreciated that.
Get rid of it and then go out and build the business and then remember us and dividends as you go forward.
We're constantly looking at this.
I'm trying to arrive at appropriate price points at appropriate times within a company because we will not compromise the company itself.
I'm.
Over promising and under delivering.
And that's one of the big things we're always.
I'm aware of in that did I, Miss something exam none of them.
I think that covers it all I think we're good.
Well, we thank you for them and we try and keep you said 30 minutes and this is exactly where I see the.
Clock right now that's where we're headed so.
Anybody has any questions of Sam or if there are any questions.
We are a very friendly way and very open and you can just call our call us here and we'll be glad to answer individually. Those are areas that we might have missed in our discussion today. So with that said K, we turn it back to you for Oh. Thank you are there is no.
Hum.
Houses are saying take.
Kate will wrap it up as we are as we go.
Thank you ladies and gentlemen, this does conclude today's event.
At this time and have a wonderful day.
Thank you for your participation.