SALM - Salem Media (SALM) - Steady As She Goes

Q1 exceeds expectations. Total company revenues increased 1.9% to $59.4 million versus our $56.4 million estimate. Cash flow, as measured by adjusted EBITDA, beat expectations as well, $7.9 million versus our estimate of $4.9 million. Each of the company's operating segments performed better than our expectations, with the largest upside in its Publishing division. Favorable Q2 outlook. Management indicated that Q2 revenues are expected to increase between 13% and 15%, which is slightly better than our expectations. Expense growth guidance between 6% and 9% is a little higher than we have modeled. As such, while we are raising our Q2 revenue estimate, we are tweaking lower our Q2 adj. EBITDA.Raising our full year 2021 estimates. We are raising our full year 2021 revenue and cash flow estimate, flowing through a large portion of the Q1 upside. Our revenue estimate is being raised from $240.2 million to $243.7 million and our adj. EBITDA estimate is adjusted higher from $30.67 million to $32.70 million. Softer Q2 upside bounce, but... We would note that the company is likely to under perform its peer Q2 revenue and cash flow growth given that many of its peers had a terrible year earlier quarter, easier comparisons. Salem did not fall off a cliff as many did and, as such, its rebound is more muted. We would note that Salem's Q2 2020 revenues were off only 17.5% versus as much as 55% for its peers. Nonetheless, we expect that the company will perform well in an economic and advertising recovery. Compelling risk reward. Near current levels the SALM shares trade at 7.2 times EV to our 2022 adj. EBITDA estimate. Our price target maintains our original target multiple of 8.4 times implies aggressive debt reduction that reflects planned asset sales and debt forgiveness of its PPP loan. Furthermore, the multiple would be in line with its current valuation of its peer group. Read More >>