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Salem Media Group, Inc. Announces Second Quarter 2019 Total Revenue of $64.7 Million

August 8, 2019 4:05 PM

CAMARILLO, Calif.--(BUSINESS WIRE)-- Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and six months ended June 30, 2019.

Second Quarter 2019 Results

For the quarter ended June 30, 2019 compared to the quarter ended June 30, 2018:

Consolidated

Broadcast

Digital Media

Publishing

Included in the results for the quarter ended June 30, 2019 are:

Included in the results for the quarter ended June 30, 2018 are:

Per share numbers are calculated based on 26,525,564 diluted weighted average shares for the quarter ended June 30, 2019, and 26,177,247 diluted weighted average shares for the quarter ended June 30, 2018.

Year to Date 2019 Results

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018:

Consolidated

Broadcast

Digital media

Publishing

Included in the results for the six months ended June 30, 2019 are:

Included in the results for the six months ended June 30, 2018 are:

Per share numbers are calculated based on 26,355,838 diluted weighted average shares for the six months ended June 30, 2019, and 26,174,393 diluted weighted average shares for the six months ended June 30, 2018.

Balance Sheet

As of June 30, 2019, the company had $231.9 million outstanding on the 6.75% senior secured notes due 2024 (the “Notes”) and $22.4 million outstanding on the Asset Based Revolving Credit Facility (“ABL Facility”).

Acquisitions and Divestitures

The following transactions were completed since April 1, 2019:

Pending transactions:

Conference Call Information

Salem will host a teleconference to discuss its results on August 8, 2019 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (877) 524-8416, and then ask to be joined into the Salem Media Group Second Quarter 2019 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 August 22, 2019 and can be heard by dialing (877) 660-6853, passcode 13692370 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.

Follow us on Twitter @SalemMediaGrp.

Third Quarter 2019 Outlook

For the third quarter of 2019, the company is projecting total revenue to decrease between 4% and 6% from third quarter 2018 total revenue of $65.5 million. Excluding the impact of political revenue and recent acquisitions and dispositions, the company is projecting total revenue to decrease between 2% and 4%. The company is also projecting operating expenses before gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to be between flat and a decrease of 3% compared to the third quarter of 2018 non-GAAP operating expenses of $55.2 million.

A reconciliation of non-GAAP operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense 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, Facebook and Twitter (@SalemMediaGrp).

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 Salem to close and integrate announced transactions, market acceptance of Salem’s radio station formats, competition from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem'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. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

(1) Regulation G

Management uses certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements. The company uses these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.

The company’s presentation of these non-GAAP financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.

Regulation G defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this earnings release. The company closely monitors EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, Publishing Operating Loss, and operating expenses excluding gains or losses on the disposition of assets, stock-based compensation, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation and amortization, all of which are non-GAAP financial measures. The company believes that these non-GAAP financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance. These non-GAAP financial measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance.

The company defines Station Operating Income (“SOI”) as net broadcast revenue minus broadcast operating expenses. The company defines Digital Media Operating Income as net Digital Media Revenue minus Digital Media Operating Expenses. The company defines Publishing Operating Loss as net Publishing Revenue minus Publishing Operating Expenses. The company defines EBITDA as net income before interest, taxes, depreciation, and amortization. The company defines Adjusted EBITDA as EBITDA before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before changes in the fair value of interest rate swap, before impairments, before net miscellaneous income and expenses, before gain on bargain purchase, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. SOI, Digital Media Operating Income, Publishing Operating Loss, EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. SOI, Digital Media Operating Income, Publishing Operating Loss, EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with GAAP. The company’s definitions of SOI, Digital Media Operating Income, Publishing Operating Loss, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.

The company defines Adjusted Free Cash Flow as Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. The company considers Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. A limitation of Adjusted Free Cash Flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. The company uses Adjusted Free Cash Flow, a non-GAAP liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The company’s presentation of Adjusted Free Cash Flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Adjusted Free Cash Flow is not necessarily comparable to similarly titled measures reported by other companies.

The company defines Same Station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station SOI as Same Station net broadcast revenue less Same Station broadcast operating expenses. Same Station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station operating results for a full calendar year are calculated as the sum of the Same Station-results for each of the four quarters of that year. The company uses Same Station operating results, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business. The company believes that Same Station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format. The company’s presentation of Same Station operating results are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Same Station operating results is not necessarily comparable to similarly titled measures reported by other companies.

For all non-GAAP financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.

The Supplemental Information tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP. The company uses non-GAAP financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.

Salem Media Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2019

2018

2019

(Unaudited)

Net broadcast revenue

$

50,563

$

49,082

$

98,613

$

95,175

Net digital media revenue

10,260

9,960

20,654

20,200

Net publishing revenue

5,449

5,638

10,800

9,774

Total revenue

66,272

64,680

130,067

125,149

Operating expenses:

Broadcast operating expenses

37,243

37,707

72,993

74,156

Digital media operating expenses

8,397

7,648

16,771

15,706

Publishing operating expenses

5,522

5,773

11,109

10,595

Unallocated corporate expenses

4,030

4,332

7,951

8,203

Change in the estimated fair value of contingent earn-out consideration

72

—

72

—

Depreciation and amortization

4,511

3,976

8,998

8,205

Net (gain) loss on the disposition of assets

5,154

(357

)

5,159

3,667

Total operating expenses

64,929

59,079

123,053

120,532

Operating income

1,343

5,601

7,014

4,617

Other income (expense):

Interest income

—

—

2

1

Interest expense

(4,754

)

(4,371

)

(9,272

)

(8,796

)

Gain on early retirement of long-term debt

234

—

234

426

Net miscellaneous income and (expenses)

(88

)

18

(13

)

19

Net income (loss) before income taxes

(3,265

)

1,248

(2,035

)

(3,733

)

Provision for (benefit from) income taxes

(1,098

)

4,892

(696

)

(411

)

Net loss

$

(2,167

)

$

(3,644

)

$

(1,339

)

$

(3,322

)

Basic loss per share Class A and Class B common stock

$

(0.08

)

$

(0.14

)

$

(0.05

)

$

(0.13

)

Diluted loss per share Class A and Class B common stock

$

(0.08

)

$

(0.14

)

$

(0.05

)

$

(0.13

)

Basic weighted average Class A and Class B common stock shares outstanding

26,177,247

26,525,564

26,174,393

26,355,838

Diluted weighted average Class A and Class B common stock shares outstanding

26,177,247

26,525,564

26,174,393

26,355,838

Salem Media Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

December 31, 2018

June 30, 2019

(Unaudited)

Assets

Cash

$

117

$

9

Trade accounts receivable, net

33,020

32,154

Other current assets

10,500

9,047

Property and equipment, net

96,344

94,591

Operating and financing lease right-of-use assets

164

61,780

Intangible assets, net

414,646

408,108

Deferred financing costs

381

304

Other assets

3,856

5,066

Total assets

$

559,028

$

611,059

Liabilities and Stockholders’ Equity

Current liabilities

$

52,878

$

66,163

Long-term debt

234,030

227,887

Operating and financing lease liabilities, less current portion

105

60,132

Deferred income taxes

35,272

34,726

Other liabilities

14,874

5,922

Stockholders’ Equity

221,869

216,229

Total liabilities and stockholders’ equity

$

559,028

$

611,059

SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share and per share data)

Class A

Class B

Common Stock

Common Stock

Additional

Paid-In

Accumulated

Treasury

Shares

Amount

Shares

Amount

Capital

Earnings

Stock

Total

Stockholders’ equity, December 31, 2018

22,950,066

$ 227

5,553,696

$ 56

$ 245,220

$ 10,372

$ (34,006)

$ 221,869

Stock-based compensation

—

—

—

—

176

—

—

176

Cash distributions

—

—

—

—

—

(1,702)

—

(1,702)

Net loss

—

—

—

—

—

322

—

322

Stockholders’ equity, March 31, 2019

22,950,066

$ 227

5,553,696

$ 56

$ 245,396

$ 8,992

$ (34,006)

$ 220,665

Distributions per share

$ 0.065

$ 0.065

Stockholders’ equity, March 31, 2019

22,950,066

$ 227

5,553,696

$ 56

$ 245,396

$ 8,992

$ (34,006)

$ 220,665

Stock-based compensation

—

—

—

—

936

—

—

936

Options exercised

200

—

—

—

—

—

—

—

Lapse of restricted shares

389,061

—

—

—

—

—

—

—

Cash distributions

—

—

—

—

—

(1,728)

—

(1,728)

Net loss

—

—

—

—

—

(3,644)

—

(3,644)

Stockholders’ equity, June 30, 2019

23,339,327

$ 227

5,553,696

$ 56

$ 246,332

$ 3,620

$ (34,006)

$ 216,229

Distributions per share

$ 0.065

$ 0.065

Class A

Class B

Common Stock

Common Stock

Additional

Paid-In

Accumulated

Treasury

Shares

Amount

Shares

Amount

Capital

Earnings

Stock

Total

Stockholders’ equity, December 31, 2017

22,932,451

$ 227

5,553,696

$ 56

$ 244,634

$ 20,370

$ (34,006)

$ 231,281

Stock-based compensation

—

—

—

—

46

—

—

46

Options exercised

8,125

—

—

—

19

—

—

19

Cash distributions

—

—

—

—

—

(1,701)

—

(1,701)

Net income

—

—

—

—

—

828

—

828

Stockholders’ equity, March 31, 2018

22,940,576

$ 227

5,553,696

$ 56

$ 244,699

$ 19,497

$ (34,006)

$ 230,473

Distributions per share

$ 0.065

$ 0.065

Stockholders’ equity, March 31, 2018

22,940,576

$ 227

5,553,696

$ 56

$ 244,699

$ 19,497

$ (34,006)

$ 230,473

Stock-based compensation

—

—

—

—

126

—

—

126

Options exercised

625

—

—

—

2

—

—

2

Cash distributions

—

—

—

—

—

(1,701)

—

(1,701)

Net (loss)

—

—

—

—

—

(2,167)

—

(2,167)

Stockholders’ equity, June 30, 2018

22,941,201

$ 227

5,553,696

$ 56

$ 244,827

$ 15,629

$ (34,006)

$ 226,733

Distributions per share

$ 0.065

$ 0.065

Salem Media Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

Six Months Ended

June 30,

2018

2019

OPERATING ACTIVITIES

Net loss

$

(1,339

)

$

(3,322

)

Adjustments to reconcile net income to net cash provided by operating activities:

Non-cash stock-based compensation

172

1,112

Depreciation and amortization

8,998

8,205

Amortization of deferred financing costs

587

513

Non-cash lease expense

—

4,448

Accretion of acquisition-related deferred payments and contingent consideration

18

2

Provision for bad debts

796

737

Deferred income taxes

(812

)

(546

)

Change in the estimated fair value of contingent earn-out consideration

72

—

Gain on early retirement of long-term debt

(234

)

(426

)

Net (gain) loss on the disposition of assets

5,159

3,667

Changes in operating assets and liabilities:

Accounts receivable and unbilled revenue

(1,099

)

3

Inventories

(223

)

(353

)

Prepaid expenses and other current assets

(383

)

1,078

Accounts payable and accrued expenses

488

(459

)

Deferred rent expense

(120

)

—

Operating lease liabilities

—

(5,765

)

Contract liabilities

(1,970

)

(1,081

)

Deferred rent income

(46

)

(84

)

Other liabilities

(13

)

—

Income taxes payable

20

32

Net cash provided by operating activities

10,071

7,761

INVESTING ACTIVITIES

Cash paid for capital expenditures net of tenant improvement allowances

(4,680

)

(4,697

)

Capital expenditures reimbursable under tenant improvement allowances and trade agreements

(7

)

—

Escrow deposits paid related to acquisitions

(185

)

—

Escrow deposits received related to radio station sale

2,045

—

Purchases of broadcast assets and radio stations

(1,100

)

—

Purchases of digital media businesses and assets

(70

)

(650

)

Proceeds from sale of assets

1,791

2,872

Other

(399

)

(728

)

Net cash used in investing activities

(2,605

)

(3,203

)

FINANCING ACTIVITIES

Payments to repurchase 6.75% Senior Secured Notes

(9,550

)

(6,123

)

Proceeds from borrowings under ABL Facility

69,277

54,295

Payments on ABL Facility

(66,374

)

(51,539

)

Refund (payments) of debt issuance costs

21

(30

)

Proceeds from the exercise of stock options

21

—

Payments of deferred installments due from acquisition activity

(15

)

—

Payments on financing lease liabilities

(59

)

(43

)

Payment of cash distribution on common stock

(3,402

)

(3,430

)

Book overdraft

2,621

2,204

Net cash used in financing activities

(7,460

)

(4,666

)

Net increase (decrease) in cash and cash equivalents

6

(108

)

Cash and cash equivalents at beginning of year

3

117

Cash and cash equivalents at end of period

$

9

$

9

See accompanying notes

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2019

2018

2019

(Unaudited)

Reconciliation of Total Operating Expenses to Operating Expenses excluding Gains or Losses on the Disposition of Assets, Stock-based Compensation Expense, Changes in the Estimated Fair Value of Contingent Earn-out Consideration and Depreciation and Amortization Expense (Recurring Operating Expenses)

Operating Expenses

$

64,929

$

59,079

$

123,053

$

120,532

Less depreciation and amortization expense

(4,511

)

(3,976

)

(8,998

)

(8,205

)

Less change in estimated fair value of contingent earn-out

consideration

(72

)

—

(72

)

—

Less net gain (loss) on the disposition of assets

(5,154

)

357

(5,159

)

(3,667

)

Less stock-based compensation expense

(126

)

(936

)

(172

)

(1,112

)

Total Recurring Operating Expenses

$

55,066

$

54,524

$

108,652

$

107,548

Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue

Net broadcast revenue

$

50,563

$

49,082

$

98,613

$

95,175

Net broadcast revenue – acquisitions

(85

)

(73

)

(247

)

(246

)

Net broadcast revenue – dispositions

(577

)

(24

)

(1,233

)

(49

)

Net broadcast revenue – format change

(68

)

(90

)

(456

)

(509

)

Same Station net broadcast revenue

$

49,833

$

48,895

$

96,677

$

94,371

Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses

Broadcast operating expenses

$

37,243

$

37,707

$

72,993

$

74,156

Broadcast operating expenses – acquisitions

(100

)

(98

)

(371

)

(367

)

Broadcast operating expenses – dispositions

(585

)

(43

)

(1,341

)

(37

)

Broadcast operating expenses – format change

(93

)

(195

)

(740

)

(777

)

Same Station broadcast operating expenses

$

36,465

$

37,371

$

70,541

$

72,975

Reconciliation of SOI to Same Station SOI

Station Operating Income

$

13,320

$

11,375

$

25,620

$

21,019

Station operating loss – acquisitions

15

25

124

121

Station operating (income) loss – dispositions

8

19

108

(12

)

Station operating loss – format change

25

105

284

268

Same Station - Station Operating Income

$

13,368

$

11,524

$

26,136

$

21,396

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2019

2018

2019

(Unaudited)

Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Loss

Net broadcast revenue

$

50,563

$

49,082

$

98,613

$

95,175

Less broadcast operating expenses

(37,243

)

(37,707

)

(72,993

)

(74,156

)

Station Operating Income

$

13,320

$

11,375

$

25,620

$

21,019

Net digital media revenue

$

10,260

$

9,960

$

20,654

$

20,200

Less digital media operating expenses

(8,397

)

(7,648

)

(16,771

)

(15,706

)

Digital Media Operating Income

$

1,863

$

2,312

$

3,883

$

4,494

Net publishing revenue

$

5,449

$

5,638

$

10,800

$

9,774

Less publishing operating expenses

(5,522

)

(5,773

)

(11,109

)

(10,595

)

Publishing Operating Loss

$

(73

)

$

(135

)

$

(309

)

$

(821

)

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 Income, 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.

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2019

2018

2019

(Unaudited)

Net loss

$

(2,167)

$

(3,644)

$

(1,339)

$

(3,322)

Plus interest expense, net of capitalized

interest

4,754

4,371

9,272

8,796

Plus provision for (benefit from)

income taxes

(1,098)

4,892

(696)

(411)

Plus depreciation and amortization

4,511

3,976

8,998

8,205

Less interest income

—

—

(2)

(1)

EBITDA

$

6,000

$

9,595

$

16,233

$

13,267

The company defines Adjusted EBITDA (1) as EBITDA (1) before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before changes in the fair value of interest rate swap, 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 Income, 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.

Three Months Ended

June 30,

Six Months Ended

June 30,

2018

2019

2018

2019

(Unaudited)

Net loss

$

(2,167)

$

(3,644)

$

(1,339)

$

(3,322)

Plus interest expense, net of capitalized interest

4,754

4,371

9,272

8,796

Plus provision for (benefit from) income taxes

(1,098)

4,892

(696)

(411)

Plus depreciation and amortization

4,511

3,976

8,998

8,205

Less interest income

—

—

(2)

(1)

EBITDA

$

6,000

$

9,595

$

16,233

$

13,267

Less net (gain) loss on the disposition of assets

5,154

(357)

5,159

3,667

Less change in the estimated fair value of contingent

earn-out consideration

72

—

72

—

Plus (gain) on early retirement of long- term

debt

(234)

—

(234)

(426)

Plus net miscellaneous (income) and expenses

88

(18)

13

(19)

Plus non-cash stock-based compensation

126

936

172

1,112

Plus ASC 842 lease adoption

—

—

—

171

Adjusted EBITDA

$

11,206

$

10,156

$

21,415

$

17,772

The company defines Adjusted Free Cash Flow (1) as Adjusted EBITDA (1) less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. The company considers Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. A limitation of Adjusted Free Cash Flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. The company uses Adjusted Free Cash Flow, a non-GAAP liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The company’s presentation of Adjusted Free Cash Flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Adjusted Free Cash Flow is not necessarily comparable to similarly titled measures reported by other companies.

The table below presents a reconciliation of Adjusted Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP measure. Adjusted Free Cash Flow is a non-GAAP liquidity measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2018

2019

2018

2019

(Unaudited)

Net cash provided (used) by operating activities

$

(2,802)

$

(1,206)

$

10,071

$

7,761

Non-cash stock-based compensation

(126)

(936)

(172)

(1,112)

Depreciation and amortization

(4,511)

(3,976)

(8,998)

(8,205)

Amortization of deferred financing costs

(317)

(255)

(587)

(513)

Non-cash lease expense

—

(2,181)

—

(4,448)

Accretion of acquisition-related deferred payments and

contingent earn-out consideration

(2)

(1)

(18)

(2)

Provision for bad debts

(650)

(417)

(796)

(737)

Deferred income taxes

1,194

(4,758)

812

546

Change in the estimated fair value of contingent earn-out

consideration

(72)

—

(72)

—

Net gain (loss) on the disposition of assets

(5,154)

357

(5,159)

(3,667)

Gain on early retirement of long-term debt

234

—

234

426

Changes in operating assets and liabilities:

Accounts receivable and unbilled revenue

2,275

1,755

1,099

(3)

Inventories

145

97

223

353

Prepaid expenses and other current assets

314

309

383

(1,078)

Accounts payable and accrued expenses

6,141

3,908

(488)

459

Contract liabilities

1,032

1,214

1,970

1,081

Operating lease liabilities (deferred rent)

1

2,307

120

5,765

Deferred rent revenue

23

41

46

84

Other liabilities

13

—

13

—

Income taxes payable

95

98

(20)

(32)

Net loss

$

(2,167)

$

(3,644)

$

(1,339)

$

(3,322)

Plus interest expense, net of capitalized interest

4,754

4,371

9,272

8,796

Plus provision for (benefit from) income taxes

(1,098)

4,892

(696)

(411)

Plus depreciation and amortization

4,511

3,976

8,998

8,205

Less interest income

—

—

(2)

(1)

EBITDA

$

6,000

$

9,595

$

16,233

$

13,267

Plus net (gain) loss on the disposition of assets

5,154

(357)

5,159

3,667

Plus change in the estimated fair value of contingent earn-out

consideration

72

—

72

—

Plus (gain) on the early retirement of long-term debt

(234)

—

(234)

(426)

Plus net miscellaneous (income) and expenses

88

(18)

13

(19)

Plus non-cash stock-based compensation

126

936

172

1,112

Plus ASC 842 lease adoption

—

—

—

171

Adjusted EBITDA

$

11,206

$

10,156

$

21,415

$

17,772

Less net cash paid for capital expenditures (1)

(2,208)

(2,293)

(4,680)

(4,697)

Less cash paid for taxes

(190)

(233)

(95)

(103)

Less cash paid for interest, net of capitalized interest

(8,600)

(8,014)

(8,650)

(8,317)

Adjusted Free Cash Flow

$

208

$

(384)

$

7,990

$

4,655

(1) Net cash paid for capital expenditures reflects actual cash payments net of cash reimbursements under tenant improvement allowances and net of property and equipment acquired in trade transactions.

Selected Debt Data

Applicable
Interest Rate

Outstanding at
June 30, 2019

Senior Secured Notes due 2024 (1)

$

231,900,000

6.75%

Asset-based revolving credit facility (2)

22,415,735

4.47%

(1) $231.9 million notes with semi-annual interest payments at an annual rate of 6.75%.

(2) Outstanding borrowings under the ABL Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per annum or prime rate plus 0.5% to 1.0% per annum.

Evan D. Masyr

Executive Vice President and Chief Financial Officer

(805) 384-4512

[email protected]

Source: Salem Media Group, Inc.

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