Saga Communications, Inc. (NASDAQ:SGA) is a media company primarily engaged in acquiring, developing, and operating broadcast properties, including opportunities complementary to its core radio business, such as digital, e-commerce, and non-traditional revenue initiatives. With a diverse portfolio of 79 FM and 31 AM radio stations across 27 markets, Saga has established itself as a prominent player in the broadcasting industry.

Financials

In the fiscal year 2023, Saga reported annual net income of $9,500,000, annual revenue of $112,773,000, annual operating cash flow of $15,379,000, and annual free cash flow of $11,023,000. These financial metrics demonstrate the company's ability to generate consistent profitability and strong cash flows, even in the face of industry challenges.

For the first quarter of 2024, Saga reported a net revenue decrease of 2.5% to $24,664,000, compared to $25,304,000 in the same period of the previous year. This decline was primarily driven by decreases in gross local revenue and non-spot gross revenue, partially offset by increases in gross interactive revenue and gross political revenue. The company's CEO, Chris Forgy, emphasized the need for transformative changes in the industry, stating that "radio isn't broken, it's just slowing down, maybe a little misunderstood."

Saga's station operating expenses increased by 5.9% to $22,981,000 in the first quarter of 2024, compared to $21,703,000 in the same period of 2023. This increase was largely due to higher compensation-related expenses, bad debt expenses, healthcare expenses, streaming and content expenses, sales survey expenses, insurance-related expenses, repairs and maintenance expenses, and music licensing expenses.

The company reported an operating loss of $2,417,000 for the first quarter of 2024, compared to an operating income of $905,000 in the same period of the previous year. This decrease was a result of the decline in net operating revenue and the increase in station operating expenses, as well as an increase in corporate general and administrative expenses and other operating expenses.

Saga's net loss for the first quarter of 2024 was $1,577,000 ($0.25 per share on a fully diluted basis), compared to a net income of $920,000 ($0.15 per share on a fully diluted basis) in the same period of 2023. The decrease in net income was primarily due to the decline in operating income, a decrease in other income, and a decrease in income tax expense.

Geographic Breakdown

In terms of geographic breakdown, Saga's Charleston, South Carolina; Columbus, Ohio; Des Moines, Iowa; Milwaukee, Wisconsin; and Norfolk, Virginia markets, when combined, represented approximately 35% of the company's consolidated net operating revenue in the first quarter of 2024. These markets also accounted for approximately 38% of Saga's consolidated station operating income during the same period.

Revenue Breakdown

Saga's revenue breakdown shows that for the first quarter of 2024, approximately 90% of its radio stations' gross revenue was from local advertising, while the remaining 10% was from national advertising. The company experienced a decrease in gross local revenue and non-spot gross revenue, but an increase in gross interactive revenue and gross political revenue.

Outlook

Looking ahead, Saga's CEO, Chris Forgy, emphasized the need for transformational change within the industry, stating that "radio isn't broken, it's just slowing down, maybe a little misunderstood." The company is actively working to provide the necessary skills, training, and resources to its leaders and media advisers to execute this transformation and better serve its customers.

Liquidity

Saga's balance sheet remains strong, with $28.8 million in cash and short-term investments as of March 31, 2024. The company continues to utilize its financial strength to strategically invest in its operations, both at the market and corporate levels, as it works to grow specific revenue types, including local, national, interactive, e-commerce, online news products, and non-traditional revenue (NTR).

Guidance

In terms of guidance, Saga expects its station operating expense to increase by approximately 4% to 5% in 2024 compared to 2023, primarily due to the inflationary environment and the company's investments in its staff, sales training, and ongoing interactive development, including its online news product. The company also anticipates its annual corporate general and administrative expense to be approximately $12 million for 2024, and its tax rate to be between 26% and 29%, with a deferred tax of 3% to 6%.

Conclusion

Saga's transformative journey amidst industry headwinds highlights the company's commitment to adapting and innovating in the ever-evolving media landscape. By investing in its people, technology, and customer relationships, Saga aims to position itself as a leader in the broadcasting industry, poised to capitalize on the opportunities that lie ahead.