Earnings Labs

Saga Communications, Inc. (SGA)

Q3 2019 Earnings Call· Sun, Nov 10, 2019

$11.03

+0.32%

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Transcript

Operator

Operator

Good morning, ladies and gentlemen, and welcome to the Saga Communications Incorporated Q3, 2019 Earnings Conference Call. At this time, all participants replace on a listen-only mode. It is now my pleasure to turn the floor to your host, Ed Christian, President and CEO of Saga Communications. Sir, the floor is yours.

Ed Christian

Management

Katherine, thank you, and this is so formal, we're more casual than that, but that's -- thank you so much. Hello, welcome for Q3. Sam is on the phone with me, and I will be turning it over to him slightly. He is going to review some numbers with you. Not the word adjusted is never used. Otherwise, UHY, our auditors would come in and severely reprimand him for doing so. You don't have any adjusted numbers, do you Sam?

Sam Bush

Management

I don't believe so. I'm looking very quickly just to make sure.

Ed Christian

Management

All right, it's yours.

Sam Bush

Management

Thank you, Ed. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial measures. Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure, are attached in the selected financial data table. As reported in the press release for the quarter, our net revenue was $31.3 million compared to $31.7 million for the quarter last year. Note that gross political revenue for the quarter this year was $96,000 compared to $486,000 for the quarter last year, a swing of $390,000. Without political, our revenue would have been approximately flat with last year. Station operating expense remained a strong point with an increase of only $171,000 for the quarter, including our picking up the expenses associated with our new stations in the Gainesville-Ocala market. On a same-station basis, our expense controls resulted in a $779,000 reduction in station operating expenses for the quarter. Free cash flow was $4.5 million for the quarter compared to $5.2 million for the same period last year. Free cash flow was impacted by the reduction in Saga's deferred tax provision, primarily due to timing differences related to depreciation and amortization between 2018 and 2019. For the quarter, our deferred tax provision was $400,000 compared to $785,000 last year. Of the roughly $1.5 million, we spent on CapEx during the third quarter, almost $400,000 was related to the continued progress in building a new tower in Norfolk, Virginia while approximately another $400,000 was spent finishing the upgrades to the existing studio buildings in Charleston and Springfield, Illinois. For the nine-month period, political was $351,000 compared to $1.3 million last…

Ed Christian

Management

Thank you, Sam. For the past several days, I've been kind of puzzling over how to start the conversation with all of you. It needs to be a coach, and I really need to be cogent with the narrative and also factuals. Let's begin. It was kind of an unsatisfactory quarter for us. I was not pleased, and I needed to dig further with my analysis of both what happened at Saga, and what's happening in the industry. Let me start with a strong premise, and that is that there was nothing wrong with radio advertising. It works. It's how it is being applied that is failing. I have a strong statement, we'll get to that. Radio revenue is and should be divided into multiple parts. Let me walk you through each so that you have the beginning of an understanding of where we're going. National revenue has markedly changed. I mentioned this before, and I want to bring it up again. As I've said before, I was a national sales manager earlier in my career for radio stations. National always commanded a premium rate over local advertisers. In truth, there was no rational reason why except that the radio industry thought that national advertisers had more money than local radio guys. Fast forward to today, and we have gone 180 degrees on this. Radio is on a downward trajectory on this. And the larger companies of scale are going for share rather than rate. And when I say downwards trajectory, it is strictly on rate. It's kind of akin right now what's happening to walking into an advertising agency with burlap bags and stuffing in all the commercials they can get even at low rates. And the little secret that’s coming out now is that certain parties are offering…

Sam Bush

Management

I do not. But I think that covers it very well. And I think Katherine, we're now ready to wrap it up.

Operator

Operator

Ed Christian

Management

Thanks Katherine.