Exhibit 99.1

 

LOGO

SALEM MEDIA GROUP, INC. ANNOUNCES SECOND QUARTER 2019

TOTAL REVENUE OF $64.7 MILLION

CAMARILLO, CA August 8, 2019 – 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).

Company Contact:

Evan D. Masyr

Executive Vice President and Chief

Financial Officer

(805) 384-4512

evan@salemmedia.com

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
June 30,
    Six Months Ended
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
Common Stock
     Class B
Common Stock
     Additional
Paid-In
Capital
     Accumulated
Earnings
    Treasury
Stock
    Total  
     Shares      Amount      Shares      Amount  

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
Common Stock
     Class B
Common Stock
     Additional
Paid-In
Capital
     Accumulated
Earnings
    Treasury
Stock
    Total  
     Shares      Amount      Shares      Amount  

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
June 30,
    Six Months Ended
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
June 30,
    Six Months Ended
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
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  
  

 

 

   

 

 

   

 

 

   

 

 

 

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
June 30,
    Six Months Ended
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

   Outstanding at
June 30, 2019
     Applicable
Interest Rate
 

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.