SALM - Salem Media (SALM) - Building A Solid Foundation for 2022
Q2 exceeds expectations. Total revenues of $63.8 million beat our forecast of $60.2 million, with a remarkable upside in the Publishing segment up 68.3% YoY. Adjusted EBITDA was $8.7 million compared to our $7.1 million estimate. Underlying strength in its Q3 outlook. Management guided Q3 revenues to be up 2% to 4%, which is better than our 1.1% decline. Importantly, the company had an extraordinary Q3 2020 given $3.5 million in Political advertising and strong results in SalemNOW from a popular film, Uncle Tom. Excluding the extraordinary year earlier revenues, revenue growth would be a strong 9% to 11%. In spite of higher operating expenses, which were guided to grow 7% to 10%, our adj. EBITDA estimate is largely unchanged due to the stronger than expected revenues.Flowing through the upside. Based on the upside surprise in Q2 adj. EBITDA and in line expectations for Q3, we are raising our full year 2021 adj. EBITDA estimate from $32.7 million to $34.1 million. We are maintaining our full year 2022 estimates at this time, although we believe that there is positive upside potential. Debt leverage is a bright spot. The company was forgiven all but $20,000 of its $11.2 million PPP loan and recently sold land valued at $12.1 million. Proceeds are earmarked for debt reduction. We believe that there are additional asset sales likely. As such, debt is expected to be less than 5 times cash flow, a meaningful improvement from the 8 times a year earlier. Management indicated that it is a priority to bring debt down to roughly 4 times or below. We are raising our financial assessment from 2.0 checks to 2.5 checks, which is considered to be average, to reflect the improved financial position. Compelling stock valuation. Currently, SALM stock price trades at an attractive 7.4 times Enterprise Value to our adjusted 2022 EBITDA estimate, at the low end of the company's 10-year average low of 7.2 times. Our price target of $4.25 a share reflects a target multiple of 8.4 times. Read More >>