Salem Media Group, Inc. (Nasdaq: SALM) released its results for
the three and twelve months ended December 31, 2018.
Fourth Quarter 2018 Results
For the quarter ended December 31, 2018 compared to the quarter
ended December 31, 2017:
Consolidated
- Total revenue remained consistent at
$67.2 million;
- Total operating expenses increased 1.3%
to $63.5 million from $62.7 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, impairment losses, depreciation expense and
amortization expense (1) increased 3.1% to $55.6 million from $53.9
million;
- Operating income decreased 18.8% to
$3.7 million from $4.5 million;
- The company recognized a net loss of
$3.1 million, or $0.12 net loss per share compared to net income of
$22.4 million or $0.85 net income per diluted share;
- EBITDA (1) decreased 2.4% to $8.7
million from $8.9 million;
- Adjusted EBITDA (1) decreased 12.8% to
$11.6 million from $13.3 million; and
- Net cash provided by operating
activities increased 27.8% to $2.8 million from $2.2 million.
Broadcast
- Net broadcast revenue increased 0.7% to
$51.1 million from $50.7 million;
- Station Operating Income (“SOI”) (1)
decreased 10.1% to $12.6 million from $14.0 million;
- Same Station (1) net broadcast revenue
increased 1.9% to $50.3 million from $49.3 million; and
- Same Station SOI (1) decreased 9.1% to
$13.0 million from $14.3 million.
Digital Media
- Digital media revenue increased 4.0% to
$11.5 million from $11.1 million; and
- Digital Media Operating Income (1)
increased 14.1% to $3.0 million from $2.7 million.
Publishing
- Publishing revenue decreased 15.3% to
$4.6 million from $5.4 million; and
- Publishing Operating Loss (1) increased
36.0% to $0.5 million from $0.4 million.
Included in the results for the quarter ended December 31, 2018
are:
- A $2.9 million ($2.1 million, net of
tax, or $0.08 per share) impairment, of which $36,000 related to
impairment of mastheads and the reminder to broadcast
licenses;
- A $0.3 million ($0.2 million, net of
tax, or $0.01 per share) net loss reflects the impact of the sale
of radio stations KOTK-AM and KCRO-AM in Omaha, Nebraska that was
adjusted as of the closing date based on the actual assets sold and
various other fixed asset disposals;
- 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; 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:
- $109,000 non-cash compensation charge
included in corporate expenses;
- $40,000 non-cash compensation charge
included in broadcast operating expenses;
- $27,000 non-cash compensation charge
included in digital media operating expenses; and
- the remaining $4,000 non-cash
compensation charge included in publishing operating expenses.
Included in the results for the quarter ended December 31, 2017
are:
- A $4.3 million ($2.6 million, net of
tax, or $0.10 per share) net loss on the disposal of assets
including a $4.7 million estimated loss for the sale of WQVN-AM
(formerly WKAT-AM) in Miami, Florida offset by a $0.4 million gain
on the sale of the WSPZ-AM tower site; and
- A $23.0 million ($0.87 per share)
income tax benefit was recorded in the fourth quarter of 2017 as a
result of the Tax Cuts and Jobs Act of 2017.
Per share numbers are calculated based on 26,186,112 diluted
weighted average shares for the quarter ended December 31, 2018,
and 26,378,260 diluted weighted average shares for the quarter
ended December 31, 2017.
Year to Date 2018 Results
For the twelve months ended December 31, 2018 compared to the
twelve months ended December 31, 2017:
Consolidated
- Total revenue decreased 0.4% to $262.8
million from $263.7 million;
- Total operating expenses increased 2.1%
to $245.8 million from $240.8 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, impairment losses, depreciation expense and
amortization expense (1) increased 0.6% to $219.4 million from
$218.2 million;
- Operating income decreased 26.2% to
$17.0 million from $23.0 million;
- The company recognized a net loss of
$3.2 million, or $0.12 net loss per share compared to net income of
$24.6 million, or $0.94 net income per diluted share;
- EBITDA (1) decreased 4.3% to $35.8
million from $37.4 million;
- Adjusted EBITDA (1) decreased 4.9% to
$43.3 million from $45.6 million; and
- Net cash provided by operating
activities decreased 16.0% to $23.0 million from $27.3
million.
Broadcast
- Net broadcast revenue increased 1.2% to
$198.5 million from $196.2 million;
- SOI (1) decreased 1.6% to $49.9 million
from $50.7 million;
- Same station (1) net broadcast revenue
increased 1.8% to $195.2 million from $191.7 million; and
- Same station SOI (1) decreased 0.5% to
$51.5 million from $51.7 million.
Digital media
- Digital media revenue decreased 1.2% to
$42.6 million from $43.1 million; and
- Digital media operating income (1)
decreased 1.3% to $9.3 million from $9.4 million.
Publishing
- Publishing revenue decreased 11.3% to
$21.7 million from $24.4 million; and
- Publishing Operating Loss (1) increased
to $0.7 million from $32,000.
Included in the results for the twelve months ended December 31,
2018 are:
- A $2.9 million ($2.1 million, net of
tax, or $0.08 per share) impairment, of which $36,000 related to
impairment of mastheads and the reminder to broadcast
licenses;
- A $4.7 million ($3.4 million, net of
tax, or $0.13 per share) net loss on the disposition of assets
includes:
- a $2.4 million pre-tax loss on the sale
of KGBI-FM in Omaha, Nebraska;
- a $1.8 million pre-tax loss on the sale
of radio stations KOTK-AM and KCRO-AM in Omaha, Nebraska;
- a $0.3 million pre-tax loss on the sale
of land in Lakeside, California;
- a $0.2 million pre-tax loss on the sale
of land in Covina, California; and
- offset by a $0.2 million pre-tax gain
on the sale of WBIX-AM in Boston, Massachusetts;
- A $0.6 million gain ($0.5 million, net
of tax, or $0.02 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 $0.5 million non-cash compensation
charge ($0.4 million, net of tax, or $0.02 per share) related to
the expensing of stock options consisting of:
- $329,000 non-cash compensation charge
included in corporate expenses;
- $122,000 non-cash compensation charge
included in broadcast operating expenses;
- $77,000 non-cash compensation charge
included in digital media operating expenses; and
- the remaining $15,000 non-cash
compensation charge included in publishing operating expenses.
Included in the results for the twelve months ended December 31,
2017 are:
- A $3.9 million ($2.3 million, net of
tax, or $0.09 per share) net loss on the disposal of assets
including a $4.7 million estimated loss for the sale of WQVN-AM
(formerly WKAT-AM) in Miami, Florida that was offset by a $0.5
million gain from the sale of a former transmitter site in its
Dallas, Texas market and a $0.4 million gain on the sale of the
WSPZ-AM tower site;
- A $2.8 million loss ($1.7 million, net
of tax, or $0.06 per share) on the early redemption of long-term
debt due to the repayment and termination of the senior credit
facilities consisting of a term loan (“Term Loan B”) and
Revolver;
- A $23.0 million ($0.87 per share)
income tax benefit was recorded in the fourth quarter of 2017 as a
result of the Tax Cuts and Jobs Act of 2017; and
- A $1.7 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 consisting of:
- $1.2 million non-cash compensation
charge included in corporate expenses;
- $0.3 million non-cash compensation
charge included in broadcast operating expenses;
- $0.1 million non-cash compensation
charge included in digital media operating expenses; and
- $0.1 million non-cash compensation
charge included in publishing operating expenses.
Per share numbers are calculated based on 26,179,702 diluted
weighted average shares for the twelve months ended December 31,
2018, and 26,435,757 diluted weighted average shares for the twelve
months ended December 31, 2017.
Balance Sheet
At December 31, 2018, the company had $238.6 million outstanding
on the 6.75% senior secured notes due 2024 and $19.7 million
outstanding on the Asset Based Revolving Credit Facility (“ABL
Facility”).
Acquisitions and Divestitures
The following transactions were completed since October 1,
2018:
- On February 28, 2019, the company sold
Mike Turner’s line of investment products, including
TurnerTrends.com and other domain names and related assets. The
company received no cash from the buyer who assumed all deferred
subscription liabilities for Mike Turner’s investment products. The
company incurred a loss of approximately $0.2 million associated
with the sale reflecting the sales price as compared to the
carrying value of the assets and the estimated cost to sell.
- On February 22, 2019, the company
entered into an agreement to sell HumanEvents.com, a conservative
opinion website that provides news and commentary on conservative
issues of interest for $0.3 million. The company incurred a loss of
approximately $0.2 million associated with the sale that closed on
February 27, 2019 reflecting the sales price as compared to the
carrying value of the assets and the estimated cost to sell.
- On October 31, 2018, the company closed
on the sale of radio stations KCRO-AM and KOTK-AM in Omaha,
Nebraska for $1.4 million in cash. Based on its then intent to sell
these assets, the company recorded the assets as held for sale at
June 30, 2018 and recognized an estimated loss of $1.6 million
based on the sale price and the estimated costs to sell. The buyer
began programming the stations under an LMA on August 8, 2018.
Pending transactions:
- On March 1, 2019, the company entered
into an agreement to acquire the pjmedia.com website for $0.1
million in cash. The purchase is expected to close during the first
quarter of 2019.
- In December 2018, Word Broadcasting
notified the company of their intent to purchase its Louisville
radio stations. They began operating the stations under a Time
Brokerage Agreement beginning on January 3, 2017 that will continue
until the purchase agreement is executed and the transaction
closes.
- 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 first half of 2019.
Conference Call Information
Salem will host a teleconference to discuss its results on March
12, 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 Fourth Quarter 2018 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 March 26, 2019 and can be heard by dialing (877)
660-6853, passcode 13687826 or on the investor relations portion of
the company’s website, located at investor.salemmedia.com.
First Quarter 2019 Outlook
For the first quarter of 2019, the company is projecting total
revenue to decline between 3% and 5% from first quarter 2018 total
revenue of $63.8 million. 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 a
decline of 1% and an increase of 2% compared to the first quarter
of 2018 non-GAAP operating expenses of $53.6 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 on the disposition
of assets. The company expects the variability of the above charges
may have a significant, and potentially unpredictable, impact on
its future GAAP financial results.
Follow us on Twitter @SalemMediaGrp.
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.
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
Twelve Months Ended December 31, December 31,
2017 2018 2017 2018
(Unaudited) Net broadcast revenue $ 50,718 $
51,077 $
196,197 $
198,502 Net digital media revenue 11,098
11,544 43,096
42,595 Net publishing revenue
5,395
4,567 24,443
21,686 Total revenue 67,211
67,188 263,736
262,783
Operating expenses: Broadcast operating expenses 36,687
38,463 145,494
148,614 Digital media operating
expenses 8,434
8,504 33,675
33,296 Publishing
operating expenses 5,770
5,077 24,475
22,396
Unallocated corporate expenses 3,072
3,748 16,255
15,686 Change in the estimated fair value of contingent
earn-out consideration 31
4 (23 )
76 Impairment of
indefinite-lived long-term assets other than goodwill —
2,870 19
2,870 Depreciation and amortization 4,371
4,592 16,962
18,226
Net (gain) loss on the disposition of
assets
4,315
253 3,905
4,653 Total operating expenses 62,680
63,511 240,762
245,817 Operating income 4,531
3,677 22,974
16,966 Other income (expense): Interest income 1
1 4
5 Interest expense (4,550 )
(4,549 ) (16,706 )
(18,328 ) Change in the fair value of interest rate
swap — — 357 — Gain (loss) on early retirement of long-term debt —
414 (2,775 )
648 Net miscellaneous income and
expenses —
2 (80 )
(10 ) Net income (loss) before income taxes (18 )
(455 ) 3,774
(719 ) Provision for
(benefit from) income taxes (22,376 )
2,605
(20,870 )
2,473 Net income
(loss) $ 22,358 $
(3,060 ) $ 24,644 $
(3,192 ) Basic earnings (loss) per share Class
A and Class B common stock $ 0.85 $
(0.12 ) $ 0.94 $
(0.12 ) Diluted earnings (loss) per share Class A and
Class B common stock $ 0.85 $
(0.12 ) $ 0.94 $
(0.12 ) Distributions per share Class A and
Class B common stock $ 0.07 $
0.07 $ 0.26 $
0.26
Basic weighted average Class A and Class B common stock
shares outstanding 26,166,769
26,186,112 26,068,942
26,179,702 Diluted weighted average Class A and Class
B common stock shares outstanding 26,378,260
26,186,112 26,435,757
26,179,702 Salem Media Group,
Inc. Condensed Consolidated Balance Sheets (in
thousands)
December 31, 2017 December 31, 2018 Assets
Cash $ 3 $
117 Trade accounts receivable, net 32,545
33,020 Other current assets 14,172
10,500 Property
and equipment, net 99,480
96,508 Intangible assets, net
420,755
414,646 Deferred financing costs 550
381
Deferred income taxes – non-current 1,070 — Other assets
4,244
3,856 Total assets $ 572,819 $
559,028 Liabilities and Stockholders’ Equity
Current liabilities $ 42,149 $
52,878 Long-term debt and
capital lease obligations 249,579
234,135 Deferred income
taxes 34,151
35,272 Other liabilities 15,659
14,874
Stockholders’ Equity 231,281
221,869 Total
liabilities and stockholders’ equity $ 572,819 $
559,028
SALEM MEDIA GROUP, INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in thousands)
Year Ended December 31, 2017
2018
OPERATING ACTIVITIES Net income (loss) $ 24,644 $
(3,192 ) Adjustments to reconcile net income to net
cash provided by operating activities: Non-cash stock-based
compensation 1,721
543 Depreciation and amortization 16,962
18,226 Amortization of deferred financing costs 940
1,114 Accretion of financing items 74 — Accretion of
acquisition-related deferred payments and contingent earn-out
consideration 42
24 Provision for bad debts 2,196
2,098 Deferred income taxes (20,932 )
2,191
Impairment of indefinite-lived long-term assets other than goodwill
19
2,870 Change in the fair value of interest rate swap (357
) — Change in the estimated fair value of contingent earn-out
consideration (23 )
76
Net (gain) loss on the disposition of
assets
3,905
4,653 (Gain) loss on early retirement of debt 2,775
(648 ) Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue 144
(2,814 )
Inventories (60 )
53 Prepaid expenses and other current
assets (537 )
308 Accounts payable and accrued expenses
(2,569 )
1,031 Deferred rent expense (133 )
(287
) Contract liabilities (1,427 )
(3,365 ) Other
liabilities (3 )
(15 ) Income taxes payable
(51 )
95 Net cash provided by operating
activities 27,330
22,961
INVESTING ACTIVITIES Cash paid for capital expenditures net
of tenant improvement allowances (8,534 )
(9,267 )
Capital expenditures reimbursable under tenant improvement
allowances and trade agreements (50 )
(77 ) Purchases
of broadcast assets and radio stations (2,282 )
(6,534
) Purchases of digital media businesses and assets (1,690 )
(4,320 ) Proceeds from sale of assets 2,456
9,894 Other (242 )
(420 ) Net
cash used in investing activities (10,342 )
(10,724 ) FINANCING ACTIVITIES Payments under
Term Loan B (263,000 )
— Payments to repurchase 6.75% Senior
Secured Notes
(15,443 ) Proceeds from borrowings
under Revolver and ABL Facility 89,738
153,650 Payments on
Revolver and ABL Facility (81,214 )
(142,990 )
Payment of interest rate swap (783 ) — Proceeds from bond offering
255,000 — Payments of debt issuance costs (7,035 )
(50
) Payments of acquisition-related contingent earn-out
consideration (14 )
(140 ) Payments of deferred
installments due from acquisition activity (225 ) — Proceeds from
the exercise of stock options 514
43 Payment of cash
distribution on common stock (6,790 )
(6,806 )
Payments on capital lease obligations (122 )
(85 )
Book overdraft (3,184 )
(302 ) Net cash
used in financing activities (17,115 )
(12,123
) Net increase (decrease) in cash and cash equivalents (127
)
114 Cash and cash equivalents at beginning of year
130
3 Cash and cash equivalents at end
of year $ 3
$ 117
Salem Media Group, Inc. Supplemental Information
(in thousands) Three Months Ended
Twelve Months Ended December 31, December 31,
2017 2018 2017 2018
(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 $ 62,680 $
63,511 $ 240,762
$
245,817 Less depreciation and amortization expense (4,371
)
(4,592 ) (16,962 )
(18,226 ) Less
change in estimated fair value of
contingent earn-out consideration
(31 )
(4 ) 23
(76 ) Less impairment of
indefinite-lived long-term
assets other than goodwill
—
(2,870 ) (19 )
(2,870 )
Less net gain (loss) on the disposition of
assets
(4,315 )
(253 ) (3,905 )
(4,653 ) Less
stock-based compensation expense (28 )
(180
) (1,721 )
(543 ) Total
Recurring Operating Expenses $ 53,935 $
55,612
$ 218,178 $
219,449
Reconciliation of Net Broadcast Revenue to Same Station Net
Broadcast Revenue Net broadcast revenue $ 50,718 $
51,077 $ 196,197 $
198,502 Net broadcast revenue –
acquisitions —
(224 ) —
(873 ) Net
broadcast revenue – dispositions (691 )
(35 ) (1,799
)
(575 ) Net broadcast revenue – format change
(708 )
(549 ) (2,736 )
(1,903 ) Same Station net broadcast revenue $ 49,319
$
50,269 $ 191,662 $
195,151
Reconciliation of Broadcast Operating Expenses to
Same Station Broadcast Operating Expenses Broadcast operating
expenses $ 36,687 $
38,463 $ 145,494 $
148,614
Broadcast operating expenses – acquisitions —
(362 )
—
(1,464 ) Broadcast operating expenses –
dispositions (791 )
(59 ) (2,444 )
(759
) Broadcast operating expenses – format change (829 )
(725 ) (3,101 )
(2,693
) Same Station broadcast operating expenses $ 35,067
$
37,317 $ 139,949 $
143,698
Reconciliation of SOI to Same Station SOI Station
Operating Income $ 14,031 $
12,614 $ 50,703 $
49,888
Station operating loss – acquisitions —
138 —
591
Station operating loss – dispositions 100
24 645
184
Station operating loss – format change 121
176 365
790 Same
Station - Station Operating Income $ 14,252 $
12,952
$ 51,713 $
51,453
Salem Media Group, Inc. Supplemental Information
(in thousands) Three Months Ended
Twelve Months Ended December 31, December 31,
2017 2018 2017 2018
(Unaudited)
Calculation of Station Operating Income, Digital
Media Operating Income and Publishing Operating Loss Net
broadcast revenue $ 50,718 $
51,077 $ 196,197 $
198,502 Less broadcast operating expenses (36,687 )
(38,463 ) (145,494 )
(148,614 ) Station Operating Income $ 14,031 $
12,614 $ 50,703 $
49,888
Net digital media revenue $ 11,098 $
11,544 $ 43,096 $
42,595 Less digital media operating expenses (8,434 )
(8,504 ) (33,675 )
(33,296 ) Digital Media Operating Income $ 2,664
$
3,040 $ 9,421 $
9,299
Net publishing revenue $ 5,395 $
4,567 $ 24,443 $
21,686 Less publishing operating expenses (5,770 )
(5,077 ) (24,475 )
(22,396 ) Publishing Operating Loss $ (375 ) $
(510 ) $ (32 ) $
(710 )
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 Twelve Months Ended December 31,
December 31, 2017 2018 2017
2018 (Unaudited) Net income (loss) $ 22,358 $
(3,060) $ 24,644 $
(3,192) Plus interest expense, net
of capitalized interest 4,550
4,549 16,706
18,328
Plus provision for (benefit from) income taxes (22,376)
2,605 (20,870)
2,473 Plus depreciation and
amortization 4,371
4,592 16,962
18,226 Less interest
income (1)
(1) (4)
(5)
EBITDA $ 8,902
$ 8,685 $ 37,438
$
35,830
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.
Salem Media Group, Inc. Supplemental
Information (in thousands)
Three Months Ended Twelve Months Ended December
31, December 31, 2017 2018 2017
2018 (Unaudited) Net income (loss) $ 22,358 $
(3,060
) $ 24,644 $
(3,192 ) Plus interest expense,
net of capitalized interest 4,550
4,549 16,706
18,328
Plus provision for (benefit from) income taxes (22,376 )
2,605 (20,870 )
2,473 Plus depreciation and
amortization 4,371
4,592 16,962
18,226 Less interest
income (1 )
(1 ) (4 )
(5 ) EBITDA $ 8,902 $
8,685 $
37,438 $
35,830
Less net (gain) loss on the disposition of
assets
4,315
253 3,905
4,653 Less change in the estimated
fair value of contingent
earn-out consideration
31
4 76 (23 ) Plus impairment of indefinite-lived
long-term assets other than goodwill
—
2,870 2,870 19 Plus change in the fair value of
interest rate swap — — (357 ) — Plus (gain) loss on early
retirement of long- term
debt
—
(414 ) 2,775
(648 ) Plus net
miscellaneous income and expenses —
(2 ) 80
10
Plus non-cash stock-based compensation 28
180 1,721
543
Adjusted EBITDA $ 13,276
$ 11,576 $
45,558
$ 43,334
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 Twelve Months Ended December 31,
December 31, 2017 2018 2017
2018 (Unaudited) Net cash provided (used) by operating
activities $ 2,162
$ 2,763 $ 27,330
$
22,961 Non-cash stock-based compensation (28 )
(180
) (1,721 )
(543 ) Depreciation and
amortization (4,371 )
(4,592 ) (16,962 )
(18,226 ) Amortization of deferred financing costs
(295 )
(259 ) (940 )
(1,114 ) Accretion
of financing items — — (74 ) — Accretion of acquisition-related
deferred payments and
contingent earn-out consideration
(10 ) — (42 )
(24 ) Provision for bad debts (648 )
(600 ) (2,196 )
(2,098 ) Deferred
income taxes 22,341
(2,492 ) 20,932
(2,191
) Change in the fair value of interest rate swap — — 357 —
Change in the estimated fair value of contingent earn-out
consideration
(31 )
(4 ) 23
(76 ) Impairment of
indefinite-lived long-term assets other than
goodwill
—
(2,870 ) (19 )
(2,870 )
Net gain (loss) on the disposition of
assets
(4,315 )
(253 ) (3,905 )
(4,653 ) Gain
(loss) on early retirement of debt —
414 (2,775 )
648
Changes in operating assets and liabilities: Accounts receivable
and unbilled revenue (607 )
(1,015 ) (144 )
2,814 Inventories (79 )
(214 ) 60
(53
) Prepaid expenses and other current assets (464 )
(868 ) 537
(308 ) Accounts payable and
accrued expenses 7,721
6,193 2,569
(1,031 )
Contract liabilities 850
985 1,427
3,365 Deferred
rent expense 130
(17 ) 133
287 Other
liabilities —
(25 ) 3
15 Income taxes payable
2
(26 ) 51
(95 ) Net income (loss) $ 22,358
$
(3,060 ) $ 24,644
$ (3,192
) Plus interest expense, net of capitalized interest 4,550
4,549 16,706
18,328 Plus provision for (benefit from)
income taxes (22,376 )
2,605 (20,870 )
2,473 Plus
depreciation and amortization 4,371
4,592 16,962
18,226 Less interest income (1 )
(1
) (4 )
(5 ) EBITDA $ 8,902
$ 8,685 $ 37,438
$
35,830
Plus net (gain) loss on the disposition of
assets
4,315
253 3,905
4,653 Plus change in the estimated
fair value of contingent earn-out
consideration
31
4 (23 )
76 Plus impairment of indefinite-lived
long-term assets other than
goodwill
—
2,870 19
2,870 Plus change in the fair value of
interest rate swap — — (357 ) — Plus (gain) loss on the early
retirement of long-term debt —
(414 ) 2,775
(648 ) Plus net miscellaneous income and expenses —
(2 ) 80
10 Plus non-cash stock-based
compensation 28
180 1,721
543 Adjusted EBITDA $ 13,276 $
11,576 $ 45,558 $
43,334 Less
net cash paid for capital expenditures (1) (1,734 )
(2,754
) (8,534 )
(9,267 ) Plus cash (paid) received
for taxes 32
(87 ) (96 )
(186 ) Less
cash paid for interest, net of capitalized interest (9,275 )
(8,437 ) (14,237 )
(17,231 ) Adjusted Free Cash Flow $ 2,299 $
298 $ 22,691 $
16,650 (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 Applicable Interest Rate
December 31, 2018 Senior Secured Notes due 2024 (1) $
238,570,000 6.75 % Asset-based revolving credit facility (2)
19,660,326 4.45 %
(1)
$238.6 million notes with semi-annual
interest payments at an annual rate of 6.75%.
(2)
Outstanding borrowings under the ABL
Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per
annum or prime rate plus 0.5% to 1.0% per annum.
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version on businesswire.com: https://www.businesswire.com/news/home/20190312005813/en/
Company Contact:Evan D. MasyrExecutive Vice President &
Chief Financial Officer(805) 384-4512evan@SalemMedia.com
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