SALM - Salem Media Group Inc. Announces Second Quarter 2023 Total Revenue of $65.8 Million

(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 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 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 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 operating 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 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 Same Station operating results is not necessarily comparable to similarly titled measures reported by other companies.

For all non-GAAP financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.

The Supplemental Information tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP. The company uses non-GAAP financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.

Salem Media Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2023

2022

2023

(Unaudited)

Net broadcast revenue

$

52,452

$

49,680

$

100,884

$

98,020

Net digital media revenue

10,804

10,860

21,104

21,370

Net publishing revenue

5,426

5,234

9,303

9,873

Total revenue

68,682

65,774

131,291

129,263

Operating expenses:

Broadcast operating expenses

41,538

43,518

79,659

86,327

Legal settlement

951

—

951

—

Digital media operating expenses

8,273

9,026

16,746

18,020

Publishing operating expenses

5,432

6,026

9,899

11,402

Unallocated corporate expenses

4,781

4,655

9,591

9,651

Debt modification costs

20

—

248

—

Depreciation and amortization

3,190

3,521

6,466

6,914

Change in the estimated fair value of contingent earn-out consideration

—

—

(5

)

(2

)

Impairment of indefinite-lived long-term assets other than goodwill

3,935

1,139

3,935

3,263

Impairment of goodwill

127

1,847

127

1,847

Net (gain) loss on the disposition of assets

(6,893

)

143

(8,628

)

122

Total operating expenses

61,354

69,875

118,989

137,544

Operating income (loss)

7,328

(4,101

)

12,302

(8,281

)

Other income (expense):

Interest income

149

13

149

26

Interest expense

(3,389

)

(3,539

)

(6,783

)

(6,970

)

Gain (loss) on early retirement of long-term debt

35

—

(18

)

(60

)

Earnings (loss) from equity method investment

3,913

(19

)

3,913

(11

)

Net miscellaneous income and (expenses)

(1

)

(9

)

—

211

Net income (loss) before income taxes

8,035

(7,655

)

9,563

(15,085

)

Benefit from income taxes

(1,082

)

(561

)

(1,293

)

(2,837

)

Net income (loss)

$

9,117

$

(7,094

)

$

10,856

$

(12,248

)

Basic income (loss) per share Class A and Class B common stock

$

0.33

$

(0.26

)

$

0.39

$

(0.45

)

Diluted income (loss) per share Class A and Class B common stock

$

0.33

$

(0.26

)

$

0.39

$

(0.45

)

Basic weighted average Class A and Class B common stock shares outstanding

27,214,787

27,216,787

27,196,081

27,216,787

Diluted weighted average Class A and Class B common stock shares outstanding

27,570,881

27,216,787

27,590,644

27,216,787

Salem Media Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

December 31, 2022

June 30, 2023

(Unaudited)

Assets

Cash

$

—

$

2

Accounts receivable, net

30,756

29,526

Other current assets

14,301

16,533

Property and equipment, net

81,296

83,467

Operating and financing lease right-of-use assets

43,734

44,628

Intangible assets, net

330,008

328,059

Deferred financing costs

681

56

Other assets

4,346

4,976

Total assets

$

505,122

$

507,247

Liabilities and Stockholders’ Equity

Current liabilities

$

64,610

$

77,796

Long-term debt

150,367

152,297

Operating and financing lease liabilities, less current portion

42,445

42,423

Deferred income taxes

66,732

63,901

Other liabilities

5,611

7,510

Stockholders’ Equity

175,357

163,320

Total liabilities and stockholders’ equity

$

505,122

$

507,247

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(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, 2021

23,922,974

$

232

5,553,696

$

56

$

248,438

$

(36,509

)

$

(34,006

)

$

178,211

Stock-based compensation

—

—

—

—

106

—

—

106

Options exercised

40,913

—

—

—

94

—

—

94

Lapse of restricted shares

14,854

—

—

—

—

—

—

—

Net income

—

—

—

—

—

1,739

—

1,739

Stockholders’ equity, March 31, 2022

23,978,741

$

232

5,553,696

$

56

$

248,638

$

(34,770

)

$

(34,006

)

$

180,150

Stock-based compensation

—

—

—

—

68

—

—

68

Net income

—

—

—

—

—

9,117

—

9,117

Stockholders’ equity, June 30, 2022

23,978,741

$

232

5,553,696

$

56

$

248,706

$

(25,653

)

$

(34,006

)

$

189,335

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, 2022

23,980,741

$

232

5,553,696

$

56

$

248,820

$

(39,745

)

$

(34,006

)

$

175,357

Stock-based compensation

—

—

—

—

75

—

—

75

Net loss

—

—

—

—

—

(5,154

)

—

(5,154

)

Stockholders’ equity, March 31, 2023

23,980,741

$

232

5,553,696

$

56

$

248,895

$

(44,899

)

$

(34,006

)

$

170,278

Stock-based compensation

—

—

—

—

136

—

—

136

Net loss

—

—

—

—

—

(7,094

)

—

(7,094

)

Stockholders’ equity, June 30, 2023

23,980,741

$

232

5,553,696

$

56

$

249,031

$

(51,993

)

$

(34,006

)

$

163,320

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2023

2022

2023

(Unaudited)

Reconciliation of Total Operating Expenses to Operating Expenses excluding Legal Settlement, Debt Modification Costs, Depreciation and Amortization Expense, Changes in the Estimated Fair Value of Contingent Earn-out Consideration, Impairments, Gains or Losses on the Disposition of Assets and Stock-based Compensation Expense (Recurring Operating Expenses)

Operating Expenses

$

61,354

$

69,875

$

118,989

$

137,544

Less legal settlement

(951

)

—

(951

)

—

Less debt modification costs

(20

)

—

(248

)

—

Less depreciation and amortization expense

(3,190

)

(3,521

)

(6,466

)

(6,914

)

Less change in estimated fair value of contingent earn-out consideration

—

—

5

2

Less impairment of indefinite-lived long-term assets other than goodwill

(3,935

)

(1,139

)

(3,935

)

(3,263

)

Less impairment of goodwill

(127

)

(1,847

)

(127

)

(1,847

)

Less net gain (loss) on the disposition of assets

6,893

(143

)

8,628

(122

)

Less stock-based compensation expense

(68

)

(136

)

(174

)

(211

)

Total Recurring Operating Expenses

$

59,956

$

63,089

$

115,721

$

125,189

Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue

Net broadcast revenue

$

52,452

$

49,680

$

100,884

$

98,020

Net broadcast revenue – acquisitions

—

(293

)

—

(498

)

Net broadcast revenue – dispositions

(68

)

(27

)

(115

)

(24

)

Net broadcast revenue – format change

—

—

—

—

Same Station net broadcast revenue

$

52,384

$

49,360

$

100,769

$

97,498

Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses

Broadcast operating expenses

$

41,538

$

43,518

$

79,659

$

86,327

Broadcast operating expenses – acquisitions

—

(872

)

(15

)

(1,531

)

Broadcast operating expenses – dispositions

(54

)

(73

)

(79

)

(98

)

Broadcast operating expenses – format change

—

—

—

—

Same Station broadcast operating expenses

$

41,484

$

42,573

$

79,565

$

84,698

Reconciliation of SOI to Same Station SOI

Station Operating Income

$

10,914

$

6,162

$

21,225

$

11,693

Station operating (income) loss – acquisitions

—

579

15

1,033

Station operating (income) loss – dispositions

(14

)

46

(36

)

74

Station operating (income) loss – format change

—

—

—

—

Same Station - Station Operating Income

$

10,900

$

6,787

$

21,204

$

12,800

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2023

2022

2023

(Unaudited)

Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)

Net broadcast revenue

$

52,452

$

49,680

$

100,884

$

98,020

Less broadcast operating expenses

(41,538

)

(43,518

)

(79,659

)

(86,327

)

Station Operating Income

$

10,914

$

6,162

$

21,225

$

11,693

Net digital media revenue

$

10,804

$

10,860

$

21,104

$

21,370

Less digital media operating expenses

(8,273

)

(9,026

)

(16,746

)

(18,020

)

Digital Media Operating Income

$

2,531

$

1,834

$

4,358

$

3,350

Net publishing revenue

$

5,426

$

5,234

$

9,303

$

9,873

Less publishing operating expenses

(5,432

)

(6,026

)

(9,899

)

(11,402

)

Publishing Operating Income (Loss)

$

(6

)

$

(792

)

$

(596

)

$

(1,529

)

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, 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

Six Months Ended

June 30,

June 30,

2022

2023

2022

2023

(Unaudited)

Reconciliation of EBITDA and Adjusted EBITDA to Net Income (Loss)

Net income (loss)

$

9,117

$

(7,094

)

$

10,856

$

(12,248

)

Plus interest expense, net of capitalized interest

3,389

3,539

6,783

6,970

Plus benefit from income taxes

(1,082

)

(561

)

(1,293

)

(2,837

)

Plus depreciation and amortization

3,190

3,521

6,466

6,914

Less interest income

(149

)

(13

)

(149

)

(26

)

EBITDA

$

14,465

$

(608

)

$

22,663

$

(1,227

)

Plus net (gain) loss on the disposition of assets

(6,893

)

143

(8,628

)

122

Plus change in the estimated fair value of contingent earn-out consideration

—

—

(5

)

(2

)

Plus debt modification costs

20

—

248

—

Plus impairment of indefinite-lived long-term assets other than goodwill

3,935

1,139

3,935

3,263

Plus impairment of goodwill

127

1,847

127

1,847

Plus net miscellaneous (income) and expenses

1

9

—

(211

)

Plus (gain) loss on early retirement of long-term debt

(35

)

—

18

60

Plus non-cash stock-based compensation

68

136

174

211

Adjusted EBITDA

$

11,688

$

2,666

$

18,532

$

4,063

Selected Debt Data

Outstanding at

June 30, 2023

Applicable

Interest Rate

Senior Secured Notes due 2028 (1)

$

159,416,000

7.125

%

Asset-based revolving credit facility (2)

$

22,615,023

7.74

%

(1)

$159.4 million notes with semi-annual interest payments at an annual rate of 7.125%.

(2)

Outstanding borrowings under the ABL Facility, with interest payments due at SOFR plus 1.5% to 2.0% per annum with a SOFR floor of 0.5% or prime rate plus 0.5% to 1.0% per annum. Effective July 1, the interest payments will be SOFR plus 4.0% or prime rate plus 3.0% which reduced to the previous rates upon the signing of the forbearance amendment.