SALM - Salem Media (SALM) - Favorable Operating Momentum Raising Target Price
Q3 beats expectations. Salem Media reported $65.9 million in total revenues, up 8.8% over the prior year quarter and exceeding our $62.0 million estimate. The Broadcast segment was the main driver of the outperformance, with a remarkable 9.3% revenue increase YoY. Adjusted EBITDA was $10.8 million versus our $8.4 million forecast, improving 12.8% YoY. Importantly, Q3 revenues and Adj. EBITDA are above 2019 levels, which is among the very few in its peer group. Setting up for a strong end of the year. Management guided Q4 revenues to be slightly up 0% to 2%, which is better than our estimate of a 0.4% decline. The revenue guide is notable given that it compares with a year earlier strong Q4 2020, driven by $3.5 million in Political revenue. Excluding Political from last year's period, revenue growth would be a solid 5% to 7%. Additionally, operating expenses partially driven by higher staffing expenses and Podcast Network costs will increase in the range of 1% to 4%, in line with our 2.7% estimate. As such, we are raising our Q4 adj. EBITDA estimate.Raising 2022 estimates. We believe that the favorable operating momentum should continue into 2022, which will benefit from an influx of Political advertising. As such, we are raising our full year 2022 revenue estimate from $252.0 million to $268.8 million and our adj. EBITDA estimate from $35.9 million to $39.2 million. Improving the financial profile. In addition to the company's refinance of a large portion of its debt, which extended maturities, management is committed to reducing debt. During the quarter, the company purchased a total of $7.3 million of its 2024 notes. As of September 30, total debt was $208.5 million, with cash of $23.7 million. As a result, debt is at a reasonable 4.9 times cash flow, a major improvement from the 8.5 times a year earlier. Raising price target. As of today, SALM shares trade at an attractive 7.4 times enterprise value to our upwardly revised 2022 cash flow estimate. We are raising our price target from $4.25 to $5.25 to reflect the upwardly revised 2022 cash flow estimate. Our target multiple remains the same. The SALM shares are rated Outperform. Read More >>