Saga Communications, Inc.

Good morning, everybody, and welcome to the Saga Communications Incorporated second quarter earnings release and conference call. At this time, all participants have been placed on a listen-only mode, and it is now my pleasure to turn the floor over to your host, Mr. Chris Forgy of Saga Communications. Chris, the floor is yours.

Thank you, Jenny, and thanks to all of you on the call for your continued interest in Saga Communications. Welcome to the 2023 second quarter conference call. And I'm immediately going to turn it over to my partner in crime, Mr. Sam Bush.

Thank you, Chris. I'll start with the obligatory. This call will contain certain forward-looking statements, performance, and results of operations that involve risks and uncertainties that are described in the risk factor 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 tables. For the quarter ended June 30th, 2023, net revenue decreased 2.2% to $29.2 million compared to $29.8 million last year. It should be noted that political impact of this year's performance, as for the quarter, we had $108,000 in gross political revenue this year, compared to $787,000 for the same period last year. Without political, our overall revenue for the quarter would have been flat with last year. Station operating expense increased 2.9% or $621,000 to $22.4 million for the three-month period. As discussed in the first quarter conference call, after a number of years of giving our employees little to no compensation increases, we made a strategic decision to give our remote pay increases in recognition of the tremendous work they do. These pay increases in related payroll taxes amounted to an estimated $446,000 in the first quarter, as previously reported, and $444,000 in the second quarter of this year. Similar to the first quarter, other smaller but still meaningful increases in our station operating expenses included increased utility expenses, music licensing fees, office maintenance and repairs, sales costs including commissions, and sales surveys. For the six-month period into June 30, 2023, net revenue was down 0.6% to $54.5 million compared to $54.8 million last year. Adjusting for political for the six-month period, gross revenue increased 0.7% for the six-month period. Gross political revenue year-to-date was $301,000 for the six months this year compared to $907,000 for the same period last year. Capital expenditures for the quarter into June 30th, 2023 were 1.3 million compared to 2.6 million for the same period last year. For the six-month period, capital expenditures were 2.6 million this year compared to 3.6 million last year. In last year's capital expenditures for the six-month period, we included approximately $770,000 for the completion of the new studio building we built in Ocala, Florida. We continue to expect to spend between $5 and $5.5 million for capital expenditures during 2023. We continue to see nice growth in national, interactive, and non-traditional revenue, with them being up 12.1%, 17.3%, and 10.4% respectively for the quarter, and 9.7%, 14.1%, and 13.5% for the six-month period into June 30th, 2023. Chris will talk more about that in a little bit as well. We intend to continue to utilize our financial strength to strategically invest in our operations, both at a market and corporate level, as we work to grow revenue types, including local, national, interactive, and NTR. And as I said, Chris will talk more about some of these early successes in a few minutes. Due to the SEC's renewed focus on the reporting of non-GAAP financial measures and the review of our filings, We've adjusted this quarter's press release to include a complete statement of cash flows as opposed to the abbreviated statement we historically have included on our form 10-Q. We continue to include the reconciliation of GAAP operating income to station operating income, which is a non-GAAP measure, but now also include an other financial data table, which allows the users of our press release and filings to make direct comparisons to data reported in previous press releases and filings. The company paid a $0.25 per share quarterly cash dividend on June 16th, 2023. We've now returned dividends of over $100 million to our shareholders since the first special dividend was paid in 2012. All said, we believe Saga is in a strong financial position to continue to return value to our shareholders through our quarterly special . The special dividends declared in 2022 were in line with the goal of maintaining our ongoing cash and short-term investment balances to between 30 and 35 million prior to future cash flows being recognized. The board continues to have discussions relative to the right level of cash to maintain on our balance sheet, and this may change based on global, national, and local economic conditions, changes in the radio industry, and potential for strategic acquisitions. The company's balance sheet reflects 34.4 million in cash in short-term investments as of June 30th, 2023, and 38.3 million as of August 7th, 2023. Facing for the third quarter continues to be variable, and I probably could say volatile as well because it seems like we look at it one week and it's up, doing better. One week it's down, doing worse, and it just keeps bouncing back and forth. For the quarter, we are currently facing down low to mid-single digits. However, you have to keep in mind that we are comparing in the third and fourth quarter to last year's political revenue of $3.6 million for the entire year, and in particular, $900,000 in third-quarter political revenue, and $1.8 million in fourth-quarter political revenue last year. Also, the market continues to be an unsettled advertising market given the uncertain economy, the Fed's interest rate policy, and the ongoing inflationary environment. We currently expect that our station operating expense will increase by approximately 3.5% to 4.5% for the year as compared to 2022. In addition to the inflationary environment, this is significantly driven by our investments in our staff, sales training, and ongoing interactive development. Corporate general and administrative expense will decrease significantly from 2022, primarily because of expenses incurred as a result of Ed Christian's passing. This reduction will be somewhat offset by an increase in director's fees and by investments we are making in corporate personnel that will be directly involved in growing specific revenue types, as previously mentioned. We anticipate that the annual corporate general and administrative expense will be approximately $10.5 to $11 million for 2023. Our tax rate is expected to be 27% to 30%, with a deferred tax of 5% to 8% going forward. And with that, I'll turn it back over to Chris.