Q4 2021 Saga Communications Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Saga Communications fourth quarter and year end earnings Conference call. At this time, all participants are in a listen only mode.
It is now my pleasure to turn the floor over to your host Ed Christian Sir the floor is yours.
Thank you very much walking everybody through another one of the worst throwing us Andrew.
Training shows.
I will tell you that the same bush of rehab momentarily where does she is you're right now, but I also want you to know that sounds Oh.
Elaborate numbers, which will occupy several minutes.
Are they only scripted thing that we have today the rest will be oh.
Hum interesting shall we say and without knowing the sham will be interesting to I don't want to say that what has just not interesting.
So because it's giving me the evil look right now.
I'm sure that would be quiet for a while.
Thank you at.
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.
For the year ended December 31, 2021, net revenue increased 13, 1% to $108 3 million.
Gross political revenue for the full year in 2021 was $1 8 million compared to $6 9 million for the same period in 2020.
When political is excluded gross revenue increased 18, 4% year over year.
Station operating expense only increased 2% to $83 2 million for the 12 month period, while operating income was $15 1 million compared to $3 9 million when impairment charges are excluded for the year ended December 31 2020.
We had no impairment charges in 2021 free cash flow was $13 8 million for the year compared to seven point say $7 6 million for the same period in 2020.
Net income for the 12 months ended December 31, 2021 was $11 2 million or $1.85 cents per fully diluted share.
Net revenue for the fourth quarter of 2021 increased one 4% over the fourth quarter of 2020 to $29 2 million.
Gross political revenue for the quarter was 886000 in 2021 compared to $3 8 million for the same period in 2020 without political gross revenue increased 10, 6% for the fourth quarter. While station operating expenses were up only two 3% for the quarter to $21 6 million.
Operating income was $4 9 million free cash flow was $3 9 million for the quarter net income was $3 7 million or 60 cents per fully diluted share for the fourth quarter.
The first quarter of 2022 is currently pacing ahead of the same period last year by a little over 11%, although with the recent global turmoil, we have seen a bit of a softer market develop in March and going forward.
Strength continues to be local direct revenue.
Direct in the fourth quarter of 2021 was approximately flat with 2019 and 14, 3% ahead of the same period in 2020.
For the year local direct was below 2019 by only three 8% and ahead of the full year 2020 by 19, 8%.
Local direct represents approximately 50% of our total net revenue for 2021.
Yeah, and Chris are going to talk a little bit more about this in a little bit. This is up from 46% and 47% in 2019 and 2020, respectively.
Our balance sheet shows $54 8 million in cash on hand as of December 31st 2021. Currently we have $56 2 million of cash on hand, I also want to remind everyone that saga reinstated its quarterly dividend in 2021 with a 16 cent per share quarterly dividend paid on July 16th followed with another 16 cent per share quarterly dividend.
On October 22nd.
On a combined 16 cent per share quarterly and 50 cent per share special dividend that was paid on January 14th.
Sockets Board of directors declared a further dividend of 16 cents per share on March 1st to be paid on April eight of this year with the recently declared dividend saga will have paid over 78 million in dividends since the initial dividend was paid in 2012.
Capital expenditures in the fourth quarter of 2021 were $1 3 million compared to 434000 for the quarter ended December 31, 2020, and 4 million for the 12 months period ended December 31, 2021 versus $2 3 million for the same period last year.
The company expects to spend a bit more on capital items in 2022, as we reduced our capital spending in 2020 in 2021 due to the uncertainty associated with the COVID-19, pandemic and resulting supply chain disruption.
Currently we expect to spend approximately five and a half to 6 million for capital expenditures. During 2022. This does include a couple of building projects, which we will discuss first further as the year develops and as they come to fruition and with that I'll turn it back over to you.
Actually I think we finally finished one of our building projects with a brand new studio building.
In Ocala, Florida.
Which we.
We should have the opening party and I think several weeks on it.
Wrapped up as it is an island of engineers are working on re wiring and so that's one of the capital projects that is done for a while.
When I started as I said everything was kind of scripted I didn't really mean that.
Dry Victorian manner towards.
But I do want to have and I do note.
Kind of a similarity in the other.
Her job presentations.
Where a lot of the conversation really goes towards a discussion a overall kind of like what SAP did but there's more to it than that and.
And I I I I've kind of like to share with you a little bit behind where it comes out and we'll call. This for.
Incidence today, a peek inside the kitchen of the restaurant.
And sure why not.
And I think a lot of things happen when when we're talking about the business and all of them.
Threw everybody outside is that they're really talking about the front room, which is usually at a nice restaurant.
Well decorated and everything else like that Procter where you put together.
And what kind of you said Gee. This is a nice place to go but you never really say cause I go visit the kitchen to find out exactly how they serve the sort of a meals.
Let's take a second and go behind the scenes or actually maybe a minute or so or whatever.
And I want to talk about.
What happens in the kitchen, and when we talk about.
And bulk.
The revenue that our radio stations generated what's called out part of the kitchen and how its put together on what it is so that you have a better understanding when you hear the numbers.
Or dollars or whatever we have in there.
Where it comes from.
It's prepared than what it is and it really and we're going to get into a little bit with Chris on those.
When you go to hearing the numbers on that so I am just raised.
What we're doing on that.
There.
Broken into a number of different.
Our parts are national.
National unreasonable dollars, we'll talk about that local agency and their local direct and in digital and events and a few other things like that.
National.
Things have changed tremendously because I I I remember for.
Decades ago, when I first started and itself. So I had a wonderful wisdom in Detroit.
Now, we do see a our radio.
The agencies I called it.
And without warning.
Worrying experience.
I actually happened to me in my first job and <unk>.
Sales from its way back when and the owner of the station was a a fun guy a gentleman by the name of Bob Howe Robinson.
And it was somewhat unusual because of the 2000 what radio station.
Detroit There was all by a single proprietor and one day I went up to them and actually Mr. Robinson.
I'm trying to learn as a salesman.
Salesmen here or there where things can you tell me how radio stations price.
Their advertiser.
Let me pause and he said well I'm going to tell you a secret.
Okay.
Nobody knows.
How pricing exist nobody can sit down and tell you.
Our rate is established.
He said what you should know is that you keep raising their rates until people stopped paying.
And you know you're charging too much.
And that was really something that stuck with me for all those years that are that when we sit down and what could drive rates around the country.
Theres no essentially a logical reason after what I, it's probably still in one market versus a similar size in another market. So we cant use any any parallels there.
And then I I remember or something it was told to me by our government.
Tony Hirsch and Tony was.
Actually somebody who lived across the hall for minimum College of Michigan State, whether became president of radio advertising represented ups Richardson.
Earn back then.
Tony was pictured me at a station in Detroit.
And I should tell me, how do you plan on pricing.
The rights for that right now.
Detroit that I was trying to get at that time.
And you said I mean should add these are what drive.
The way, we do it at the at R. R.
It was the state I've stopped laughing right.
And I won't go into I know you are doing here other than saying, it's Tony you said you started $100, let's say.
The buyer will say to you.
Oh I'm not paying you go okay, how about 90 Ah ha.
How about Oh, Okay alright.
Oh.
Okay fine how about 75 and.
The buyer says Wow.
That's your stopped laughing road.
And he was very serious popped out at that time to show you that there really isn't I think this is part of the national which is different than where we got straight and we'll get into that in saga.
The other thing, but that really is the.
Important thing, it's what Chad.
I Miss and in price you got national it changes because there is no no no.
Nothing there that really happens at the National I remember like other parts of our business Oracle direct where Sam mentioned.
You don't find necessarily or the negotiations.
Yeah, and the other areas and then the kitchen for instance, what I'd tell you that you go into a restaurant there.
Hamburgers that $15 and you know that you just came from another restaurant was 13 and you don't say today the way there yet so I want the they are hamburger, but I'm already going to pay $13 for the hamburger because that's what it sells for a dog in the street.
And while that's not the same type of restaurant.
And the same is also true you don't say well your order.
I Hamburger well I walked pretty fries with that Hamburger.
They're going to kind of look at your strange way out of that.
And that's part of the thing that happens a national Advertiser.
That's why I wanted to take a moment here and really kind of get Chris involved with recycling it and show you or just always tell you how we view things entirely.
Different way in terms of trying to run.
Our our company and concentrate on where we believe the future of radio future already ourselves really.
It involves in our local communities flights is why they're so important to us and Chris you can just kind of bring us up the street a little bit on some things that you have observed by the way Chris for you spend with US for many years was our former general manager in Columbus.
Here in hours as senior Vice President in charge of operations and deals very heavily themselves Chris.
Got it.
Thank you Ed and as you remember at the conversation, we just had with someone we know and trust quite well who will remain nameless.
Who's very knowledgeable in all things national.
Sets us if you recall just the other day that over the last few weeks National business has gone crickets silence.
And.
As you remember our our response to one another was okay, well you know what we can't control that so let's move on we can't forecast that we can't control. It so to your point the things that we do focus on.
And kind of look at it. This way you know we control the things we can and then do we don't worry about the rest things like and.
And I should say because of the way. It has built the company over time strategically brick by brick.
Saga Communications is set up beautifully.
To do things like half, 50% of our net revenue would be made up of local direct business because in the markets that we're involved in we are connected in the community and we can impact the community and we can impact the market or mark to market and.
So the things that we focus on are the things we control like N T or Ed mentioned events. We have have created a number of events at all of our markets COVID-19, I'll put a little bit of a hold on some of those things those things are coming back and coming back strong and so we anticipate a nice lift.
In 2022 with events the other one is digital and.
We have seen an exponential growth as much as 65% on a per months all in when you're looking at at extreme.
Streaming and targeted display.
And the stuff that we love to sell when it comes to targeted display are or excuse me on on digital all the things the products that we own our native products are expandable banners and streaming for example.
But even with our targeted display where there was a 60 cent dollars and like I said, where we're growing at a at a pretty significant rate every single month are in that category.
And the big one as Sam mentioned at the onset was our local direct as Ed said, we want to let you a little bit behind the curtain or the door in the kitchen, because you don't ever really got to go in there and see how the food is made and why it's made that way, but in 'twenty in the in Q4 of 2021, and we did $5.7 million more.
In local direct revenue than we did in local agency revenue.
That's $5 seven more than we did in local agency, we averaged about almost $2 million more a month.
In local direct.
Business than we did in local agency.
And for the year.
That number rose to 21 million more in local direct revenue than we did in local agency and again, averaging in that one eight to two point.
To.
The $2 million a month more than local direct business then local agency.
So you know and and so how so the question might be okay. So how do you do that well.
We have a thing called the entre to the meals you know in keeping with the theme with being in the kitchen, it's called ideas.
And new emerging revenue categories.
Typically you would say what are your biggest revenue category. So all their automotive for sure you know.
Number one well automotive is is not and has not been our number one category for quite some time.
In fact, our number one category is home improvement you've heard Ed talk about the emerging categories. We've introduced over time, if you've been on these calls.
Things like Windows garage doors siding, electrical plumbing H P. A C. I don't think any of US has ever had a plumber ask us for added value or free spots or give me a promotion with that those are categories that we can impact and we can control. That's our number one category right now is home improvement.
Number two is as followed by professional services and another emerging category that we've gotten involved didnt had wonderful succession and many of our markets things like attorneys tax preparation financial planners.
And believe it or not.
Our friends in the automotive category came in a distant third in terms of our top three categories.
And when I said you know we introduced this with ideas.
Those are called spec spots in our in our business and what they are.
Commercials that have the clients name them.
And we come up with an idea we do some research makes them assumptions do a CNA talk to the client find out where their pain is at.
And deliver a commercial who doesn't like to hear their name in the commercial.
Very seldom do roofers and contractors get to hear that that's part of the show Biz in the show in show business.
So how do we do that we do that with ideas and I shared this with you on on a previous call those who have been on in 2020 one we.
We did 23000 over 23000 spec spots.
In the year of 2021 Q4 alone we did 5600 of them.
So that averages about about 16 to 17 spec spots per market per week. So this isn't an event that happens hey, let's do some spec spots. This week or this month. This is a behavior of continual behavior that goes on all the time every day, it's a it's a non negotiable for us and the neat thing about that when we sell with.
<unk> ideas and spec spots and audio are closing ratios go too well.
Well above 35% closing ratio on business that we close that has used spec spot selling.
And I hope I wasn't too.
For Bose on that but I think that gives helps give everyone. A sense of what you were talking about and let's go to the kitchen.
[laughter] fashion, Thank you Chris.
It was very good.
<unk>.
I'm not sure I'm speechless.
Not a very unusual for me, but I do want to.
Wrapped up with one thing.
The national business, and how that's changed and and why we don't participate in that because back in the early early days nationals.
We spent already because of the agencies in a disciplined and and everything they did to dig into the radio station as to what it was and who it was and what what the what it meant.
For the agencies and how many of the time buyers back then knew the names of the morning shows.
What they were in the communities and that's not there anymore and we still have problems, which.
With.
How already was so all of us as a whole.
And I was just there without.
Without getting into a lot of other details.
Tell you that this is again, where we were record straight on that local business is so very important to us as a and as a company.
The.
Way that we go after it.
Chris I explained to you is kind of the secret sauce. There, we're showing you showing you what what we're doing in these areas at the same time, what we're doing in terms of our communities is important one of the initiatives that we're doing right now.
As as a basically a cat all call for.
Audio with journalists are because we've decided that we're amping up.
And good numbers hiring for each of our markets, we want more and more.
Newspeople to come to work for us to help us rather than continue gathering and expanding and in the communities. If if you look right now at what's going on with newspapers.
Where they're closer to around the country where the.
The breeder surface going down about them is they do clubs as they do go away or decided to go with strict way through.
Putting there newspapers on line, we have the opportunity to do better and our communities by establishing our own time line in which we have done in a couple of markets.
Uh huh.
Out in Tennessee for instance, and I'm in Clarksville.
We have a.
A car show now, which I forget the exact numbers of people to go to the website and look at the our paper.
Because the other one as far as non existent essentially in a community.
These are the things that we're doing that are so important to us.
As a as radio broadcaster and we also feel that that's a future is Oh boy dealers are shut in the beginning of what we're trying to go how we're making this happen and how we can have the passion for the community either community has the passion for us as part of what we're doing.
And I wanted to take today very much to you.
Wayne do you what about how pricing how we view it differently. So did you have an idea on what really is the core upside to where our beliefs are and where we're continuing to go and that's important there has to be this passion or as we just feel like we're adding salespeople as we speak right now we're adding news.
People as we speak right now watching for the binding them, whereas others. Other broadcasters are reducing the number of salespeople and try and its changes into a bulk sales industry rather than a reliance on them local that's kind of what I have to say I'm really proud of.
Of what we're doing I'm proud of our people and I'm proud of where we're going and I'm proud of what we're trying to do without working it's just product categories about how we're seeking out individual new type of businesses are you know I think I shouldn't I wanted to call lapsed or somewhere.
One of her silverstein at El Abra alloys, a matter of fact.
And has an ear on one of our stations like K country, a country station in Ocala.
And account, which is that has.
Throwing knives throwing what is it.
Oh sure external eat they're like Oh, they are here.
Yes exactly.
Hey, Oh, sorry.
As people come over in Europe .
Competition, drawing axis, well I mean, nobody's taught about that before until somebody came up with the idea of us.
In fact, it could widen out crude commercial's fourth and it's presented to the client and go from there.
That's how that's how it is and is it just part of where it is and there's so much more and believe me we love to talk about it.
We have no no.
Barriers towards communication with us where they are we'd love to talk about this we love to try to inform our investors. So that they really have an understanding of what saga is all about rather than just reading some information in our numbers to you. We want you to see behind the scenes.
Behind the kitchen door as to how we prepare and how we do it and what makes us so successful.
As we have become.
Because we care I think I've done enough on the speech on that happened I say them I think that's very good.
Okay, I'm I'm, not getting carried away or anything like that.
Never.
And I try not to get into my usual fan speaking and a lot of the other stuff because I think it's important, especially when you hear where where we can't plan on national dollars, where we have to have it out there.
The.
The bedrock of our business that we control.
That's part of what we do savings or anything else that I should really break out.
That's good we did have a one question come in.
And it's understandable and it was basically a question about a change in our tax rate between 2020 and 2021 .
With that well they changed anything about that.
[laughter]. Unfortunately, we don't we don't control that so it is what it is but 20 years. When he was a very unique year due to the COVID-19 impact on the financials are there were a number of reasons that 2000 Twenty's tax rate was this difference as it was and I'm not going to try to go into all the technical gory details, but as our business began to reflect a more normal.
The operating environment in 2021 our tax rate returned to a more normalized rate of 28%.
And going forward, we do anticipate our tax rate to be between 27, and 29% with a deferred rate of 3% to 5% and I think that as best we can on a simple basis provides the answer to the question.
Oh, Okay, Oh, I forgot to mention something in this this would be my my thing for it.
Our industry has a propensity for kind of trying to reduce rates and go and we're heading towards the bottom, but as of last week actually this week.
After a number of workshops over the last months try and gotten this and in collaboration with three of our managers one representing.
A smaller box or a medium size went up large size working with them on developing a plan.
Which I'm not going to spend a lot of time now but basically.
We have just raised rates across the company.
We find it during a time when there was an inflation of now I think its six 7% or something.
Somewhere in or is it seven six somewhere in there I think it's seven six.
Afternoon, everybody related but we have found this is a time for us that we could.
Raise rates something is somewhat unique in the broadcast industry, but we have done so we have had.
To set a floor.
For each of our markets as to what the rates are and design they planned.
Is again, it's taken us about six weeks to put together and how this is a factor but each went up the markets are it is mandatory is a floor.
Chris is great the things I have and.
And what Salman involved with a project golf, So I created a way to do to make this so that we know that we can have a benchmark towards pushing forward to where we wanted to go over the next several years and it is upwards in terms of the value that we provide in south Florida.
In terms of the pricing for it so I did want to put that in or had mentioned, it's it's a solid thing I'll be glad to spend any time talking to.
Any of you about exactly how it's structured we can get into diet at that time.
That's where I kind of end up on the Sam.
And if you can pick up anything else.
I think we can turn it back over to Catherine to wrap up the call.
Thank you ladies and gentlemen. This concludes today's conference call. You may disconnect at this time and have a wonderful day. Thank you Peter Thanks Catherine.
Yeah.
Okay.