Q1 2022 Saga Communications Inc Earnings Call

Operator: Good afternoon, ladies and gentlemen, and welcome to the Saga Communications first quarter 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 Christian. Sir, the floor is your.

Edward K. Christian: Thanks, I appreciate it and good afternoon, everybody and thank you all for joining us here for a little [inaudible] we hope, coming up. And I was trying to say, just a few minutes ago, before we started talking, and we said we really have the spices up. Then it occurred to me that about a year ago or so, we talked to the agent for Johnny Gilbert, who is the announcer in Jeopardy, and I wanted to see if we could get him to do some work for us, voice work for us and, I thought maybe if I hired Johnny Gilbert to do the intro here, which I know would be better than me trying to do it for Sam, and with his dulcet tones. Age 92 stroke during the show there. Anyway, to get going again, thank you. I'll be back in a few minutes after Sam runs through some numbers and information. So, with all that said, here is Sam.

And I was driving a sham just a few minutes ago before we started talking and it showed we really have the spices up. Then it occurred to me that there about a year ago or so we talk to the agent for. Oh, Sam helped me with Johnny Gilbert who was the announcer Ah Ah Ah. Jeopardy, and I wanted to see if we could get him to do some work for us and a voice work for us and I thought maybe if I got hired Johnnie Gilbert to do the intro here. Oh I'd better than me trying to do it for Sam you know and with his dulcet tones. Age 92 stroke during the show there anyway, Oh, two did growing again, thank you I'll be back that up your business after Sam up runs through some. If numbers and information so with all that said you were saying.

Then it occurred to me that there about a year ago or so we talk to the agent for.

Oh, Sam helped me with Johnny Gilbert who was the announcer Ah Ah Ah.

Jeopardy, and I wanted to see if we could get him to do some work for us and a voice work for us and I thought maybe if I got hired Johnnie Gilbert to do the intro here.

Oh I'd better than me trying to do it for Sam you know and with his dulcet tones.

Age 92 stroke during the show there anyway, Oh, two did growing again, thank you I'll be back that up your business after Sam up runs through some.

If numbers and information so with all that said you were saying.

Samuel D. Bush: Thank you, Ed. In this call we`ll contain forward looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the risk factor section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial majors. Reconciliation for all the non-GAAP financial measures to the most directly comparable gap measure are attached in the selected financial data tables. For the quarter ended March 31st 2022, net revenue increased 12% to 25 million compared to 22.3 million last year. Political didn't factor much in the comparison of revenue is gross political revenue for the first quarter of 2022 was 121.000 compared to 209.000 in the first quarter of last year.

Reconciliation for all the non-GAAP financial measures to the most directly comparable gap measure are attached in the selected financial data tables.

For the quarter ended March 31st 2022, net revenue increased 12% to 25 million compared to 22.3 million last year political didn't factor much in the comparison of revenue is gross political revenue for the first quarter of 2022 was 121000 compared to 209000 in the first quarter of last year.

We are expecting political to pick up significantly as we continue through the year, particularly in the third and fourth quarters.

Station operating expense increased 8.7% to 20.6 million for the three month period.

Station operating income increased 17.8 % to 5.6 million, while operating income was 1.7 million compared to 883.000 for the same period last year.

Free cash flow was 1.9 million for the quarter compared to 1.8 million for the same period in 2021.

Net income for the first quarter 2022 was 1.2 million or 20 cents per fully diluted share.

Second quarter of 2022 is currently pacing ahead of the same period last year by approximately 6%, although with the ongoing global turmoil everything is week by week and month by month.

Local direct continues to be strong at 12.4 million in the first quarter of 2022.

Again, representing approximately 50% of our total net revenue for the quarter.

We also saw nice increases in digital revenue in our non traditional revenue during the quarter.

It's nice to see non traditional revelling, normally referred to as NTR, growth as our markets are beginning to move forward again with a lot of local events that we've traditionally been involved with.

Our balance sheet shows 55.2 million in cash on hand as of March 31st 2022. Currently we have 52.1 million of cash on hand.

With a combined quarterly dividend of 16 cents per share and the 50 cents per share special dividend that was paid on January 14th 2022.

And that's 16 cents per share quarterly dividend paid on April 8th, Saga has paid over 78 million in dividends since the initial dividend was paid in 2012.

We'll have another question in a little bit, but while I'm talking about cash we did get a question about April's cash usage, related to the 55 million we had at the end of March, and the 52 million as of this week.

Approximately 1.6 million was a quarterly tax payment, nothing exciting about that, but it has to be done.

The exciting part is approximately 1 million went to buy a building in Norfolk, Virginia, which will allow us to move out of our current studio site, which we've leased for the past 25 plus years.

This was a tremendous opportunity as the seller was already operating the site as radio studios.

We will have some work to do to update the facilities, once we take possession, but once we are able to move, we will significantly reduce our operating costs in the market. This will actually allow us to be done with the largest lease we have ever had for a piece of property as a company.

Capital expenditures in the first quarter of 2022, where 923.000, compared to 534.000 for the quarter ended March 31st 2021.

The company expects to spend a bit more on capital items in 2022 as we reduced our capital spending in 2020 and 2021, due to the uncertainty associated with the COVID-19 pandemic and resulting supply chain disruption.

Currently we expect to spend approximately 5.5 to 6 million for capital expenditures during 2022.

This does include a couple of building projects, one of which I just talked about, others we`ll talk about as they come to fruition.

We currently expect that our station operating expense will increase by approximately 5% to 7%, which includes additional sales commissions based on our revenue growth, as well as our increases in our cost of sales surveys and health care.

Our ongoing tax rate is expected to be 29% to 30% with a deferred tax of 5% to 10%. And with that, Ed, I will turn it back over to you.

Edward K. Christian: Thank you, Sam. We should mention one thing here.

When you're talking about the building that we've acquired and we'll be moving into within the next six months-three years, somewhere in there, by the time we have to do the remodelling. Saga, we have a kind of a policy where we all went to all of our own structures, where the exception, it hasn't been up too. So, this would be the one that we do a leas and that is scheduled to be put into a new building and that's in the Hilton Head. Well, actually in Boston. So, by this time next year will have just one very small one of our very smaller markets, where you spill there, but other than that. We believe we've been opening all of our own locations, so that it's nice to breathe depreciation. And a good thing for us to have to be able to create and challenge and configure the building in a way that we want it to be. Sam and I were sitting around and talking about what can we say that was new and exciting without it continuing during the same wrote as a presentation every time we speak. And I I think it's something when I look back right now where we've been in the first quarter. A lot of it was difficult, we'd like to think of it as challenging, because our whole idea and everything and we tried to get her here at Saga is find different ways to stay within the pattern of what good broadcasting is all about.

Within the next six months three years somewhere in there by the time, we have to do the remodeling that what's the saga, we'd have a kind of a policy where we all went to all of our own structures were the exception.

It hasn't been up to so this would be the one that we.

I'll wait one other.

We do a leash and that is scheduled to.

To be put into a new building and that's in the Hilton head.

Well actually in Boston Ah. So by this time next year will have just one very small one of our very smaller markets as Ah, where you spill there, but other than that we've been we've been opening all of our own Ah Ah Ah Ah locations, so that it's nice to breathe.

Depreciation and a good thing for us to have to be able to.

Right and challenge in and and Ah configured the building in a way that we.

[noise], it's seven and I were sitting around and talking about gosh, what what can we say that was new and exciting without it continuing during the same wrote a presentation every time we speak.

And I I think it's something when I look back right now where we've been in the first order.

A lot of your website was difficult we'd like to think of it as challenging.

Because our whole idea and everything and we tried to get her here with Tiger.

Is is find different ways to stay.

Stay within the pattern aboard good broadcasting is all about.

Same time come up with something that's new and interesting and innovative while we continue on with the old basic balder of commercial broadcasting.

It is a challenge right now, but it's a good challenge because it really is good for us to stimulate on our own brain cells, what we can do to enhance the properties we have, what can we do to, perhaps enhance this tactile impression with our audience, where he can reach out and touch them.

Good for us to stimulate on our own brain cells, what we can do to enhance the properties. We have what can we do to to.

Too bad.

Fabulous tactile impression with our audience, where where he can reach out and touch them.

I think I mentioned it last time, when we talked that the whole plan of Saga, since the beginning, was to really reach into middle markets, where we felt we could make a difference, whether you go in and pick a commanding lead position in the marketplace.

The the whole plan absurd since since the beginning was to really reaching.

Reach into middle markets, where we felt we could make a difference wherever you go in and pick a commanding lead position in the marketplace.

And also have it so that the market wasn't too big to be indifferent to radio and too small that we couldn't make a good return on our investment in the marketplace.

Return on our investment in the marketplace.

And we've really come a long way in terms of developing that and if you go back to the beginning of Saga, when we started with the company with just a couple of larger stations or larger markets.

Actually, we had three to begin with, and if you put in the licenses for there, our metro signal`s very small, and translators we have 165, 170 radio licenses in the company right now. 

Samuel D. Bush: We have 113 AM and FMs and 80 translators metro signals, so almost 200.

Almost 200.

Edward K. Christian: You know I I keep forgetting how many there are because I'm trying to decide on buying translators and Samuel always tells me that, when they come back, but they've been proven very, very effective for us because they allow us to have what we call, the stackable, where we use the metro signals as an add on and in addition to it.

And, I remember early on in my career when one of the managers, sales manager was talking about successful shoe salesmen, and he would always say afterwards "you want some socks to go with your shoes?", and he added that, that's kind of how we treat the secondary stations we have, is this package you get man through added or some additional revenue. I think I mentioned it last time, that we've also increased our rates within the last month or so. We had a big discussion with all of our managers setting up by and redesigned exactly where they were in terms of what what they're selling right was, and how old is configured, and we added about 10 per cent increase in our rights. Which we believe it was about time, because when we looked around and we saw the increases that we're having with DOS, in terms of music costs, insurance cost, related class like that, we needed to do so. So, in an industry where the rates seem to be going down, our rates are increasing, which we find as an interesting approach kind of thing. There's something that I think brings us kind of, one of the different world, is that we really do spend a lotta time with the various communities, with the process, I think I mentioned this last time, of hiring news people, which is the interesting thing, and the fact that the sat drove the business of having dedicated news reporters for radio has been decreasing. And yet, we find the necessity to find and bring into the business, and that's the trouble recruiting right now.

Sales manager was but.

Talking about successful.

Shoe salesman, and there would always say afterwards.

Once in.

Oh socks, they're dealt with your shoes and he ended up man, that's kind of how we treat the.

Stations, where you have is this package you get man through additives somebody an additional revenue.

I think I mentioned it last time and we've also increased our our rates within the last month or so we had a big discussion.

With all of our managers setting up by and.

Redesigned exactly where they were in terms of what what they're selling right was and how old is configured and we added about 10 per cent increase.

Increase in our in our rights.

We believe it was about time, because when we looked around and we saw the increases that we're having a good day.

With in terms of music costs insurance cost related classes like that we needed to do so so in an industry, where the rates seem to be going down our rates are increasing which we fight as an interesting approach trying to think.

There's something that I think brings us kind of what are the different world is that we really do spend a lotta time.

With the various communities, where the process I think I mentioned, the last night of hiring Ah Newspeople, which is the interesting thing and the fact that the that sat drove the business of having you know dedicated news reporters for radio has spent.

Creasing and yet we find that.

To find and bring into the into the business and that's the trouble recruiting right now [noise].

For instance, in this last go round, pardon me with my allergies right now  work out a little worse, but in this last go round we had about 24 resumes come in.

For when we were start recruiting for a newspaper.

With.

And, it was interesting to find out in this remote world today, that of those 24, about two thirds of them were people who said  "Yeah, I can be a news reporter for you, I can do this, but I want to do it from my home. I'm in San Bernardino and you're in Des Moines, Iowa, but I can still do news casts." where you can`t. 

Because we're not working for that, we're working for the type of person who gets involved in the community.

Who is active in the community to get to know everybody, the mayor to the fire chief, or any of that who can provide information for us.

And that's what we need in this community and we're doing that and I think that's an important thing for us there to gain a certain level of professionalism and recognition in the community.

For us there to Jane.

A certain level of professionalism and recognition in that community.

In a tired world, which is what I think we're in right now, we have to do things that are really important to what happens in communities, we have to have fun radio stations, we have to have radio stations that have full coverage of what's going on in community and that's what we will continue on doing.

We we have to do things that are really important to what happens in communities, where you have to have you know.

Fun radio stations, where you have to have radio stations that have full coverage of what's going on in a few minutes and that's what we will continue on doing.

It's been a challenging world. In sales, we're having a lot of fun developing new products, we talked about that. I was just sitting with one yesterday about working at an order that came in for a company that were, at least on 26-week schedule, from showing the invisible French thing for dogs in your yard. Now who would have thought several years ago that outside of that is a product category?

At least I'm twenty-six week schedule from showing the invisible.

French thing for.

Four dogs in your yard now who went up to several years ago outside of that is a product category.

But nevertheless, if you'd go out and do you find somebody like this and you say "look, there`s a lot of dogs in town, we might as well try and do this" and it's a different way for them to reach out and touch. That's just one example, and I don't want to keep going through, what you think that all we do is chase showy ideas, but we don't. We're looking for the different ways through find and seek out money and add it to us, instead of working at major and external agencies, which are cutting back in terms of the rights that they're willing to pay for radio and also the private money that goes into it.

A lot of dogs, and tired and we might as well try and do this and it's a different way for them to reach out and touch. That's just one example, and I I don't want to keep going through you know what you think of where all we do is chase showy ideas, but we don't we're looking for the different ways through find and seek.

out money and add it to us, instead of working at major and external agencies, which are cutting back in terms of the rights that they're willing to pay for radio and also the private money that goes into it.

We want to be kind of, we want to be challenging, we wanna always be forward momentum on what we do and we try not to burden you with a lot of numbers or a lot of information, because we're talking then about the whole of the company, rather than the individual marketplace, and we don't wanna get into that either. That's why we are offering you the opportunity to call Sam or to call me and ask any questions you might have about what we're doing in the business to make this more effective.

Because we're talking then about the whole of the company rather than the individual market place and and we don't Wanna get into that either that's why we are offering you the opportunity to call a sample or gourmet.

And ask any questions you might have about what we're doing in the business Tomatoes more effective.

Yes, it is a challenging time, but as I said, for us we kind of welcome that, because it keeps your brain cells growing and keeps you thinking, and we're working on some some really kind of creative, inventive idea, I think I told one of the ones we`re doing, that we have planned to launch in about a week from now. You`re probably just really kind of wondering about my sanity.

that we have plans to launch in about a week from now. You`re probably just

Just really kind of wonder about by Saturday at.

Well, can I, should I tell them?

Can I can I.

Oh I'd tell them.

Samuel D. Bush: Go ahead [laughter].

Edward K. Christian: Okay. It occurred to me several weeks ago that one of the big problems, I was reading an article, one of the big problems that they talked about is that more and more Americans are having problems going to sleep at night, falling asleep, and it goes through talking about this and what it's doing to the person's health, well being, and everything else like that, by being restless at night.

Of several weeks ago.

That one of the big problems I was reading an article in one of the big problems that are talked about is that it.

More and more Americans are having problems.

Going to swipe at nightfall falling asleep.

And it goes through talking about this and what it's doing to.

The person's health, well being and everything else like that by being Restless at night.

So, one of the things that has happened to radio today is that we have lost a lot of wisdom in the overnight areas. Overnight radio used to be a relative or a big thing. Right now, there are a couple of major shows that are syndicated for overnight, better talk shows that are good but, in terms of the music area and music formats for overnight a lot of it has now been automated and produced right off the machines and with nobody in a facility to speak up or nobody at all in the facility.

One of the things that.

Happened to radio today is that we have lost a lot of wisdom overnight areas overnight radio used to be a a relative or a big thing right. Now there are a couple of major shows that are syndicated for overnight better talk shows that are good but.

In terms of the music area and music formats for overnight a lot of it has now been automated Ah.

Produced right off the machines and with nobody in in in a facility.

Speak up or nobody at all.

Felony.

So, I came up with an idea of "okay. So, why don't we do something that's totally different, totally unique to radio itself, commercial over the air radio?" And so, we've been working for practically the idea that we're doing here and we're taking as a prototype: extra-hours station in Boston and in Hilton Head.

For practically idea that we're doing here and we're taking as a prototype.

Extra hours station in Boston Ah Hilton head.

And one of the stations that we have four radio stations in, and one of them that we do always easy favourites, we've had on there for several years now, and it's going quite well for us, but we decided that there really isn't an overnight listening audience to it and so we're going to be running, I guess, we call it deep sleep music overnight, but it's not music, it`s silence and so, you're going to think I'm probably a little nutty here, but that`s okay. 11 o'clock or midnight until 5 in the morning, will be just the sounds of rain and thunder in the background to provide sleep audience, and you're going "Well, why do you make any sense out of that?". We`ll be selling very short spots and they`re  gonna be brought to you by spots like mattress stores, that type of private category. To mention some hours during from 11 until 5, or midnight till 5. We haven`t actually come out with the hours when we're gonna do it.

We've had on there for several years now.

And it's going quite well for us, but we decided that there really isn't it overnight.

Audience through it and.

And so we're going to be running.

[laughter].

I guess, we call it deep sleep music overnight, but it's not music its silence and so from.

Oh.

You're going to think I'm, probably a little nutty here, but that certainly 11 o'clock or midnight until five in the morning will be just the sounds of rain and Thunder.

in the background to provide sleep audience, and you're going "Well, why do you make any sense out of that?". We`ll be selling Very short spots and they`re  gonna be brought to you by spots like mattress stores, that type of private category.

Very short spots whenever he brought to you by spots there like mattress stores that type of private category to.

2 mentions of some hours during from 11 until 5, or midnight till 5. We haven`t actually come out with the hours when we're gonna do it.

During from 11 until five or midnight till five wherever and actually coming out when they got older is that what you're gonna do it.

Again, let's try and take you know from lemons, which is kind of a big overnight hours and turn them into a lemonade, and I wish to monetise that and sell them in 26 or 52 week schedules on the station and break it into two breaks an hour, which is what we're doing, so it won't be commercialized, and basically that`s what it would be, the feeding the idea of try to put people to sleep.

Hours and turn them into a lemonade and I wished monetise that and sell them in 26 or are 50, 52 week Ah Ah schedules on the station and break it into two breaks an hour, which is what we're doing so it won't be commercialized.

Basically that would be that the feeding the idea of try to put people to sleep.

But there will be mentions all the time like that.

That's probably what we can do and it's something that we can do for revenue producing, and have money coming overnight thing, and in the same time providing a service through a lot of listeners. So we'll see what happens on that.

Try not to ramble today on this, but I think that that's what radio needs is some different thinking, some different way of looking at the problems.

And if we strive out, we strive out on something and we invent something else and have to have the forward momentum.

We have question coming up and I'll get back to what we do, but the question is where do we envision radio in 10 years, and we'll talk about that in a couple of minutes.

In the meantime, I'll be just tossing back to Sam to see if he has any other comments, or anything, any other questions of any kind

Samuel D. Bush: No, we had a couple of questions that I already took care of. Another one asked us about uploading audio recordings of the conference calls. We did start doing that with the fourth quarter call. So, in addition to this transcript which gets posted to our website, you can also find audio recordings of the calls now on the website as soon as we get them processed and back to us.

And then is it said, there was a question about 10 years from now, do you expect more or less radio listeners in your markets and what's the grand plan for radio?

And what's the Grand plan for radio.

Edward K. Christian: Yeah, that really depends upon the passion of the broadcasters, the passion of the commercial owners that are in there today. If they want to keep the medium alive, we can certainly do that, and if they wanna continue they, speaking of, that's probably out of line, but if a broadcaster today wants to continue survival for the commercial radio, then they have to begin to think exactly, rather than cutting in and reducing everything that I do and try to commercialize it and have it centralized.

The parachute into commercial.

Owners that are in there today, if if they want to keep the medium about life, we can certainly do that.

And if.

If they Wanna continue they.

Speaking of your.

That's probably that that's how that line, but if a if a broadcaster today wants to continue.

Survival for the.

ER commercial radio then they have to begin to think exactly rather than cutting in and reducing reducing everything that I do and try to commercialize it habit centralized.

I think we will have a shorter life than normal in 10 years or whatnot, but the 10 years that the question came in on.

They may not but.

But if you sat there and you decided that you were going to have a radio station that really was what radio has been in the past then it can continue to be in the future with better ideas.

Then we do have a stronger position, as long as where you don't forget that we have listeners out there who want local information.

We do have a strong position as warm as where you don't forget that we have listeners out there.

What local information.

But let's face it, a good radio signal, or great radio signal gets out 40 miles and that's the area that you have to work, that's the area that you have to protect, and those are the people that you have to protect. And if we do that, we have a life, we will still be important we'll still be meaningful to the communities that we serve.

If we'd get away from that and try to make it, then radio is one big program for the entire US, It's syndicated or it's put together in major form or whatever.

It`s gonna be shortened. But if the passion is still there, if the desire is still there to be good broadcasters, and the heat is still there to warm the homes of people who are listening to radio because of the value that it has, we're fine. I can't go out more than 10 years on it, but I'm surely finding [inaudible] will be around and that is because we haven't bend over ideas and, and we have the people behind us.

But if the if the passion is still there if the desire is still there to be good broadcasters.

And the heat is still there to to warm the homes of of people who are listening to radio because of the value of that it has we're fine you know I can't go out you know more than 10 years on it but I'm certainly blending a tiger will be around and that is because we haven't been.

Ideas and.

And we have the people behind US you know.

We've got a great great group of radio stations and a great group of people who work there to help us keep on thinking about new ideas for the private project.

And then, it's an idea, it's a commitment of passion, it`s a commitment of dedication, it started as a commitment of working at this as a commercial adventure that we don't, you know, our product is invisible.

[noise] commitment dedication it sort of came up with.

Of looking at this as a commercial venture that we we don't you know our product is invisible.

And we have to remember that and we're not having something coming off of this subway line.

It`s an entirely different thing and it's no different than anything in the arts, and I consider radio an art, just as you would a Broadway play, or a symphony, or anything else like that. We have that ability and we have to remember that and that has to be our primary focus.

And if we don't do that, then we're going to lose the momentum that we have where you're gonna miss the passion that is there, and it's gonna be a shorter life, but in the meantime, we work for a long life with Saga, because we'll never lose the values that we've had and established for so many years.

I think that kind of brought it up. 

Samuel D. Bush: That`s very good. I mean, it's all about our radio, it`s all about local, and that's what the Saga does best.

Edward K. Christian: Well, yeah. Let's hope so. We continue.

Let's hope so.

That's the magic mantra that we have and that is the radio that reaches out and touches the people. And, you know, just this morning I was listening to one of our stations the river, the RSI and North Hampton, and Monte, our morning person and the face of our morning shows, does a really unique morning show, it is great and reaches out and there`s a lot of phones and a lot of listeners calling and talking about various things.

Ah Ah Ah Ah person on his face in the morning. So.

Does a really unique boring show, it is great and reaches out and there`s a lot of phones and a lot of listeners calling and talking about various things.

And with Monte you never know where he's gonna go or what he`s gonna come up with in terms of it, and that's unusual, and it's unique, and it's great for the communities, when they feel this cohesiveness that comes from the morning shows that we try to bring out.

And that's just one example of our shows and I could go through and start talking about our morning shows and our personalities and how they relate to the community that`s there, and that's the thing that`s really just so, so important in why we are doing this business and caring for, really caring for the community, is where I think we come out ahead. I've been kind of this prevailing alone here and is there other things that I'm missing, Sam? So I think that's good and I think Matthew we can turn it back over to you to wrap up the call.

And that's just one example of our shows and I could go through and start talking about our morning shows and our personalities and how they relate to the community that`s there, and that's the thing that`s really just so, so important in why we are doing this business and caring for, really caring for the community, is where I think we come out ahead. I've been kind of this prevailing alone here and is there other things that I'm missing, Sam?

Business and and caring for and caring really caring for the humidity is where I think work how 'bout I had I've been kind of this private like along here and is or other things that I'm missing. So I think that's good and I think Matthew we can turn it back over to you to wrap up the call.

Samuel D. Bush: I think that`s good and I think, Matthew, we can turn it back over to you to wrap up the call.

Operator: Certainly. Thank you, ladies and gentlemen. This concludes today's event, you may disconnect at this time and have a wonderful day. Thank you for your participation.