Salem Media Group, Inc. Announces Second Quarter 2019 Total Revenue of $64.7 Million

Category:

Thursday, August 8, 2019 1:05 pm PDT

Dateline:

CAMARILLO, Calif.

Public Company Information:

NASDAQ:
SALM

Salem Media Group, Inc. Announces Second Quarter 2019 Total Revenue of $64.7 Million

CAMARILLO, Calif.--(BUSINESS WIRE)--Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and six months ended June 30, 2019.

Second Quarter 2019 Results

For the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018:

Consolidated

  • Total revenue decreased 2.4% to $64.7 million from $66.3 million;
  • Total operating expenses decreased 9.0% to $59.1 million from $64.9 million;
  • Operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, depreciation expense and amortization expense (1) decreased 1.0% to $54.5 million from $55.1 million;
  • Operating income increased to $5.6 million from $1.3 million;
  • The company’s net loss increased to $3.6 million, or $0.14 net loss per share compared to $2.2 million, or $0.08 net loss per share;
  • EBITDA (1) increased 59.9% to $9.6 million from $6.0 million;
  • Adjusted EBITDA (1) decreased 9.4% to $10.2 million from $11.2 million; and
  • Net cash used by operating activities decreased 57.0% to $1.2 million from $2.8 million.

Broadcast

  • Net broadcast revenue decreased 2.9% to $49.1 million from $50.6 million;
  • Station Operating Income (“SOI”) (1) decreased 14.6% to $11.4 million from $13.3 million;
  • Same Station (1) net broadcast revenue decreased 1.9% to $48.9 million from $49.8 million; and
  • Same Station SOI (1) decreased 13.8% to $11.5 million from $13.4 million.

Digital Media

  • Digital media revenue decreased 2.9% to $10.0 million from $10.3 million; and
  • Digital Media Operating Income (1) increased 24.1% to $2.3 million from $1.9 million.

Publishing

  • Publishing revenue increased 3.5% to $5.6 million from $5.4 million; and
  • Publishing Operating Loss (1) remained consistent at $0.1 million.

Included in the results for the quarter ended June 30, 2019 are:

  • A $0.4 million ($0.3 million, net of tax, or $0.01 per diluted share) net gain on the disposition of assets includes a $0.4 million pre-tax gain of a portion of land on the company’s transmitter site in Miami, Florida;
  • A $0.9 million non-cash compensation charge ($0.7 million, net of tax, or $0.03 per share) related to the expensing of stock options primarily consisting of:
    • $0.5 million non-cash compensation charge included in corporate expenses; and
    • $0.4 million non-cash compensation charge included in broadcast operating expenses.

Included in the results for the quarter ended June 30, 2018 are:

  • A $5.2 million ($3.8 million, net of tax, or $0.14 per share) net loss on the disposition of assets includes a $4.8 million estimated pre-tax loss on the sale of radio stations in Omaha, Nebraska, a $0.3 million pre-tax loss on the sale of land in Muth Valley, California and a $0.2 million pre-tax loss on the sale of land in Covina, California offset by a $0.2 million pre-tax gain on the sale of WBIX-AM in Boston, Massachusetts;
  • A $0.2 million gain ($0.2 million, net of tax, or $0.01 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; and
  • A $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options primarily included in corporate expenses.

Per share numbers are calculated based on 26,525,564 diluted weighted average shares for the quarter ended June 30, 2019, and 26,177,247 diluted weighted average shares for the quarter ended June 30, 2018.

Year to Date 2019 Results

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018:

Consolidated

  • Total revenue decreased 3.8% to $125.1 million from $130.1 million;
  • Total operating expenses decreased 2.0% to $120.5 million from $123.1 million;
  • Operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, depreciation expense and amortization expense (1) decreased 1.0% to $107.5 million from $108.7 million;
  • Operating income decreased to $4.6 million from $7.0 million;
  • The company’s net loss increased to $3.3 million, or $0.13 net loss per share from $1.3 million, or $0.05 net loss per share;
  • EBITDA (1) decreased 18.3% to $13.3 million from $16.2 million;
  • Adjusted EBITDA (1) decreased 17.0% to $17.8 million from $21.4 million; and
  • Net cash provided by operating activities decreased 22.9% to $7.8 million from $10.1 million.

Broadcast

  • Net broadcast revenue decreased 3.5% to $95.2 million from $98.6 million;
  • SOI (1) decreased 18.0% to $21.0 million from $25.6 million;
  • Same station (1) net broadcast revenue decreased 2.4% to $94.4 million from $96.7 million; and
  • Same station SOI (1) decreased 18.1% to $21.4 million from $26.1 million.

Digital media

  • Digital media revenue decreased 2.2% to $20.2 million from $20.7 million; and
  • Digital media operating income (1) increased 15.7% to $4.5 million from $3.9 million.

Publishing

  • Publishing revenue decreased 9.5% to $9.8 million from $10.8 million; and
  • Publishing Operating Loss (1) increased to $0.8 million from $0.3 million.

Included in the results for the six months ended June 30, 2019 are:

  • A $3.7 million ($2.7 million, net of tax, or $0.10 per share) net loss on the disposition of assets including a $3.8 million pre-tax loss for the sale of radio station WSPZ-AM in Washington, D.C., a $0.2 million pre-tax loss on the sale of Mike Turner’s line of investment products and a $0.2 million pre-tax loss on the sale of HumanEvents.com, offset by a $0.4 million pre-tax gain of a portion of land on the company’s transmitter site in Miami, Florida and a $0.1 million pre-tax gain on the sale of Newport Natural Health;
  • A $0.4 million gain ($0.3 million, net of tax, or $0.01 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024;
  • A $0.2 million one-time expense associated with the adoption of ASC 842 ($0.1 million, net of tax) and
  • A $1.1 million non-cash compensation charge ($0.8 million, net of tax, or $0.03 per share) related to the expensing of stock options and restricted stock primarily consisting of:
    • $0.6 million non-cash compensation charge included in corporate expenses; and
    • $0.5 million non-cash compensation charge included in broadcast operating expenses.

Included in the results for the six months ended June 30, 2018 are:

  • A $5.2 million ($3.8 million, net of tax, or $0.15 per share) net loss on the disposition of assets includes a $4.8 million estimated pre-tax loss on the sale of radio stations in Omaha, Nebraska, a $0.3 million pre-tax loss on the sale of land in Muth Valley, California and a $0.2 million pre-tax loss on the sale of land in Covina, California offset by a $0.2 million pre-tax gain on the sale of radio station WBIX-AM in Boston, Massachusetts;
  • A $0.2 million gain ($0.2 million, net of tax, or $0.01 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; and
  • A $0.2 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options consisting of:
    • $0.1 million non-cash compensation charge included in corporate expenses; and
    • $40,000 non-cash compensation charge included in broadcast operating expenses.

Per share numbers are calculated based on 26,355,838 diluted weighted average shares for the six months ended June 30, 2019, and 26,174,393 diluted weighted average shares for the six months ended June 30, 2018.

Balance Sheet

As of June 30, 2019, the company had $231.9 million outstanding on the 6.75% senior secured notes due 2024 (the “Notes”) and $22.4 million outstanding on the Asset Based Revolving Credit Facility (“ABL Facility”).

Acquisitions and Divestitures

The following transactions were completed since April 1, 2019:

  • On July 25, 2019, the company acquired the Journeyboxmedia.com website and related assets for $0.5 million in cash.
  • On July 10, 2019 the company acquired certain assets including a digital content library from Steelehouse Productions, Inc. for $0.1 million in cash.
  • On June 27, 2019, the company sold a portion of land on its transmitter site in Miami, Florida, for $0.9 million in cash. The company recognized a pre-tax gain of $0.4 million reflecting the sales price as compared to the carrying value of the land.
  • On June 6, 2019, the company acquired the InvestmentHouse.com website and the related financial newsletter assets and deferred subscription liabilities for $0.6 million in cash. As part of the purchase agreement, the company may pay an additional incentive payment equal to 10% of revenue earned in excess of a predetermined during the incentive period ending May 31, 2020. Using a probability-weighted discounted cash flow model based on its own assumptions as to the ability of InvestmentHouse.com to achieve revenue in excess of the targets at the time of closing, the company estimated the fair value of the contingent earn-out consideration to be $2,500, which approximated the present value based on the earn-out period of less than twelve months.
  • On May 14, 2019, the company sold radio station WSPZ-AM (previously WWRC-AM) in Washington D.C. for $0.8 million in cash. The buyer began programming the station under a Time Brokerage Agreement (“TBA”) on April 12, 2019. The company recorded an estimated pre-tax loss of $3.8 million as of March 31, 2019, based on its plan to sell the station and the probability of the sale, which reflects the sales price as compared to the carrying value of the radio station assets and the estimated closing costs. The company recorded an additional loss of $32,000 upon closing based on the actual closing costs incurred.

Pending transactions:

  • On July 25, 2019, the company entered into an agreement to sell radio stations WWMI-AM and WLCC-AM in Tampa Florida and WZAB-AM and WKAT-AM in Miami, Florida for $8.2 million in cash. The company recognized an estimated pre-tax loss of $4.7 million on July 25, 2019, which reflects the sales price as compared to the carrying value of the assets of the radio stations and the estimated closing costs. This transaction is subject to the approval of the FCC and is expected to close in the third quarter of 2019.
  • On July 10, 2019, the company entered into an agreement to sell radio station WORL-AM in Orlando, Florida for $0.9 million in cash. The company recognized an estimated pre-tax loss of $1.6 million on July 10, 2019, which reflects the sales price as compared to the carrying value of the radio station assets and the estimated closing costs. The company also entered a LMA effective September 2, 2019, under which the radio station will be operated by the buyer pending the closing of the sale of the station. This transaction is subject to the approval of the FCC and is expected to close in the third quarter of 2019.
  • On January 3, 2017, Word Broadcasting began operating our Louisville radio stations (WFIA-AM; WFIA-FM; WGTK-AM) under a twenty-four month TBA. We received $0.5 million in cash associated with an option for Word Broadcasting Network to acquire the radio stations during the term. In December 2018, Word Broadcasting notified the company of their intent to purchase our Louisville radio stations. The TBA contained an extension clause that allowed Word Broadcasting to continue operating the station until the purchase agreement was executed and the transaction closed. On June 28, 2019, the TBA was amended to include an additional 24 months under which Word Broadcasting will program the radio stations with the option to acquire the stations extended to December 31, 2020.
  • On April 29, 2019 the company entered into an agreement to exchange FM Translator W276CR, in Bradenton, Florida with FM Translator W262CP in Bayonet Point, Florida. No cash will be exchanged for the assets.
  • On April 26, 2018, the company entered an agreement to exchange radio station KKOL-AM, in Seattle, Washington for KPAM-AM in Portland, Oregon. The transaction is expected to close in the second half of 2019. No cash will be exchanged for the assets.

Conference Call Information

Salem will host a teleconference to discuss its results on August 8, 2019 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (877) 524-8416, and then ask to be joined into the Salem Media Group Second Quarter 2019 call or listen via the investor relations portion of the company’s website, located at investor.salemmedia.com. A replay of the teleconference will be available through August 22, 2019 and can be heard by dialing (877) 660-6853, passcode 13692370 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.

Follow us on Twitter @SalemMediaGrp.

Third Quarter 2019 Outlook

For the third quarter of 2019, the company is projecting total revenue to decrease between 4% and 6% from third quarter 2018 total revenue of $65.5 million. Excluding the impact of political revenue and recent acquisitions and dispositions, the company is projecting total revenue to decrease between 2% and 4%. The company is also projecting operating expenses before gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to be between flat and a decrease of 3% compared to the third quarter of 2018 non-GAAP operating expenses of $55.2 million.

A reconciliation of non-GAAP operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP financial measure, in particular, the change in the estimated fair value of earn-out consideration, impairments and gains or losses from the disposition of fixed assets. The company expects the variability of the above charges may have a significant, and potentially unpredictable, impact on its future GAAP financial results.

About Salem Media Group, Inc.

Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape. Learn more about Salem Media Group, Inc., at www.salemmedia.com, Facebook and Twitter (@SalemMediaGrp).

Forward-Looking Statements

Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of Salem to close and integrate announced transactions, market acceptance of Salem’s radio station formats, competition from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem's reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

(1) Regulation G

Management uses certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements. The company uses these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.

The company’s presentation of these non-GAAP financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.

Regulation G defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this earnings release. The company closely monitors EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, Publishing Operating Loss, and operating expenses excluding gains or losses on the disposition of assets, stock-based compensation, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation and amortization, all of which are non-GAAP financial measures. The company believes that these non-GAAP financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance. These non-GAAP financial measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance.

The company defines Station Operating Income (“SOI”) as net broadcast revenue minus broadcast operating expenses. The company defines Digital Media Operating Income as net Digital Media Revenue minus Digital Media Operating Expenses. The company defines Publishing Operating Loss as net Publishing Revenue minus Publishing Operating Expenses. The company defines EBITDA as net income before interest, taxes, depreciation, and amortization. The company defines Adjusted EBITDA as EBITDA before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before changes in the fair value of interest rate swap, before impairments, before net miscellaneous income and expenses, before gain on bargain purchase, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. SOI, Digital Media Operating Income, Publishing Operating Loss, EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. SOI, Digital Media Operating Income, Publishing Operating Loss, EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with GAAP. The company’s definitions of SOI, Digital Media Operating Income, Publishing Operating Loss, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.

The company defines Adjusted Free Cash Flow as Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. The company considers Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. A limitation of Adjusted Free Cash Flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. The company uses Adjusted Free Cash Flow, a non-GAAP liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The company’s presentation of Adjusted Free Cash Flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Adjusted Free Cash Flow is not necessarily comparable to similarly titled measures reported by other companies.

The company defines Same Station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station SOI as Same Station net broadcast revenue less Same Station broadcast operating expenses. Same Station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station operating results for a full calendar year are calculated as the sum of the Same Station-results for each of the four quarters of that year. The company uses Same Station operating results, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business. The company believes that Same Station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format. The company’s presentation of Same Station operating results are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Same Station operating results is not necessarily comparable to similarly titled measures reported by other companies.

For all non-GAAP financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.

The Supplemental Information tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP. The company uses non-GAAP financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.

Salem Media Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

Three Months Ended

Six Months Ended

June 30,

June 30,

 

2018

 

 

2019

 

 

2018

 

 

2019

 

(Unaudited)

Net broadcast revenue

$

 

 

 

50,563

 

$

 

 

 

49,082

 

$

 

 

 

98,613

 

$

 

 

 

95,175

 

Net digital media revenue

10,260

 

9,960

 

20,654

 

20,200

 

Net publishing revenue

5,449

 

5,638

 

10,800

 

9,774

 

Total revenue

66,272

 

64,680

 

130,067

 

125,149

 

Operating expenses:

 

 

 

 

Broadcast operating expenses

37,243

 

37,707

 

72,993

 

74,156

 

Digital media operating expenses

8,397

 

7,648

 

16,771

 

15,706

 

Publishing operating expenses

5,522

 

5,773

 

11,109

 

10,595

 

Unallocated corporate expenses

4,030

 

4,332

 

7,951

 

8,203

 

Change in the estimated fair value of contingent earn-out consideration

72

 

 

72

 

 

Depreciation and amortization

4,511

 

3,976

 

8,998

 

8,205

 

Net (gain) loss on the disposition of assets

5,154

 

(357

)

5,159

 

3,667

 

Total operating expenses

64,929

 

59,079

 

123,053

 

120,532

 

Operating income

1,343

 

5,601

 

7,014

 

4,617

 

Other income (expense):

 

 

 

 

Interest income

 

 

2

 

1

 

Interest expense

(4,754

)

(4,371

)

(9,272

)

(8,796

)

Gain on early retirement of long-term debt

234

 

 

234

 

426

 

Net miscellaneous income and (expenses)

(88

)

18

 

(13

)

19

 

Net income (loss) before income taxes

(3,265

)

1,248

 

(2,035

)

(3,733

)

Provision for (benefit from) income taxes

(1,098

)

4,892

 

(696

)

(411

)

Net loss

$

 

 

 

(2,167

)

$

 

 

 

(3,644

)

$

 

 

 

(1,339

)

$

 

 

 

(3,322

)

 

 

 

 

Basic loss per share Class A and Class B common stock

$

 

 

 

(0.08

)

$

 

 

 

(0.14

)

$

 

 

 

(0.05

)

$

 

 

 

(0.13

)

Diluted loss per share Class A and Class B common stock

$

 

 

 

(0.08

)

$

 

 

 

(0.14

)

$

 

 

 

(0.05

)

$

 

 

 

(0.13

)

 

 

 

 

Basic weighted average Class A and Class B common stock shares outstanding

26,177,247

 

26,525,564

 

26,174,393

 

26,355,838

 

Diluted weighted average Class A and Class B common stock shares outstanding

26,177,247

 

26,525,564

 

26,174,393

 

26,355,838

 

Salem Media Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

June 30, 2019

 

 

 

 

 

 

(Unaudited)

Assets

 

 

 

 

 

 

Cash

 

$

 

117

 

$

 

9

Trade accounts receivable, net

 

 

33,020

 

 

32,154

Other current assets

 

 

10,500

 

 

9,047

Property and equipment, net

 

 

96,344

 

 

94,591

Operating and financing lease right-of-use assets

 

 

164

 

 

61,780

Intangible assets, net

 

 

414,646

 

 

408,108

Deferred financing costs

 

 

381

 

 

304

Other assets

 

 

3,856

 

 

5,066

Total assets

 

$

 

559,028

 

$

 

611,059

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

$

 

52,878

 

$

 

66,163

Long-term debt

 

 

234,030

 

 

227,887

Operating and financing lease liabilities, less current portion

 

 

105

 

 

60,132

Deferred income taxes

 

 

35,272

 

 

34,726

Other liabilities

 

 

14,874

 

 

5,922

Stockholders’ Equity

 

 

221,869

 

 

216,229

Total liabilities and stockholders’ equity

 

$

 

559,028

 

$

 

611,059

SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share and per share data)

 

Class A

 

Class B

 

 

 

 

 

 

 

 

 

Common Stock

 

Common Stock

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-In

 

Accumulated

 

Treasury

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Earnings

 

Stock

 

Total

Stockholders’ equity, December 31, 2018

22,950,066

 

$ 227

 

5,553,696

 

$ 56

 

$ 245,220

 

$ 10,372

 

$ (34,006)

 

$ 221,869

Stock-based compensation

 

 

 

 

176

 

 

 

176

Cash distributions

 

 

 

 

 

(1,702)

 

 

(1,702)

Net loss

 

 

 

 

 

322

 

 

322

Stockholders’ equity, March 31, 2019

22,950,066

 

$ 227

 

5,553,696

 

$ 56

 

$ 245,396

 

$ 8,992

 

$ (34,006)

 

$ 220,665

Distributions per share

$ 0.065

 

 

 

$ 0.065

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity, March 31, 2019

22,950,066

 

$ 227

 

5,553,696

 

$ 56

 

$ 245,396

 

$ 8,992

 

$ (34,006)

 

$ 220,665

Stock-based compensation

 

 

 

 

936

 

 

 

936

Options exercised

200

 

 

 

 

 

 

 

Lapse of restricted shares

389,061

 

 

 

 

 

 

 

Cash distributions

 

 

 

 

 

(1,728)

 

 

(1,728)

Net loss

 

 

 

 

 

(3,644)

 

 

(3,644)

Stockholders’ equity, June 30, 2019

23,339,327

 

$ 227

 

5,553,696

 

$ 56

 

$ 246,332

 

$ 3,620

 

$ (34,006)

 

$ 216,229

Distributions per share

$ 0.065

 

 

 

$ 0.065

 

 

 

 

 

 

 

 

 

 

 

Class A

 

Class B

 

 

 

 

 

 

 

 

 

Common Stock

 

Common Stock

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-In

 

Accumulated

 

Treasury

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Earnings

 

Stock

 

Total

Stockholders’ equity, December 31, 2017

22,932,451

 

$ 227

 

5,553,696

 

$ 56

 

$ 244,634

 

$ 20,370

 

$ (34,006)

 

$ 231,281

Stock-based compensation

 

 

 

 

46

 

 

 

46

Options exercised

8,125

 

 

 

 

19

 

 

 

19

Cash distributions

 

 

 

 

 

(1,701)

 

 

(1,701)

Net income

 

 

 

 

 

828

 

 

828

Stockholders’ equity, March 31, 2018

22,940,576

 

$ 227

 

5,553,696

 

$ 56

 

$ 244,699

 

$ 19,497

 

$ (34,006)

 

$ 230,473

Distributions per share

$ 0.065

 

 

 

$ 0.065

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity, March 31, 2018

22,940,576

 

$ 227

 

5,553,696

 

$ 56

 

$ 244,699

 

$ 19,497

 

$ (34,006)

 

$ 230,473

Stock-based compensation

 

 

 

 

126

 

 

 

126

Options exercised

625

 

 

 

 

2

 

 

 

2

Cash distributions

 

 

 

 

 

(1,701)

 

 

(1,701)

Net (loss)

 

 

 

 

 

(2,167)

 

 

(2,167)

Stockholders’ equity, June 30, 2018

22,941,201

 

$ 227

 

5,553,696

 

$ 56

 

$ 244,827

 

$ 15,629

 

$ (34,006)

 

$ 226,733

Distributions per share

$ 0.065

 

 

 

$ 0.065

 

 

 

 

 

 

 

 

 

 

Salem Media Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

Six Months Ended

June 30,

 

 

2018

 

 

2019

 

OPERATING ACTIVITIES

 

 

Net loss

$

(1,339

)

$

(3,322

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Non-cash stock-based compensation

 

172

 

 

1,112

 

Depreciation and amortization

 

8,998

 

 

8,205

 

Amortization of deferred financing costs

 

587

 

 

513

 

Non-cash lease expense

 

 

 

4,448

 

Accretion of acquisition-related deferred payments and contingent consideration

 

18

 

 

2

 

Provision for bad debts

 

796

 

 

737

 

Deferred income taxes

 

(812

)

 

(546

)

Change in the estimated fair value of contingent earn-out consideration

 

72

 

 

 

Gain on early retirement of long-term debt

 

(234

)

 

(426

)

Net (gain) loss on the disposition of assets

 

5,159

 

 

3,667

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable and unbilled revenue

 

(1,099

)

 

3

 

Inventories

 

(223

)

 

(353

)

Prepaid expenses and other current assets

 

(383

)

 

1,078

 

Accounts payable and accrued expenses

 

488

 

 

(459

)

Deferred rent expense

 

(120

)

 

 

Operating lease liabilities

 

 

 

(5,765

)

Contract liabilities

 

(1,970

)

 

(1,081

)

Deferred rent income

 

(46

)

 

(84

)

Other liabilities

 

(13

)

 

 

Income taxes payable

 

20

 

 

32

 

Net cash provided by operating activities

 

10,071

 

 

7,761

 

INVESTING ACTIVITIES

 

 

 

 

Cash paid for capital expenditures net of tenant improvement allowances

 

(4,680

)

 

(4,697

)

Capital expenditures reimbursable under tenant improvement allowances and trade agreements

 

(7

)

 

 

Escrow deposits paid related to acquisitions

 

(185

)

 

 

Escrow deposits received related to radio station sale

 

2,045

 

 

 

Purchases of broadcast assets and radio stations

 

(1,100

)

 

 

Purchases of digital media businesses and assets

 

(70

)

 

(650

)

Proceeds from sale of assets

 

1,791

 

 

2,872

 

Other

 

(399

)

 

(728

)

Net cash used in investing activities

 

(2,605

)

 

(3,203

)

FINANCING ACTIVITIES

 

 

 

 

Payments to repurchase 6.75% Senior Secured Notes

 

(9,550

)

 

(6,123

)

Proceeds from borrowings under ABL Facility

 

69,277

 

 

54,295

 

Payments on ABL Facility

 

(66,374

)

 

(51,539

)

Refund (payments) of debt issuance costs

 

21

 

 

(30

)

Proceeds from the exercise of stock options

 

21

 

 

 

Payments of deferred installments due from acquisition activity

 

(15

)

 

 

Payments on financing lease liabilities

 

(59

)

 

(43

)

Payment of cash distribution on common stock

 

(3,402

)

 

(3,430

)

Book overdraft

 

2,621

 

 

2,204

 

Net cash used in financing activities

 

(7,460

)

 

(4,666

)

Net increase (decrease) in cash and cash equivalents

 

6

 

 

(108

)

Cash and cash equivalents at beginning of year

 

3

 

 

117

 

Cash and cash equivalents at end of period

$

9

 

$

9

 

See accompanying notes

Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

Three Months Ended

Six Months Ended

June 30,

June 30,

 

2018

 

 

2019

 

 

2018

 

 

2019

 

(Unaudited)

Reconciliation of Total Operating Expenses to Operating Expenses excluding Gains or Losses on the Disposition of Assets, Stock-based Compensation Expense, Changes in the Estimated Fair Value of Contingent Earn-out Consideration and Depreciation and Amortization Expense (Recurring Operating Expenses)

Operating Expenses

$

 

64,929

 

$

 

59,079

 

$

 

123,053

 

$

 

120,532

 

Less depreciation and amortization expense

 

 

(4,511

)

 

 

(3,976

)

 

 

(8,998

)

 

 

(8,205

)

Less change in estimated fair value of contingent earn-out

consideration

(72

)

 

(72

)

 

Less net gain (loss) on the disposition of assets

(5,154

)

357

 

(5,159

)

(3,667

)

Less stock-based compensation expense

 

 

(126

)

 

 

(936

)

 

 

(172

)

 

 

(1,112

)

Total Recurring Operating Expenses

$

 

55,066

 

$

 

54,524

 

$

 

108,652

 

$

 

107,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue

Net broadcast revenue

 

$

 

50,563

 

 

$

 

49,082

 

 

$

 

98,613

 

 

$

 

95,175

 

Net broadcast revenue – acquisitions

(85

)

(73

)

(247

)

(246

)

Net broadcast revenue – dispositions

 

 

(577

)

 

 

(24

)

 

 

(1,233

)

 

 

(49

)

Net broadcast revenue – format change

(68

)

(90

)

(456

)

(509

)

Same Station net broadcast revenue

 

$

 

49,833

 

 

$

 

48,895

 

 

$

 

96,677

 

 

$

 

94,371

 

 

 

 

 

Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses

Broadcast operating expenses

 

$

 

37,243

 

 

$

 

37,707

 

 

$

 

72,993

 

 

$

 

74,156

 

Broadcast operating expenses – acquisitions

(100

)

(98

)

(371

)

(367

)

Broadcast operating expenses – dispositions

 

 

(585

)

 

 

(43

)

 

 

(1,341

)

 

 

(37

)

Broadcast operating expenses – format change

(93

)

(195

)

(740

)

(777

)

Same Station broadcast operating expenses

 

$

 

36,465

 

 

$

 

37,371

 

 

$

 

70,541

 

 

$

 

72,975

 

 

 

 

Reconciliation of SOI to Same Station SOI

 

 

 

 

 

 

 

 

 

 

 

 

Station Operating Income

$

 

13,320

 

$

 

11,375

 

$

 

25,620

 

 

$

 

21,019

 

Station operating loss – acquisitions

 

 

15

 

 

 

25

 

 

 

124

 

 

 

121

 

Station operating (income) loss – dispositions

8

 

19

 

108

 

(12

)

Station operating loss – format change

 

 

25

 

 

 

105

 

 

 

284

 

 

 

268

 

Same Station - Station Operating Income

$

 

13,368

 

$

 

11,524

 

$

 

26,136

 

$

 

21,396

 

Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

Three Months Ended

Six Months Ended

June 30,

June 30,

 

2018

 

 

2019

 

 

2018

 

 

2019

 

(Unaudited)

Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Loss

Net broadcast revenue

$

 

50,563

 

$

 

49,082

 

$

 

98,613

 

$

 

95,175

 

Less broadcast operating expenses

 

 

(37,243

)

 

 

(37,707

)

 

 

(72,993

)

 

 

(74,156

)

Station Operating Income

$

 

13,320

 

$

 

11,375

 

$

 

25,620

 

$

 

21,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net digital media revenue

$

 

10,260

 

$

 

9,960

 

$

 

20,654

 

$

 

20,200

 

Less digital media operating expenses

 

 

(8,397

)

 

 

(7,648

)

 

 

(16,771

)

 

 

(15,706

)

Digital Media Operating Income

$

 

1,863

 

$

 

2,312

 

$

 

3,883

 

$

 

4,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net publishing revenue

$

 

5,449

 

$

 

5,638

 

$

 

10,800

 

$

 

9,774

 

Less publishing operating expenses

 

 

(5,522

)

 

 

(5,773

)

 

 

(11,109

)

 

 

(10,595

)

Publishing Operating Loss

$

 

(73

)

$

 

(135

)

$

 

(309

)

$

 

(821

)

The company defines EBITDA (1) as net income before interest, taxes, depreciation, and amortization. The table below presents a reconciliation of EBITDA (1) to Net Income, the most directly comparable GAAP measure. EBITDA (1) is a non-GAAP financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

 

 

 

 

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

 

2019

2018

 

2019

(Unaudited)

Net loss

 

$

(2,167)

 

$

(3,644)

 

$

(1,339)

 

$

(3,322)

Plus interest expense, net of capitalized

interest

4,754

4,371

9,272

8,796

Plus provision for (benefit from)

income taxes

 

 

(1,098)

 

 

4,892

 

 

(696)

 

 

(411)

Plus depreciation and amortization

4,511

3,976

8,998

8,205

Less interest income

 

 

 

 

 

 

(2)

 

 

(1)

EBITDA

$

6,000

$

9,595

$

16,233

$

13,267

The company defines Adjusted EBITDA (1) as EBITDA (1) before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before changes in the fair value of interest rate swap, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. The table below presents a reconciliation of Adjusted EBITDA (1) to Net Income, the most directly comparable GAAP measure. Adjusted EBITDA (1) is a non-GAAP financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

 

2018

 

2019

2018

2019

 

 

(Unaudited)

Net loss

 

$

(2,167)

 

$

(3,644)

 

$

(1,339)

 

$

(3,322)

Plus interest expense, net of capitalized interest

4,754

4,371

9,272

 

8,796

Plus provision for (benefit from) income taxes

 

 

(1,098)

 

 

4,892

 

 

(696)

 

 

(411)

Plus depreciation and amortization

4,511

3,976

8,998

 

8,205

Less interest income

 

 

 

 

 

 

(2)

 

 

(1)

EBITDA

$

6,000

$

9,595

$

16,233

$

13,267

Less net (gain) loss on the disposition of assets

 

 

5,154

 

 

(357)

 

 

5,159

 

 

3,667

Less change in the estimated fair value of contingent

earn-out consideration

72

72

 

Plus (gain) on early retirement of long- term

debt

 

 

(234)

 

 

 

 

(234)

 

 

(426)

Plus net miscellaneous (income) and expenses

88

(18)

13

 

(19)

Plus non-cash stock-based compensation

 

 

126

 

 

936

 

 

172

 

 

1,112

Plus ASC 842 lease adoption

 

 

 

 

 

 

 

 

171

Adjusted EBITDA

$

11,206

$

10,156

$

21,415

$

17,772

The company defines Adjusted Free Cash Flow (1) as Adjusted EBITDA (1) less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. The company considers Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. A limitation of Adjusted Free Cash Flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. The company uses Adjusted Free Cash Flow, a non-GAAP liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The company’s presentation of Adjusted Free Cash Flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Adjusted Free Cash Flow is not necessarily comparable to similarly titled measures reported by other companies.

The table below presents a reconciliation of Adjusted Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP measure. Adjusted Free Cash Flow is a non-GAAP liquidity measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2019

2018

2019

(Unaudited)

Net cash provided (used) by operating activities

 

$

(2,802)

 

$

(1,206)

 

$

10,071

 

$

7,761

Non-cash stock-based compensation

(126)

(936)

(172)

(1,112)

Depreciation and amortization

 

 

(4,511)

 

 

(3,976)

 

 

(8,998)

 

 

(8,205)

Amortization of deferred financing costs

(317)

(255)

(587)

(513)

Non-cash lease expense

 

 

 

 

(2,181)

 

 

 

 

(4,448)

Accretion of acquisition-related deferred payments and

contingent earn-out consideration

(2)

(1)

(18)

(2)

Provision for bad debts

 

 

(650)

 

 

(417)

 

 

(796)

 

 

(737)

Deferred income taxes

1,194

(4,758)

812

546

Change in the estimated fair value of contingent earn-out

consideration

(72)

 

 

 

 

(72)

 

 

Net gain (loss) on the disposition of assets

(5,154)

357

 

 

(5,159)

 

 

(3,667)

Gain on early retirement of long-term debt

 

 

234

 

 

 

 

234

 

 

426

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable and unbilled revenue

 

 

2,275

 

 

1,755

 

 

1,099

 

 

(3)

Inventories

145

97

 

 

223

 

 

353

Prepaid expenses and other current assets

 

 

314

 

 

309

 

 

383

 

 

(1,078)

Accounts payable and accrued expenses

6,141

3,908

 

 

(488)

 

 

459

Contract liabilities

 

 

1,032

 

 

1,214

 

 

1,970

 

 

1,081

Operating lease liabilities (deferred rent)

 

 

1

 

 

2,307

 

 

120

 

 

5,765

Deferred rent revenue

23

41

 

 

46

 

 

84

Other liabilities

 

 

13

 

 

 

 

13

 

 

Income taxes payable

 

95

 

98

 

 

(20)

 

 

(32)

Net loss

 

$

(2,167)

 

$

(3,644)

 

$

(1,339)

 

$

(3,322)

Plus interest expense, net of capitalized interest

4,754

4,371

9,272

8,796

Plus provision for (benefit from) income taxes

 

 

(1,098)

 

 

4,892

 

 

(696)

 

 

(411)

Plus depreciation and amortization

4,511

3,976

8,998

8,205

Less interest income

 

 

 

 

 

 

(2)

 

 

(1)

EBITDA

$

6,000

$

9,595

$

16,233

$

13,267

Plus net (gain) loss on the disposition of assets

 

 

5,154

 

 

(357)

 

 

5,159

 

 

3,667

Plus change in the estimated fair value of contingent earn-out

consideration

72

72

Plus (gain) on the early retirement of long-term debt

 

 

(234)

 

 

 

 

(234)

 

 

(426)

Plus net miscellaneous (income) and expenses

88

(18)

13

(19)

Plus non-cash stock-based compensation

 

 

126

 

 

936

 

 

172

 

 

1,112

Plus ASC 842 lease adoption

 

 

 

 

 

 

 

 

171

Adjusted EBITDA

$

11,206

$

10,156

$

21,415

$

17,772

Less net cash paid for capital expenditures (1)

 

 

(2,208)

 

 

(2,293)

 

 

(4,680)

 

 

(4,697)

Less cash paid for taxes

(190)

(233)

(95)

(103)

Less cash paid for interest, net of capitalized interest

 

 

(8,600)

 

 

(8,014)

 

 

(8,650)

 

 

(8,317)

Adjusted Free Cash Flow

$

208

$

(384)

$

7,990

$

4,655

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Net cash paid for capital expenditures reflects actual cash payments net of cash reimbursements under tenant improvement allowances and net of property and equipment acquired in trade transactions.

Selected Debt Data

 

Applicable
Interest Rate

Outstanding at
June 30, 2019

Senior Secured Notes due 2024 (1)

$

231,900,000

6.75%

Asset-based revolving credit facility (2)

 

22,415,735

 

 

4.47%

(1) $231.9 million notes with semi-annual interest payments at an annual rate of 6.75%.

(2) Outstanding borrowings under the ABL Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per annum or prime rate plus 0.5% to 1.0% per annum.

 

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Contact:

Evan D. Masyr
Executive Vice President and Chief Financial Officer
(805) 384-4512
evan@salemmedia.com