Salem Media Group, Inc.

Greetings and welcome to the Salem Media Group Inc. fourth quarter 2020 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Evan Masur, Executive Vice President and Chief Financial Officer. Thank you, sir. Please go ahead.

Thank you, and welcome to all of you for joining us today on Salem Media Group's fourth quarter 2020 earnings call. As a reminder, if you get disconnected at any time, you can dial back in or listen from our website at www.salemmedia.com. Joining me on the call today are Edward Atzinger, Chief Executive Officer, David Santrella, President of Broadcast Media, and David Evans, President of Interactive and Publishing. We'll begin in just a moment with our prepared remarks, and once we are done, the conference call operator will come back on the line to instruct you on how to submit questions. Given the current circumstances, we're once again continuing to work remotely, so that may cause some extra coordination during the question and answer portion of the call. Please be advised that statements made on this call 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. These forward-looking statements are based on currently available information. Actual results may differ materially from those anticipated, and reported results should not be considered an indication of future performance. We do not intend and undertake no obligation to update our forward-looking statements, including forecasts of future performance the potential for growth of existing markets, the opening of new markets, or the potential growth from future acquisitions. This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically Station Operating Income, or SOI, EBITDA, adjusted EBITDA, and adjusted free cash flow. In conformity with Regulation G, information required to accompany the disclosure of non-GAAP financial measures is available on the investor relations portion of the company's website at salemmedia.com. And with that, I would now like to turn the call over to Edward Atzinger.

Thanks, Evan, and thanks to all of you for being part of today's call. Well, I'm pleased to report that Salem's business continues to improve, and the fourth quarter of 2020 was the best quarter of the year. But before I begin to review the quarter's financial performance, I'd like to spend a little time discussing our growing digital platform. About a month ago, we launched another digital initiative within our broadcast division, the Salem Podcast Network. We started this new venture with a new podcast by Dinesh D'Souza. We have since added Charlie Kirk's podcast, which was previously distributed by Podcast One, and we expect to add more high-profile conservative and Christian podcasts in the coming months. The launch has been extremely successful with 11.2 million podcast downloads in the last four weeks alone, as well as 1.9 million views of the video version of these podcasts. Advertiser demand for the new products has been tremendous. We've already booked $2.1 million of new business for these new platforms. The Salem Podcast Network is layered on top of our other successful broadcast digital initiatives, including Salem Surround, our local digital multimedia advertising agency, which we launched in 2018, and Salem Now, an over-the-top streaming movie business that was launched in the second quarter of 2020. Add this to our national digital division, and you can see that we have developed quite a significant digital footprint. In fact, on a combined basis, we had $18.1 million in total digital revenue in the fourth quarter of 2020, which was an increase of 24.8% from the fourth quarter of 2019. Total digital revenue represents now 28% of Salem's total revenue, which is about double the industry according to the Radio Advertising Bureau. This growth in digital revenue gives Salem quite a unique and diversified revenue mix compared to other radio broadcasters. So now we're 25% traditional radio advertising, 27% national and local block programming, 28% digital revenue, and that's a combination of advertising and e-commerce, and 8% book publishing and 12% miscellaneous other revenue. So with that, let me now walk you through our financial results. For the fourth quarter of 2020, total revenue decreased by 0.2%. Expenses increased by 0.3%, which resulted in a 3% decrease in adjusted EBITDA. I should point out that we had several one-time expenses totaling $1.9 million in the fourth quarter related to a legal accrual and some other miscellaneous expenses. When taking these one-time items into account, adjusted EBITDA would have been up 16.4%. So you can see our performance despite the challenging economic conditions was robust and on the way back. Let me now review the results by division to give you a little more perspective. We continue to see sequential improvement in the broadcast division. For the fourth quarter, broadcast revenue increased by 5.9% when compared to the third quarter of 2020. but did decline 4.8% when compared to the fourth quarter of 2019. While we're not happy, obviously, with the decline in revenue, it does compare favorably to the industry as a whole. If you look at the Miller Kaplan data for the radio industry as a whole, the markets in which Salem operates was down 15.4%. So our performance, 5.9%, is certainly better than that. Once again, this outperformance can be attributed to Salem's business model with its foundation based on national, local, and ministry block programming, and also as a result of our recent investment in and attention to our digital growth opportunities. Political revenue was a big contributing factor in the fourth quarter. As a matter of fact, we had the biggest quarter of political revenue in the history of our company, recording $3.5 million to political revenue in the fourth quarter of 2020. By comparison, we booked only $400,000 of political advertising revenue in the fourth quarter of 2019. We also ended 2020, by the way, with record political revenue totaling $6.6 million. To put that in perspective, Salem's second best year ever for generating political revenue was 2012, when the company booked $5.5 million in that category. Even during the pandemic, Salem's National Christian Ministry block programming revenue has held up quite well. In the fourth quarter, revenue declined 2.4%, primarily related to a couple of program producers whose revenue model was heavily dependent upon event revenue for most of their budget. We expect them to be back once the COVID crisis is over. This revenue stream provides a solid foundation for our businesses as it has from our inception and represents just about 25% of our total broadcast revenue. Local digital revenue increased 46.5% to $6.8 million in the fourth quarter of 2020 compared to the fourth quarter of 2019. Included in this category is 6.8 million digital revenue from our owned and operated local radio websites. Salem Surround and Salem Now. We remain most encouraged by the returns we are beginning to reap on our digital investments, and we expect to see additional vigorous growth in this category in the coming quarters. We're also continuing to see improvement in traditional radio advertising spot revenue. Total spot revenue improved 21.1% when compared to third quarter 2020. Of course, compared to fourth quarter 2019, local spot revenue declined 19.3%. While national spot revenue improved 16.2%. Combined, total spot revenue was down 10.5% in the quarter compared to the prior year, which was better than the industry again, which, according to Miller Kaplan, showed a decline in total spot revenue of about 17.8%. And finally, we had another great quarter with our syndicated network. business with revenue improving 13.8% driven by growth in affiliates and strong political revenue. I mentioned on our last call that we launched the Charlie Kirk show in early October. We're pleased with the early results of this show and his affiliate growth. Expenses in the broadcast division were down 4.6% due to lower sales commissions and cost control measures that we outlined during our second quarter earnings call. However, reduction in expenses were partially offset by some of the one-time increases that I referred to earlier. Revenue generated by our National Digital Division was up 14.5%. Town Hall Media, a network of conservative news and opinion sites, had another great quarter with revenue up 36.2%. This growth was due to a combination of a 61% increase in website visits, strong political revenue, and the continued growth from Town Hall, VIP, our premium subscription service, which was launched at the end of 2019. Obviously, the election was a large driver in the increase in traffic. Revenue on our Christian websites increased 6.1%, and Christian Church Products, our e-commerce business, was up 5.6%. Expenses in the National Digital Division were up 10.1% due to increased variable sales, marketing, and content costs. Finally, revenue at our publishing division increased 19%. This increase was driven largely at Regnery, publishing by the success of the book One Vote Away by Ted Cruz. And we're quite optimistic about Regnery and Salem Books in 2021 as we have a solid lineup for a non-election year. Some of you may have seen in the news that Simon & Schuster canceled Senator Josh Hawley's book. We're pleased to report that. that we will be releasing his book, The Tyranny of Big Tech, on May 4th. Additionally, our self-publishing business was up 11.3% on the increase in author submissions and the rounding out of our sales force. So with that, let me turn the call back to Evan for additional detail on the quarter's performance. Evan?