Q3 2024 Saga Communications Inc Earnings Call
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Speaker Change: Good day everyone, and welcome to the Saga Communications 3rd Quarter 2024 Earnings Release and Conference Call.
At this time, all participants have been placed on a listen-only mode.
Speaker Change: It is now my pleasure to turn the floor over to your host, Chris Forgy. Sir, the floor is yours.
Chris Forgy: Thank you, Matt. Good morning and welcome to our corporate team, our shareholders, the writers from our industry's trade publications.
and our Saga employees.
All who have joined us today for the third quarter earnings call. So thank you for being here.
It's been another interesting few weeks, hasn't it?
Today, half of the citizens in the U.S. are elated, the other half woke up yesterday unhappy and frankly concerned for the future.
Speaker Change: Regardless of which side of the aisle you're on, these are turbulent times, no question about it.
Speaker Change: We recently saw more layoffs in the automotive and broadcast sectors and many of our advertising partners are forced to choose between meeting their payroll or putting a hold on their advertising.
It's truly a main street thing and it's been going on for some time
So the question is, what do we do about it?
Speaker Change: Saga's approaches to turbulent times comes from a passage called the Stockdale Paradox that we've shared with our leadership team and characterizes how we are behaving going through it.
It goes like this
Speaker Change: In order to navigate difficult times, you must first confront the brutal facts, accepting the current reality, even if it's difficult. You must maintain faith, having an unwavering belief that you will prevail, no matter how long it takes.
Speaker Change: He must be consistent, continuing to work through pain and uncertainty.
Speaker Change: You must acknowledge your mistakes and accept that failure and bad decisions are inevitable, and acknowledge it to yourself, your team, and others.
And you must overcome temporary difficulties by embracing challenges as temporary constraints and develop a plan to live in the crisis. Finally, you must stay focused, maintain a personal sense of spirituality, morality, values, and meaning.
Speaker Change: this type of discipline during the transformational change. We chose to put ourselves through.
would be painful without political unrest, massive layoffs, economic downdrafts, and small business uncertainty on Main Street.
And, we consciously made that decision to chart a different path and expand our digital footprint in the midst of all this turbulence.
Speaker Change: Now any reasonable person knows and understands during a transformational change of this nature, of course there will be additional expenses.
R&D costs money.
and reinvestment by definition creates additional expense.
but only for a time.
And as expenses level off and plateau, we grow.
Admittedly, Saga was a very late entry into the digital landscape.
Bush, which had its advantages and disadvantages.
One advantage is we're able to carefully observe the mistakes that others made and then look back at both the intended and unintended consequences that occurred during the innovation.
Speaker Change: There were disadvantages too. During our tardiness, we sacrificed the relative skill levels of our sellers in the digital space.
Speaker Change: So, a great deal of education and training time was necessary to get our media advisors up to speed on digital and the new philosophy we're implementing.
We then aligned our intentions for growth.
Speaker Change: and with those who understood how to protect and grow radio's percentage of the total ad spend, while at the same time growing our digital verticals.
This process is headed by Saga's Director of Innovation and Growth, Matt Burgoyne.
Speaker Change: Matt and his team have helped us to understand the role that radio and digital play in the consumer journey.
Speaker Change: To be clear, this is not a product or an inwardly focused product-oriented sales process.
Speaker Change: It's a philosophy and methodology built to achieve better results for our local advertisers.
Speaker Change: based on a journey a consumer embarks on when they are exposed to advertising.
Speaker Change: You know furthermore capitalizes on the power of radio to move the consumer to a series of specific actions
Speaker Change: to search for the client's name, click on the client's website, call them or visit their business. We call this philosophy blended advertising.
Speaker Change: This philosophy dovetails nicely with the other top of funnel verticals we've been implementing and growing the past 20 months.
Speaker Change: in Dash Graphics with Q, our 18 online news sites, eCommerce, streaming, and Saga's Best of program. Sam will share some specifics on that in just a moment.
Speaker Change: So over the past year we have been equipping our media advisors with the knowledge, the training, and the in-house
Speaker Change: the knowledge, the training, and the in-house resources to enable him, in turn, to share that knowledge with our local direct advertisers, providing those advertisers with the sophistication large national advertisers get from digital in a very easy-to-understand way.
that levels the playing field using blended advertising tools.
Speaker Change: This allows them to compete and win market share from even the most behemoth sized advertisers.
Speaker Change: as we begin to track our progress with blended advertising. And keep in mind, we've only just begun.
We are astounded by the early returns.
Speaker Change: We are seeing some incredible outcomes when the media advisors dutifully practice blended advertising.
Excuse me.
Speaker Change: Firstly, it doesn't decrease the client's radio spend. In fact, blended advertising significantly increases the radio-only spend and increases the total radio and digital spend mid to high double digits.
Speaker Change: who ended up advertising a saved businesses that were going to cancel radio with us.
Speaker Change: and led to a blended digital and radio outcome that actually increased the client's overall spend and the client's results.
Speaker Change: And then there are outcomes for our local direct advertisers. They include getting more clients, getting more patients, getting more leads, and ultimately getting more sales.
Speaker Change: The question continues to be, I've asked it a number of times, where would we be had we not taken this new path of innovation and growth?
Sam: More on that later. Until then, I'm going to turn it over to you, Sam. Take it away.
Thank you, Chris.
Sam: 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.
Sam: 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 measures are attached in the selected financial data tables.
Speaker Change: For the quarter ended September 30, 2024, net revenue decreased 3.5% to $28.1 million, compared to $29.1 million last year.
Speaker Change: Political was a bit better, as for the quarter we had $677,000 in gross political revenue this year compared to $234,000 for the same period last year.
Speaker Change: Station operating expense increased 3.1% to $23.5 million for the three-month period.
Speaker Change: Station operating income, a non-GAAP financial measure for the quarter, was $6 million, and net income was $1.3 million, or $0.20 per fully diluted share.
Speaker Change: On a same station basis for the third quarter, net revenue decreased 5.8 percent to $27.5 million and station operating expense decreased 0.3 percent to $22.7 million.
Speaker Change: As a reminder, we closed on the purchase of the Lafayette stations on May 31st, 2024. Everything in Lafayette is coming along nicely as they are getting fully integrated into the Saga operating procedures and culture.
Speaker Change: For the nine-month period ended September 30, 2024, net revenue decreased 2.5 percent to $81.5 million. Gross political revenue was $1.3 million for the period compared to $538,000 for the same period last year.
Speaker Change: Station operating expense increased 4.7% to $70 million for the nine-month period.
Speaker Change: Station Operating Income, a non-GAAP financial measure for the nine months, was $15.2 million and Net Income was $2.2 million or $0.35 per fully diluted share.
Speaker Change: This will result in somewhat challenging revenue comparisons for our digital business over the next couple of quarters net of that strategic decision to eliminate a revenue positive silo that was providing little profitability. Our digital business continues to have significant growth potential.
Speaker Change: Expenses continued to be impacted by strategic strategic investments in our people and our product offerings, including E. Commerce Interactive online news market best of productions, New and continued NTR events.
Speaker Change: For a little more color on revenue E Commerce was up 33% or 153000 in the third quarter and is up 89% or 849000 for the nine month period.
Speaker Change: Adding to what was mentioned before about our digital efforts interactive was up four 5% or 122000 for the quarter and up 21, 4% or $1 5 million for the nine month period.
Speaker Change: NTR events were up 11% or 246000 for the quarter and one 5% or 87000 for the nine months period the.
Speaker Change: The market's best off programs have booked $1 3 million in gross revenue year to date through September 30 of 2024. This is a 21% increase over the same period in 2023 for the quarter. The revenue was 522000, which is an 11% increase you should note that portions of the best of revenue are recorded.
Speaker Change: G R and portions of recorded in interactive as we have both online and printed advertising offers offerings in this segment.
Speaker Change: Online news, which is a subset of the interactive numbers increased 68% or 242000 for the quarter and 66% or 631000 for the nine months period.
Speaker Change: Total revenue for the quarter was 597000 and for the year $1 6 million.
Speaker Change: Capital expenditures for the quarter ended September 30th we're 200 or 625000 compared to 760000 for the same period last year for.
Speaker Change: For the nine months period capital expenditures were $3 2 million compared to $3 4 million for the same period last year. We currently expect to spend between 4 million and $4 6 million for capital expenditures in 2024.
Speaker Change: The Companys balance sheet reflects $28 7 million in cash and short term investments as of September 30th and 28 million as of November 4th. We currently have 5 million drawn against our $50 million revolving credit facility, which we used to close the Lafayette acquisition.
Speaker Change: We paid a quarterly dividend of <unk> 25.
Speaker Change: <unk> per share for approximately $1 6 million during the quarter on October 18, 2024 to date, we have paid our 130, we have paid over $133 million in dividends to our shareholders since 2012.
Speaker Change: Pacing for the fourth quarter remained soft and we are currently pacing down low to mid single digits political did pick up nicely in October as of November five 2024, we had total political for the year of $3 3 million.
Speaker Change: During the last presidential election in 2020, we recorded approximately $6 9 million in gross political revenue for the year. We just didn't have stations in all of the the right States. This year political for the fourth quarter looks to be $2 million of the 3.3 million total you expect spectation and the bulk of that was in October.
Speaker Change: On our current <unk>.
Speaker Change: Projections, we currently expect that our station operating expense on a same station basis will increase by approximately 3% to 5% for the year as compared to 2023.
Speaker Change: In addition to the inflationary environment that is significantly driven by our by our investments in our staff sales training and ongoing interactive development, including our online news product, we anticipate that the annual corporate general and administrative expense will be approximately $12 2 million for 2020 for our tax rate is expected to be 27 to 31 person.
Speaker Change: Sent with the deferred tax rate of six 9% going forward.
Speaker Change: Chris after a lot of numbers I'll give it back to you.
Chris Forgy: Well, Sam I think it's safe to say that theres turbulence in the environment and the economy and our sector and a number of sectors.
Speaker Change: Turbulent seems to be one of those ongoing phrases in terms that we use and hear a lot about.
Speaker Change: Nothing more turbulent than what we experienced recently.
Speaker Change: As most of you know hurricane Helane. The first few hurricanes that made landfall last month on the West Coast of Florida also re tabick all the way to the Carolinas.
Speaker Change: There was a massive flooding saga on seven radio stations and an online new site in Asheville, North Carolina call. It eight to eight news now.
Speaker Change: The city of Asheville was absolutely decimated.
Speaker Change: Astro was literally and figuratively underwater.
Speaker Change: The members of the Asheville Radio Group Media group led by President and GM, Tom Davis operations manager, Steve Richards, and Chief engineer Cameron Dempsey, along with many others ran towards the challenges and not away from them.
Speaker Change: Because when it's time to shine.
Speaker Change: What we do.
Speaker Change: Even when circumstances are dire so for a moment picture this.
Speaker Change: No phone no internet access.
Speaker Change: 60% of the city had no power the water treatment facility was wiped out that's there was no running water whatsoever for weeks and there is still a limited amount of potable water today.
Speaker Change: The hospital was overwhelmed with injured flood victims water tanks were brought in to the hospital and we're protected by FEMA agents. So the hospital staff could treat the injured without interruption.
Speaker Change: Additional medical personnel came all the way from Texas, and even Canada to assist.
Speaker Change: And sadly there were over 100 lives lost it was like a war zone.
Speaker Change: During all of this chaos five of our seven Nashville Media Group radio stations remained on the air.
Speaker Change: To employees like Cameron and Steve, who I mentioned, a moment ago, who were literally hauling five gallon containers of gasoline up a mountain to keep the backup generators operational and the radio stations on the air.
Speaker Change: Yes, real media group stations simulcast and critical information to the Asheville community because radio was the only way for them to get the disaster information and direction they needed.
Speaker Change: The National Media group had feet on the streets, and our microphones lifetime went and transmittal mirrors, where all in full operational mode.
Speaker Change: Broadcasters, even reached out to me from all over the country.
Speaker Change: See how they could help and offer whatever we needed.
Speaker Change: The broadcasters Foundation of America responded immediately making grants available to Asheville Media group employees, who were in need of assistance.
Speaker Change: No one could get in and out of Asheville, It was impossible.
Speaker Change: So so what saga corporate office and team did with the help of our Charleston Media group stations, we packed a box truck with water and supplies and drove it from South Carolina to North Carolina and unloaded it specifically for our Asheville Media group employees.
Speaker Change: We also ran free honor messages on behalf of local business.
Speaker Change: Who were open and able to operate letting listeners know that they were open and ready to serve them.
Speaker Change: And finally, there was an inter market exchange lives.
Speaker Change: Live and on the air that took place between Nashville. His morning show on the Mountain W. TMT 1059 F N featuring Jeff and Rizzo and the morning show in Columbus, Ohio, with Toric and Elliot on Q F. M Ninety-six W. I'll requeue.
Speaker Change: Interview was radio is at its best without a doubt it.
Speaker Change: It was the first real look at the on the ground images of the devastation Helene it caused.
Speaker Change: The radio exchange was.
Speaker Change: Stimulating horrific.
Speaker Change: And frankly riveting.
Speaker Change: It was must hear radio.
Speaker Change: The professionalism and sense of humanity emanated from the entire interview.
Speaker Change: And then it Kickstarted a saga wide relief effort that aired on all saga stations.
Speaker Change: No water no insulin for those who desperately needed it no proper sanitation no power.
Speaker Change: And as one resident said the citizens of Asheville were trapped in a giant cereal bowl of water and waste.
Speaker Change: Here's an excerpt from what our Hendersonville flood victims said.
Speaker Change: After the flood.
Speaker Change: I can't say enough.
Speaker Change: Radio is so critically important to our people everywhere.
Speaker Change: I think sometimes we forget because you can't flip on the T V or.
Speaker Change: The internet when a disaster hits, because it's just simply not available.
Speaker Change: What would we do without radio.
Speaker Change: I honestly don't know.
Speaker Change: So I am very very thankful.
Speaker Change: And she entered her quote with God bless radio.
Speaker Change: He didn't say what would we do without streaming.
Speaker Change: You didn't say what would we do without podcasts and your audio she said, what we do without radio.
Speaker Change: The passion and commitment for our people to serve our communities and sagas response to the needs was unimpressive was unprecedented.
Speaker Change: Ashville disaster exemplifies how radio can serve as a beacon of hope.
Speaker Change: Providing essential information and connecting communities in the darkest of ours.
Speaker Change: What other media can say that name one.
Speaker Change: Radio is the original audio.
Speaker Change: The number one reach medium the commands attention deeply.
Speaker Change: Deeply connecting with our listeners and driving outcomes for our customers.
Speaker Change: And by the way if any of you are still interested they are still taking donations.
Speaker Change: You can go to one bun com, which is the county, the Nashville's located in it.
Speaker Change: O N E B U and isn't Nancy.
Speaker Change: C as in Cat, Oh, Amazon Mary B as in Boy E Dot com.
Speaker Change: So we.
Speaker Change: We bring all this back around how do you weather, both a literal and figurative storm.
Speaker Change: Robert Frost said it best.
Speaker Change: The best way out.
Speaker Change: Is through.
Speaker Change: Saga is walking and punching through these turbulent times and we will come out on the other side stronger better trained better equipped to continue to forge more meaningful and profitable relationships with our customers all of them.
Speaker Change: Thank you again for being part of Sage <unk> Q3 earnings call.
Speaker Change: And we will talk to you next time.
Speaker Change: Yeah.
Speaker Change: Chris We had a few questions come in.
Speaker Change: Cost of them, we've at least touched on but maybe we can go into a little bit more depth. The first is in terms of the digital business. What are the headwinds that you face in growing your digital business competitive environment.
Speaker Change: Digital sales staff economic headwinds.
Speaker Change: Sam.
Sam: They're really like four words that come to mind when I think about that question and we've talked about this with our leadership team with our media advisors. It was our corporate staff and with our board.
Speaker Change: The things that are.
Sam: Causing downdraft or can cause some issues for us are.
Sam: Simply time.
Speaker Change: Talent training and speed.
Speaker Change: Focusing on the really it's just the time to catch up.
Speaker Change: We were 10 or 12 years behind in the digital and the start of our digital processes. So we had a lot of catch up to do that takes money and time and training.
Speaker Change: Talent.
Speaker Change: Frankly in it's it's been difficult.
Speaker Change: Before we made this transition defined hire and onboard really good sales talent.
Speaker Change: So even with our good a really strong processes that we have to find and hire and evaluate the talent.
Speaker Change: So talent is a challenge.
Speaker Change: And then the the.
Speaker Change: Onboarding.
Speaker Change: People as I mentioned in the training the training also takes time.
Speaker Change: And if not when it takes time to do the training and it takes time to practice and get really good at it.
Speaker Change: So you are not having to play slow you can play fast which brings in the final element in that speed.
Speaker Change: The better we learn the more we practices the better we get at it the faster we can run and the faster the results will come.
Speaker Change: Very good. Thank you you also talked a little bit about the tone of the advertising market heading into Q4 without the political and you talked about main street and what the advertisers what we're saying on main street, we obviously all know that looking at the.
Speaker Change: The political aspects of what's been going on over the last year with the elections are what's been going on Palestine Israel.
Speaker Change: Ukraine, the economics of the world the car issues and so forth, but would you like to say anything else about.
Speaker Change: The advertising market in Q4.
Speaker Change: I think I think there's both good news and not so good news I mean, you saw Atlantis and G. M make major layoffs in Detroit, just a couple of weeks ago.
Speaker Change: We also saw major broadcast sector layoffs that happened over the last couple of days and I from what I understand you're not finished.
Speaker Change:
Speaker Change: And to me people are our most important resource.
Speaker Change: And we can't win without people and without the resources to train them and equip them. So for me that's really not that part of it is really off the table off the table.
Speaker Change: But that wasn't a metaphor when I said, our advertising partners are having to make decisions about whether to meet payroll or pause their advertising campaigns that has actually been said multiple times.
Speaker Change: I actually got that and shared it on a on a in a board meeting I think from one of our leaders and one of our markets that advertisers were actually saying that at the same time the stock market was performing pretty well yesterday. So there.
Speaker Change: There is both good news than bad news and some we control. Some we don't we just focus on the ones, we can control and run really fast and keep punching through.
Speaker Change: Very good and I think we're moving in the right direction absolutely.
Speaker Change: I'm not I think we're we're good if you want to wrap up the call and thanks, everybody for joining.