What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-09 · 85 added, 66 removed, 204 unchanged (43% of the section changed)

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This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the radio broadcasting industry, the economy, and the Company.

Words such as “anticipates,” “believes,” “expects,” “intends,” “is likely,” “plans,” “projects,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

Words such as “anticipates,” “believes,” “can,” “could,” “endeavors” “expects,” “intends,” “is likely,” “may,” “plans,” “projects,” “seeks,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence.

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terrorist attacks;

the war in Ukraine, the effects of widespread outbreak of illness or disease, inflation;

the wars in Ukraine and Middle East, the effects of widespread outbreak of illness or disease, inflation;

increased energy costs;

21 unchanged sentences

We own or operate broadcast properties in 27 markets, including 79 FM and 33 AM radio stations and 80 metro signals.

We anticipate our corporate general and administrative expense to decrease from 2022 significantly because of approximately $3.8 million in expenses incurred related to the passing of our CEO, Edward Christian and payments required as a result of his death.

This reduction will be offset, however, by an increase in directors’ fees of $312,000 and by investments we anticipate making in corporate personnel, and sales and training initiatives.

We anticipate our corporate general and administrative expense to decrease from 2022 significantly because of approximately $3.8 million in expenses incurred related to the passing of our former CEO, Edward Christian and payments required as a result of his death.

This reduction will be partially offset, however, by an increase in directors’ fees of $312,000 and by investments we have made in additional corporate personnel directly attributable to sales and training initiatives.

Radio Stations

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The majority of our revenue is generated from local advertising, which is sold primarily by each radio market’s sales staff.

For the six months ended June 30, 2023 and 2022, approximately 89% and 90%, respectively, of our radio stations’ gross revenue was from local advertising.

For the nine months ended September 30, 2023 and 2022, approximately 90% and 90%, respectively, of our radio stations’ gross revenue was from local advertising.

To generate national advertising sales, we engage independent advertising sales representative firms that specialize in national sales for each of our broadcast markets.

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Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year.

Furthermore, we expect political revenue in 2023 to decrease from 2022 levels as a result of less elections at the national, state and local levels.

Furthermore, we expect political revenue in 2023 to decrease from 2022 levels as a result of fewer elections at the national, state and local levels.

Our net operating revenue, station operating expense and operating income varies from market to market based upon each market’s rank or size which is based upon population and the available radio advertising revenue in that particular market.

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We believe that the diversification of formats on our radio stations helps to insulate us from the effects of changes in musical tastes of the public on any particular format.

The primary operating expenses involved in owning and operating radio stations are employee salaries, sales commissions, programming expenses, depreciation, and advertising and promotion expenses.

The primary operating expenses involved in owning and operating radio stations are employee salaries, sales commissions, sales survey and ratings expenses, health insurance expense, programming expenses including music licensing fees, depreciation, and advertising and promotion expenses.

The radio broadcasting industry is subject to rapid technological change, evolving industry standards and the emergence of new media technologies and services.

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Our goal is to allow our listeners to connect with our brands on demand, wherever, however and whenever they choose.

We continue to create and expand opportunities through targeted digital advertising, online community news, entertainment and events and an array of digital services that include online promotions, mobile messaging, and email marketing.

During the six months ended June 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, our Columbus, Ohio;

We continue to create and expand opportunities for revenue generation through targeted digital advertising, online community news, entertainment and events and an array of digital services that include online promotions, mobile messaging, and email marketing.

During the nine months ended September 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, our Columbus, Ohio;

Des Moines, Iowa;

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Net Operating Revenue

the Six Months Ended

the Nine Months Ended

for the Years Ended

September 30,

Columbus, Ohio

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Portland, Maine

During the six months ended June 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, the radio stations in our five largest markets, when combined, represented approximately 39%, 43%, 44% and 43%, respectively, of our consolidated station operating income.

During the nine months ended September 30, 2023 and 2022 and the years ended December 31, 2022 and 2021, the radio stations in our five largest markets, when combined, represented approximately 40%, 44%, 44% and 43%, respectively, of our consolidated station operating income.

The following table describes the percentage of our consolidated station operating income represented by each of these markets:

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Station Operating Income(*)

for the Six Months Ended

for the Nine Months Ended

for the Years Ended

September 30,

Columbus, Ohio

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Operating income adjusted for corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets.

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Results of Operations

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022.

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022.

Consolidated Results of Operations

Three Months Ended

September 30,

(In thousands, except percentages and per share information)

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Income tax provision

Net income (loss)

Earnings per share (diluted)

N/M = Not Meaningful

For the three months ended June 30, 2023, consolidated net operating revenue was $29,175,000 compared with $29,821,000 for the three months ended June 30, 2022, a decrease of $646,000 or 2.2%.

We had decreases in gross political revenue of $679,000, gross local revenue of $679,000 and gross barter revenue of $78,000, partially offset by increases in gross interactive revenue of $362,000, gross national revenue of $290,000 and gross non-spot revenue of $191,000, from the second quarter of 2022.

The gross political revenue decreased due to a decrease in the number of national, state and local elections.

For the three months ended September 30, 2023, consolidated net operating revenue was $29,149,000 compared with $29,980,000 for the three months ended September 30, 2022, a decrease of $831,000 or 2.8%.

We had decreases in gross local revenue of $1,052,000 and gross political revenue of $624,000, partially offset by increases in gross interactive revenue of $696,000 and gross non-spot revenue of $156,000, from the third quarter of 2022.

The decrease in gross local revenues was attributable to decreases at our Charleston, South Carolina;

Clarksville, Tennessee;

Columbus, Ohio;

Ithaca, New York;

Milwaukee, Wisconsin;

Portland, Maine;

Springfield, Illinois markets partially offset by increases at our Bellingham, Washington and Ocala, Florida markets.

The decrease in our gross barter revenue is due to minor decreases at the majority of our markets.

and Portland, Maine markets.

The gross political revenue decreased due to a decrease in the number of national, state and local elections.

The increase in gross interactive revenue is primarily due to an increase in our streaming revenue.

The most significant increases in gross national revenue occurred in our Norfolk, Virginia and Ocala, Florida markets.

The most significant increases in gross non-spot revenue occurred in our Charleston, South Carolina;

Keene, New Hampshire;

Milwaukee, Wisconsin and Yankton, South Dakota markets.

Station operating expense was $22,407,000 for the three months ended June 30, 2023, compared with $21,786,000 for the three months ended June 30, 2022, an increase of $621,000 or 2.9%.

The increase in operating expense was primarily a result of increases in compensation-related expense, building maintenance and repairs, commission expense, utility expenses, sales rating survey expenses, and programming rights expenses, of $433,000, $131,000, $127,000, $78,000, $62,000 and $33,000, respectively, partially offset by a decrease in healthcare costs of $270,000, from the second quarter of 2022.

We had operating income for the three months ended June 30, 2023 of $4,296,000 compared to $5,381,000 for the three months ended June 30, 2022, a decrease of $1,085,000.

The decrease was a result of the decrease in net operating revenue and increase in station operating expense, noted above, partially offset by a decrease in corporate general and administrative expenses of $137,000 and a decrease in other operating (income) expense, net of $45,000.

In the second quarter of 2022, we recorded a loss on the sale of fixed assets of $45,000 compared to no gain or loss on the sale of fixed assets in the second quarter of 2023 in other operating (income) expense, net.

The decrease in corporate general and administrative expenses was primarily comprised of a decrease of $300,000 in compensation-related expense partially offset by an increase of $66,000 in directors’ fees and $90,000 in other consulting fees.

We generated net income of $3,350,000 ($0.55 per share on a fully diluted basis) during the three months ended June 30, 2023, compared to $3,823,000 ($0.63 per share on a fully diluted basis) for the three months ended June 30, 2022, a decrease of $473,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $11,000 partially offset by an increase in interest income of $298,000 and a decrease in income tax expense of $325,000.

The increase in interest expense is due to an increase in interest rates and amortization of bank fees.

The most significant increases in gross non-spot revenue occurred in our Asheville, North Carolina;

Charleston, South Carolina;

Ithaca, New York;

Norfolk, Virginia and Yankton, South Dakota markets.

Station operating expense was $22,760,000 for the three months ended September 30, 2023, compared with $22,295,000 for the three months ended September 30, 2022, an increase of $465,000 or 2.1%.

The increase in operating expense was primarily a result of increases in compensation-related expense, healthcare costs, sales rating survey expenses, utility expenses, building maintenance and repairs, and programming rights expenses, of $331,000, $211,000, $107,000, $87,000, $82,000 and $71,000, respectively, partially offset by a decrease in commission expenses of $360,000, from the third quarter of 2022.

We had operating income for the three months ended September 30, 2023 of $3,492,000 compared to $1,055,000 for the three months ended September 30, 2022, an increase of $2,437,000.

The increase in operating income was the result of a decrease in corporate general and administrative expenses of $3,815,000 partially offset by a decrease in net operating revenue and increase in station operating expense, noted above, and an increase in other operating (income) expense, net of $82,000.

In the third quarter of 2022, we recorded a gain on sale of fixed assets of $37,000 compared to a loss on the sale of fixed assets in the third quarter of 2023 of $45,000 in other operating (income) expense, net.

The decrease in corporate general and administrative expenses was primarily due to the $3.8 million expense recorded in the third quarter of 2022 related to the employment agreement we had with our founder and former CEO, Mr.

Christian, that was required upon his death.

Additionally, we had a decrease of $471,000 in compensation-related expense offset by an increase of $156,000 in travel and seminar related expenses, $150,000 in other legal and consulting fees, $104,000 in directors’ fees, and $43,000 in insurance costs.

We generated net income of $2,729,000 ($0.45 per share on a fully diluted basis) during the three months ended September 30, 2023, compared to a net loss of $104,000 ( ($0.01 ) per share on a fully diluted basis) for the three months ended September 30, 2022, an increase of $2,833,000.

The increase in net income is primarily due to the increase in operating income, described above, an increase in interest income of $257,000 and a decrease in income tax expense of $185,000 partially offset by an increase in interest expense of $12,000 and a decrease in other income of $34,000.

The increase in interest income is related to higher rates of return on money market accounts reflected as cash equivalents and from our short-term investment accounts which began in May 2022.

The decrease in our income tax expense is due to the decrease in income before income tax.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The decrease in our income tax expense is due to the permanent difference between book and taxable income related to the compensation paid to our founder and former CEO as described above and in footnote 8 (Income Taxes).

The increase in interest expense is due to an increase in interest rates and amortization of bank fees.

The decrease in other income is due to minimal other income earned in the third quarter of 2022 versus no other income earned in the third quarter of 2023.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Results of Operations

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022.

Six Months Ended

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022.

Nine Months Ended

September 30,

(In thousands, except percentages and per share information)

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Income tax provision

Net income (loss)

Earnings per share (diluted)

N/M = Not Meaningful

For the six months ended June 30, 2023, consolidated net operating revenue was $54,479,000 compared with $54,788,000 for the six months ended June 30, 2022, a decrease of $309,000 or 0.6%.

We had decreases in gross local revenue of $956,000, and gross political revenue of $606,000, and an increase in agency commissions of $108,000 partially offset by increases in gross interactive revenue of $535,000, gross national revenue of $447,000 and gross non-spot revenue of $435,000, from 2022.

For the nine months ended September 30, 2023, consolidated net operating revenue was $83,628,000 compared with $84,768,000 for the nine months ended September 30, 2022, a decrease of $1,140,000 or 1.3%.

We had decreases in gross local revenue of $2,003,000, gross political revenue of $1,229,000, and gross barter revenue of $92,000 and an increase in agency commissions of $50,000 partially offset by increases in gross interactive revenue of $1,233,000, gross non-spot revenue of $582,000 and gross national revenue of $512,000, from 2022.

The decrease in gross local revenues was attributable to decreases at our Charleston, South Carolina;

Clarksville, Tennessee;

Columbus, Ohio;

Des Moines, Iowa;

Ithaca, New York;

Milwaukee, Wisconsin;

and Springfield, Illinois markets partially offset by increases at our Asheville, North Carolina;

Bellingham, Washington and Charlottesville, Virginia markets.

Portland, Maine and Springfield, Illinois markets partially offset by increases at our Asheville, North Carolina;

Bellingham, Washington;

Charlottesville, Virginia and Harrisonburg, Virginia markets.

The gross political revenue decreased due to a decrease in the number of national, state and local elections.

The increase in agency commissions is due to increases in both our national and local agency revenue.

The decrease in our gross barter revenue is due to minor decreases in the majority of our markets.

The increase in agency commissions is due to increases in our national revenue.

The increase in gross interactive revenue is primarily due to an increase in our streaming revenue.

The most significant increases in gross national revenue occurred in our Charlottesville, Virginia;

The most significant increases in gross national revenue occurred in our Charleston, South Carolina;

Charlottesville, Virginia;

Des Moines, Iowa;

Norfolk, Virginia and Ocala, Florida markets.

The most significant increases in gross non-spot revenue occurred in our Charleston, South Carolina;

Milwaukee, Wisconsin;

Ocala, Florida and Yankton, South Dakota markets.

Station operating expense was $44,110,000 for the six months ended June 30, 2023, compared with $42,354,000 for the six months ended June 30, 2022, an increase of $1,756,000 or 4.1%.

The increase in operating expense was primarily a result of increases in compensation-related expense, utility expenses, sales commission expenses, building maintenance and repairs, programming rights expense, sales rating survey expenses, sales training expenses, music licensing fees and promotional expenses, of $822,000, $166,000, $161,000, $146,000, $113,000, $87,000, $48,000, $47,000 and $46,000, respectively, for the comparable period of 2022.

We had operating income for the six months ended June 30, 2023 of $5,201,000 compared to $7,091,000 for the six months ended June 30, 2022, a decrease of $1,890,000.

The decrease was a result of the decrease in net operating revenue and the increase in station operating expense, as noted above, an increase in other operating (income) expense, net of $40,000 partially offset by a decrease in corporate general and administrative expenses of $215,000.

In 2023, we recorded a loss on the sale of fixed assets of $80,000 compared to a loss on the sale of fixed assets of $40,000 in 2022.

The decrease in corporate general and administrative expenses was primarily comprised of a decrease of $502,000 in compensation-related expense partially offset by an increase of $131,000 in directors’ fees and $195,000 in other consulting fees.

We generated net income of $4,270,000 ($0.70 per share on a fully diluted basis) during the six months ended June 30, 2023, compared to $5,027,000 ($0.83 per share on a fully diluted basis) for the six months ended June 30, 2022 ended, a decrease of $757,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $22,000 partially offset by an increase in interest income of $583,000, an increase in other income of $117,000 and an increase in income tax expense of $455,000.

The increase in interest expense is due to an increase in interest rates and amortization of bank fees.

Norfolk, Virginia;

Ocala, Florida and Springfield, Massachusetts markets.

The most significant increases in gross non-spot revenue occurred in our Asheville, North Carolina;

Bellingham, Washington;

Charleston, South Carolina;

Ithaca, New York and Yankton, South Dakota markets.

Station operating expense was $66,870,000 for the nine months ended September 30, 2023, compared with $64,649,000 for the nine months ended September 30, 2022, an increase of $2,221,000 or 3.4%.

The increase in operating expense was primarily a result of increases in compensation-related expense, utility expenses, building maintenance and repairs, healthcare costs, sales rating survey expenses, programming rights expense, and music licensing fees, of $1,219,000, $274,000, $273,000, $213,000, $194,000, $184,000, and $89,000, respectively, partially offset by commission expenses of $199,000 for the comparable period of 2022.

We had operating income for the nine months ended September 30, 2023 of $8,693,000 compared to $8,146,000 for the nine months ended September 30, 2022, an increase of $547,000.

The increase in operating income was the result of a decrease in corporate general and administrative expenses of $4,030,000 partially offset by a decrease in net operating revenue and increase in station operating expense, noted above, and an increase in other operating (income) expense, net of $122,000.

We recorded a loss on sale of fixed assets of $125,000 in 2023 compared to a loss on the sale of fixed assets in the 2022 of $3,000 in other operating (income) expense, net.

Christian, that was required upon his death.

Additionally, we had a decrease of $1,219,000 in compensation-related expense partially offset by an increase of $345,000 in other consulting fees, $202,000 in directors’ fees, $145,000 in insurance costs and $32,000 in travel and seminar related expenses.

We generated net income of $6,999,000 ($1.15 per share on a fully diluted basis) during the nine months ended September 30, 2023, compared to $4,923,000 ($0.82 per share on a fully diluted basis) for the nine months ended September 30, 2022 ended, an increase of $2,076,000.

The increase in net income is primarily due to the increase in operating income, described above, an increase in interest income of $840,000, an increase in other income of $83,000 and a decrease in income tax expense of $640,000, partially offset by an increase in interest expense of $34,000.

The increase in interest income is related to higher rates of return on money market accounts reflected as cash equivalents and from our short-term investment accounts which began in May 2022.

The increase in other income is due to reimbursements from the FCC related to their spectrum auction of $115,000 described in footnote 13 (Other Income) versus the minimal other income earned in 2022.

The decrease in our income tax expense is due to the decrease in income before income tax.

The increase in interest expense is due to an increase in interest rates and amortization of bank fees.

Liquidity and Capital Resources

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The cumulative transaction fees are being amortized over the remaining life of the Credit Facility.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to SOFR (5.09% at June 30, 2023), plus 1% to 2% or the base rate plus 0% to 1%.

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to SOFR (5.31% at September 30, 2023), plus 1% to 2% or the base rate plus 0% to 1%.

The spread over SOFR and the base rate vary from time to time, depending upon our financial leverage.

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The Credit Facility contains a number of financial covenants (all of which we were in compliance with at June 30, 2023) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.

We had no debt outstanding at December 31, 2022 or June 30, 2023.

We had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at both June 30, 2023 and December 31, 2022.

We had no debt outstanding at December 31, 2022 or September 30, 2023.

We had approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at both September 30, 2023 and December 31, 2022.

Sources and Uses of Cash

During the six months ended June 30, 2023 and 2022, we had net cash flows from operating activities of $6,038,000 and $7,340,000, respectively.

During the nine months ended September 30, 2023 and 2022, we had net cash flows from operating activities of $13,921,000 and $14,362,000, respectively.

We believe that cash flow from operations will be sufficient to meet quarterly debt service requirements for payments of interest and principal under our Credit Facility if we borrow in the future.

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In March 2013, our board of directors authorized an increase to our Stock Buy-Back Program (the “Buy-Back Program”) to allow us to purchase up to $75.8 million of our Class A Common Stock.

From its inception in 1998 through June 30, 2023, we have repurchased 2.2 million shares of our Class A Common Stock for $57.6 million.

During the three and six months ended June 30, 2023, we did not repurchase any shares related to the Buy-Back Program.

From its inception in 1998 through September 30, 2023, we have repurchased 2.2 million shares of our Class A Common Stock for $57.6 million.

During the three and nine months ended September 30, 2023, we did not repurchase any shares related to the Buy-Back Program.

We halted the directions issued for any additional buybacks under our plan in 2020.

We continue to monitor economic conditions to determine if and when it makes sense to make additional buybacks under our plan.

Our capital expenditures, exclusive of acquisitions, for the six months ended June 30, 2023 were $2,637,000 (3,563,000 in 2022).

Our capital expenditures, exclusive of acquisitions, for the nine months ended September 30, 2023 were $3,397,000 ($4,731,000 in 2022).

We anticipate capital expenditures in 2023 to be approximately $4.5 million to $5.0 million, which we expect to finance through funds generated from operations.

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The translators are start-up stations and therefore, have no pro forma revenue and expenses.

On September 27, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share on its Class A Common Stock.

This dividend, totaling approximately $1,500,000 was paid on November 3, 2023 to

shareholders of record on October 11, 2023 and is recorded in dividends payable in our Condensed Consolidated Balance Sheet at September 30, 2023.

On May 9, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share on its Class A Common Stock.

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This dividend, totaling approximately $13,800,000, was paid on January 13, 2023 to shareholders of record on December 21, 2022.

On September 20, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share and a special cash dividend of $2.00 per share on its Classes A Common Stock.

On September 20, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share and a special cash dividend of $2.00 per share on its Class A Common Stock.

This dividend, totaling approximately $13,600,000, was paid on October 21, 2022 to shareholders of record on October 3, 2022.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis