Salem Media Group, Inc. Announces Fourth Quarter 2016 Total Revenue of $70.7 Million
CAMARILLO, Calif.–(BUSINESS WIRE)–Salem Media Group, Inc. (Nasdaq: SALM) released its results for the
three and twelve months ended December 31, 2016.
Fourth Quarter 2016 Results
For the quarter ended December 31, 2016 compared to the quarter ended
December 31, 2015:
Consolidated
- Total revenue increased 2.2% to $70.7 million from $69.1 million;
-
Total operating expenses increased 12.3% to $67.2 million from $59.9
million; -
Operating expenses, excluding gains or losses on the sale or disposal
of assets, stock-based compensation expense, changes in the estimated
fair value of contingent earn-out consideration, impairments,
depreciation expense and amortization expense (1) decreased 0.6% to
$55.5 million from $55.8 million; - Operating income decreased to $3.5 million from $9.3 million;
-
Net income decreased to $3.0 million, or $0.11 net income per diluted
share from $5.3 million, or $0.20 net income per diluted share; - EBITDA (1) decreased to $9.8 million from $16.4 million;
-
Adjusted EBITDA (1) increased 14.1% to $15.2 million from $13.3
million; -
Net cash provided by operating activities increased 15.5% to $12.4
million from $10.7 million; and -
Adjusted Free Cash Flow (1) increased 33.8% to $9.6 million from $7.2
million.
Broadcast
-
Net broadcast revenue increased 1.3% to $52.2 million from $51.6
million; -
Station Operating Income (“SOI”) (1) decreased 1.9% to $15.4 million
from $15.7 million; -
Same Station (1) net broadcast revenue increased 0.3% to $51.7 million
from $51.5 million; and -
Same Station SOI (1) decreased 1.3% to $15.6 million from $15.8
million.
Digital Media
-
Digital media revenue increased 6.9% to $12.7 million from $11.9
million; and -
Digital Media Operating Income (1) increased 24.7% to $3.2 million
from $2.6 million.
Publishing
- Publishing revenue was consistent at $5.7 million; and
-
Publishing Operating Loss (1) decreased to $0.5 million from $1.2
million.
Included in the results for the quarter ended December 31, 2016 are:
-
A $6.5 million ($3.9 million, net of tax, or $0.15 per share)
impairment of indefinite-lived long-term assets related to the
company’s broadcast licenses in the Cleveland, Detroit, Dallas and
Portland markets; -
A $0.5 million ($0.3 million, net of tax, or $0.1 per share)
impairment of indefinite-lived long-term assets related to the
company’s mastheads within Salem Publishing; -
A $0.2 million ($0.1 million net of tax, or $0.01 per share) net
decrease in the estimated fair value of the contingent earn-out
consideration associated with the Eagle, Bryan Perry Newsletters,
Daily Devotional and Turner Investment acquisitions; -
A $0.1 million gain on bargain purchase for KXFN-AM in St. Louis,
Missouri; and -
A $0.1 million non-cash compensation charge related to the expensing
of stock options primarily consisting of corporate expenses.
Included in the results for the quarter ended December 31, 2015 are:
-
A $0.9 million ($0.6 million, net of tax, or $0.02 per share) net
decrease in the estimated fair value of the contingent earn-out
consideration associated with the Twitchy.com, Eagle entities, Bryan
Perry Newsletters and Daily Devotional acquisitions; -
A $0.4 million ($0.3 million, net of tax, or $0.1 per share)
impairment of goodwill related to our Singing News Network (formerly
Solid Gospel Network) entity; -
A $1.4 million ($0.8 million, net of tax, or $0.03 per diluted share)
gain on bargain purchase including $0.8 million for WSDZ-AM in St.
Louis, Missouri, $0.3 million for KDIZ-AM in Minneapolis, Minnesota,
and $0.3 million for WWMI-AM in Tampa, Florida; and -
A $0.1 million non-cash compensation charge ($0.1 million, net of tax)
related to the expensing of stock options primarily consisting of
corporate expenses.
Per share numbers are calculated based on 26,101,172 diluted weighted
average shares for the quarter ended December 31, 2016, and 25,893,015
diluted weighted average shares for the quarter ended December 31, 2015.
Year to Date 2016 Results
For the twelve months ended December 31, 2016 compared to the twelve
months ended December 31, 2015:
Consolidated
- Total revenue increased 3.2% to $274.3 million from $265.8 million;
-
Total operating expenses increased 5.8% to $246.2 million from $232.8
million; -
Operating expenses, excluding gains or losses on the sale or disposal
of assets, stock-based compensation expense, changes in the estimated
fair value of contingent earn-out consideration, impairments,
depreciation expense and amortization expense (1) increased 3.6% to
$223.2 million from $215.3 million; - Operating income decreased 15.0% to $28.1 million from $33.0 million;
-
Net income decreased to $8.9 million, or $0.34 net income per diluted
share from $11.2 million, or $0.43 per diluted share; - EBITDA (1) decreased 10.5% to $45.7 million from $51.0 million;
- Adjusted EBITDA (1) increased 1.4% to $51.1 million from $50.4 million;
-
Net cash provided by operating activities increased 7.6% to $38.9
million from $36.1 million, and -
Adjusted Free Cash Flow (1) increased 2.3% to $27.6 million from $27.0
million.
Broadcast
-
Net broadcast revenue increased 2.5% to $202.0 million from $197.2
million; - SOI (1) decreased 1.1% to $55.7 million from $56.4 million;
-
Same Station (1) net broadcast revenue increased 1.2% to $199.4
million from $197.0 million; and -
Same Station SOI (1) decreased 0.7% to $56.1 million from $56.5
million.
Digital Media
-
Digital media revenue increased 4.5% to $46.8 million from $44.8
million; and -
Digital Media Operating Income (1) increased 11.8% to $10.5 million
from $9.4 million.
Publishing
-
Publishing revenue increased 7.1% to $25.5 million from $23.8 million;
and -
Publishing Operating Loss (1) decreased to $0.7 million from $0.9
million.
Included in the results for the twelve months ended December 31, 2016
are:
-
A $6.5 million ($3.9 million, net of tax, or $0.15 per share)
impairment of indefinite-lived long-term assets related to the
company’s broadcast licenses in the Cleveland, Dallas, Detroit and
Portland markets; -
A $0.5 million ($0.3 million, net of tax, or $0.1 per share)
impairment of indefinite-lived long-term assets related to the
company’s mastheads within Salem Publishing; -
A $0.7 million impairment loss ($0.4 million, net of tax, or $0.02 per
share) on land held for sale in Covina, California; -
A $1.9 million ($1.1 million, net of tax, or $0.04 per diluted share)
net gain on the sale or disposal of assets primarily associated with
the $1.9 million gain on the sale of the Miami tower site and a $0.7
million gain from a land easement in South Carolina offset by a $0.4
million charge for leasehold improvements incurred upon the relocation
of the offices in Washington D.C. market in addition to various fixed
asset disposals; -
A $1.6 million (or $0.06 per share) increase in the deferred tax
valuation allowance; -
A $0.7 million ($0.4 million, net of tax, or $0.02 per share) net
decrease in the estimated fair value of the contingent earn-out
consideration associated with the Eagle entities, Bryan Perry
Newsletters, Daily Devotional and Turner Investment acquisitions; -
A $0.5 million ($0.3 million, net of tax, or $0.01 per share) reserve
for a litigation matter; -
A $0.1 million gain on bargain purchase for KXFN-AM in St. Louis,
Missouri; and -
A $0.6 million non-cash compensation charge ($0.3 million, net of tax,
or $0.01 per share) related to the expensing of stock options
consisting of:- $0.4 million non-cash compensation included in corporate expenses;
-
$0.1 million non-cash compensation included in broadcast operating
expenses; and -
$0.1 million non-cash compensation included in Digital media
operating expenses.
Included in the results for the twelve months ended December 31, 2015
are:-
A $1.7 million ($1.0 million, net of tax, or $0.04 per share) net
decrease in the estimated fair value of the contingent earn-out
consideration associated with the Twitchy.com, Eagle entities, Bryan
Perry Newsletters and Daily Devotional acquisitions; -
A $0.4 million ($0.3 million, net of tax, or $0.1 per share)
impairment of goodwill related to the Singing News Network (formerly
Solid Gospel Network) entity; -
A $0.2 million pre-tax loss ($0.1 million, net of tax) on disposals of
assets primarily associated with the relocation of the office and
studio in the Seattle market; -
A $1.4 million ($0.8 million, net of tax, or $0.03 per diluted share)
gain on bargain purchase including $0.8 million for WSDZ-AM in St.
Louis, Missouri, $0.3 million for KDIZ-AM in Minneapolis, Minnesota,
and $0.3 million for WWMI-AM in Tampa, Florida; and -
A $0.8 million non-cash compensation charge ($0.5 million, net of tax,
or $0.02 per share) related to the expensing of stock options
consisting of:- $0.5 million non-cash compensation included in corporate expenses;
-
$0.1 million non-cash compensation included in broadcast operating
expenses; -
$0.1 million non-cash compensation included in Digital media
operating expenses; and - the remainder included in publishing operating expenses.
Per share numbers are calculated based on 26,034,990 diluted weighted
average shares for the twelve months ended December 31, 2016, and
25,887,819 diluted weighted average shares for the twelve months ended
December 31, 2015.Balance Sheet
As of December 31, 2016, the company had $263.0 million outstanding on
the Term Loan B and $0.5 million outstanding under the revolver. The
company was in compliance with the covenants of its credit facility. The
company’s bank leverage ratio was 4.96 versus a compliance covenant
ratio of 6.00.Acquisitions and Divestitures
The following transactions were completed since October 1, 2016:
-
On March 1, 2017, the company closed on the acquisition of an FM
translator in Roseburg, Oregon for $45,000 in cash. The FM translator
will be used in its Portland, Oregon market. -
On January 16, 2017, the company closed on the acquisition of an FM
translator in Astoria, Florida for $33,000 in cash. The FM translator
will be relocated to the Seattle, Washington market for use by its
KGNW-AM radio station. -
On January 6, 2017, the company closed on the acquisition of an FM
translator construction permit in Mohave Valley, Arizona for $20,000
in cash. The FM translator will be relocated to the San Diego,
California market for use by its KCBQ-AM radio. -
On December 31, 2016, the company closed on the acquisition of an FM
translator in Aurora, Florida for $50,000 in cash. The FM translator
will be used by its WHIM-AM radio station in Miami, Florida. -
On December 31, 2016, the company closed on the acquisition of an FM
translator in Port St. Lucie, Florida for $50,000 in cash. The FM
translator will be used by its WLCC-AM radio station in Tampa, Florida. -
On December 14, 2016, the company closed on the acquisition of an FM
translator in Rhinelander, Wisconsin for $50,000 in cash. The FM
translator will be used by its WWTC-AM radio station in Minneapolis,
Minnesota. -
On December 8, 2016, the company closed on the acquisition of an FM
translator in Little Fish Lake Valley, California for $44,000 in cash.
The FM translator will be used by its KFIA-AM radio station in
Sacramento, California. -
On December 1, 2016, the company closed on the acquisition of an FM
translator in Lake Placid, Florida for $35,000 in cash. The FM
translator will be used by its WTLN-AM radio station in Orlando,
Florida. -
On December 1, 2016, the company acquired ChristianConcertAlerts.com
for $0.2 million, of which $0.1 million was paid in cash upon close
with the remaining $50,000 being due in two installments within the
next year. -
On November 22, 2016, the company closed on the acquisition of two FM
translator construction permits in Lahaina, Hawaii and Kihei, Hawaii
for $110,000 in cash. The FM translators will be used by its KHNR-AM
and KGU-AM radio stations in Honolulu, Hawaii. -
On November 22, 2016, the company closed on the acquisition of an FM
translator in Crested Butte, Colorado for $38,500 in cash. The FM
translator will be used by its KZNT-AM radio station in Colorado
Springs, Colorado. -
On November 21, 2016, the company closed on the acquisition of an FM
translator in Dansville, New York for $75,000 in cash. The FM
translator will be used by its WMCA-AM radio station in New York, New
York. -
On November 21, 2016, the company closed on the acquisition of an FM
translator in Carbondale, Pennsylvania for $75,000 in cash. The FM
translator will be used by its WPGP-AM radio station in Pittsburgh,
Pennsylvania. -
On November 11, 2016, the company closed on the acquisition of an FM
translator construction permit in Kingsville, Texas for $50,000 in
cash. The FM translator will be used by its KNTH-AM radio station in
Houston, Texas. -
On November 7, 2016, the company closed on the acquisition of an FM
translator in Sebring, Florida for $77,000 in cash. The FM translator
will be used by its WKAT-AM radio station in Miami, Florida. -
On October 20, 2016, the company closed on the acquisition of radio
station KXFN-AM in St. Louis, Missouri for $190,000 in cash. The
station was dark upon closing and launched on December 29, 2016. -
On October 20, 2016, the company closed on the acquisition of three FM
translator construction permits for $155,000 in cash. The FM
translator construction permits were based in Angola, Indiana, Cofax,
Indiana and Battle Creek, Michigan and will be used by WHK-AM and
WHKW-AM, its radio stations in Cleveland, Ohio and WSDZ-AM its radio
station in St. Louis, Missouri. -
On October 19, 2016, the company closed on the acquisition of an FM
translator construction permit in Palm Coast, Florida for $65,000 in
cash from a related party. The FM translator will be used by its
WTWD-AM radio station in Tampa, Florida. -
On October 17, 2016, the company purchased Historyonthenet.com and
Authentichistory.com for $0.1 million. -
On October 12, 2016, the company closed on the acquisition of an FM
translator in Lake City, Florida for $65,000 in cash from a related
party. The FM translator will be used by its WBZW-AM radio station in
Orlando, Florida. -
In November 2016, the company entered an agreement with Word
Broadcasting Network to transfer the operation of its Louisville radio
stations (WFIA-AM; WFIA-FM; WGTK-AM) under a twenty-four month Time
Brokerage Agreement effective as of January 3, 2017. The company
received $0.5 million of cash from Word Broadcasting Network
associated with an option for them to purchase these stations.
Conference Call Information
Salem will host a teleconference to discuss its results on March 9, 2017
at 2:00 p.m. Pacific Time. To access the teleconference, please dial
(877) 524-8416, and then ask to be joined into the Salem Media Group
Fourth Quarter 2016 call or listen via the investor relations portion of
the company’s website, located at investor.salemmedia.com.
A replay of the teleconference will be available through March 19, 2017
and can be heard by dialing (877) 660-6853, passcode 13654863 or on the
investor relations portion of the company’s website, located at investor.salemmedia.com.First Quarter 2017 Outlook
For the first quarter of 2017, the company is projecting total revenue
to be between flat and an increase of 2% over first quarter 2016 total
revenue of $64.6 million. The company is also projecting operating
expenses, excluding gains or losses on the sale or disposal of assets,
stock-based compensation expense, changes in the estimated fair value of
contingent earn-out consideration, impairments, depreciation expense and
amortization expense to be between flat and an increase of 3% compared
to the first quarter of 2016 operating expenses excluding gains or
losses on the sale or disposal of assets, stock-based compensation
expense, changes in the estimated fair value of contingent earn-out
consideration, depreciation expense and amortization expense of $54.1
million.A reconciliation of non-GAAP operating expenses, excluding gains or
losses on the sale or disposal of assets, stock-based compensation
expense, changes in the estimated fair value of contingent earn-out
consideration, impairments, depreciation expense and amortization
expense to the most directly comparable GAAP measure is not available
without unreasonable efforts on a forward-looking basis due to the
potential high variability, complexity and low visibility with respect
to the charges excluded from this non-GAAP financial measure, in
particular, the change in the estimated fair value of earn-out
consideration, impairments and gains or losses from the sale or disposal
of fixed assets. The company expects the variability of the above
charges may have a significant, and potentially unpredictable, impact on
its future GAAP financial results.About Salem Media Group, Inc.
Salem Media Group is America’s leading multimedia company specializing
in Christian and conservative content, with media properties comprising
radio, digital media and book, magazine and newsletter publishing. Each
day Salem serves a loyal and dedicated audience of listeners and readers
numbering in the millions nationally. With its unique programming focus,
Salem provides compelling content, fresh commentary and relevant
information from some of the most respected figures across the media
landscape.The company, through its Salem Radio Group, is the largest commercial
U.S. radio broadcasting company providing Christian and conservative
programming. Salem owns and/or operates 118 radio stations, with 73
stations in the top 25 media markets. Salem Radio Network (“SRN”) is a
full-service national radio network, with nationally syndicated programs
comprising Christian teaching and talk, conservative talk, news, and
music. SRN is home to many industry-leading hosts including: Bill
Bennett, Mike Gallagher, Hugh Hewitt, Michael Medved, Dennis Prager and
Eric Metaxas.Salem New Media is a powerful source of Christian and conservative
themed news, analysis, and commentary. Salem’s Christian sites include:
Christianity.com®, BibleStudyTools.com, GodTube.com, GodVine.com,
WorshipHouseMedia.com and OnePlace.com. Considered by many to be a
consolidation of the conservative news and opinion sector’s most
influential brands, Salem’s conservative sites include RedState.com,
Townhall.com®, HotAir.com, Twitchy.com, BearingArms.com and
HumanEvents.com.Salem’s Regnery Publishing unit, with a nearly 70-year history, remains
the nation’s leading publisher of conservative books. Having published
many of the seminal works of the early conservative movement, Regnery
today continues as the dominant publisher in the conservative space,
with leading authors including: Ann Coulter, Dinesh D’Souza, Newt
Gingrich, David Limbaugh, Ed Klein and Mark Steyn. Salem’s book
publishing business also includes Xulon Press™ and Hillcrest Media,
Salem Author Services, collectively, a leading provider of
self-publishing services for Christian and conservative authors.Salem Publishing™ publishes Christian and conservative magazines
including Homecoming®, YouthWorker Journal™, The Singing News, and
Preaching.Salem’s Eagle Financial Publications provides general market analysis
and non-individualized investment strategies from financial commentators
Mark Skousen, Nicholas Vardy, Doug Fabian, Bryan Perry and Bob Carlson,
as well as a stock screening website for dividend investors
(DividendInvestor.com). The business unit’s other financial websites
include EagleDailyInvestor.com, DividendYieldHunter and ETFU.com.Eagle Wellness provides insightful health advice and is a trusted source
of high quality nutritional supplements from some of the country’s
leading health experts. Leigh Erin Connealy MD, at
NewportNaturalHealth.com, is the medical director of one of the largest
medical practices in the country where she practices integrative
medicine. Ski Chilton PhD, at GeneSmart.com, is a scientist and full
professor at Wake Forest Medical School. He is a leading authority on
the impact of diet and nutrition on health.Forward-Looking Statements
Statements used in this press release that relate to future plans,
events, financial results, prospects or performance are forward-looking
statements as defined under the Private Securities Litigation Reform Act
of 1995. Actual results may differ materially from those anticipated as
a result of certain risks and uncertainties, including but not limited
to the ability of Salem to close and integrate announced transactions,
market acceptance of Salem’s radio station formats, competition from new
technologies, adverse economic conditions, and other risks and
uncertainties detailed from time to time in Salem’s reports on Forms
10-K, 10-Q, 8-K and other filings filed with or furnished to the
Securities and Exchange Commission. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
of the date hereof. Salem undertakes no obligation to update or revise
any forward-looking statements to reflect new information, changed
circumstances or unanticipated events.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,
Credit Agreement 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 sale or disposal 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 sale or disposal of assets, before
changes in the estimated fair value of contingent earn-out
consideration, before changes in the fair value of interest rate swap,
before impairments, before net miscellaneous income and expenses, before
gain on bargain purchase, before (gain) loss on early retirement of
long-term debt and before non-cash compensation expense. The
company defines Credit Agreement Adjusted EBITDA as Adjusted EBITDA plus
adjustments permitted under the terms of the company’s senior credit
facility.Contacts
Salem Media Group, Inc.
Evan D. Masyr
Executive Vice President
& Chief Financial Officer
805-384-4512
Evan@SalemMedia.com
