Salem Media Group, Inc. (NASDAQ: SALM) released its results for
the three and nine months ended September 30, 2021.
Third Quarter 2021 Results
For the quarter ended September 30, 2021 compared to the quarter
ended September 30, 2020:
Consolidated
- Total revenue increased 8.8% to $66.0 million from $60.6
million;
- Total operating expenses decreased 10.2% to $50.2 million from
$55.9 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, debt
modification costs, depreciation expense and amortization expense
(1) increased 8.1% to $55.2 million from $51.0 million;
- Operating income increased 232.5% to $15.8 million from $4.8
million;
- Net income increased 6,615.5% to $22.1 million, or $0.81 net
income per diluted share from $0.3 million, or $0.01 net income per
diluted share;
- EBITDA (1) increased 268.8% to $30.2 million from $8.2
million;
- Adjusted EBITDA (1) increased 12.5% to $10.8 million from $9.6
million; and
- Net cash provided by operating activities increased 8.8% to
$4.5 million from $4.2 million.
Broadcast
- Net broadcast revenue increased 9.3% to $49.6 million from
$45.4 million;
- Station Operating Income (“SOI”) (1) increased 9.2% to $12.1
million from $11.1 million;
- Same Station (1) net broadcast revenue increased 8.9% to $49.1
million from $45.1 million; and
- Same Station SOI (1) increased 5.5% to $12.0 million from $11.4
million.
Digital Media
- Digital media revenue increased 8.5% to $10.6 million from $9.8
million; and
- Digital Media Operating Income (1) decreased 10.8% to $2.4
million from $2.7 million.
Publishing
- Publishing revenue increased 5.6% to $5.7 million from $5.4
million; and
- Publishing Operating Income (1) was $0.5 million to compared to
an operating loss of $0.4 million.
Included in the results for the quarter ended September 30, 2021
are:
- A $2.3 million ($1.7 million, net of tax, or $0.06 per share)
charge for debt medication costs. On September 10, 2021, the
company refinanced $112.8 million of the 2024 Notes by exchanging
into $114.7 million (reflecting a call premium of 1.688%) of 2028
Notes. The transaction was assessed on a lender-specific level and
was accounted for as a debt modification in accordance with ASC 470
with $2.3 million of fees paid to third parties included in
operating expenses for the period;
- A $10.6 million ($7.8 million, net of tax, or $0.29 per diluted
share) net gain on the disposition of assets relates to a $10.5
million pre-tax gain on the sale of land in Lewisville, Texas, and
$0.1 million pre-tax gain on the sale of the Hilary Kramer
Financial Newsletter and related assets as well as various other
fixed asset disposals; and
- A $0.1 million non-cash compensation charge ($0.1 million, net
of tax) related to the expensing of stock options.
Included in the results for the quarter ended September 30, 2020
are:
- A $1.4 million ($1.0 million, net of tax, or $0.04 per share)
net loss on the disposition of assets which includes a $1.4 million
estimated pre-tax loss for the write-off of Miami assets as a
result of the company’s plan to exit the market and reflects
various fixed asset disposals; and
- A $0.1 million non-cash compensation charge ($0.1 million, net
of tax) related to the expensing of stock options.
Per share numbers are calculated based on 27,280,949 diluted
weighted average shares for the quarter ended September 30, 2021,
and 26,791,353 diluted weighted average shares for the quarter
ended September 30, 2020.
Year to Date 2021 Results
For the nine months ended September 30, 2021 compared to the
nine months ended September 30, 2020:
Consolidated
- Total revenue increased 10.1% to $189.1 million from $171.8
million;
- Total operating expenses decreased 12.1% to $163.3 million from
$185.9 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,
impairments, debt modification costs, depreciation expense and
amortization expense (1) increased 3.7% to $161.6 million from
$155.9 million;
- The company had operating income of $25.8 million compared to
an operating loss of $14.1 million;
- The company generated net income of $24.7 million, or $0.91 net
income per diluted share compared to a net loss of $57.4 million,
or $2.15 net loss per share;
- EBITDA (1) was $46.7 million as compared to a loss of $3.5
million;
- Adjusted EBITDA (1) increased 73.4% to $27.5 million from $15.9
million; and
- Net cash provided by operating activities decreased 36.3% to
$14.7 million from $23.1 million.
Broadcast
- Net broadcast revenue increased 8.0% to $140.4 million from
$130.0 million;
- SOI (1) increased 32.0% to $33.5 million from $25.3
million;
- Same station (1) net broadcast revenue increased 8.1% to $139.5
million from $129.0 million; and
- Same station SOI (1) increased 27.4% to $33.5 million from
$26.3 million.
Digital media
- Digital media revenue increased 7.9% to $30.6 million from
$28.4 million; and
- Digital media operating income (1) increased 1.7% to $5.3
million from $5.2 million.
Publishing
- Publishing revenue increased 35.4% to $18.1 million from $13.4
million; and
- Publishing Operating Income (1) was $1.2 million compared to an
operating loss of $3.1 million.
Included in the results for the nine months ended September 30,
2021 are:
- A $2.3 million ($1.7 million, net of tax, or $0.06 per share)
charge for debt medication costs. On September 10, 2021, the
company refinanced $112.8 million of the 2024 Notes by exchanging
into $114.7 million (reflecting a call premium of 1.688%) of 2028
Notes. The transaction was assessed on a lender-specific level and
was accounted for as a debt modification in accordance with ASC 470
with $2.3 million of fees paid to third parties included in
operating expenses for the period;
- A $10.6 million ($7.8 million, net of tax, or $0.29 per diluted
share) net gain on the disposition of assets relating to a $10.5
million pre-tax gain on the sale of land in Lewisville, Texas, a
$0.5 million pre-tax gain on the sale of Singing News Magazine and
Singing News Radio and a $0.1 million pre-tax gain on the sale of
the Hilary Kramer Financial Newsletter and related assets offset by
$0.4 million additional loss recorded at closing on the sale of
radio station WKAT-AM and FM translator in Miami, Florida and
various fixed asset disposals; and
- A $0.2 million non-cash compensation charge ($0.2 million, net
of tax, or $0.01 per share) related to the expensing of stock
options.
Included in the results for the nine months ended September 30,
2020 are:
- A $1.5 million ($1.1 million, net of tax, or $0.04 per share)
net loss on the disposition of assets which includes a $1.4 million
estimated pre-tax loss for the write-off of Miami assets as a
result of the company’s plan to exit the market and reflects
various fixed asset disposals;
- A $17.3 million impairment charge ($12.8 million, net of tax,
or $0.48 per share), of which $0.3 million related to impairment of
mastheads, and the remainder to broadcast licenses due to the
financial impact of the COVID-19 pandemic;
- A $0.3 million impairment charge ($0.2 million, net of tax, or
$0.01 per share) related to the company’s goodwill; and
- A $0.3 million non-cash compensation charge ($0.2 million, net
of tax, or $0.01 per share) 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
operating expenses; and
- the remaining $0.1 million non-cash compensation charge
included in digital media and publishing operating expenses.
Per share numbers are calculated based on 27,217,382 diluted
weighted average shares for the nine months ended September 30,
2021, and 26,683,363 diluted weighted average shares for the nine
months ended September 30, 2020.
Balance Sheet
On September 10, 2021, the company exchanged $112.8 million of
the 2024 Notes for $114.7 million (reflecting a call premium of
1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (“2028
Notes.”) Contemporaneously with the refinancing, the company
obtained commitments from the holders of the 2028 Notes to purchase
up to $50 million in additional 2028 Notes (“Delayed Draw 2028
Notes,”) contingent upon satisfying certain performance benchmarks,
the proceeds of which are to be used exclusively to repurchase or
repay the remaining balance outstanding of the 2024 Notes. The
transaction was assessed on a lender-specific level and was
accounted for as a debt modification in accordance with FASB ASC
Topic 470. The company incurred debt issuance costs of $4.2
million, of which $2.3 million of third-party debt modification
costs are reflected in operating expenses for the current period,
$0.8 million is deferred with the Delayed Draw 2028 Notes, and $1.1
million, along with $3.0 million from the exchanged 2024 Notes, is
being amortized as part of the effective yield on the 2028
Notes.
The company received $11.2 million in aggregate principal amount
of PPP loans through the SBA during the first quarter of 2021 based
on the eligibility of our radio stations and networks as determined
on a per-location basis. The PPP loans were accounted for as debt
in accordance with ASC 470. The loan balances and accrued interest
were forgivable provided that the proceeds were used for eligible
purposes, including payroll, benefits, rent and utilities within
the covered period. The company used the PPP loan proceeds
according to the terms and filed timely applications for
forgiveness. During July 2021, the SBA forgave all but $20,000 of
the PPP loans resulting in a pre-tax gain on the forgiveness of
$11.2 million. The remaining PPP loan was repaid in July 2021.
Acquisitions and Divestitures
The following transactions were completed since July 1,
2021:
- On July 27, 2021, the company sold the Hilary Kramer Financial
Newsletter and related assets for $0.2 million to be collected in
quarterly installments over the two-year period ending September
30, 2023.
- On July 23, 2021, the company sold approximately 34 acres of
land in Lewisville, Texas, currently being used as the transmitter
site for Company owned radio station KSKY-AM, for $12.1 million in
cash. The company will retain enough of the property in the
southwest corner of the site to operate the station.
- On July 2, 2021, the company acquired SeniorResource.com for
$0.1 million of cash.
- On July 1, 2021, the company acquired the ShiftWorship.com
domain and digital assets for $2.6 million of cash.
Pending transactions:
- On August 31, 2021, the company entered an agreement to sell
approximately 77 acres of land in Tampa, Florida for $13.5 million.
The company will move the transmitter for WTBN-AM and diplex it at
its owned and operated WGUL-AM facility. The company expects to
close on this transaction by the end of the year.
- On August 23, 2021, the company entered an agreement to sell
just over nine acres of land in the Denver area for $8.2 million.
The company expects to close this sale early in 2022 and plans to
continue broadcasting both KRKS-AM and KBJD-AM from this site.
- On June 2, 2021, the company entered into an agreement to
acquire radio station KKOL-AM in Seattle, Washington for $0.5
million. The company paid $0.1 million of cash into an escrow
account and began operating the station under a Local Marketing
Agreement (“LMA”) on June 7, 2021.
- On February 5, 2020, we entered into an agreement with Word
Broadcasting to sell radio stations WFIA-AM, WFIA-FM and WGTK-AM in
Louisville, Kentucky for $4.0 million with credits applied from
amounts previously paid, including a portion of the monthly fees
paid under a Time Brokerage Agreement (“TBA”). Due to changes in
debt markets, the transaction was not funded, and it is uncertain
when, or if, the transaction will close. Word Broadcasting
continues to program the stations under a TBA that began in January
2017.
Conference Call Information
Salem will host a teleconference to discuss its results on
November 4, 2021 at 4:00 p.m. Central Time. To access the
teleconference, please dial (877) 524-8416, and then ask to be
joined into the Salem Media Group Third Quarter 2021 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 18, 2021 and can be heard by
dialing (877) 660-6853, passcode 13722694 or on the investor
relations portion of the company’s website, located at
investor.salemmedia.com.
Follow us on Twitter @SalemMediaGrp.
Fourth Quarter 2021 Outlook
For the fourth quarter of 2021, the company is projecting total
revenue to be between flat and an increase of 2% from fourth
quarter 2020 total revenue of $64.5 million. Excluding the impact
of $3.5 million in political revenue in fourth quarter of 2020, we
are projecting revenue to increase between 6% and 8%. Compared to
the fourth quarter of 2019, we are projecting revenue to be between
flat and an increase of 2%. The company is also projecting
operating expenses before gains or losses on the sale or disposal
of assets, stock-based compensation expense, changes in the
estimated fair value of contingent earn-out consideration,
impairments, depreciation expense and amortization expense to
increase between 1% and 4% compared to the fourth quarter of 2020
non-GAAP operating expenses of $54.6 million. Compared to the
fourth quarter of 2019, we are projecting expenses to also increase
between 1% and 4%.
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 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,
2020
2021
2020
2021
(Unaudited)
Net broadcast revenue
$
45,391
$
49,591
$
130,041
$
140,422
Net digital media revenue
9,808
10,645
28,355
30,603
Net publishing revenue
5,442
5,747
13,366
18,093
Total revenue
60,641
65,983
171,762
189,118
Operating expenses:
Broadcast operating expenses
34,283
37,463
104,704
106,968
Digital media operating expenses
7,144
8,269
23,123
25,280
Publishing operating expenses
5,814
5,213
16,443
16,844
Unallocated corporate expenses
3,849
4,284
11,909
12,764
Debt modification costs
—
2,347
—
2,347
Change in the estimated fair value of contingent earn-out
consideration
(10
)
—
(12
)
—
Impairment of indefinite-lived
long-term assets other than goodwill
—
—
17,254
—
Impairment of goodwill
—
—
307
—
Depreciation and amortization
3,428
3,215
10,686
9,671
Net (gain) loss on the disposition of assets
1,381
(10,607
)
1,494
(10,552
)
Total operating expenses
55,889
50,184
185,908
163,322
Operating income (loss)
4,752
15,799
(14,146
)
25,796
Other income (expense):
Interest income
1
—
1
1
Interest expense
(4,024
)
(4,026
)
(12,069
)
(11,887
)
Gain on the forgiveness of PPP
loans
—
11,212
—
11,212
Gain (loss) on the early retirement of long-term debt
—
(56
)
49
(56
)
Net miscellaneous income and (expenses)
1
2
(45
)
87
Net income (loss) before income taxes
730
22,931
(26,210
)
25,153
Provision for income taxes
401
837
31,180
479
Net income (loss)
$
329
$
22,094
$
(57,390
)
$
24,674
Basic income (loss) per share Class A and
Class B common stock
$
0.01
$
0.82
$
(2.15
)
$
0.92
Diluted income (loss) per share Class A
and Class B common stock
$
0.01
$
0.81
$
(2.15
)
$
0.91
Basic weighted average Class A and Class B
common stock shares outstanding
26,683,363
26,870,664
26,683,363
26,825,483
Diluted weighted average Class A and Class
B common stock shares outstanding
26,791,353
27,280,949
26,683,363
27,217,382
Salem Media Group,
Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
December 31, 2020
September 30, 2021
(Unaudited)
Assets
Cash
$
6,325
$
23,781
Trade accounts receivable, net
24,469
24,429
Other current assets
15,002
15,641
Property and equipment, net
79,122
78,425
Operating and financing lease right-of-use
assets
48,355
44,221
Intangible assets, net
347,547
346,779
Deferred financing costs
213
895
Other assets
3,538
4,042
Total assets
$
524,571
$
538,213
Liabilities and Stockholders’
Equity
Current liabilities
$
50,860
$
48,386
Long-term debt
213,764
208,559
Operating and financing lease liabilities,
less current portion
47,847
43,259
Deferred income taxes
68,883
69,287
Other liabilities
7,938
8,124
Stockholders’ Equity
135,279
160,598
Total liabilities and stockholders’
equity
$
524,571
$
538,213
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
Deficit
Stock
Total
Stockholders’ equity, December 31,
2019
23,447,317
$ 227
5,553,696
$ 56
$ 246,680
$ (23,294)
$(34,006)
$ 189,663
Stock-based compensation
—
—
—
—
103
—
—
103
Cash distributions
—
—
—
—
—
(667)
—
(667)
Net loss
—
—
—
—
—
(55,204)
—
(55,204)
Stockholders’ equity, March 31,
2020
23,447,317
$ 227
5,553,696
$ 56
$ 246,783
$ (79,165)
$(34,006)
$ 133,895
Distributions per share
$ 0.025
$ 0.025
Stock-based compensation
—
—
—
—
96
—
—
96
Net loss
—
—
—
—
—
(2,515)
—
(2,515)
Stockholders’ equity, June 30,
2020
23,447,317
$ 227
5,553,696
$ 56
$ 246,879
$ (81,680)
$(34,006)
$ 131,476
Stock-based compensation
—
—
—
—
74
—
—
74
Net income
—
—
—
—
—
329
—
329
Stockholders’ equity, September 30,
2020
23,447,317
$ 227
5,553,696
$ 56
$ 246,953
$ (81,351)
$(34,006)
$ 131,879
Class A
Class B
Common Stock
Common Stock
Additional
Paid-In
Accumulated
Treasury
Shares
Amount
Shares
Amount
Capital
Deficit
Stock
Total
Stockholders’ equity, December 31,
2020
23,447,317
$
227
5,553,696
$
56
$
247,025
$
(78,023
)
$
(34,006
)
$
135,279
Stock-based compensation
—
—
—
—
78
—
—
78
Options exercised
185,782
2
—
—
390
—
—
392
Net income
—
—
—
—
—
323
—
323
Stockholders’ equity, March 31,
2021
23,633,099
$
229
5,553,696
$
56
$
247,493
$
(77,700
)
$
(34,006
)
$
136,072
Stock-based compensation
—
—
—
—
84
—
—
84
Net income
—
—
—
—
—
2,257
—
2,257
Stockholders’ equity,
June 30, 2021
23,633,099
$
229
5,553,696
$
56
$
247,577
$
(75,443
)
$
(34,006
)
$
138,413
Stock-based compensation
—
—
—
—
78
—
—
78
Options exercised
6,725
—
—
—
13
—
—
13
Net income
—
—
—
—
—
22,094
—
22,094
Stockholders’ equity, September 30,
2021
23,639,824
$
229
5,553,696
$
56
$
247,668
$
(53,349
)
$
(34,006
)
$
160,598
SALEM MEDIA GROUP,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2021
2020
2021
OPERATING ACTIVITIES
Net income (loss)
$
329
$
22,094
$
(57,390
)
$
24,674
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Non-cash stock-based compensation
74
78
273
240
Depreciation and amortization
3,428
3,215
10,686
9,671
Amortization of deferred financing
costs
214
264
675
690
Non-cash lease expense
2,281
2,180
6,745
6,527
Provision for bad debts
501
77
4,122
(248
)
Deferred income taxes
325
807
30,954
404
Impairment of indefinite-lived long-term
assets other than goodwill
—
—
17,254
—
Impairment of goodwill
—
—
307
—
Gain on the forgiveness of PPP loans
—
(11,212
)
—
(11,212
)
Change in the estimated fair value of
contingent earn-out consideration
(10
)
—
(12
)
—
Net (gain) loss on the disposition of
assets
1,381
(10,607
)
1,494
(10,552
)
(Gain) loss on early retirement of
long-term debt
—
56
(49
)
56
Changes in operating assets and
liabilities:
Accounts receivable and unbilled
revenue
(2,965
)
(488
)
2,565
(67
)
Inventories
89
(188
)
99
(412
)
Prepaid expenses and other current
assets
(1,440
)
(899
)
(1,343
)
(1,218
)
Accounts payable and accrued expenses
4,151
2,143
5,871
2,596
Operating lease liabilities
(2,993
)
(2,386
)
(6,396
)
(7,317
)
Contract liabilities
(1,993
)
(528
)
5,274
782
Deferred rent income
(117
)
(83
)
(268
)
28
Other liabilities
1,050
6
2,254
41
Income taxes payable
(125
)
20
30
63
Net cash provided by operating
activities
$
4,180
$
4,549
$
23,145
$
14,746
INVESTING ACTIVITIES
Cash paid for capital expenditures net of
tenant improvement allowances
(1,040
)
(2,958
)
(3,565
)
(6,952
)
Capital expenditures reimbursable under
tenant improvement allowances and trade agreements
(46
)
(119
)
(140
)
(138
)
Deposits on broadcast assets and radio
stations
—
—
—
(100
)
Purchases of broadcast assets and radio
stations
—
—
—
(600
)
Purchases of digital media businesses and
assets
(400
)
(2,680
)
(400
)
(3,980
)
Proceeds from sale of assets
—
12,144
188
15,771
Proceeds from the cash surrender value of
life insurance policies
—
—
2,363
—
Other
31
(413
)
(353
)
(1,227
)
Net cash provided by (used in) investing
activities
$
(1,455
)
$
5,974
$
(1,907
)
$
2,774
FINANCING ACTIVITIES
Proceeds from 2028 Notes
—
114,731
—
114,731
Payments to repurchase or exchange 2024
Notes
—
(119,443
)
(3,392
)
(119,443
)
Proceeds from borrowings under ABL
Facility
277
—
38,626
16
Payments on ABL Facility
(2,677
)
—
(34,452
)
(5,016
)
Proceeds from borrowing under PPP
loans
—
—
—
11,195
Payments under PPP loans
—
17
—
17
Payments of debt issuance costs
(58
)
(1,902
)
(124
)
(1,921
)
Proceeds from the exercise of stock
options
—
13
—
405
Payments on financing lease
liabilities
(17
)
(16
)
(52
)
(48
)
Payment of cash distribution on common
stock
—
—
(667
)
—
Book overdraft
—
—
(1,885
)
—
Net cash used in financing activities
$
(2,475
)
$
(6,600
)
$
(1,946
)
$
(64
)
Net increase (decrease) in cash and cash
equivalents
$
250
$
3,923
$
19,292
$
17,456
Cash and cash equivalents at beginning of
year
19,048
19,858
6
6,325
Cash and cash equivalents at end of
period
$
19,298
$
23,781
$
19,298
$
23,781
Salem Media Group,
Inc.
Supplemental
Information
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2021
2020
2021
(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, Debt Modification Costs and Depreciation and
Amortization Expense (Recurring Operating Expenses)
Operating Expenses
$
55,889
$
50,184
$
185,908
$
163,322
Less debt modification costs
—
(2,347
)
—
(2,347
)
Less depreciation and amortization
expense
(3,428
)
(3,215
)
(10,686
)
(9,671
)
Less change in estimated fair value of
contingent earn-out
consideration
10
—
12
—
Less impairment of indefinite-lived
long-term assets other
than goodwill
—
—
(17,254
)
—
Less impairment of goodwill
—
—
(307
)
—
Less net gain (loss) on the disposition of
assets
(1,381
)
10,607
(1,494
)
10,552
Less stock-based compensation expense
(74
)
(78
)
(273
)
(240
)
Total Recurring Operating
Expenses
$
51,016
$
55,151
$
155,906
$
161,616
Reconciliation of Net Broadcast Revenue
to Same Station Net Broadcast Revenue
Net broadcast revenue
$
45,391
$
49,591
$
130,041
$
140,422
Net broadcast revenue – acquisitions
—
(264
)
—
(343
)
Net broadcast revenue – dispositions
(192
)
2
(635
)
(36
)
Net broadcast revenue – format change
(104
)
(216
)
(384
)
(561
)
Same Station net broadcast revenue
$
45,095
$
49,113
$
129,022
$
139,482
Reconciliation of Broadcast Operating
Expenses to Same Station Broadcast Operating Expenses
Broadcast operating expenses
$
34,283
$
37,463
$
104,704
$
106,968
Broadcast operating expenses –
acquisitions
—
(168
)
—
(206
)
Broadcast operating expenses –
dispositions
(344
)
(14
)
(1,225
)
(199
)
Broadcast operating expenses – format
change
(252
)
(209
)
(771
)
(593
)
Same Station broadcast operating
expenses
$
33,687
$
37,072
$
102,708
$
105,970
Reconciliation of SOI to Same Station
SOI
Station Operating Income
$
11,108
$
12,128
$
14,229
$
33,454
Station operating (income) loss –
acquisitions
—
(96
)
—
(137
)
Station operating loss – dispositions
152
16
438
163
Station operating (income) loss – format
change
148
(7
)
239
32
Same Station - Station Operating
Income
$
11,408
$
12,041
$
14,906
$
33,512
Salem Media Group,
Inc.
Supplemental
Information
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2021
2020
2021
(Unaudited)
Calculation of Station Operating
Income, Digital Media Operating Income and Publishing Operating
Income (Loss)
Net broadcast revenue
$
45,391
$
49,591
$
130,041
$
140,422
Less broadcast operating expenses
(34,283
)
(37,463
)
(104,704
)
(106,968
)
Station Operating Income
$
11,108
$
12,128
$
25,337
$
33,454
Net digital media revenue
$
9,808
$
10,645
$
28,355
$
30,603
Less digital media operating expenses
(7,144
)
(8,269
)
(23,123
)
(25,280
)
Digital Media Operating Income
$
2,664
$
2,376
$
5,232
$
5,323
Net publishing revenue
$
5,442
$
5,747
$
13,366
$
18,093
Less publishing operating expenses
(5,814
)
(5,213
)
(16,443
)
(16,844
)
Publishing Operating Income (Loss)
$
(372
)
$
534
$
(3,077
)
$
1,249
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 debt modification costs, before changes in the
estimated fair value of contingent earn-out consideration, before
impairments, before net miscellaneous income and expenses, before
(gain) loss on early retirement of long-term debt, before gain on
the forgiveness of PPP loans, 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,
2020
2021
2020
2021
(Unaudited)
Net income (loss)
$
329
$
22,094
$
(57,390
)
$
24,674
Plus interest expense, net of capitalized
interest
4,024
4,026
12,069
11,887
Plus provision for income taxes
401
837
31,180
479
Plus depreciation and amortization
3,428
3,215
10,686
9,671
Less interest income
(1
)
—
(1
)
(1
)
EBITDA
$
8,181
$
30,172
$
(3,456
)
$
46,710
Less net (gain) loss on the disposition of
assets
1,381
(10,607
)
1,494
(10,552
)
Less debt modification costs
—
2,347
—
2,347
Less change in the estimated fair value of
contingent
earn-out consideration
(10
)
—
(12
)
—
Plus impairment of indefinite-lived
long-term assets
other than goodwill
—
—
17,254
—
Plus impairment of goodwill
—
—
307
—
Plus (gain) loss on early retirement of
long- term
debt
—
56
(49
)
56
Plus net miscellaneous (income) and
expenses
(1
)
(2
)
45
(87
)
Plus gain on the forgiveness of PPP
loans
―
(11,212
)
―
(11,212
)
Plus non-cash stock-based compensation
74
78
273
240
Adjusted EBITDA
$
9,625
$
10,832
$
15,856
$
27,502
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,
2020
2021
2020
2021
(Unaudited)
Net cash provided by operating
activities
$
4,180
$
4,549
$
23,145
$
14,746
Non-cash stock-based compensation
(74
)
(78
)
(273
)
(240
)
Depreciation and amortization
(3,428
)
(3,215
)
(10,686
)
(9,671
)
Amortization of deferred financing
costs
(214
)
(264
)
(675
)
(690
)
Non-cash lease expense
(2,281
)
(2,180
)
(6,745
)
(6,527
)
Provision for bad debts
(501
)
(77
)
(4,122
)
248
Deferred income taxes
(325
)
(807
)
(30,954
)
(404
)
Change in the estimated fair value of
contingent earn-out
consideration
10
—
12
—
Impairment of indefinite-lived long-term
assets other than
goodwill
—
—
(17,254
)
—
Impairment of goodwill
—
—
(307
)
—
Gain on forgiveness of PPP loans
—
11,212
—
11,212
Net gain (loss) on the disposition of
assets
(1,381
)
10,607
(1,494
)
10,552
Gain (loss) on early retirement of
long-term debt
—
(56
)
49
(56
)
Changes in operating assets and
liabilities:
Accounts receivable and unbilled
revenue
2,965
488
(2,565
)
67
Inventories
(89
)
188
(99
)
412
Prepaid expenses and other current
assets
1,440
899
1,343
1,218
Accounts payable and accrued expenses
(4,151
)
(2,143
)
(5,871
)
(2,596
)
Contract liabilities
1,993
528
(5,274
)
(782
)
Operating lease liabilities (deferred
rent)
2,993
2,386
6,396
7,317
Deferred rent revenue
117
83
268
(28
)
Other liabilities
(1,050
)
(6
)
(2,254
)
(41
)
Income taxes payable
125
(20
)
(30
)
(63
)
Net income (loss)
$
329
$
22,094
$
(57,390
)
$
24,674
Plus interest expense, net of capitalized
interest
4,024
4,026
12,069
11,887
Plus provision for income taxes
401
837
31,180
479
Plus depreciation and amortization
3,428
3,215
10,686
9,671
Less interest income
(1
)
—
(1
)
(1
)
EBITDA
$
8,181
$
30,172
$
(3,456
)
$
46,710
Plus net (gain) loss on the disposition of
assets
1,381
(10,607
)
1,494
(10,552
)
Plus change in the estimated fair value of
contingent earn-out
consideration
(10
)
—
(12
)
—
Plus debt modification costs
—
2,347
—
2,347
Plus impairment of indefinite-lived
long-term assets other than
goodwill
—
—
17,254
—
Plus impairment of goodwill
—
—
307
—
Plus (gain) on the early retirement of
long-term debt
—
56
(49
)
56
Plus gain on the forgiveness of PPP
loans
—
(11,212
)
—
(11,212
)
Plus net miscellaneous (income) and
expenses
(1
)
(2
)
45
(87
)
Plus non-cash stock-based compensation
74
78
273
240
Adjusted EBITDA
$
9,625
$
10,832
$
15,856
$
27,502
Less net cash paid for capital
expenditures (1)
(1,040
)
(2,958
)
(3,565
)
(6,952
)
Less cash paid for taxes
(201
)
(10
)
(196
)
(13
)
Less cash paid for interest, net of
capitalized interest
(133
)
(2,239
)
(7,737
)
(9,634
)
Adjusted Free Cash Flow
$
8,251
$
5,625
$
4,358
$
10,903
(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
September 30, 2021
Senior Secured Notes due 2028 (1)
$
114,731,000
7.125%
Senior Secured Notes due 2024 (2)
$
98,815,000
6.750%
(1) $114.7 million notes with semi-annual
interest payments at an annual rate of 7.125%.
(2) $98.8 million notes with semi-annual
interest payments at an annual rate of 6.750%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211104006162/en/
Evan D. Masyr Executive Vice President and Chief Financial
Officer (805) 384-4512 evan@salemmedia.com
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