Saga Communications, Inc.

Good morning, everyone, and welcome to the fourth quarter and year-end earnings release conference call. At this time, all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Chris Forgey. Her, the floor is yours.

Thank you, Matt. Have you ever considered a career in broadcasting? Those are some awful tones you started with this morning, so thanks very much for that. And thank you to everyone who has taken the time to join Saga's Q4 and year-end earnings calls. We do appreciate your continued interest and participation in Saga Communications, a company that we believe is the best broadcast company on the planet. As you can see, we have a lot to talk about today. A new variable dividend program, $40 million worth of dry powder on hand, and something else new and different in the broadcast sector these days, an accretive acquisition. Firstly, we are pleased to announce the addition of the Lafayette, Indiana cluster to the Saga family. By way of Newhoff Media, and Lafayette is expected to close in mid-May of quarter two of this year. Lafayette is home to Purdue University, Sam Bush, and now the Saga Communications. Lafayette holds beautifully in the Saga's roster of markets and is consistent with our target market acquisition strategy. And is a market, frankly, that we have coveted for a number of years. We are acquiring an entity with great brands and a talented group of passionate broadcasters. We're frankly delighted to get started. And once boggified, Lafayette has the potential for growth in several verticals, including local, digital, and e-commerce. We previously forecasted a 16-market launch of our new online news service. This was to be completed by the end of 2024. As of today, I'm pleased to announce that we've already generated over $1 million in pre-booked revenue for 2024 and 2021. the year-end timelines have accelerated to have not 16 but 18 markets online by the end of not the end of the year, but by the end of quarter two. Also in previous earnings calls, we've reported the intensity with which we utilize audio spec spot creative to present ideas to customers to use as on-air messaging. In 2021, we produced 21,000 spec spots in the company. In 2022, that number rose to 25,000. And again, I'm pleased to announce that in 2023, we have produced 25,500 spec spots for our customers in our marketplaces. The activity level in our saga markets is at an all-time high, yet we're really never – our appetite for success is really never satisfied. Are we experiencing the same countervailing forces you frequently hear about on other earnings calls? Absolutely, you bet we are. Inflation, interest rates, political upheaval – and general economic headwinds. Oh, yes, I almost forgot this one. Business booking later and later in the year. You probably heard that one a number of times on the calls you've been on. The truth is that, you know, we really don't or can't control any of these things, can we? We have a picture that hangs on the office of every one of our market managers' walls that reads, we cannot direct the wind, we can only adjust the sails. which is exactly what we set out to do 13 months ago, adjust the sails. This was done to enable us to navigate in angry economic waters. In fact, we chronicled all that we had implemented in the last 13 months and identified 37 different data points. Now, this isn't like 37 points of light that you may have heard of back in the 80s and 90s. This is 37 different data points that exist in Saga today that did not exist 13 months ago. If you're interested, you will be able to find all of these data points in the annual president's letter in Saga's 2023 annual report. And a note to make as we share the year-end and fourth quarter earnings with you, please note that many of the processes installed are just now beginning to bear fruit. You know, we ask the question, where would we be today without the deployment of these growth strategies? Probably right where many of our operators in the sector are currently. in double-digit decline. So with that, here are a few of the highlights from Q4, as well as the year-ending 12-31-23. National in Q4 was down 4.2%, but for the year-ending 12-31-23 was up 3.7%. Local Q4 was down 1.7%, and for the year-ending 12-31-23 was down 2.7%. Screening. Streaming business which monetizes the simulcast streams of our over-the-air broadcast through multiple distribution channels, both locally and programmatically, was up 46% for the year ending 12-31-23. It was up from 2.6 million in 2022 to 3.9 million in 2023. Total interactive for a quarter was up 35.4% and for the year ending 12-31-23, was up 24.6%. These interactive numbers represent 8% of our total net revenue, with a total 2024 goal of achieving 11% in net revenue. E-commerce. E-commerce provides advertisers who have a limited budget or wish to augment an existing ad campaign the opportunity to do so in exchange for gift certificates to their business. Those certificates are then posted on our station deal sites and sold at a discount. We then retained the revenue, and our customers utilized said revenue to purchase advertising on our market stations. This vertical helped us generate $1.4 million in the year ending 12-31-23. By the way, a 100% increase and still growing. Total net rev, Q4, was down 3.2%, and for the year ending 12-31-23 was down 1.85%. Again, a note of interest excluding political. Gross revenue finished flat for the year ending 12-31-23 and was up 1% in Q4 of 2023. With that, I will turn it over to our bullet maker, Sam Bush.

Thank you, Chris. I'm going to start with the obligatory paragraph. This call will and already has contained forward-looking statements about our future performance and results of operations. That involves risks and uncertainties that are described in the risk factors section of our most recent form, 10-K. This 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. First, let me say that Chris and I are quite proud that our board of directors were able to declare our first ever variable dividend along with our fourth quarter and year-end 2023 press release this morning. The variable dividend policy was adopted and announced on December 7, 2022. The dividend is based on distributing to our shareholders 70% of a calculated amount that starts with net income and adds back non-tax expenses and deducts capital expenditures. Dividends declared during the year, as well as in years where it's applicable, the amount of any stock buyback or any requisitions. I'll call the result of this calculation cash available for the variable dividend for reference purposes. During 2023, the board declared 6.1 million in quarterly cash dividends and a special cash dividend of 12.5 million. The board considered the special cash dividend a capital allocation restructuring dividend based on its previously stated intentions to reduce our cash and liquid security balances over time from approximately 60 million in August of 2022 to a level being more appropriate based on Saga's performance as well as economic conditions. As the press release indicated, I wanted to stress that including the quarterly dividend to be paid tomorrow, as well as the first variable dividend to be paid on April 5th, Saga will have paid out more than $130 million in dividends. Again, that is over $130 million in dividends since the inception of our dividend policy 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, and variable dividends. 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 the potential for strategic acquisitions. Also, as Chris indicated, it is exciting to be working towards closing of our previously announced acquisition of five radio stations in Lafayette, Indiana. We missed out on the opportunity to acquire them a number of years ago when they were sold to the new Los Angeles. The current staff's commitment to serving their local community is a great foundation to build off of as we bring them into the Saga family. I'm especially pleased with this opportunity to purchase some great radio stations that have tremendous opportunities in front of them as I received my master's degree from the Krannert School at Purdue. Unfortunately, I did promise Chris that I would not break out singing back home again in Indiana or the Purdue School of Song.