Salem Media Group, Inc.

Third-quarter total revenue decreased 5.0% to $63.5 million. Operating expenses on a recurring basis increased 0.2% to $61.0 million, and adjusted EBITDA increased to $2.5 million. Net broadcast revenue decreased 4.2% to $49.0 million, broadcast operating expenses increased 2.4% to $42.2 million, and station operating income was $6.8 million, down 31.8%. On a same-station basis, net broadcast revenue decreased 4.9% to $48.6 million and SOI decreased 28.2% to $7.3 million. As of September 30, 2023, total debt was $179.9 million, including $159.4 million of 7.125% 2028 notes and $20.5 million outstanding on the ABL. For Q4 2023, Salem expects total revenue to decline 6% to 8% from Q4 2022’s $68.8 million, or 2% to 4% excluding political revenue and the pending Salem Church Products sale. Q4 operating expenses are projected to be flat to down 3% versus Q4 2022 non-GAAP operating expenses of $61.6 million, or up 1% to down 2% excluding the pending asset sale.

David Santrella said the quarter reflected a difficult ad environment, describing the industry as being in a “persistent ad recession,” and noted Salem is feeling the same pressure. He highlighted that the company’s cost cuts are improving free cash flow and that management remains focused on operating efficiencies. He also emphasized active portfolio management, saying Salem is evaluating assets for monetization and expects digital revenue to reaccelerate in Q4.

Evan Masyr gave the key financial details: revenue of $63.5 million, recurring operating expenses of $61.0 million, adjusted EBITDA of $2.5 million, and debt of $179.9 million at quarter end. He pointed out the ABL default, the four forbearance agreements with Wells Fargo, and the tightened revolver terms, including the reduction in notional revolver capacity from $30 million to $25 million and a minimum excess availability requirement of $2 million. He said the leverage ratio was 11.0 and that Salem plans to use asset-sale proceeds to fully pay down the revolver.

The main analyst question focused on how much revenue and EBITDA would be lost from the announced asset sales. Management said they did not have all figures handy, but Evan estimated the transactions would reduce EBITDA by roughly $2 million to $3 million. Questions also centered on the Sarasota land sale and rezoning; management said the buyer owns an adjacent parcel, county pre-approval is already in hand, and they are highly confident the rezoning will be completed, with closing expected in December of next year.