Salem Media Group, Inc. Announces Third Quarter 2023 Total Revenue of $63.5 Million

Salem Media Group, Inc. (the "company") (NASDAQ:SALM) released its results for the three and nine months ended September 30, 2023.

Third Quarter 2023 Results

For the three months ended September 30, 2023 compared to the three months ended September 30, 2022:

Consolidated

• Total revenue decreased 5.0% to $63.5 million from $66.9 million;
• Total operating expenses increased 31.9% to $99.8 million from $75.6 million;
• Operating expenses, excluding stock-based compensation expense, debt modification costs, gains and losses on the sale or disposition of assets, impairments, depreciation expense and amortization expense (1) increased 0.2% to $61.0 million from $60.8 million;
• Operating loss increased to $36.3 million from $8.8 million;
• Net loss increased to $31.3 million, or $1.15 net loss per share, from $11.9 million, or $0.44 net loss per share;
• EBITDA (1) decreased to $(33.1) million from $(5.7) million; and
• Adjusted EBITDA (1) increased 9.3% to $2.5 million from $2.3 million.

Broadcast

• Net broadcast revenue decreased 4.2% to $49.0 million from $51.1 million;
• Station Operating Income ("SOI") (1) decreased 31.8% to $6.8 million from $10.0 million;
• Same Station (1) net broadcast revenue decreased 4.9% to $48.6 million from $51.0 million; and
• Same Station SOI (1) decreased 28.2% to $7.3 million from $10.1 million.

Digital Media

• Digital media revenue decreased 2.2% to $10.0 million from $10.2 million; and
• Digital Media Operating Income (1) decreased 20.9% to $1.5 million from $1.9 million.

Publishing

• Publishing revenue decreased 17.5% to $4.6 million from $5.5 million; and
• Publishing Operating Loss (1) increased 36.6% to $1.4 million from $1.0 million.

Included in the results for the three months ended September 30, 2023 are:

• A $35.1 million ($26.0 million, net of tax, or $0.95 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Cleveland, Colorado Springs, Columbus, Dallas, Detroit, Greenville, Little Rock, Miami, New York, Orlando, Philadelphia, Phoenix, Portland, Sacramento, San Diego, San Francisco and Tampa;
• A $0.7 million ($0.5 million, net of tax, or $0.02 per share) impairment charge to the value of goodwill in Townhall and Salem Author Services;
• A $0.5 million ($0.3 million, net of tax, or $0.01 per diluted share) net gain on the disposition of asset relates primarily to the $0.4 million pre-tax gain on the sale of radio stations in Seattle, Washington; and
• A $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expense of stock options.

Included in the results for the three months ended September 30, 2022 are:

• A $7.7 million ($5.7 million, net of tax, or $0.21 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Columbus, Dallas, Greenville, Honolulu, Little Rock, Orlando, Philadelphia, Portland, Sacramento, and San Francisco;
• A $0.2 million ($0.1 million, net of tax) loss on the disposal of assets;
• A $3.8 million ($2.8 million, net of tax, or $0.10 per share) legal settlement expense; and
• A $0.1 million non-cash compensation charge related to the expensing of stock options.

Per share numbers are calculated based on 27,216,787 diluted weighted average shares for the three months ended September 30, 2023 and 2022.

Year to Date 2023 Results

For the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022:

Consolidated

• Total revenue decreased 2.7% to $192.8 million from $198.2 million;
• Total operating expenses increased 21.9% to $237.3 million from $194.6 million;
• Operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, debt modification costs, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (1) increased 5.4% to $186.2 million from $176.6 million;
• The company had an operating loss of $44.6 million as compared to operating income of $3.5 million;
• The company recognized $4.0 million in film distribution income from an unconsolidated equity investment in the nine months ended September 30, 2022;
• Net loss increased to $43.5 million, or $1.60 net loss per share, from $1.0 million, or $0.04 net loss per share;
• EBITDA (1) decreased to $(34.3) million from $17.0 million; and
• Adjusted EBITDA (1) decreased 68.4% to $6.6 million from $20.8 million.

Broadcast

• Net broadcast revenue decreased 3.3% to $147.0 million from $152.0 million;
• SOI (1) decreased 40.7% to $18.5 million from $31.2 million;
• Same station (1) net broadcast revenue decreased 3.8% to $146.1 million from $151.8 million; and
• Same station SOI (1) decreased 35.9% to $20.1 million from $31.3 million.

Digital media

• Digital media revenue increased 0.1% to $31.3 million; and
• Digital media operating income (1) decreased 22.4% to $4.8 million from $6.2 million.

Publishing

• Publishing revenue decreased 2.7% to $14.4 million from $14.8 million; and
• Publishing Operating Loss (1) increased 81.3% to $2.9 million from $1.6 million.

Included in the results for the nine months ended September 30, 2023 are:

• A $38.4 million ($28.4 million, net of tax, or $1.04 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Cleveland, Colorado Springs, Columbus, Dallas, Detroit, Greenville, Little Rock, Miami, New York, Orlando, Philadelphia, Phoenix, Portland, Sacramento, San Diego, San Francisco and Tampa;
• A $2.6 million ($1.9 million, net of tax, or $0.07 per share) impairment charge to the value of goodwill in Townhall and Salem Author Services;
• A $0.1 million loss on the early retirement of long-term debt associated with the 2024 Notes;
• A $0.3 million ($0.2 million, net of tax, or $0.01 per diluted share) net gain on the disposition of assets reflects a $3.3 million pre-tax gain on the sale of the economic interests in the leases at our Greenville, South Carolina to a related party and a $0.4 million estimated pre-tax gain on the sale of radio station KNTS-AM and KLFE-FM in Seattle, Washington that was offset by a $3.3 million estimated pre-tax loss on the pending sale of radio station KSAC-FM in Sacramento, California and $0.1 million of net losses from various fixed asset disposals; and
• A $0.3 million ($0.2 million, net of tax, or $0.01 per share) non-cash compensation charge related to the expense of stock options.

Included in the results for the nine months ended September 30, 2022 are:

• A $11.7 million ($8.6 million, net of tax, or $0.32 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Columbus, Dallas, Greenville, Honolulu, Little Rock, Orlando, Philadelphia, Portland, Sacramento and San Francisco;
• A $8.5 million ($6.3 million, net of tax, or $0.23 per diluted share) net gain on the disposition of assets related primarily to the $6.5 million pre-tax gain on the sale of land used in the company's Denver, Colorado broadcast operations, the $1.8 million pre-tax gain on sale of land used in the company's Phoenix, Arizona broadcast operations, and $0.5 million pre-tax gain on the sale of the company's radio stations in Louisville, Kentucky offset by various fixed asset disposals;
• A $4.8 million ($3.5 million, net of tax, or $0.13 per share) legal settlement expense;
• A $0.1 million ($0.1 million, net of tax) goodwill impairment charge;
• A $0.2 million ($0.2 million, net of tax, or $0.01 per share) charge for debt modification costs; and
• A $0.2 million ($0.2 million, net of tax, or $0.01 per share) non-cash compensation charge related to the expensing of stock options.

Per share numbers are calculated based on 27,216,787 diluted weighted average shares for the nine months ended September 30, 2023, and 27,202,983 diluted weighted average shares for the nine months ended September 30, 2022.

Balance Sheet

As of September 30, 2023, the company had $159.4 million outstanding on the 7.125% senior secured notes due 2028 ("2028 Notes") and $20.5 million outstanding on the ABL facility.

Acquisitions and Divestitures

The following transactions were completed since July 1, 2023:

• On November 6, 2023 the company sold radio stations WGTK-FM, WRTH-FM and WLTE-FM in Greenville, South Carolina for $6.8 million.
• On July 21, 2023 the company sold radio station KNTS-AM in Seattle, Washington for $0.2 million.
• On July 13, 2023 the company sold radio station KLFE-AM in Seattle, Washington for $0.5 million. Radio station KLFE-AM was being programmed under a Time Brokerage Agreement ("TBA") as of August 1, 2022.

Pending transactions:

• On October 17, 2023 the company entered into an agreement to sell land in Sarasota, Florida for $9.5 million. The closing is conditional upon getting the property rezoned, and the company expects to close the sale in late 2024.
• On September 29, 2023 the company entered into an agreement to sell Salem Church Products for $30.0 million. At closing the company will receive $22.5 million in cash and a promissory note of $7.5 million. The principal shall be due and payable in three installments in the amount of $2.5 million starting the one-year anniversary of the closing date in 2024 through 2026. When the transaction closes, the parties will also enter into a $10.0 million multi-year agreement for the company to advertise Gloo platform's products and services across its radio and digital platform. The company expects to close the sale in the fourth quarter of this year.
• On September 1, 2023 the company entered into an agreement to sell radio station WTWD-AM and an translator in Tampa, Florida for $0.7 million subject to approval of the Federal Communications Commission ("FCC"). The company expects to close the sale in the fourth quarter of this year.
• On June 29, 2023 the company entered into an agreement to sell radio station KSAC-FM in Sacramento, California for $1.0 million subject to approval of the FCC. Radio station KSAC-FM started being programmed under a TBA on August 1, 2023. The company expects to close the sale in the fourth quarter of this year.

Conference Call Information

The company will host a teleconference to discuss its results on November 13, 2023 at 4:00 p.m. Central Time. To access the teleconference, please dial (888) 770-7291, and then ask to be joined into the Salem Media Group Third Quarter 2023 call or listen via the investor relations portion of the company's website, located at investor.salemmedia.com. A replay of the teleconference will be available through November 27, 2023 and can be heard by dialing (800) 770-2030, passcode 2413416 or on the investor relations portion of the company's website, located at investor.salemmedia.com.

Follow us on Twitter @SalemMediaGrp.

Fourth Quarter 2023 Outlook

For the fourth quarter of 2023, the company is projecting total revenue to decline between 6% and 8% from the fourth quarter 2022 total revenue of $68.8 million. This guidance assumes the closing of the pending sale of Salem Church Products in the fourth quarter. Excluding the impact of the 2022 political revenue and the financial results from the pending asset sale, the company would project total revenue to decline between 2% and 4%. The company is also projecting operating expenses before gains or losses on the sale or disposal of assets, stock-based compensation expense, legal settlement, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense ("Recurring Operating Expenses") to be between flat and a decrease 3% compared to the fourth quarter of 2022 Recurring Operating Expenses of $61.6 million. Excluding the impact of the pending asset sale, expenses are projected to be between an increase of 1% and a decrease of 2%.

A reconciliation of Recurring Operating Expenses (a non-GAAP measure) to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP financial measure, in particular, the change in the estimated fair value of earn-out consideration, impairments and gains or losses from the disposition of fixed assets. The company expects the variability of the above charges may have a significant, and potentially unpredictable, impact on its future GAAP financial results.

About Salem Media Group, Inc.

Salem Media Group is America's leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape. Learn more about Salem Media Group, Inc. at www.salemmedia.com.

Forward-Looking Statements

Statements used in this press release 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. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of the company to close and integrate announced transactions, market acceptance of the company's radio station formats, competition from new technologies, inflation and other adverse economic conditions, and other risks and uncertainties detailed from time to time in the company's reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

The company defines EBITDA (1) as net income before interest, taxes, depreciation, and amortization. The table below presents a reconciliation of EBITDA (1) to Net Loss, the most directly comparable GAAP measure. EBITDA (1) is a non-GAAP financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP. The company defines Adjusted EBITDA (1) as EBITDA (1) before gains or losses on the disposition of assets, before debt modification costs, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of long-term debt, and before non-cash compensation expense. The table below presents a reconciliation of Adjusted EBITDA (1) to Net Loss, the most directly comparable GAAP measure. Adjusted EBITDA (1) is a non-GAAP financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

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