Salem Media Group, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Segment Data

Segment Data

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Data

NOTE 19. SEGMENT DATA

FASB ASC Topic 280, “

Segment Reporting

,” requires companies to provide certain information about their operating segments. We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which also qualify as reportable segments. Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. We continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary.

We measure and evaluate our operating segments based on operating income and operating expenses that do not include allocations of costs related to corporate functions, such as accounting and finance, human resources, legal, tax and treasury, which are reported as unallocated corporate expenses in our condensed consolidated statements of operations included in this quarterly report on Form

10-Q.

We also exclude costs such as amortization, depreciation, taxes and interest expense.

Segment performance, as defined by Salem, is not necessarily comparable to other similarly titled captions of other companies.

Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets. Our broadcasting segment includes our national networks and national sales firms. National companies often prefer to advertise across the United States as an efficient and cost-effective way to reach their target audiences. Our national platform under which we offer radio airtime, digital campaigns and print advertisements can benefit national companies by reaching audiences throughout the United States.

Salem Radio Network

(“SRN

”), based in Dallas, Texas, develops, produces and syndicates a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and News Talk stations. SRN

delivers programming via satellite to approximately 3,100 affiliated radio stations throughout the United States, including several of our Salem-owned stations. SRN

operates five divisions, SRN

Talk, SRN

News, SRN

Websites, SRN

Satellite Services and Salem Music Network that includes Today’s Christian Music (“TCM”) and Singing News

Radio.

Salem Media Representatives (“SMR”) is our national advertising sales firm with offices in 12 U.S. cities. SMR specializes in placing national advertising on Christian and talk formatted radio stations as well as other commercial radio station formats. SMR sells commercial airtime to national advertisers on our radio stations and through our networks, as well as for independent radio station affiliates. SMR also contracts with independent radio stations to create custom advertising campaigns for national advertisers to reach multiple markets.

Salem Surround, our national multimedia advertising agency with locations in 34 markets across the United States, offers a comprehensive suite of digital marketing services to develop and execute audience-based marketing strategies for clients on both the national and local level. Salem Surround specializes in digital marketing services for each of our radio stations and websites as well as provides a full-service digital marketing strategy for each of our clients.

Digital Media

Our digital media based businesses provide Christian, conservative, investing and health-themed content,

e-commerce,

audio and video streaming, and other resources digitally through the web. Salem Web Network (“SWN”) websites include Christian content websites; BibleStudyTools.com, Crosswalk.com

, GodVine.com, iBelieve.com, GodTube

.com, OnePlace

™

.com, Christianity.com, GodUpdates.com, CrossCards

™

.com, ChristianHeadlines.com, LightSource.com, AllCreated.com, ChristianRadio.com, CCMmagazine.com, SingingNews

.com and SouthernGospel.com and our conservative opinion websites; collectively known as Townhall Media, include Townhall.com

, HotAir

™

.com, Twitchy

.com, RedState

.com, BearingArms.com, ConservativeRadio.com and pjmedia.com. We also publish digital newsletters through Eagle Financial Publications, which provide market analysis and

non-individualized

investment strategies from financial commentators on a subscription basis.

Our church

e-commerce

websites, including SermonSearch

™

.com, ChurchStaffing.com, WorshipHouseMedia.com, SermonSpice

™

.com, WorshipHouseKids.com, Preaching.com, ChristianJobs.com, Youthworker.com, JourneyBoxMedia.com and Playblackmedia.com, offer a variety of digital resources including videos, song tracks, sermon archives and job listings to pastors and Church leaders.

Our web content is accessible through all of our radio station websites that feature content of interest to local audiences throughout the United States.

Publishing

Our publishing operating segment includes three businesses: (1) Regnery

Publishing, a traditional book publisher that has published dozens of bestselling books by leading conservative authors and personalities, including Ann Coulter, Newt Gingrich, David Limbaugh, Ed Klein, Mark Steyn and Dinesh D’Souza; (2) Salem Author Services, a self-publishing service for authors through Xulon Press and Mill City Press; and (3)

Singing News

which produces and distributes a print magazine.

The table below presents financial information for each operating segment as of March 31, 2020 and 2019 based on the composition of our operating segments:


	Broadcast			Digital Media			Publishing			Unallocated Corporate Expenses			Consolidated
	(Dollars in thousands)
Three Months Ended March 31, 2020
Net revenue	$	45,180		$	9,104		$	3,966		$	—		$	58,250
Operating expenses		37,327			8,326			5,062			4,210			54,925

Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the disposition of assets	$	7,853		$	778		$	(1,096	)	$	(4,210	)	$	3,325

Depreciation		1,645			771			69			228			2,713
Amortization		9			768			210			—			987
Change in the estimated fair value of contingent earn-out consideration		—			(5	)		—			—			(5	)
Impairment of indefinite-lived long-term assets other than goodwill		16,994			—			260			—			17,254
Impairment of goodwill		184			10			105			8			307
Net (gain) loss on the disposition of assets		79			—			—			—			79

Net operating income (loss)	$	(11,058	)	$	(766	)	$	(1,740	)	$	(4,446	)	$	(18,010	)

Three Months Ended March 31, 2019
Net revenue	$	46,093		$	10,240		$	4,136		$	—		$	60,469
Operating expenses		36,449			8,058			4,822			3,871			53,200

Net operating income (loss) before depreciation, amortization and net (gain) loss on the disposition of assets	$	9,644		$	2,182		$	(686	)	$	(3,871	)	$	7,269

Depreciation		1,860			774			116			183			2,933
Amortization		9			1,075			212			—			1,296
Net (gain) loss on the disposition of assets		3,783			239			—			2			4,024

Net operating income (loss)	$	3,992		$	94		$	(1,014	)	$	(4,056	)	$	(984	)


	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
As of March 31, 2020
Inventories, net	$	—	$	—	$	647	$	—	$	647
Property and equipment, net		71,685		6,040		807		8,098		86,630
Broadcast licenses		320,864		—		—		—		320,864
Goodwill		2,746		19,499		1,446		—		23,691
Other indefinite-lived intangible assets		—		—		—		—		—
Amortizable intangible assets, net		260		4,885		967		1		6,113
As of December 31, 2019
Inventories, net	$	—	$	—	$	717	$	—	$	717
Property and equipment, net		72,816		6,127		801		7,929		87,673
Broadcast licenses		337,858		—		—		—		337,858
Goodwill		2,930		19,509		1,551		8		23,998
Other indefinite-lived intangible assets		—		—		260		—		260
Amortizable intangible assets, net		268		5,653		1,178		1		7,100