Salem Media Group, Inc.

Greetings and welcome to the Salem Media Group second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Evan Macer, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Welcome, everyone, and thank you for joining us today for Salem Media Group's second quarter 2021 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 Axinger, Chief Executive Officer, David Santrella, President of Broadcast Media, and David Evans, President of Interactive and Publishing. We will begin in just a moment with our prepared remarks. Once we are done, the conference call operator will come back on the line to instruct you on how to submit questions. 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 our website at www.salemedia.com. And with that, I will now turn the call over to Edward Attinger.

Ed? Thank you, Evan, and thanks to all of you for being with us on today's call. In my prepared remarks, I'll focus on our Q2 financial results. I think you can go into digital and provide an update on M&A and our leverage. I'll then turn the call back to Evan, who will provide more detail on Q2 and will also give guidance for Q3. So with that, Let's talk about the second quarter. For the second quarter of 2021, total revenue increased 20.6%. Expenses increased 9.9%, resulting in a 212.1% increase in adjusted EBITDA. While the increase in revenue and adjusted EBITDA are significant, obviously we're comparing Q2 2020, which bore the biggest brunt of the COVID lockdown, so it distorts it a bit. It's therefore also important to compare performance to 2019, though the economy is still not fully recovered in 2021 as it was in 2019, but it's a better comparison. Comparing to 2019, total revenue decreased 1.4%, expenses increased 0.9%, and adjusted EBITDA decreased 13.9%. On the last couple of calls, I've been highlighting the combined digital revenue for Salem, both the digital revenue in the broadcast division and the Digital Revenue and Peer Play Digital Division. In the second quarter, combined digital revenue was up 19.7% to $18.1 million and represents now 28.3% of the total revenue. Let's take a look at results by division to provide a little more perspective. For the second quarter of 2021, broadcast revenue increased 18.5% when compared to the second quarter of 2020. While the overall economy continues to improve and open more, much of the second quarter saw continuing restrictions in many of the markets in which we operate. When comparing second quarter 2021 revenue to second quarter 2019, when the economy was fully open, total broadcast revenue was down 4.7%. With respect to the growth compared to last year, we continue to see meaningful growth in broadcast digital revenue, which was up 36.7% compared to last year, and up 110.5% when compared to the second quarter of 2019. So good progress there. Much of this growth is due to our recent digital initiatives, Salem Surround, Salem Now, and Salem Podcast Network, in addition to growth in streaming revenue. The newest of these initiatives is the Salem Podcast Network, which was launched at the beginning of this year. Both revenue and the number of podcasts continue to grow. We recently added Trish Reagan in mid-June, and we do expect revenue growth in the future to continue as we add more high-profile talent. We certainly will provide updates as we do. Traditional spot revenue, advertising revenue was up 35%. with local advertising up 35.4% and national advertising up 33.7%. We're still not back to 2019 levels due to the economy, but if we compare it to 2019, we're making progress. Total spot revenue was down 20.9% in the quarter, but it's moving in the right direction. Our national network had another strong quarter with a 17.1% increase in revenue. This growth is driven by an increase in affiliates, particularly from the Charlie Kirk show. Comparing to 2019, national network revenue was essentially flat, down only 0.1%. National block programming was up 0.8% in the second quarter compared to the second quarter of last year, while local block programming was up 3.3%. In total, block programming was up 1.6% compared to last year and declined 9.3% compared to the second quarter of 2019. Expenses in the broadcast division were up 9.3%, due primarily to increased revenue with station operating income improving 66.6%. When compared to 2019, expenses were down 4.1% due to cost containment initiatives that we've discussed in some of the previous calls, and SOI was down 6.6%. At our national digital division, revenue increased 9.5% compared to the second quarter of 2020, and increased 3.8% in the period of the second quarter of 2019. While Salem Web Network, our critical news site, and town hall media had slight increases, the significant growth driver in the second quarter was Eagle Financial Publications, which was up 26.7% compared to 2020. The increase was from the Retirement Watch newsletter as a result of increased investment in marketing. Additionally, revenue at Salem Church Products was up 11.1% in the second quarter, primarily due to the increased drop postings at churchstaffing.com. Expenses in the National Digital Division increased 9%, again due in large part to the increased marketing cost at Eagle Financial Publications, partially offset by cost-saving initiatives. Operating income improved 11.8%. Finally, our publishing division had a revenue increase of 68.3% compared to the second quarter of 2020. Revenue was up 18.1% compared to the second quarter of 2019. Both segments of this division had solid growth in the quarter compared to last year. Revenue at single author services increased 42.9% from growing the sales force and some increased marketing. Additionally, we had a small benefit from COVID with people being stuck at home as some decided to take the time to write books, which always got us business. Our traditional book publisher, Regnery Publishing, had a 100.2% increase in revenue compared to last year. We had a couple of titles that performed very well for us, including Speechless by Michael Knowles, Irreversible Damage by Abigail Schreier, Fault Lines by Votie Bachman, and The Unanswered Letter by Ferris Cassell, which was a National Jewish Book Award winner. Publishing expenses were up 15.4% due to costs associated with increased book sales, and we posted a $234,000 profit in the division. On the M&A front, we closed on a couple of previously announced transactions. On June 1st, we acquired two AM radio stations in San Francisco for $600,000. We also acquired Centerline New Media for $1.3 million on April 28th, Additionally, on May 25th, we closed on the sale of Singing News Magazine and Singing News Radio for approximately $100,000 in cash, plus the buyer assumed the subscription liability of approximately $400,000. Finally, as far as transactions that were mentioned in our last earnings call on June 25th, we closed on the sale of approximately 34 acres of land in Louisville, Texas, just outside of Dallas, for $12.1 million. We retained nine acres of the parcel and were broadcast from there with virtually no loss in coverage and therefore no loss in revenue. With respect to previously unannounced transactions, on July 1st, we closed on the acquisition of Shift Worship for $2.6 million. We will roll this business under the Salem Church Products Division. Finally, I'd like to conclude my prepared remarks with a brief discussion about debt and leverage. If you recall, a year ago, our leverage ratio was 8.96, which was badly distorted by the impact of COVID-19. but it's improved substantially since then. As of June 30, 2021, we had $216.3 million in bonds outstanding and nothing drawn on our revolver. Additionally, we have PPP loans of $11.2 million recorded as debt on the balance sheet as of June 30. Last month, we were informed that the SBA has forgiven all but $20,000 of those loans. We also had $19.9 million in cash on June 30th. Our leverage ratio was 6.06 as defined by our credit agreements. If, however, we met the cash we have on hand and reflect the forgiveness of the PPP loans, our leverage ratio would have been 5.23. Substantial improvement for which we are very grateful. Additionally, if you factor in the $12.1 million of cash we received in July, From the Dallas land sale, leverage would be below five. So with that, I'll turn the call back to Evan for additional details on the quarter's performance and guidance. Evan?