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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190808005772/en/
Evan D. Masyr Executive Vice President and Chief Financial
Officer (805) 384-4512 evan@salemmedia.com
Salem Media (NASDAQ:SALM)
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