Salem Media Group Inc

What they do

Salem Media Group operates radio stations in large metropolitan markets, assembles market clusters for operational efficiencies, and creates programming through its radio stations, networks, and digital operations. It also provides multimedia marketing services via Salem Surround, operates the Salem Podcast Network, Salem News Channel, an OTT television network, and SalemNOW. The company has three reportable segments: Broadcast, Digital Media, and Publishing.

Revenue drivers

• Broadcast — Generates revenue from the sale of block program time, advertising time on radio stations to national and local advertisers, banner and streaming advertisements on station websites, digital newsletters, and national network advertising and syndication. In Q3 2023, net broadcast revenue was $49.0 million, down 4.2% year-over-year.
• Digital Media — Earns revenue from digital advertising, including banner ads, streaming ads, digital newsletters, and custom digital media campaigns through Salem Surround. In Q3 2023, digital media revenue was $10.0 million, down 2.2% year-over-year.
• Publishing — Generates revenue from book publishing and related products. In Q3 2023, publishing revenue was $4.6 million, down 17.5% year-over-year.
• Salem Surround — A full-service multimedia marketing agency that provides broadcast and digital marketing services and custom digital media campaigns to customers, contributing to broadcast and digital revenue.

Recent performance

For the third quarter of 2023, total revenue decreased 5.0% to $63.5 million from $66.9 million. The company reported an operating loss of $36.3 million, primarily due to a $35.1 million impairment charge on broadcast licenses in multiple markets and a $0.7 million goodwill impairment. Net loss increased to $31.3 million, or $1.15 per share, compared to $11.9 million, or $0.44 per share, in the prior year. Adjusted EBITDA increased 9.3% to $2.5 million from $2.3 million. For the nine months ended September 30, 2023, total revenue decreased 2.7% to $192.8 million, and net loss was $43.5 million, or $1.60 per share.

Strategy

Salem Media Group is committed to programming and content emphasizing Christian values, family themes, and conservative news, even if it means forgoing potentially more profitable opportunities. The company aims to expand its integrated multimedia platform while aggressively managing operating costs and cash flows. It continues to invest in websites, mobile applications, broadcast signals, and promoting its authors and on-air talent. Recent expansion efforts included investing in an entity to develop, produce, and distribute a documentary motion picture.

Risks

• Debt and liquidity risk — The company may need additional funds to service its debt and execute its business strategy, and its ability to access borrowings under its ABL Facility is a stated risk.
• Impairment risk — A $35.1 million impairment charge on broadcast licenses was recorded in Q3 2023, and future write-offs of FCC broadcast licenses and goodwill could occur.
• Industry and economic conditions — Risks include changes in the popularity of radio as an advertising medium, changes in consumer tastes, and general economic conditions in the markets where Salem operates.
• Regulatory risk — The company's ability to renew its broadcast licenses and the impact of regulatory rules or proceedings are ongoing risks.

Outlook

Management notes that historical operating results are not necessarily indicative of future results and lists risks such as reductions in revenue forecasts, inflation, and the need for additional funds. The company continues to focus on expanding its multimedia platform while managing costs. No specific financial guidance is provided in the excerpts.