Salem Media Group, Inc. (Nasdaq: SALM) released its results for
the three and nine months ended September 30, 2019.
Third Quarter 2019 Results
For the quarter ended September 30, 2019 compared to the quarter
ended September 30, 2018:
Consolidated
- Total revenue decreased 2.2% to $64.1 million from $65.5
million;
- Total operating expenses increased 32.7% to $78.6 million from
$59.3 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,
impairments, depreciation expense and amortization expense (1)
decreased 0.1% to $55.1 million from $55.2 million;
- The company had an operating loss of $14.5 million compared to
operating income of $6.3 million;
- The company had a net loss of $20.0 million, or $0.75 net loss
per share, impacted by a $17.5 million loss on the disposition of
assets and a $1.9 million impairment of indefinite-lived long-term
assets other than goodwill, compared to net income of $1.2 million,
or $0.05 net income per diluted share;
- EBITDA (1) was a negative $10.6 million compared to a positive
$10.9 million;
- Adjusted EBITDA (1) decreased 13.0% to $9.0 million from $10.3
million; and
- Net cash used by operating activities decreased 33.7% to $6.7
million from $10.1 million.
Broadcast
- Net broadcast revenue decreased 2.3% to $47.7 million from
$48.8 million;
- Station Operating Income (“SOI”) (1) decreased 11.0% to $10.4
million from $11.7 million;
- Same Station (1) net broadcast revenue decreased 1.4% to $46.5
million from $47.2 million; and
- Same Station SOI (1) decreased 11.4% to $10.6 million from
$12.0 million.
Digital Media
- Digital media revenue decreased 12.0% to $9.1 million from
$10.4 million; and
- Digital Media Operating Income (1) decreased 21.4% to $1.9
million from $2.4 million.
Publishing
- Publishing revenue increased 15.3% to $7.3 million from $6.3
million; and
- Publishing Operating Income (1) increased to $0.8 million from
$0.1 million.
Included in the results for the quarter ended September 30, 2019
are:
- A $17.5 million ($13.0 million, net of tax, or $0.49 per share)
net loss on the disposition of assets which includes a $9.9 million
estimated pre-tax loss for the pending sale of radio stations
WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts,
WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas,
Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas,
KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis,
Missouri, a $4.7 million pre-tax loss from the sale of radio
stations WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and
WOCN-AM (formerly WKAT-AM) in Miami, Florida, a $1.6 million
pre-tax loss from the sale of radio station WDYZ-AM (formerly
WORL-AM) in Orlando, Florida and a $1.3 million pre-tax loss on the
exchange of radio station KKOL-AM in Seattle, Washington for
KPAM-AM in Portland, Oregon;
- A $1.9 million impairment charge ($1.4 million, net of tax, and
$0.05 per share) associated with the company’s broadcast licenses.
Broadcast licenses were deemed to be impaired in four of the seven
markets tested. Impairments were recorded in its Louisville,
Philadelphia, Portland and San Francisco markets; and
- A $0.2 million non-cash compensation charge ($0.1 million, net
of tax) related to the expensing of stock options primarily
consisting of:
- $0.1 million non-cash compensation charge included in corporate
expenses; and
- $0.1 million non-cash compensation charge included in
broadcast, digital media and publishing operating expenses.
Included in the results for the quarter ended September 30, 2018
are:
- A $0.8 million ($0.6 million, net of tax, or $0.02 per diluted
share) net gain reflects the impact of the sale of radio station
KGBI-FM in Omaha, Nebraska that was adjusted as of the closing date
based on the actual assets sold and a reduction in liabilities
associated with the radio station and various other fixed asset
disposals; and
- A $0.2 million non-cash compensation charge ($0.1 million, net
of tax, or $0.01 per share) related to the expensing of stock
options consisting of:
- $0.1 million non-cash compensation charge included in corporate
expenses;
- the remaining $0.1 million non-cash compensation charge
included in broadcast, digital media and publishing operating
expenses.
Per share numbers are calculated based on 26,616,696 diluted
weighted average shares for the quarter ended September 30, 2019,
and 26,312,194 diluted weighted average shares for the quarter
ended September 30, 2018.
Year to Date 2019 Results
For the nine months ended September 30, 2019 compared to the
nine months ended September 30, 2018:
Consolidated
- Total revenue decreased 3.2% to $189.3 million from $195.6
million;
- Total operating expenses increased 9.2% to $199.1 million from
$182.3 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,
impairments, depreciation expense and amortization expense (1)
decreased 0.7% to $162.7 million from $163.8 million;
- The company had an operating loss of $9.9 million compared to
operating income of $13.3 million;
- The company’s net loss increased to $23.3 million, or $0.88 net
loss per share from $0.1 million, or $0.01 net loss per share;
- EBITDA (1) decreased 90.2% to $2.7 million from $27.1
million;
- Adjusted EBITDA (1) decreased 15.7% to $26.8 million from $31.8
million; and
- Net cash provided by operating activities decreased 28.4% to
$14.5 million from $20.2 million.
Broadcast
- Net broadcast revenue decreased 3.1% to $142.9 million from
$147.4 million;
- SOI (1) decreased 15.8% to $31.4 million from $37.3
million;
- Same station (1) net broadcast revenue decreased 2.1% to $140.9
million from $143.8 million; and
- Same station SOI (1) decreased 16.0% to $32.0 million from
$38.1 million.
Digital media
- Digital media revenue decreased 5.5% to $29.3 million from
$31.1 million; and
- Digital Media Operating Income (1) increased 1.6% to $6.4
million from $6.3 million.
Publishing
- Publishing revenue remained consistent at $17.1 million;
and
- Publishing Operating Loss (1) decreased to $0.1 million from
$0.2 million.
Included in the results for the nine months ended September 30,
2019 are:
- A $21.2 million ($15.7 million, net of tax, or $0.59 per share)
net loss on the disposition of assets which includes a $9.9 million
estimated pre-tax loss for the pending sale of radio stations
WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts,
WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas,
Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas,
KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis,
Missouri, the $4.7 million pre-tax loss from the sale of radio
stations WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and
WOCN-AM (formerly WKAT-AM) in Miami, Florida, a $3.8 million
pre-tax loss on the sale of radio station WSPZ-AM in Washington,
D.C., a $1.6 million pre-tax loss from the sale of radio station
WDYZ-AM (formerly WORL-AM) in Orlando, Florida, a $1.3 million
pre-tax loss on the exchange of radio station KKOL-AM in Seattle,
Washington for KPAM-AM in Portland, Oregon, a $0.2 million pre-tax
loss on the sale 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 on the sale 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 $1.9 million impairment charge ($1.4 million, net of tax, and
$0.05 per share) associated with the company’s broadcast licenses.
Broadcast licenses were deemed to be impaired in four of the seven
markets tested. Impairments were recorded in its Louisville,
Philadelphia, Portland and San Francisco markets;
- 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 $1.3 million non-cash compensation charge ($1.0 million, net
of tax, or $0.04 per share) related to the expensing of stock
options and restricted stock primarily consisting of:
- $0.7 million non-cash compensation charge included in corporate
expenses; and
- $0.5 million non-cash compensation charge included in broadcast
operating expenses; and
- the remaining $0.1 million non-cash compensation charge
included in digital media and publishing operating expenses.
Included in the results for the nine months ended September 30,
2018 are:
- A $4.4 million ($3.3 million, net of tax, or $0.12 per share)
net loss on the disposition of assets which includes a $2.4 million
pre-tax loss on the sale of KGBI-FM in Omaha, Nebraska, a $1.6
million estimated pre-tax loss on the sale of the remaining 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 $0.4 million non-cash compensation charge ($0.3 million, net
of tax, or $0.01 per share) related to the expensing of stock
options consisting of:
- $0.2 million non-cash compensation charge included in corporate
expenses;
- $0.1 million non-cash compensation charge included in broadcast
operating expenses; and
- $0.1 million non-cash compensation charge included in digital
media operating expenses.
Per share numbers are calculated based on 26,442,791 diluted
weighted average shares for the nine months ended September 30,
2019, and 26,177,565 diluted weighted average shares for the nine
months ended September 30, 2018.
Balance Sheet
As of September 30, 2019, the company had $231.9 million
outstanding on the 6.75% senior secured notes due 2024 (the
“Notes”) and $18.1 million outstanding on the Asset Based Revolving
Credit Facility (“ABL Facility”).
Acquisitions and Divestitures
The following transactions were completed since July 1,
2019:
- On September 27, 2019, the company closed on the exchange of
radio station KKOL-AM, in Seattle, Washington for KPAM-AM in
Portland, Oregon. No cash was exchanged for the assets. The company
recognized a non-cash pre-tax loss of $1.3 million on the exchange
based on the estimated fair value of KPAM-AM as compared to the
carrying value of KKOL-AM and the estimated closing costs. The
company began operating KPAM-AM under an LMA on January 2,
2018.
- On September 26, 2019, the company sold radio stations WWMI-AM
and WLCC-AM in Tampa, Florida and WZAB-AM and WOCN-AM (formerly
WKAT-AM) in Miami, Florida for $8.2 million in cash. The company
recognized a pre-tax loss of $4.7 million, which reflects the sales
price as compared to the carrying value of the assets of the radio
stations and the closing costs.
- On September 18, 2019, the company sold radio station WDYZ-AM
(formerly WORL-AM) in Orlando, Florida for $0.9 million in cash.
The company recognized a pre-tax loss of $1.6 million, which
reflects the sales price as compared to the carrying value of the
radio station assets and the estimated closing costs.
- On September 9, 2019, the company closed on the acquisition of
a construction permit for an FM translator in Louisville, Kentucky
for $35,000 in cash. The FM translator will be used by WGTK-AM in
Louisville, Kentucky.
- On August 15, 2019 the company closed on the exchange of FM
Translator W276CR, in Bradenton, FL for FM Translator W262CP in
Bayonet Point, FL. No cash was exchanged for the assets.
- 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.
Pending
transactions:
- On October 31, 2019, the company entered into an agreement to
sell radio station WBZW-AM in Orlando, Florida, and an FM
translator construction permit for $0.2 million in cash. The
company expects to recognize a pre-tax loss of approximately $1.7
million in the fourth quarter of 2019, which reflects the sale
price as compared to the carrying value of the assets less the
estimated closing costs. The transaction is subject to the approval
of the Federal Communications Commission (“FCC”) and is expected to
close in mid-2020.
- On August 13, 2019, the company entered into an agreement to
sell radio stations WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston,
Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly
KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in
Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and
WSDZ-AM in St. Louis, Missouri for $8.7 million in cash. The
company recognized an estimated pre-tax loss of $9.9 million in the
third quarter of 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 fourth quarter
of 2019.
- On January 3, 2017, Word Broadcasting began operating the
company’s Louisville radio stations (WFIA-AM; WFIA-FM; WGTK-AM)
under a twenty-four month Time Brokerage Agreement (“TBA”). The
company 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 its 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.
Conference Call Information
Salem will host a teleconference to discuss its results on
November 12, 2019 at 1:00 p.m. Pacific Time. To access the
teleconference, please dial (877) 524-8416, and then ask to be
joined into the Salem Media Group Third 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 November 26, 2019 and can be heard by
dialing (877) 660-6853, passcode 13696693 or on the investor
relations portion of the company’s website, located at
investor.salemmedia.com.
Follow us on Twitter @SalemMediaGrp.
Fourth Quarter 2019 Outlook
For the fourth quarter of 2019, the company is projecting total
revenue to decrease between 4% and 6% from fourth quarter 2018
total revenue of $67.2 million. Excluding the impact of political
revenue and recent acquisitions and dispositions, the company is
projecting total revenue to be between flat and a decrease of 2%.
The company is also projecting operating expenses before gains or
losses on 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 an increase of 1% and a decrease of 2%
compared to the fourth quarter of 2018 non-GAAP operating expenses
of $55.6 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 Income (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 Income (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 Income (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 Income (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 Income (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
Nine Months Ended
September 30,
September 30,
2018
2019
2018
2019
(Unaudited)
Net broadcast revenue
$
48,812
$
47,679
$
147,425
$
142,854
Net digital media revenue
10,397
9,149
31,051
29,349
Net publishing revenue
6,319
7,288
17,119
17,062
Total revenue
65,528
64,116
195,595
189,265
Operating expenses:
Broadcast operating expenses
37,158
37,310
110,151
111,466
Digital media operating expenses
8,021
7,282
24,792
22,988
Publishing operating expenses
6,210
6,517
17,319
17,112
Unallocated corporate expenses
3,987
4,183
11,938
12,386
Change in the estimated fair value of
contingent earn-out consideration
—
(40
)
72
(40
)
Impairment of indefinite-lived long-term
assets other than goodwill
—
1,915
—
1,915
Depreciation and amortization
4,636
3,891
13,634
12,096
Net (gain) loss on the disposition of
assets
(759
)
17,545
4,400
21,212
Total operating expenses
59,253
78,603
182,306
199,135
Operating income (loss)
6,275
(14,487
)
13,289
(9,870
)
Other income (expense):
Interest income
2
—
4
1
Interest expense
(4,507
)
(4,410
)
(13,779
)
(13,206
)
Gain on early retirement of long-term
debt
—
—
234
426
Net miscellaneous income and
(expenses)
1
—
(12
)
19
Net income (loss) before income taxes
1,771
(18,897
)
(264
)
(22,630
)
Provision for (benefit from) income
taxes
564
1,108
(132
)
697
Net income (loss)
$
1,207
$
(20,005
)
$
(132
)
$
(23,327
)
Basic earnings (loss) per share Class A
and Class B common stock
$
0.05
$
(0.75
)
$
(0.01
)
$
(0.88
)
Diluted earnings (loss) per share Class A
and Class B common stock
$
0.05
$
(0.75
)
$
(0.01
)
$
(0.88
)
Basic weighted average Class A and Class B
common stock shares outstanding
26,183,910
26,616,696
26,177,565
26,442,791
Diluted weighted average Class A and Class
B common stock shares outstanding
26,312,194
26,616,696
26,177,565
26,442,791
Salem Media Group,
Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
December 31, 2018
September 30, 2019
(Unaudited)
Assets
Cash
$
117
$
7
Trade accounts receivable, net
33,020
33,465
Other current assets
10,500
27,042
Property and equipment, net
96,344
88,317
Operating and financing lease right-of-use
assets
164
56,989
Intangible assets, net
414,646
375,226
Deferred financing costs
381
268
Other assets
3,856
4,931
Total assets
$
559,028
$
586,245
Liabilities and Stockholders’
Equity
Current liabilities
$
52,878
$
64,916
Long-term debt
234,030
228,091
Operating and financing lease liabilities,
less current portion
105
56,476
Deferred income taxes
35,272
35,759
Other liabilities
14,874
6,332
Stockholders’ Equity
221,869
194,671
Total liabilities and stockholders’
equity
$
559,028
$
586,245
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 (Deficit)
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 income
—
—
—
—
—
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
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
Stock-based compensation
—
—
—
—
177
—
—
177
Options exercised
—
—
—
—
—
—
—
—
Lapse of restricted shares
41,323
—
—
—
—
—
—
—
Cash distributions
—
—
—
—
—
(1,730
)
—
(1,730
)
Net (loss)
—
—
—
—
—
(20,005
)
—
(20,005
)
Stockholders’ equity, September 30,
2019
23,380,650
$
227
5,553,696
$
56
$
246,509
$
(18,115
)
$
(34,006
)
$
194,671
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
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
Stock-based compensation
—
—
—
—
191
—
—
191
Options exercised
8,865
—
—
—
22
—
—
22
Cash distributions
—
—
—
—
—
(1,702
)
—
(1,702
)
Net income
—
—
—
—
—
1,207
—
1,207
Stockholders’ equity, September 30,
2018
22,950,066
$
227
5,553,696
$
56
$
245,040
$
15,134
$
(34,006
)
$
226,451
Distributions per share
$
0.065
$
0.065
SALEM MEDIA GROUP,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2018
2019
2018
2019
OPERATING ACTIVITIES
Net income (loss)
$
1,207
$
(20,005
)
$
(132
)
$
(23,327
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Non-cash stock-based compensation
191
177
363
1,289
Depreciation and amortization
4,636
3,891
13,634
12,096
Amortization of deferred financing
costs
268
253
855
766
Non-cash lease expense
—
2,287
—
6,735
Accretion of acquisition-related deferred
payments and contingent consideration
6
—
24
2
Provision for bad debts
702
670
1,498
1,407
Deferred income taxes
511
1,033
(301
)
487
Change in the estimated fair value of
contingent earn-out consideration
—
(40
)
72
(40
)
Impairment of indefinite-lived long-term
assets other than goodwill
—
1,915
—
1,915
Gain on early retirement of long-term
debt
—
—
(234
)
(426
)
Net (gain) loss on the disposition of
assets
(759
)
17,545
4,400
21,212
Changes in operating assets and
liabilities:
Accounts receivable and unbilled
revenue
(2,730
)
(2,366
)
(3,829
)
(2,363
)
Inventories
62
(19
)
(161
)
(372
)
Prepaid expenses and other current
assets
(177
)
(740
)
(560
)
338
Accounts payable and accrued expenses
6,736
4,963
7,224
4,504
Deferred rent expense
(115
)
—
(235
)
—
Operating lease liabilities
—
(2,218
)
—
(7,983
)
Contract liabilities
(410
)
(629
)
(2,380
)
(1,710
)
Deferred rent income
(23
)
(46
)
(69
)
(130
)
Other liabilities
(27
)
(16
)
(40
)
(16
)
Income taxes payable
49
55
69
87
Net cash provided by operating
activities
$
10,127
$
6,710
20,198
14,471
INVESTING ACTIVITIES
Cash paid for capital expenditures net of
tenant improvement allowances
(1,833
)
(1,367
)
(6,513
)
(6,064
)
Capital expenditures reimbursable under
tenant improvement allowances and trade agreements
(70
)
(3
)
(77
)
(3
)
Purchases of broadcast assets and radio
stations
(5,249
)
(35
)
(6,534
)
(35
)
Purchases of digital media businesses and
assets
(4,250
)
(600
)
(4,320
)
(1,250
)
Proceeds from sale of assets
4,682
1,330
8,518
4,202
Other
1
3
(398
)
(725
)
Net cash used in investing activities
(6,719
)
(672
)
(9,324
)
(3,875
)
FINANCING ACTIVITIES
Payments to repurchase 6.75% Senior
Secured Notes
—
—
(9,550
)
(6,123
)
Proceeds from borrowings under ABL
Facility
42,060
32,072
111,337
86,367
Payments on ABL Facility
(43,763
)
(36,423
)
(110,137
)
(87,962
)
Refund (payments) of debt issuance
costs
(32
)
(13
)
(11
)
(43
)
Proceeds from the exercise of stock
options
22
—
43
—
Payments of acquisition-related contingent
earn-out consideration
(125
)
—
(140
)
—
Payments on financing lease
liabilities
(14
)
(22
)
(73
)
(65
)
Payment of cash distribution on common
stock
(1,702
)
(1,730
)
(5,104
)
(5,160
)
Book overdraft
154
76
2,775
2,280
Net cash used in financing activities
(3,400
)
(6,040
)
(10,860
)
(10,706
)
Net increase (decrease) in cash and cash
equivalents
8
(2
)
14
(110
)
Cash and cash equivalents at beginning of
year
9
9
3
117
Cash and cash equivalents at end of
period
17
7
$
17
$
7
Salem Media Group,
Inc.
Supplemental
Information
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 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,
Impairments and Depreciation and Amortization Expense (Recurring
Operating Expenses)
Operating Expenses
$
59,253
$
78,603
$
182,306
$
199,135
Less depreciation and amortization
expense
(4,636
)
(3,891
)
(13,634
)
(12,096
)
Less change in estimated fair value of
contingent earn-out consideration
—
40
(72
)
40
Less impairment of indefinite-lived
long-term assets other than goodwill
—
(1,915
)
—
(1,915
)
Less net gain (loss) on the disposition of
assets
759
(17,545
)
(4,400
)
(21,212
)
Less stock-based compensation expense
(191
)
(177
)
(363
)
(1,289
)
Total Recurring Operating
Expenses
$
55,185
$
55,115
$
163,837
$
162,663
Reconciliation of Net Broadcast Revenue
to Same Station Net Broadcast Revenue
Net broadcast revenue
$
48,812
$
47,679
$
147,425
$
142,854
Net broadcast revenue – acquisitions
(10
)
(28
)
(257
)
(274
)
Net broadcast revenue – dispositions
(1,102
)
(557
)
(2,335
)
(606
)
Net broadcast revenue – format change
(543
)
(593
)
(999
)
(1,102
)
Same Station net broadcast revenue
$
47,157
$
46,501
$
143,834
$
140,872
Reconciliation of Broadcast Operating
Expenses to Same Station Broadcast Operating Expenses
Broadcast operating expenses
$
37,158
$
37,310
$
110,151
$
111,466
Broadcast operating expenses –
acquisitions
(11
)
(31
)
(382
)
(398
)
Broadcast operating expenses –
dispositions
(1,379
)
(762
)
(2,720
)
(799
)
Broadcast operating expenses – format
change
(591
)
(635
)
(1,331
)
(1,412
)
Same Station broadcast operating
expenses
$
35,177
$
35,882
$
105,718
$
108,857
Reconciliation of SOI to Same Station
SOI
Station Operating Income
$
11,654
$
10,369
$
37,274
$
31,388
Station operating loss – acquisitions
1
3
125
124
Station operating loss – dispositions
277
205
385
193
Station operating loss – format change
48
42
332
310
Same Station - Station Operating
Income
$
11,980
$
10,619
$
38,116
$
32,015
Salem Media Group,
Inc.
Supplemental
Information
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2018
2019
2018
2019
(Unaudited)
Calculation of Station Operating
Income, Digital Media Operating Income and Publishing Operating
Loss
Net broadcast revenue
$
48,812
$
47,679
$
147,425
$
142,854
Less broadcast operating expenses
(37,158
)
(37,310
)
(110,151
)
(111,466
)
Station Operating Income
$
11,654
$
10,369
$
37,274
$
31,388
Net digital media revenue
$
10,397
$
9,149
$
31,051
$
29,349
Less digital media operating expenses
(8,021
)
(7,282
)
(24,792
)
(22,988
)
Digital Media Operating Income
$
2,376
$
1,867
$
6,259
$
6,361
Net publishing revenue
$
6,319
$
7,288
$
17,119
$
17,062
Less publishing operating expenses
(6,210
)
(6,517
)
(17,319
)
(17,112
)
Publishing Operating Income (Loss)
$
109
$
771
$
(200
)
$
(50
)
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 (Loss), 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. 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 (Loss), 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
September 30,
Nine Months Ended
September 30,
2018
2019
2018
2019
(Unaudited)
Net income (loss)
$
1,207
$
(20,005
)
$
(132
)
$
(23,327
)
Plus interest expense, net of capitalized
interest
4,507
4,410
13,779
13,206
Plus provision for (benefit from) income
taxes
564
1,108
(132
)
697
Plus depreciation and amortization
4,636
3,891
13,634
12,096
Less interest income
(2
)
—
(4
)
(1
)
EBITDA
$
10,912
$
(10,596
)
$
27,145
$
2,671
Less net (gain) loss on the disposition of
assets
(759
)
17,545
4,400
21,212
Less change in the estimated fair value of
contingent
earn-out consideration
—
(40
)
72
(40
)
Plus impairment of indefinite-lived
long-term assets
other than goodwill
—
1,915
—
1,915
Plus (gain) on early retirement of long-
term
debt
—
—
(234
)
(426
)
Plus net miscellaneous (income) and
expenses
(1
)
—
12
(19
)
Plus non-cash stock-based compensation
191
177
363
1,289
Plus ASC 842 lease adoption
—
—
—
171
Adjusted EBITDA
$
10,343
$
9,001
$
31,758
$
26,773
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
Nine Months Ended
September 30,
September 30,
2018
2019
2018
2019
(Unaudited)
Net cash provided (used) by operating
activities
$
10,127
$
6,710
$
20,198
$
14,471
Non-cash stock-based compensation
(191
)
(177
)
(363
)
(1,289
)
Depreciation and amortization
(4,636
)
(3,891
)
(13,634
)
(12,096
)
Amortization of deferred financing
costs
(268
)
(253
)
(855
)
(766
)
Non-cash lease expense
—
(2,287
)
—
(6,735
)
Accretion of acquisition-related deferred
payments and contingent earn-out consideration
(6
)
—
(24
)
(2
)
Provision for bad debts
(702
)
(670
)
(1,498
)
(1,407
)
Deferred income taxes
(511
)
(1,033
)
301
(487
)
Change in the estimated fair value of
contingent earn-out consideration
—
40
(72
)
40
Impairment of indefinite-lived long-term
assets other than goodwill
—
(1,915
)
—
(1,915
)
Gain (loss) on the disposition of
assets
759
(17,545
)
(4,400
)
(21,212
)
Gain (loss) on early retirement of
debt
—
—
234
426
Changes in operating assets and
liabilities:
Accounts receivable and unbilled
revenue
2,730
2,366
3,829
2,363
Inventories
(62
)
19
161
372
Prepaid expenses and other current
assets
177
740
560
(338
)
Accounts payable and accrued expenses
(6,736
)
(4,963
)
(7,224
)
(4,504
)
Contract liabilities
410
629
2,380
1,710
Operating lease liabilities (deferred
rent)
115
2,218
235
7,983
Deferred rent income
23
46
69
130
Other liabilities
27
16
40
16
Income taxes payable
(49
)
(55
)
(69
)
(87
)
Net income (loss)
$
1,207
$
(20,005
)
$
(132
)
$
(23,327
)
Plus interest expense, net of capitalized
interest
4,507
4,410
13,779
13,206
Plus provision for (benefit from) income
taxes
564
(4,059
)
(132
)
(4,470
)
Plus depreciation and amortization
4,636
3,891
13,634
12,096
Less interest income
(2
)
—
(4
)
(1
)
EBITDA
$
10,912
$
(10,596
)
$
27,145
$
2,671
Plus (gain) loss on the disposition of
assets
(759
)
17,545
4,400
21,212
Plus change in the estimated fair value of
contingent earn-out consideration
—
(40
)
72
(40
)
Plus impairment of indefinite-lived
long-term assets other than goodwill
—
1,915
—
1,915
Plus (gain) loss on the early retirement
of long-term debt
—
—
(234
)
(426
)
Plus net miscellaneous income and
expenses
(1
)
—
12
(19
)
Plus non-cash stock-based compensation
191
177
363
1,289
Plus ASC 842 lease adoption
—
—
—
171
Adjusted EBITDA
$
10,343
$
9,001
$
31,758
$
26,773
Less net cash paid for capital
expenditures (1)
(1,833
)
(1,367
)
(6,513
)
(6,064
)
Plus cash (paid) received for taxes
(4
)
(19
)
(99
)
(122
)
Less cash paid for interest, net of
capitalized interest
(144
)
(258
)
(8,794
)
(8,575
)
Adjusted Free Cash Flow
$
8,362
$
7,357
$
16,352
$
12,012
(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.
Outstanding at
Selected Debt Data
September 30, 2019
Applicable Interest
Rate
Senior Secured Notes due 2024
(1)
$
231,900,000
6.75%
Asset-based revolving credit
facility (2)
18,065,335
4.11%
(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/20191112005922/en/
Evan D. Masyr Executive Vice President and Chief Financial
Officer (805) 384-4512 evan@salemmedia.com
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