Salem Media Group, Inc.

remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Evan Masur, Chief Financial Officer.

Welcome and thank you for joining us today for Salem Media Group's second quarter 2023 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. In the room with me today is David Santrella, Chief Executive Officer, and David Evans, Chief Operating Officer. We'll 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, and adjusted EBITDA. 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 will now turn the call over to Dave Santrella. Dave?

Thanks, Evan, and thanks to everyone for joining us on the call and on the webcast. My prepared remarks will include a review of Salem financial performance in the second quarter and a discussion of some asset sales. Once I'm done, I'll turn the call back to Evan to provide more details on the second quarter financial performance, talk about our debt, and give guidance for the third quarter. Well, we continue to face some headwinds from a tough economy and high interest rates. Total revenue for the second quarter declined 4.2%, and expenses increased 5.2%. This resulted in a 77.2% decline in adjusted EBITDA. While these numbers are in line with the guidance we provided on our last call, we are not happy with these results. Accordingly, we have taken further cost-cutting measures including the elimination of the 401 match, banning all non-essential travel, a restructure of some general manager positions and our sales organizations, and pay cuts have been taken by senior management. In total, these cuts amount to approximately $10 million in annual savings. We continue to look for additional efficiencies as we navigate the challenging economy. I always like to summarize the total of our digital efforts on each earnings call because I think this is often overlooked by investors. When we take the digital revenue in the broadcast division, which includes assets like our podcast network, Salem Surround, and the Salem News Channel, and the revenue from our national digital division, total Salem digital revenue was $20.8 million in the second quarter. This represents 31.6% of our total revenue. While the growth in digital has slowed and was only up 0.5% in the quarter, we still believe that digital represents Salem's most important growth opportunity. Now I'll review the financial performance for each division in the second quarter. Revenue from the broadcast division declined 5.3% in the quarter. Similar to last quarter, spot revenue is the biggest driver of the decline with national spot down 29.5% and local spot down 10.1%. More than half of the decline is due to political revenue, which was 0.3 million in the second quarter compared to 1.5 million in the second quarter of last year. Excluding the impact of political, broadcast revenue declined 3% in the quarter. It is worth noting that the first of the Republican presidential debates is scheduled for later this month. We anticipate an increase in the pace of political revenue in the second half of this year. Aside from the reduction in political revenue and the continued decline in traditional spot advertising revenue is due to the advertiser pullback in response to the overall economy. We also saw a slowing in the pace of revenue growth of the digital revenue in the broadcast division. which was up 0.6% in the quarter. Revenue from national block programming increased 0.8% in the quarter. Now, as you know, most of our block programming deals are long-term. Many of our newer block programming deals were finalized in Q1 of 2022. So, as they anniversary, we see that growth slow down. Therefore, we're pleased to see that we continue to grow albeit at a slower pace than the previous 12 months. Network revenue, not surprisingly, is feeling the impact of a tough economy as it decreased 5.8% in the quarter. However, excluding political revenue in both Q2 this year and last year, network revenue actually increased 0.4%. The pace of growth in broadcast expenses declined compared to last quarter. As a reminder, in Q1, broadcast expenses increased 12.3% as we continue to make investments in many of our digital initiatives, including the Salem News Channel. By comparison, broadcast expenses in the second quarter increased 4.8%. While we are still making these investments, as we believe digital will play an even larger part of the future, the reduced pace in expenses reflects the various cost-cutting measures that we've taken. Revenue at Salem's National Digital Division increased 0.5% in Q2. This business continues to face challenges from algorithm changes made by Facebook and the declining use of the third-party cookie. In the National Digital Division, expenses in the quarter increased 9.1%, primarily due to increased marketing and sales costs and professional services. Book publishing revenue decreased 3.5% in the second quarter. Book sales net of the estimated returns allowance was just about flat in the second quarter compared to Q2 of last year. The best-selling titles in the quarter were Manhood by Josh Hawley, Letter to the American Church by Eric Metaxas, and Overture of Hope by Isabel Vincent. In the third quarter, we're releasing The Ever-Loving Truth by Bodie Bauckham, and the Babylon Bee Guide to Gender. Expenses in the book publishing division were up 10.9%, primarily due to an increased inventory obsolescence reserve. Turning to M&A activity, we have a few asset sales to report. Last month, we closed on the sale of two stations in Seattle, KLFEAM for $500,000 and KNTSAM for $225,000. Additionally, on June 29th, we entered into an agreement to sell KSAC FM in Sacramento for $1.0 million and expect to close that transaction in early October. And with that, I'll turn the call back over to Evan for more details on the quarter's performance and guidance for the third quarter.