Salem Media Group, Inc.

Good day, everyone, and welcome to the Salem Media Group third quarter 2023 earnings call. Today's call is being recorded. It is now my pleasure to turn the call over to Evan Masur, Chief Financial Officer. Please go ahead.

Welcome and thank you for joining us today for Salem Media Group's third 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. With me today are 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 our website at salemmedia.com.

I will now like to turn the call over to Dave Santrana. Dave? Thanks, Evan, and good afternoon to everyone on the call and on the webcast. My prepared remarks will focus on a review of Salem's financial performance in the third quarter and an update on asset sales. After that, I'll turn the call back to Evan to provide some additional details on the performance in the third quarter, talk about Salem's debt, and give guidance for the fourth quarter. As you have heard from many of our peers, our industry continues to face challenges with the economy and elevated interest rates. In fact, S&P has said that we are in a persistent ad recession and we're feeling it as well. For the third quarter, total revenue declined 5.0%, though only 3.9% excluding political. Expenses increased just 0.2% and adjusted EBITDA improved 9.3% due to last year's legal settlement accrual of $3.8 million. With the cost cuts we've outlined in our last two calls, free cash flow is improving and we remain focused on operating efficiencies. Now I'll break down Salem's performance for each division. In the broadcast division, revenue declined 4.2% in the quarter, largely due to political comps and the impact of the ad recession. In the third quarter of 2022, we recorded $1.5 million in political revenue, as compared to only 700,000 for the third quarter of this year. Spot advertising revenue continues to be the biggest reason for the overall decline in broadcast revenue. National spot was down 17.9% and local spot was down 6.6%. Overall, total spot advertising revenue was down 9.6% or $1.3 million. Network revenue was down 10.1%. Digital revenue growth within the broadcast division has stalled out due to the advertising recession, with revenue down 4.5% in the quarter after only a slight increase of 0.6% in Q2. However, we expect a return to double-digit growth in all digital, including the national digital division, in Q4. As a reminder, total digital revenue, both digital revenue in the broadcast division and national digital division, represent 29.5% of our total revenue. Block programming revenue was essentially flat, down 0.1% in the third quarter. As you know, this is an important category for Salem and unique to our business model. Block programming makes up 40% of our broadcast revenue and 31% of our total revenue. Broadcast operating expenses increased 2.4% and were up due to severance expense and investments in the Salem News Channel and the Miami Market, which was acquired at the beginning of 2023. In the National Digital Division, revenue declined 2.2% in the third quarter. This is due to the Facebook algorithm change that took place in Q3 2022 and the recent non-renewal of the Bible Gateway Representation Agreement, partially offset by increased revenue from George Gilder Investment Newsletter's acquisition. Digital expenses were up 2% due to severance costs and costs associated with the George Gilder newsletter acquisition. Revenue from our book publishing decreased 17.5% in the third quarter due to a light publishing schedule. Additionally, the softness in the overall economy has caused some declines in our self-publishing business. Expenses in the publishing business were down 9.2% due primarily to variable costs. I want to now update you on the asset sales activity. We've been very busy and have a lot to report. On our last call, I mentioned that we entered into an agreement to sell KSAC FM in Sacramento for $1.0 million. We've received initial consent from the FCC and expect to close on that sale next month. Just last week, on November 6th, we closed on the sale of three FM radio stations in Greenville, South Carolina, for $6.8 million. In that market, we still own two translators, the tower site and the studio office building, all of which are listed for sale. On September 29th, we entered into an agreement to sell Salem Church products for $30 million, of which $22.5 million will be paid at closing. The remaining $7.5 million will be paid in three equal installments beginning on the first anniversary of the closing. Additionally, upon closing, we will enter into a separate $10 million multi-year advertising for equity agreement whereby Salem will advertise for the buyer Glue LLC. The equity agreement includes a put option that guarantees that Salem will receive a minimum price of $10 million for the equity. We are working on closing this transaction as soon as possible. On September 1st, we entered into an agreement to sell radio station WTWDAM and a translator in Tampa, Florida for $0.7 million. We expect this to close by the end of next month. On October 17th, we entered into an agreement to sell land in Sarasota, Florida for $9.5 million. The closing is conditional upon getting the property rezoned and we expect to close the sale in late 2024. We'll use the proceeds from these asset sales to fully pay off the revolver. The current revolver expires on February 1st of next year. We are currently working on a new revolver and expect to have it in place by the end of the year. With that, I'll turn the call back to Evan for more details on the quarter's performance and guidance for the last quarter of 2023. Thank you, Dave.