Salem Media Group, Inc. (SALM) is a domestic multimedia company specializing in Christian and conservative content. The company operates across three key segments: Broadcast, Digital Media, and Publishing. With a diverse portfolio of radio stations, digital platforms, and publishing assets, Salem has established itself as a prominent player in the media industry, catering to audiences interested in faith-based and politically conservative content.

Financials

For the fiscal year ended December 31, 2022, Salem reported annual net income of -$3,236,000, annual revenue of $266,966,000, annual operating cash flow of $7,742,000, and annual free cash flow of -$5,640,000. These figures demonstrate the company's ability to generate revenue, though profitability remains a challenge.

In the third quarter of 2023, the company reported net revenue of $63,497,000, a decrease of 5.0% compared to the same period in the prior year. This decline was primarily driven by a 4.2% decrease in net broadcast revenue, a 2.2% decrease in net digital media revenue, and a 17.5% decrease in net publishing revenue. The company attributed these decreases to a combination of factors, including lower demand for advertising, softening in the radio market, and a reduction in book sales.

Broadcast Segment Performance

Salem's Broadcast segment, which includes the ownership and operation of radio stations in large metropolitan markets, as well as national networks and sales firms, generated net revenue of $48,966,000 in the third quarter of 2023, a decrease of 4.2% compared to the same period in the prior year. This decline was primarily due to a 9.6% decrease in net advertising revenue, which was partially offset by a 0.7% increase in block programming revenue.

The company's national advertising revenue decreased by 17.9%, while local advertising revenue decreased by 6.6%. This decline was partially attributed to a decrease in political advertising revenue, which generated $0.1 million in the third quarter of 2023 compared to $0.7 million in the same period of the prior year.

Digital Media Segment Performance

The Digital Media segment, which includes the company's Christian and conservative websites, digital newsletters, and other digital platforms, reported net revenue of $9,965,000 in the third quarter of 2023, a decrease of 2.2% compared to the same period in the prior year. This decrease was primarily driven by a 15.9% decline in digital advertising revenue, which was partially offset by a 21.2% increase in digital subscription revenue.

The decline in digital advertising revenue was attributed to changes in Facebook algorithms that limit political content, the growing use of browsers that block third-party cookies, and the overall state of the economy, which has weakened demand for advertising.

Publishing Segment Performance

Salem's Publishing segment, which includes Regnery® Publishing and Salem Author Services, reported net revenue of $4,566,000 in the third quarter of 2023, a decrease of 17.5% compared to the same period in the prior year. This decline was primarily due to a 19.2% decrease in net book sales, which was partially offset by a 13.5% decrease in self-publishing fees.

The decrease in net book sales was primarily driven by a 54% decrease in volume, which was partially offset by a 36% increase in the average price per unit sold. The company attributed this decline to the timing and popularity of book releases during the quarter.

Liquidity

As of September 30, 2023, Salem had $173,135,000 in long-term debt, including $152,611,000 in 2028 Notes and $20,524,000 in outstanding borrowings under its Asset-Based Revolving Credit Facility. The company's weighted average interest rate was 7.43% at the end of the third quarter.

Salem's cash and cash equivalents were $0 as of September 30, 2023, and the company had $3,100,000 in borrowing base availability under its Asset-Based Revolving Credit Facility. The company's current ratio was 0.66, and its quick ratio was 0.64, indicating a relatively tight liquidity position.

Business Overview

Salem Media Group, Inc. was founded in 1986 and is headquartered in Irving, Texas. The company operates across three key segments: Broadcast, Digital Media, and Publishing.

The Broadcast segment includes the ownership and operation of radio stations in large metropolitan markets, as well as national networks and sales firms. The company's radio stations and networks target audiences interested in Christian and family-themed programming, as well as conservative news and talk content.

The Digital Media segment encompasses the company's Christian and conservative websites, digital newsletters, and other digital platforms. These assets provide audiences with a wide range of content, including investing advice, audio and video streaming, and other resources.

The Publishing segment includes Regnery® Publishing, a traditional book publisher that has published dozens of bestselling books by leading conservative and Christian authors, as well as Salem Author Services, a self-publishing service for authors.

Risks and Challenges

Salem Media Group faces several risks and challenges that could impact its future performance. These include:

1. Dependence on advertising revenue: The company's Broadcast and Digital Media segments are heavily reliant on advertising revenue, which can be volatile and subject to economic conditions.

2. Competitive landscape: Salem operates in a highly competitive media industry, with both traditional and digital competitors vying for audience attention and advertising dollars.

3. Regulatory environment: The company's operations are subject to various regulatory requirements, including those related to the Federal Communications Commission (FCC) and content standards.

4. Technological changes: Evolving consumer preferences and the rapid pace of technological change in the media industry could impact the company's ability to adapt and remain relevant.

5. Liquidity concerns: Salem's relatively tight liquidity position, as evidenced by its current and quick ratios, could limit its financial flexibility and ability to invest in growth initiatives.

Outlook

The company has not provided specific financial guidance for the upcoming fiscal year. However, management has acknowledged the ongoing challenges in the media industry, including softening advertising demand and the need to adapt to changing consumer preferences and technological advancements.

Despite these headwinds, Salem remains committed to its diversified business model and is focused on leveraging its strong brand recognition and loyal audience base to drive growth across its Broadcast, Digital Media, and Publishing segments.

Conclusion

Salem Media Group, Inc. is navigating a complex and evolving media landscape, leveraging its diversified portfolio of assets to cater to audiences interested in Christian and conservative content. While the company has faced some financial challenges, including declines in revenue and profitability, it remains committed to adapting to industry changes and exploring new opportunities to drive long-term growth and shareholder value.