Q3 2023 Saga Communications Inc Earnings Call

We look forward to talking with you soon please hold the line and we'll be right back with you.

[music].

Okay.

Good day and welcome to the Saga Communications, Inc. Third quarter earnings release and conference call.

At this time all participants have been placed on listen only mode. It is now my pleasure to turn the floor over to your host Christopher <unk>, President and CEO, Sir the floor is yours.

Thank you Paul and thanks to all of you have taken the time to join Sage.

Q3 earnings call.

We appreciate your continued interest in participation in Saga communications.

We've got a lot to talk about today for starters.

Pleased to report. The addition of our people resources and renewed focus and specific opportunistic growth areas is starting to impact our revenue in a real positive way.

I'm pretty sure you won't hear some of these things on other earnings calls you might be participating in over the next few days.

For the quarter National was up 1%.

This is in a sector that's down in national business double digits amongst our brethren.

Digital was up 34% for the quarter and continues to grow with a great deal of headroom and we do it differently than most.

And finally, MTR the selling events.

<unk> is up 7.7 points for the quarter.

And year to date national.

Ready for this six 9%.

Interactive is up 21%.

And NTR or the selling events is up 11.1% or other areas of focus e-commerce, which is the selling of certificates.

Over the past trailing 12 months is totaled $1.3 million and is still growing.

We are still in the process of deploying our online news and information service in several of our saga markets.

And have multiple markets in Q4 installation. This year and next you may also refer to this or be familiar with this is metaphorically Clarksville mouse.

We also continue to perform really well in targeted categories number one category continues to be home improvement, which includes HVAC plumbing roofing.

Installations.

Invisible fence companies and things like that and that too was still growing automotive has made a surge and moves into our number two category business.

And professional services has moved to number three which is things like aesthetic plastic surgery, cosmetic dentistry and weight loss.

So Sam I think they called out of Ts on the ear when our on air personalities, just give a little look inside so I'm going to send it back to Sam for some more performance Sad news.

Thank you, Chris and that to US was very nicely done.

I do have to read the obligatory 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 measure.

As to the most directly comparable GAAP measure are attached in the selected financial data tables to our press release.

So now the fun part for the quarter ended September 32023, net revenue decreased two 8% to $29 2 million compared to $30 million last year political certainly impacted this year's performance as for the quarter. We had 234000 in gross political revenue this year compared to 858000 for the same.

<unk> last year.

Without political our overall revenue for the quarter would have been down less than 1% from last year Steve.

Station operating expense increased two 1% to $22 8 million for the three months period as discussed in the first quarter conference call. After a number of years of giving our employees literally no compensation increases we made the strategic decision to give a remarkable staff pay increases and recommend recognition of the tremendous work they do.

These pay increases and related payroll taxes amounted to an estimated 331000 or approximately 71% of the increase in the third quarter station operating expense and $1 2 million or approximately 55% of the year to date increased similar to previous quarters, other smaller, but still meaningful increases and our station operating.

<unk> included increased health insurance utility expenses music licensing fees programming rights and sales surveys I can assure you that Chris and I and the whole staff here are always watching expenses and making sure that we're making good solid decisions on where expenses increase in where the decrease.

For the nine months period ended September 32023, net revenue decreased one 3% to $83 6 million compared to $84 8 million last year adjusting for political for the nine month period gross revenue was flat for the same period last year.

Political revenue year to date was 538000 for the nine months this year compared to $1 8 million for the same period last year.

Keep in mind that our third quarter and nine months results for 2022 were impacted by the one time expense of $3 8 million related to Ed Christians, passing these expenses were reported in more detail in our previous calls and filings.

Capital expenditures for the quarter ended September 32023, with 760000 compared to $1 2 million for the same period last year for the nine months period capital expenditures were $3 4 million this year compared to $4 7 million last year. We currently expect to spend between $4 $5 5 million for capital expenditures during 'twenty.

23.

As Chris said, we continue to see growth in gross national which was up one 9% gross interactive, which was up 695000 or 34% and gross non traditional revenue, which was up 156000 or seven 7% for the quarter and as Chris said, six 9% 21, 1% an 11.1.

<unk> percent, respectively for the nine month period ended September 32023.

While local revenue was down for the quarter. It's important to note that E Commerce, which gets recorded as local direct revenue increased 77% to 459000 for the quarter and 44% to 952000 for the nine month period a.

Trailing 12 month is Christie's earlier E Commerce gross revenue was approximately $1 3 million.

We believe that there is still significant growth to be achieved in these areas as well as our continued digital effort.

We continue to plan on utilizing our financial strength to strategically invest in our operations both at a market and corporate level as we work to grow specific revenue types, including local national Interactive E Commerce, NTR and anything else, Chris and the team can think of.

But put a little pressure on you Chris Thank you.

As discussed in our second quarter earnings call due to the FCC's renewed focus on our reporting of non-GAAP financial measures and their review of our filings we have adjusted our quarterly press releases, starting with our second quarter earnings press release to include a complete statement of cash flows as opposed to the abbreviated statement that we historically have included in our Form 10-Q.

We continue to include the reconciliation of GAAP operating income to station operating income, which is a non-GAAP measure, but now also include and other financial data table, which allows the users of our press release and filings to make direct comparisons to data reported in previous press releases and filings.

The company will pay a 25 cent per share quarterly dividend Tomorrow November <unk> to shareholders of record as of October 11th 2023, we have now returned dividends of over $111 million to our shareholders. Since the first special dividend was paid in Q1 2012 every time I speak to this I find this to be an amazing return to our investors and it grew.

Statement of confidence of what we believe the future looks like for saga, having returned $111 million over the past 11 years. All said, we believe saga is in a strong financial position to continue to return value to our shareholders through our quarterly special and variable dividends. The special dividends declared in 2022 were in line with the goal of Maine.

<unk>, our ongoing cash and short term investment balances at between 30% to 35 million prior to future cash flows being recognized the board continues to have discussions relative to the right level of cash to maintain on our balance sheet and this may change based on global national and local economic conditions changes in the radio industry and potential for strategic.

Acquisitions the.

The Companys balance sheet reflects $41 7 million in cash and short term investments as of September 32023, and $41 9 million as of October 32023.

Pacing for the third quarter continues to be variable for the quarter were currently pacing down mid single digits overall.

Basically flat with fourth quarter last year when factoring in political.

We booked $1 9 million in gross political revenue during the fourth quarter last year. It still continues to be an unsettled advertising market given the uncertain economy. The feds interest rate policy the ongoing inflationary environment. In addition to other worldwide issues.

We currently expect that our station operating expense will increase by approximately three five to four 5% for the year as compared to 2022.

In addition to the inflationary environment is significantly driven by investments in our staff sales training and ongoing interactive development.

We anticipate the annual corporate general and administrative.

Ministry of expense will be approximately 10, 5% to $11 million for 2023.

Our tax rate is expected to be 27% to 30% with a deferred tax of 5% to 8% going forward and with that I will turn it back over to Chris.

Lastly, and you were very active today.

Thank you for that.

Thank you Sam So as you can see saga continues to be a well run.

Full company in spite of what some think about the sector being in melting iceberg.

And today, we're just going to give you just a little peek behind the curtain to show you a few of the things that makes it different and special.

As we see it their leadership.

Character culture and people.

We teach and preach that leadership is an action not a position.

Leadership, you create a vision you gained acceptance of that vision.

And that's a matter of empowering and inspiring people to lead to be a champion for change and to grow themselves and to grow the organization if characters what an individual does when no one's looking.

And culture is what an organization does when no one's looking.

Culture is the character of the organization.

So the different special and different and special attributes of Saga I mentioned earlier, our strong character.

<unk> culture innovative leadership and great people.

By the way the same share these elements translate into a strong balance sheet.

40, plus million dollars in cash and no debt best run companies are the most profitable companies.

The other day I was talking with one of our investors, who said and I quote and he's right.

He said Sage is an undervalued company in us and is an undervalued stock.

These are the messages that you should be getting out to the investment community.

He said saga is a well run company and is financially solid.

And the high consistent dividend saga pace are safe and quote.

We saga I believe get punished for the sins of our radio brother.

We're getting delisted and our unparalleled financial condition because of their high debt revenue decline.

Which causes investors, who may not be all that knowledgeable are informed on the sector to make negative generalizations about the entire sector.

Thus there is an unfair Lee cloud unfairly cast in cloud over the whole industry.

And that's just not saga, we behave differently.

Our balance sheet chosen.

Okay back to looking behind the curtain as I mentioned to you.

I was in the hospital.

Recently and prior to that I had planned organized and curated.

A saga leadership conference, which would have been the first one that we'd had in five years.

I was to lead our leaders through a day and a half of innovation and growth.

We had all of our new people acquisitions lined up and ready to install the vision with the entire group.

Well Unfortunately for me the day before the conference I became Ellen wasn't able to be there because it's very important event and by the way. This was without question my greatest disappointment.

In my career, thus far.

I was devastated.

As I was lying in my hospital bed feeling sorry for myself.

I began to receive emails and texts from those who were in attendance at the conference.

And they read things like this even though you're not here physically your presence is definitely felt everywhere.

Your corporate leadership team is really stepping up.

Leading the conference you would be proud.

Managers that had been with saga for over 20, maybe 25 years.

We're saying things like this is the best managers meeting we've ever had.

I quickly realized this isn't about me it.

It was about the character and the culture of our people that we had built and the leaders we had developed in <unk>.

Order for them to step up and behave as they did when I wasn't able to be there.

The saga corporate leadership team showed who they are.

And who wouldn't want them to be.

And it manifested itself right there in front of the entire saga group of Gms and sales managers. They practice, what we've reached.

And I was proud of them.

The Saga leadership conference was so successful because our saga leadership decided it was gonna be.

I don't believe this could have happened or would've happened in many of the other companies in the broadcast sector.

And then about a couple of three weeks later I received a call from Phil Zachary Our G M in Portland, Maine.

And he called me after the leadership conference and.

By the way he and I talk to often talk and sports analogies.

And I think it's timely because the world series just happened congratulation for the Texas Rangers.

Until said to me you know if I was in the World series and I was the picture.

And I was in game seven.

And I had to stand at the mountain and look down.

Uh huh.

The base path and see the murderer's row.

Of people that you all are established there we've established in the company.

He said I wouldn't want to go to the mounting pitch.

People like Sam Bush, Kathy Babinski, Wayne Leland Eric Christian.

Angela parks.

Katy Gamble.

Matt we're going <unk>.

Andrew Schultz, Mario Christina and Pat Paxton and of course, Tom how and Bruce Warner.

Who head up our national sales.

And there are others, who weren't at the leadership conference and.

They're really the gas it makes the saga edge NGO and enable us to do all of the new things that our team is embarking on now.

Our teams of engineers and engineering I T administration digital.

Accounting and human resources, So films correct I've said it frequently some of the many things that make saga different and special.

It's our culture, our leadership and our people.

We love what we do.

And we love each other.

So I'll leave you with this.

My daughter's several months ago sent me a text, but they still carry on my phone.

And my daughter Sarabeth he lives in Columbus.

It really sums up our discussion and I said, when I talked to managers I get the feeling they're important.

When I talked to leaders I get the impression that I'm important.

Thank you all again for your interest in Saga Communications. We appreciate your time and attention during this call and Sam and I are always here for questions.

Comments.

Even sarcastic comments, if you'd like to make them. So we'll we'll look forward to talking with you. All next month and thank you again for your time.

Thank you.

Thank you. This does conclude today's conference and you may disconnect. Your lines at this time have a wonderful day and thank you for your participation.

[laughter].

Yes.

Yeah.