What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-10 · 97 added, 53 removed, 163 unchanged (48% of the section changed)

56 unchanged sentences

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

For the three months ended March 31, 2024 and 2023, approximately 90% and 90%, respectively, of our radio stations’ gross revenue was from local advertising.

For the six months ended June 30, 2024 and 2023, approximately 90% and 89%, 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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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 and related benefit costs, sales commissions, programming expenses, depreciation, and advertising and promotion expenses.

The primary operating expenses involved in owning and operating radio stations are employee salaries and related benefits costs, sales commissions, programming expenses, 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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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 three months ended March 31, 2024 and 2023 and the years ended December 31, 2023 and 2022, our Charleston, South Carolina:

Columbus, Ohio;

During the six months ended June 30, 2024 and 2023 and the years ended December 31, 2023 and 2022, our Columbus, Ohio;

Des Moines, Iowa;

Milwaukee, Wisconsin;

and Norfolk, Virginia markets, when combined, represented approximately 35%, 37%, 37% and 39%, respectively, of our consolidated net operating revenue.

Norfolk, Virginia;

and Portland, Maine markets, when combined, represented approximately 36%, 37%, 37% and 39%, respectively, of our consolidated net operating revenue.

An adverse change in any of these radio markets or our relative market position in those markets could have a significant impact on our operating results as a whole.

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Net Operating Revenue

the Three Months Ended

the Six Months Ended

for the Years Ended

4 unchanged sentences

Norfolk, Virginia

During the three months ended March 31, 2024 and 2023 and the years ended December 31, 2023 and 2022, the radio stations in our five largest markets, when combined, represented approximately 38%, 40%, 40% and 43%, respectively, of our consolidated station operating income.

During the six months ended June 30, 2024 and 2023 and the years ended December 31, 2023 and 2022, the radio stations in our five largest markets, when combined, represented approximately 36%, 39%, 40% 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 Three Months Ended

for the Six Months Ended

for the Years Ended

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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 March 31, 2024 Compared to Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022.

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023.

Consolidated Results of Operations

Three Months Ended

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Other operating expense, net

Operating (loss) income

Operating income

Interest expense

Interest income

Income (loss) before income tax expense

Income tax provision (benefit)

Deferred (benefit)

Net (loss) income

Income before income tax expense

Income tax provision

Earnings (loss) per share (diluted)

N/M = Not Meaningful

For the three months ended March 31, 2024, consolidated net operating revenue was $24,664,000 compared with $25,304,000 for the three months ended March 31, 2023, a decrease of $640,000 or 2.5%.

We had decreases in gross local revenue and non-spot gross revenue of $1,184,000 and $165,000 respectively partially offset by increases in gross interactive revenue and gross political revenue of $573,000 and $118,000, respectively for the comparable period of 2023.

The most significant decreases in gross local revenue were at our Clarksville, Tennessee;

For the three months ended June 30, 2024, consolidated net operating revenue was $28,742,000 compared with $29,175,000 for the three months ended June 30, 2023, a decrease of $433,000 or 1.5%.

We had an increase of approximately $262,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of $695,000 generated by stations we owned or operated for the comparable period in 2023 (“same station”).

The decrease in same station revenue was primarily a result of decreases in gross local revenue of $1,728,000 and gross national revenue of $46,000, partially offset by increases in gross interactive revenue of $803,000 and gross political revenue of $180,000, from the second quarter of 2023.

The decrease in gross local revenues was attributable to decreases at our Bellingham, Washington;

Clarksville, Tennessee;

Columbus, Ohio;

Des Moines, Iowa;

Manchester, New Hampshire;

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Norfolk, Virginia;

Portland, Maine and Yankton, South Dakota markets.

The markets with the most significant decreases in 2024 in non-spot events were Des Moines, Iowa;

Manchester, New Hampshire and Yankton, South Dakota.

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

The gross political revenue increased due to an increase in the number of national, state and local elections compared to 2023.

Station operating expense was $22,981,000 for the three months ended March 31, 2024, compared with $21,703,000 for the three months ended March 31, 2023, an increase of $1,278,000 or 5.9%.

The increase in operating expense was primarily the result of increases in compensation-related expenses, bad debt expenses, healthcare expenses, streaming and content expenses, sales survey expenses, insurance-related expenses, repairs and maintenance expenses, and music licensing expenses, of $471,000, $287,000, $135,000, $109,000, $103,000, $42,000, $35,000 and $35,000, respectively, for the comparable period of 2023.

We had an operating loss for the three months ended March 31, 2024 of $2,417,000 compared to operating income $905,000 for the three months ended March 31, 2023, a decrease of $3,322,000.

The decrease was a result of the decrease in net operating revenue and increase in station operating expense, as noted above, along with an increase in corporate general and administrative expenses of $513,000 and an increase in other operating expense of $891,000.

The increase in corporate general and administrative expenses was primarily comprised of an increase of $208,000 in stock based compensation, an increase of $146,000 in compensation-related expense, an increase of $117,000 in travel-related expenses, and an increase of $76,000 in legal fees, partially offset by a decrease in other consulting fees of $40,000.

and Ocala, Florida markets.

The decrease in gross national revenue is primarily due to a decrease at our Norfolk, Virginia market partially offset by an increase at our Columbus, Ohio market.

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

The gross political revenue increased due to an increase in the number of national, state and local elections.

Station operating expense was $23,544,000 for the three months ended June 30, 2024, compared with $22,407,000 for the three months ended June 30, 2023, an increase of $1,137,000 or 5.1%.

We had an increase of approximately $233,000 that was attributable to stations that we did not own or operate for the entire comparable period, combined with an increase of $904,000 generated by stations we owned or operated for the comparable period in 2023.

The increase in same station operating expense was primarily a result of increases in compensation-related expenses, bad debt expenses, and interactive consulting and content expenses of $718,000, $207,000, and $120,000, respectively, partially offset by decreases in music licensing expenses, and barter expenses of $75,000, and $71,000, respectively, from the second quarter of 2023.

We had operating income for the three months ended June 30, 2024 of $2,143,000 compared to $4,296,000 for the three months ended June 30, 2023, a decrease of $2,153,000.

The decrease in operating income was the result of a decrease in net operating revenue and an increase in station operating expenses noted above, and an increase in corporate general and administrative expenses of $577,000 and an increase in other operating (income) expense, net of $6,000.

The increase in corporate general and administrative expenses was primarily due to increases in stock-based compensation, compensation-related expenses, and computer software and cyber security expenses of $272,000, $205,000, and $83,000, respectively.

We generated net income of $2,501,000 ($0.40 per share on a fully diluted basis) during the three months ended June 30, 2024, compared to $3,350,000 ($0.55 per share on a fully diluted basis) for the three months ended June 30, 2023, a decrease of $849,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $28,000, a decrease in interest income of $96,000, partially offset by an increase in other income of $1,133,000 and a decrease in income tax expense of $295,000.

The increase in interest expense is due to an increase in debt outstanding.

The decrease in interest income is related to the decrease in the amount of short-term investment accounts.

The increase in other income is due to the $1,133,000 received related to the sale of an investment in BMI.

The gain on sale of investment is recorded in other (income) expense, net in the Company’s Condensed Consolidated Statement of Operation.

The decrease in our income tax expense is due to lower income before income tax expense from the second quarter of 2024.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Results of Operations

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023.

Six Months Ended

(In thousands, except percentages and per share information)

Net operating revenue

Station operating expenses

Corporate general and administrative

Other operating expense, net

Operating income (loss)

Interest expense

Interest income

Income before income tax expense

Income tax provision

Earnings (loss) per share (diluted)

N/M = Not Meaningful

For the six months ended June 30, 2024, consolidated net operating revenue was $53,406,000 compared with $54,479,000 for the six months ended June 30, 2023, a decrease of $1,073,000 or 2.0%.

We had an increase of approximately $262,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of $1,335,000 generated by stations we owned or operated for the comparable period in 2023.

The decrease in same station revenue was primarily a result of decreases in gross local revenue of $2,912,000, and gross non-spot revenue of $175,000, partially offset by increases in gross interactive revenue of $1,370,000 and gross political revenue of $297,000, from the second quarter of 2023.

The decrease in gross local revenues was attributable to decreases at our Clarksville, Tennessee;

Columbus, Ohio;

Des Moines, Iowa;

Manchester, New Hampshire;

and Milwaukee, Wisconsin markets.

The decrease in gross non-spot revenue is primarily due to decreases at our Bellingham, Washington;

Clarksville, Tennessee;

Columbus, Ohio;

Manchester, New Hampshire;

and Yankton, South Dakota markets partially offset by an increase at our Portland, Maine market.

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

The gross political revenue increased due to an increase in the number of national, state and local elections.

Station operating expense was $46,525,000 for the six months ended June 30, 2024, compared with $44,110,000 for the six months ended June 30, 2023, an increase of $2,415,000 or 5.5%.

We had an increase of approximately $233,000 that was attributable to stations that we did not own or operate for the entire comparable period, combined with an increase of $2,182,000 generated by stations we owned or operated for the comparable period in 2023.

The increase in same station operating expense was primarily a result of increases in compensation-related expense, bad debt expenses, interactive consulting and content expenses, sales rating survey expenses, and promotional expenses of $1,301,000, $494,000, $245,000, $179,000, and $81,000, respectively, partially offset by decreases in barter expenses and music licensing expenses of $64,000, and $56,000, respectively, from the comparable period in 2023.

We had an operating loss for the six months ended June 30, 2024, of $274,000 compared to operating income of $5,201,000 for the six months ended June 30, 2023, a decrease of $5,475,000.

The decrease in operating income was the result of a decrease in net operating revenue and an increase in station operating expenses noted above, and an increase in corporate general and administrative expenses of $1,090,000 and an increase in other operating (income) expense, net of $897,000.

The increase in corporate general and administrative expenses was primarily due to increases in stock-based compensation, compensation-related expenses, and travel-related expenses of $480,000, $400,000, and $159,000, respectively.

In 2024, we recorded a loss on the sale of fixed assets and intangibles of $977,000 compared to a loss on the sale of fixed assets of $80,000 in 2023.

The loss on sale of fixed assets and intangibles recorded in other operating expense in 2024 primarily relates to the sale of WYSE-AM, W275CP translator and W248CM translator located in our Asheville, North Carolina market and the relinquishment of our FCC license for KBAI-AM located in our Bellingham, Washington market, described in footnote 7 (Acquisitions and Dispositions).

We generated a net loss of $1,577,000 ($(0.25) per share on a fully diluted basis) during the three months ended March 31, 2024, compared to net income of $920,000 ($0.15 per share on a fully diluted basis) for the three months ended March 31, 2023, a decrease of $2,497,000.

The decrease in net income is primarily due to the decrease in operating income, described above, a decrease in other income of $119,000 partially offset by an increase in interest income of $14,000, and a decrease in income tax expense of $930,000.

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.

The decrease in other income is due to reimbursements from the FCC related to their spectrum auction of $115,000 described in footnote 13 (Other Income) that we received in 2023 as opposed to 2024 where we did not have other income earned in the first quarter.

The decrease in our income tax expense is due to a loss before income tax benefit in 2024 compared to income before income tax expense in 2023.

We generated net income of $924,000 ($0.15 per share on a fully diluted basis) during the six months ended June 30, 2024, compared to $4,270,000 ($0.70 per share on a fully diluted basis) for the six months ended June 30, 2023 ended, a decrease of $3,346,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $28,000, a decrease in interest income of $82,000 partially offset by an increase in other income of $1,014,000 and a decrease in income tax expense of $1,225,000.

The increase in interest expense is due to an increase in debt outstanding.

The decrease in interest income is related to the decrease in the amount of short-term investment accounts.

The increase in other income is due to the $1,133,000 received related to the sale of an investment in BMI.

The gain on sale of investment is recorded in other (income) expense, net in the Company’s Condensed Consolidated Statement of Operation.

The decrease in our income tax expense is due to lower income before income tax expense for the comparable period.

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 (5.34% at March 31, 2024), 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 (5.33% at June 30, 2024), 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.

Letters of credit issued under the Credit Facility will be subject to a participation fee (which is equal to the interest rate applicable to Eurocurrency Loans, as defined in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25% per annum payable to the issuing bank.

Under the Third Amendment, we now pay quarterly commitment fees of 0.25% per annum on the used portion of the

Credit Facility.

Under the Third Amendment, we now pay quarterly commitment fees of 0.25% per annum on the unused portion of the Credit Facility.

We previously paid quarterly commitment fees of 0.2% to 0.3% per annum on the unused portion of the Revolving Credit Facility.

The Credit Facility contains a number of financial covenants (all of which we were in compliance with at March 31, 2024) 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 have no debt outstanding at December 31, 2023 or March 31, 2024.

We have approximately $50 million of unused borrowing capacity under the Revolving Credit Facility at both March 31, 2024 and December 31, 2023.

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 $5,000,000 debt outstanding at June 30, 2024 that we borrowed in conjunction with our Lafayette acquisition and no debt outstanding at December 31, 2023.

We had approximately $45 million and $50 million of unused borrowing capacity under the Revolving Credit Facility at June 30, 2024 and December 31, 2023, respectively.

Sources and Uses of Cash

During the three months ended March 31, 2024 and 2023, we had net cash flows from operating activities of $3,803,000 and $4,835,000, respectively.

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

During the six months ended June 30, 2024 and 2023, we had net cash flows from operating activities of $5,047,000 and $6,038,000, 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.

However, if such cash flow is not sufficient we may be required to sell additional equity securities, refinance our obligations or dispose of one or more of our properties in order to make such scheduled payments.

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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 March 31, 2024, we have repurchased 2.2 million shares of our Class A Common Stock for $57.8 million.

During the three months ended March 31, 2024, we did not repurchase any shares related to the Buy-Back Program.

From its inception in 1998 through June 30, 2024, we have repurchased 2.2 million shares of our Class A Common Stock for $57.8 million.

During the three and six months ended June 30, 2024, 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 three months ended March 31, 2024 were $1,050,000 ($1,362,000 in 2023).

Our capital expenditures, exclusive of acquisitions, for the six months ended June 30, 2024 were $2,574,000 ($2,637,000 in 2023).

We anticipate capital expenditures in 2024 to be approximately $5.0 million to $5.5 million, which we expect to finance through funds generated from operations.

On February 13, 2024, we entered into an agreement to purchase the assets of WKOA (FM), WKHY (FM), WASK (FM), WXXB (FM), WASK (AM) and W269DJ from Neuhoff Communications, Inc.

serving the Greater Lafayette, Indiana radio market for $5.3 million which we expect to finance through funds generated from operations or borrowings under our credit agreement.

We expect to close on this acquisition in the second quarter of 2024.

During 2024, the Company’s Board of Directors declared a quarterly cash dividend and a variable cash dividend on its Class A Common Stock.

These dividends totaling approximately $5.3 million were accrued or paid during the first quarter of 2024.

During 2023, our Board of Directors declared four quarterly cash dividends and one special dividend totaling $3.00 per share on our Class A shares.

These dividends totaling approximately $18.6 million were accrued or paid during 2023.

serving the Greater Lafayette, Indiana radio market for $5.3 million, subject to certain purchase price adjustments.

The Company closed on this transaction on May 31, 2024, using funds from operations and borrowings under our credit agreement, of $5,850,000, which included the purchase price of $5,300,000, the purchase of $482,000 in accounts receivable and certain closing adjustments and transactional costs of approximately $68,000.

During 2024, the Company’s Board of Directors has declared two quarterly cash dividends and a variable dividend on its Class A Common Stock.

These dividends totaling $1.10 per share and approximately $6.9 million were paid during 2024.

During 2023, the Company’s Board of Directors declared four quarterly cash dividends and one special dividend on its Class A Common Stock.

These dividends totaling $3.00 per share and approximately $18.6 million were accrued or paid during 2023.

We continue to actively seek and explore opportunities for expansion through the acquisitions of additional broadcast properties.

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We have future cash obligations under various types of contracts, including the terms of our Credit Facility, operating leases, programming contracts, employment agreements, and other operating contracts.

For additional

information concerning our future cash obligations see “Item 7.

For additional information concerning our future cash obligations see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation — Summary Disclosures About Contractual Obligations” in our annual report on Form 10-K for the year ended December 31, 2023.

6 unchanged sentences

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