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Salem Media Group, Inc. Announces Fourth Quarter 2019 Total Revenue of $64.6 Million

March 12, 2020 4:05 PM

CAMARILLO, Calif.--(BUSINESS WIRE)-- Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and twelve months ended December 31, 2019.

Fourth Quarter 2019 Results

For the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018:

Consolidated

Broadcast

Digital Media

Publishing

Included in the results for the quarter ended December 31, 2019 are:

Included in the results for the quarter ended December 31, 2018 are:

Per share numbers are calculated based on 26,683,363 diluted weighted average shares for the quarter ended December 31, 2019, and 26,186,112 diluted weighted average shares for the quarter ended December 31, 2018.

Year to Date 2019 Results

For the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018:

Consolidated

Broadcast

Digital media

Publishing

Included in the results for the twelve months ended December 31, 2019 are:

Included in the results for the twelve months ended December 31, 2018 are:

Per share numbers are calculated based on 26,502,934 diluted weighted average shares for the twelve months ended December 31, 2019, and 26,179,702 diluted weighted average shares for the twelve months ended December 31, 2018.

Balance Sheet

As of December 31, 2019, the company had $219.8 million outstanding on the 6.75% senior secured notes due 2024 (the “Notes”) and $12.4 million outstanding on the Asset Based Revolving Credit Facility (“ABL Facility”).

Acquisitions and Divestitures

The following transactions were completed since October 1, 2019:

Pending transactions:

Conference Call Information

Salem will host a teleconference to discuss its results on March 12, 2020 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 Fourth 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 March 26, 2020 and can be heard by dialing (877) 660-6853, passcode 13697766 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.

Follow us on Twitter @SalemMediaGrp.

First Quarter 2020 Outlook

For the first quarter of 2020, the company is projecting total revenue to be between flat and a decrease of 2% from first quarter 2019 total revenue of $60.5 million. Excluding the impact of recent acquisitions and dispositions, the company is projecting total revenue to be between flat and an increase of 2%. The company is also projecting operating expenses before gains or losses on 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 an increase of 3% compared to the first quarter of 2019 non-GAAP operating expenses of $53.0 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 Income (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 Income (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 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 Income (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 Income (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 Income (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

Twelve Months Ended

December 31,

December 31,

2018

2019

2018

2019

(Unaudited)

Net broadcast revenue

$

51,077

$

50,485

$

198,502

$

193,339

Net digital media revenue

11,544

9,816

42,595

39,165

Net publishing revenue

4,567

4,332

21,686

21,394

Total revenue

67,188

64,633

262,783

253,898

Operating expenses:

Broadcast operating expenses

38,463

37,973

148,614

149,439

Digital media operating expenses

8,504

7,813

33,296

30,801

Publishing operating expenses

5,077

5,236

22,396

22,348

Unallocated corporate expenses

3,748

3,554

15,686

15,940

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

4

(1

)

76

(41

)

Impairment of indefinite-lived long-term assets other than goodwill

2,870

1,010

2,870

2,925

Impairment of goodwill

—

2,427

—

2,427

Depreciation and amortization

4,592

3,838

18,226

15,934

Net (gain) loss on the disposition of assets

253

1,114

4,653

22,326

Total operating expenses

63,511

62,964

245,817

262,099

Operating income (loss)

3,677

1,669

16,966

(8,201

)

Other income (expense):

Interest income

1

1

5

2

Interest expense

(4,549

)

(4,290

)

(18,328

)

(17,496

)

Gain on early retirement of long-term debt

414

1,244

648

1,670

Net miscellaneous income and (expenses)

2

144

(10

)

163

Net loss before income taxes

(455

)

(1,232

)

(719

)

(23,862

)

Provision for income taxes

2,605

3,280

2,473

3,977

Net loss

$

(3,060

)

$

(4,512

)

$

(3,192

)

$

(27,839

)

Basic loss per share Class A and Class B common stock

$

(0.12

)

$

(0.17

)

$

(0.12

)

$

(1.05

)

Diluted loss per share Class A and Class B common stock

$

(0.12

)

$

(0.17

)

$

(0.12

)

$

(1.05

)

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

26,186,112

26,683,363

26,179,702

26,502,934

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

26,186,112

26,683,363

26,179,702

26,502,934

Salem Media Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

December 31, 2018

December 31, 2019

(Unaudited)

Assets

Cash

$

117

$

6

Trade accounts receivable, net

33,020

30,824

Other current assets

10,500

10,893

Property and equipment, net

96,344

87,673

Operating and financing lease right-of-use assets

164

54,730

Intangible assets, net

414,646

369,216

Deferred financing costs

381

224

Other assets

3,856

4,864

Total assets

$

559,028

$

558,430

Liabilities and Stockholders’ Equity

Current liabilities

$

52,878

$

53,134

Long-term debt

234,030

216,468

Operating and financing lease liabilities, less current portion

105

54,174

Deferred income taxes

35,272

38,778

Other liabilities

14,874

6,213

Stockholders’ Equity

221,869

189,663

Total liabilities and stockholders’ equity

$

559,028

$

558,430

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 (Deficit)

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 income

—

—

—

—

—

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

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

Stock-based compensation

—

—

—

—

177

—

—

177

Options exercised

—

—

—

—

—

—

—

—

Lapse of restricted shares

41,323

—

—

—

—

—

—

—

Cash distributions

—

—

—

—

—

(1,730

)

—

(1,730

)

Net loss

—

—

—

—

—

(20,005

)

—

(20,005

)

Stockholders’ equity, September 30, 2019

23,380,650

$

227

5,553,696

$

56

$

246,509

$

(18,115

)

$

(34,006

)

$

194,671

Distributions per share

$

0.065

$

0.065

Stock-based compensation

—

—

—

—

171

—

—

171

Options exercised

—

—

—

—

—

—

—

—

Lapse of restricted shares

66,667

—

—

—

—

—

—

—

Cash distributions

—

—

—

—

—

(667

)

—

(667

)

Net loss

—

—

—

—

—

(4,512

)

—

(4,512

)

Stockholders’ equity, December 31, 2019

23,447,317

$

227

5,553,696

$

56

$

246,680

$

(23,294

)

$

(34,006

)

$

189,663

Distributions per share

$

0.025

$

0.025

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONT’D)

(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, 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

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

Stock-based compensation

—

—

—

—

191

—

—

191

Options exercised

8,865

—

—

—

22

—

—

22

Cash distributions

—

—

—

—

—

(1,702

)

—

(1,702

)

Net income

—

—

—

—

—

1,207

—

1,207

Stockholders’ equity,

September 30, 2018

22,950,066

$

227

5,553,696

$

56

$

245,040

$

15,134

$

(34,006

)

$

226,451

Distributions per share

$

0.065

$

0.065

Stock-based compensation

—

—

—

—

180

—

—

180

Options exercised

—

—

—

—

—

—

—

—

Cash distributions

—

—

—

—

—

(1,702

)

—

(1,702

)

Net loss

—

—

—

—

—

(3,060

)

—

(3,060

)

Stockholders’ equity,

December 31, 2018

22,950,066

$

227

5,553,696

$

56

$

245,220

$

10,372

$

(34,006

)

$

221,869

Distributions per share

$

0.065

$

0.065

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2018

2019

2018

2019

OPERATING ACTIVITIES

Net loss

$

(3,060

)

$

(4,512

)

$

(3,192

)

$

(27,839

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Non-cash stock-based compensation

180

171

543

1,460

Depreciation and amortization

4,592

3,838

18,226

15,934

Amortization of deferred financing costs

259

294

1,114

1,060

Non-cash lease expense

—

2,291

—

9,026

Accretion of acquisition-related deferred payments and contingent consideration

—

3

24

5

Provision for bad debts

600

659

2,098

2,066

Deferred income taxes

2,492

3,019

2,191

3,506

Impairment of indefinite-lived long-term assets other than goodwill

2,870

1,010

2,870

2,925

Impairment of goodwill

—

2,427

—

2,427

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

4

(1

)

76

(41

)

Net (gain) loss on the disposition of assets

253

1,114

4,653

22,326

Gain on early retirement of long-term debt

(414

)

(1,244

)

(648

)

(1,670

)

Changes in operating assets and liabilities:

Accounts receivable and unbilled revenue

1,015

1,768

(2,814

)

(595

)

Inventories

214

(68

)

53

(440

)

Prepaid expenses and other current assets

868

279

308

617

Accounts payable and accrued expenses

(6,193

)

(6,513

)

1,031

(2,009

)

Deferred rent expense

83

—

(152

)

—

Operating lease liabilities

—

(2,129

)

—

(10,112

)

Contract liabilities

(985

)

53

(3,365

)

(1,657

)

Deferred rent income

(66

)

(79

)

(135

)

(209

)

Other liabilities

25

(18

)

(15

)

(34

)

Income taxes payable

26

177

95

264

Net cash provided by operating activities

$

2,763

$

2,539

$

22,961

$

17,010

INVESTING ACTIVITIES

Cash paid for capital expenditures net of tenant improvement allowances

(2,754

)

(1,693

)

(9,267

)

(7,757

)

Capital expenditures reimbursable under tenant improvement allowances and trade agreements

—

(25

)

(77

)

(28

)

Purchases of broadcast assets and radio stations

—

—

(6,534

)

(35

)

Purchases of digital media businesses and assets

—

—

(4,320

)

(1,250

)

Proceeds from sale of assets

1,376

16,539

9,894

20,741

Other

(22

)

(13

)

(420

)

(738

)

Net cash provided by (used in) investing activities

$

(1,400

)

$

14,808

$

(10,724

)

$

10,933

FINANCING ACTIVITIES

Payments to repurchase 6.75% Senior Secured Notes

(5,893

)

(10,628

)

(15,443

)

(16,751

)

Proceeds from borrowings under ABL Facility

42,313

25,423

153,650

111,790

Payments on ABL Facility

(32,853

)

(31,062

)

(142,990

)

(119,024

)

Refund (payments) of debt issuance costs

(39

)

(1

)

(50

)

(44

)

Proceeds from the exercise of stock options

—

—

43

—

Payments of acquisition-related contingent earn-out consideration

—

—

(140

)

—

Payments on financing lease liabilities

(12

)

(18

)

(85

)

(83

)

Payment of cash distribution on common stock

(1,702

)

(667

)

(6,806

)

(5,827

)

Book overdraft

(3,077

)

(395

)

(302

)

1,885

Net cash used in financing activities

$

(1,263

)

$

(17,348

)

$

(12,123

)

$

(28,054

)

Net increase (decrease) in cash and cash equivalents

$

100

$

(1

)

$

114

$

(111

)

Cash and cash equivalents at beginning of year

17

7

3

117

Cash and cash equivalents at end of period

$

117

$

6

$

117

$

6

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

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, Impairments and Depreciation and Amortization Expense (Recurring Operating Expenses)

Operating Expenses

$

63,511

$

62,964

$

245,817

$

262,099

Less depreciation and amortization expense

(4,592

)

(3,838

)

(18,226

)

(15,934

)

Less change in estimated fair value of contingent earn-out

consideration

(4

)

1

(76

)

41

Less impairment of indefinite-lived long-term assets other

than goodwill

(2,870

)

(1,010

)

(2,870

)

(2,925

)

Less impairment of goodwill

—

(2,427

)

—

(2,427

)

Less net gain (loss) on the disposition of assets

(253

)

(1,114

)

(4,653

)

(22,326

)

Less stock-based compensation expense

(180

)

(171

)

(543

)

(1,460

)

Total Recurring Operating Expenses

$

55,612

$

54,405

$

219,449

$

217,068

Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue

Net broadcast revenue

$

51,077

$

50,485

$

198,502

$

193,339

Net broadcast revenue – acquisitions

—

—

(257

)

(274

)

Net broadcast revenue – dispositions

(1,608

)

(125

)

(3,943

)

(731

)

Net broadcast revenue – format change

(654

)

(983

)

(1,653

)

(2,085

)

Same Station net broadcast revenue

$

48,815

$

49,377

$

192,649

$

190,249

Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses

Broadcast operating expenses

$

38,463

$

37,973

$

148,614

$

149,439

Broadcast operating expenses – acquisitions

—

(1

)

(382

)

(399

)

Broadcast operating expenses – dispositions

(1,920

)

(330

)

(4,640

)

(1,129

)

Broadcast operating expenses – format change

(601

)

(1,071

)

(1,932

)

(2,483

)

Same Station broadcast operating expenses

$

35,942

$

36,571

$

141,660

$

145,428

Reconciliation of SOI to Same Station SOI

Station Operating Income

$

12,614

$

12,512

$

49,888

$

43,900

Station operating loss – acquisitions

—

1

125

125

Station operating loss – dispositions

312

205

697

398

Station operating (income) loss – format change

(53

)

88

279

398

Same Station - Station Operating Income

$

12,873

$

12,806

$

50,989

$

44,821

Salem Media Group, Inc.

Supplemental Information

(in thousands)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2018

2019

2018

2019

(Unaudited)

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

Net broadcast revenue

$

51,077

$

50,485

$

198,502

$

193,339

Less broadcast operating expenses

(38,463

)

(37,973

)

(148,614

)

(149,439

)

Station Operating Income

$

12,614

$

12,512

$

49,888

$

43,900

Net digital media revenue

$

11,544

$

9,816

$

42,595

$

39,165

Less digital media operating expenses

(8,504

)

(7,813

)

(33,296

)

(30,801

)

Digital Media Operating Income

$

3,040

$

2,003

$

9,299

$

8,364

Net publishing revenue

$

4,567

$

4,332

$

21,686

$

21,394

Less publishing operating expenses

(5,077

)

(5,236

)

(22,396

)

(22,348

)

Publishing Operating Loss

$

(510

)

$

(904

)

$

(710

)

$

(954

)

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 (Loss), 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. 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 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 (Loss), 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
December 31,

Twelve Months Ended
December 31,

2018

2019

2018

2019

(Unaudited)

Net loss

$

(3,060

)

$

(4,512

)

$

(3,192

)

$

(27,839

)

Plus interest expense, net of capitalized interest

4,549

4,290

18,328

17,496

Plus provision for income taxes

2,605

3,280

2,473

3,977

Plus depreciation and amortization

4,592

3,838

18,226

15,934

Less interest income

(1

)

(1

)

(5

)

(2

)

EBITDA

$

8,685

$

6,895

$

35,830

$

9,566

Less net (gain) loss on the disposition of assets

253

1,114

4,653

22,326

Less change in the estimated fair value of contingent

earn-out consideration

4

(1

)

76

(41

)

Plus impairment of indefinite-lived long-term assets

other than goodwill

2,870

1,010

2,870

2,925

Plus impairment of goodwill

—

2,427

—

2,427

Plus (gain) on early retirement of long- term

debt

(414

)

(1,244

)

(648

)

(1,670

)

Plus net miscellaneous (income) and expenses

(2

)

(144

)

10

(163

)

Plus non-cash stock-based compensation

180

171

543

1,460

Plus ASC 842 lease adoption

—

—

—

171

Adjusted EBITDA

$

11,576

$

10,228

$

43,334

$

37,001

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

Twelve Months Ended

December 31,

December 31,

2018

2019

2018

2019

(Unaudited)

Net cash provided (used) by operating activities

$

2,763

$

2,539

$

22,961

$

17,010

Non-cash stock-based compensation

(180

)

(171

)

(543

)

(1,460

)

Depreciation and amortization

(4,592

)

(3,838

)

(18,226

)

(15,934

)

Amortization of deferred financing costs

(259

)

(294

)

(1,114

)

(1,060

)

Non-cash lease expense

—

(2,291

)

—

(9,026

)

Accretion of acquisition-related deferred payments and

contingent earn-out consideration

—

(3

)

(24

)

(5

)

Provision for bad debts

(600

)

(659

)

(2,098

)

(2,066

)

Deferred income taxes

(2,492

)

(3,019

)

(2,191

)

(3,506

)

Change in the estimated fair value of contingent earn-out

consideration

(4

)

1

(76

)

41

Impairment of indefinite-lived long-term assets other than

goodwill

(2,870

)

(1,010

)

(2,870

)

(2,925

)

Impairment of goodwill

—

(2,427

)

—

(2,427

)

Gain (loss) on the disposition of assets

(253

)

(1,114

)

(4,653

)

(22,326

)

Gain (loss) on early retirement of debt

414

1,244

648

1,670

Changes in operating assets and liabilities:

Accounts receivable and unbilled revenue

(1,015

)

(1,768

)

2,814

595

Inventories

(214

)

68

(53

)

440

Prepaid expenses and other current assets

(868

)

(279

)

(308

)

(617

)

Accounts payable and accrued expenses

6,193

6,513

(1,031

)

2,009

Contract liabilities

985

(53

)

3,365

1,657

Operating lease liabilities (deferred rent)

(83

)

2,129

152

10,112

Deferred rent income

66

79

135

209

Other liabilities

(25

)

18

15

34

Income taxes payable

(26

)

(177

)

(95

)

(264

)

Net loss

$

(3,060

)

$

(4,512

)

$

(3,192

)

$

(27,839

)

Plus interest expense, net of capitalized interest

4,549

4,290

18,328

17,496

Plus provision for income taxes

2,605

3,280

2,473

3,977

Plus depreciation and amortization

4,592

3,838

18,226

15,934

Less interest income

(1

)

(1

)

(5

)

(2

)

EBITDA

$

8,685

$

6,895

$

35,830

$

9,566

Plus (gain) loss on the disposition of assets

253

1,114

4,653

22,326

Plus change in the estimated fair value of contingent earn-

out consideration

4

(1

)

76

(41

)

Plus impairment of indefinite-lived long-term assets other

than goodwill

2,870

1,010

2,870

2,925

Plus impairment of goodwill

—

2,427

—

2,427

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

(414

)

(1,244

)

(648

)

(1,670

)

Plus net miscellaneous (income) and expenses

(2

)

(144

)

10

(163

)

Plus non-cash stock-based compensation

180

171

543

1,460

Plus ASC 842 lease adoption

—

—

—

171

Adjusted EBITDA

$

11,576

$

10,228

$

43,334

$

37,001

Less net cash paid for capital expenditures (1)

(2,754

)

(1,693

)

(9,267

)

(7,757

)

Plus cash (paid) received for taxes

(87

)

(85

)

(186

)

(207

)

Less cash paid for interest, net of capitalized interest

(8,437

)

(7,964

)

(17,231

)

(16,539

)

Adjusted Free Cash Flow

$

298

$

486

$

16,650

$

12,498

(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

Outstanding at
December 31, 2019

Applicable
Interest Rate

Senior Secured Notes due 2024 (1)

$

219,836,000

6.75

%

Asset-based revolving credit facility (2)

12,426,024

3.98

%

(1)

$219.8 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.

Company Contact:

Evan D. Masyr

Executive Vice President and Chief

Financial Officer

(805) 384-4512

[email protected]

Source: Salem Media Group, Inc.

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