What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-09 · 65 added, 59 removed, 201 unchanged (38% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may be identified by the use of forward-looking terms such as “will,” “may,” “believes,” “intends,” “expects,” “anticipates,” “plans,” “estimates,” “guidance,” and similar expressions are intended to identify forward-looking statements that are not historical facts.

Forward-looking statements may be identified by the use of forward-looking terms such as “will,” “may,” “believes,” “intends,” “expects,” “anticipates,” “plans,” “estimates,” “guidance,” and similar expressions that are intended to identify forward-looking statements that are not historical facts.

These statements are made as of the date of this report or as otherwise indicated, based on current expectations.

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terrorist attacks;

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

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

increased energy costs;

and risk factors described in our annual report on Form 10-K for the year ended December 31, 2023 or in this quarterly report.

and risk factors described in our annual report on Form 10-K for the year ended December 31, 2023 or elsewhere in this quarterly report.

These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.

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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, 2024 and 2023, approximately 90% and 89%, respectively, of our radio stations’ gross revenue was from local advertising.

For the nine months ended September 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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Advertisers measure these results based on increased demand for their goods or services and/or actual revenues generated from such demand.

Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media, and signal strength.

Various factors affect the rates a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media, and signal strength.

When we acquire and/or begin to operate a station or group of stations we generally increase programming and advertising and promotion expenses to increase our share of our target demographic audience.

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

During the nine months ended September 30, 2024 and 2023 and the twelve months ended December 31, 2023 and 2022, 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,

Charleston, South Carolina

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Norfolk, Virginia

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.

During the nine months ended September 30, 2024 and 2023 and the twelve months ended December 31, 2023 and 2022, the radio stations in our five largest markets, when combined, represented approximately 36%, 41%, 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 Six Months Ended

for the Nine Months Ended

for the Years Ended

September 30,

Charleston, South Carolina

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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, 2024 Compared to Three Months Ended June 30, 2023

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

Results of Operations

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

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

Consolidated Results of Operations

Three Months Ended

September 30,

(In thousands, except percentages and per share information)

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N/M = Not Meaningful

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%.

For the three months ended September 30, 2024, consolidated net operating revenue was $28,118,000 compared with $29,149,000 for the three months ended September 30, 2023, a decrease of $1,031,000 or 3.5%.

We had an increase of approximately $666,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of $1,697,000 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;

The decrease in same station revenue was primarily a result of decreases in gross local revenue of $2,635,000 and gross national revenue of $107,000, partially offset by increases in gross political revenue of $442,000, non-spot revenue of $240,000 and gross interactive revenue of $95,000 and a decrease in agency commissions of $226,000, from the third 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;

Milwaukee, Wisconsin;

Norfolk, Virginia;

and Ocala, Florida markets.

and Norfolk, Virginia 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 decrease in agency commissions is due to the decrease in national and local agency 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 increase in non-spot revenue is due to increases at our Manchester, New Hampshire;

Milwaukee, Wisconsin;

Portland, Maine;

and Yankton, South Dakota markets.

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

Station operating expense was $23,458,000 for the three months ended September 30, 2024, compared with $22,760,000 for the three months ended September 30, 2023, an increase of $698,000 or 3.1%.

We had an increase of approximately $775,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of $77,000 generated by stations we owned or operated for the comparable period in 2023.

The decrease in same station operating expense was primarily a result of decreases in compensation-related expenses and music licensing expenses of $363,000 and $90,000, respectively, partially offset by increases in bad debt expenses, interactive consulting and content expenses, sales survey expenses and advertising and promotion expenses of $165,000, $115,000, $40,000 and $35,000, respectively, from the third quarter of 2023.

We had operating income for the three months ended September 30, 2024 of $1,645,000 compared to $3,492,000 for the three months ended September 30, 2023, a decrease of $1,847,000.

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 $114,000 and an increase in other operating (income) expense, net of $4,000.

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 increase in corporate general and administrative expenses was primarily due to increases in stock-based compensation, computer software and cyber security expenses and compensation-related expenses of $224,000, $110,000, and $29,000, respectively, partially offset by decreases in insurance related costs and other consulting expenses of $132,000 and $101,000, respectively.

We generated net income of $1,267,000 ($0.20 per share on a fully diluted basis) during the three months ended September 30, 2024, compared to $2,729,000 ($0.45 per share on a fully diluted basis) for the three months ended September 30, 2023, a decrease of $1,462,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $77,000, a decrease in interest income of $136,000, partially offset by an increase in other income of $78,000 and a decrease in income tax expense of $520,000.

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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

The increase in other income is due to the gain on insurance claims of $78,000 received as a result of weather-related damages.

The gain on insurance claim 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 third quarter of 2024.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 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

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

Nine Months Ended

September 30,

(In thousands, except percentages and per share information)

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Other operating expense, net

Operating income (loss)

Operating income

Interest expense

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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%.

For the nine months ended September 30, 2024, consolidated net operating revenue was $81,524,000 compared with $83,628,000 for the nine months ended September 30, 2023, a decrease of $2,104,000 or 2.5%.

We had an increase of approximately $926,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of $3,030,000 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 same station revenue was primarily a result of decreases in gross local revenue of $5,552,000, and gross national revenue of $163,000, partially offset by increases in gross interactive revenue of $1,470,000 and gross political revenue of $735,000, and a decrease in agency commissions of $371,000 from 2023.

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

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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 decrease in gross national revenue is primarily due to a decrease at our Norfolk, Virginia market partially offset by increases at our Bellingham, Washington;

Columbus, Ohio and Springfield, Illinois markets.

The decrease in agency commissions is due to the decrease in national and local agency revenue.

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%.

Station operating expense was $69,983,000 for the nine months ended September 30, 2024, compared with $66,870,000 for the nine months ended September 30, 2023, an increase of $3,113,000 or 4.7%.

We had an increase of approximately $998,000 that was attributable to stations that we did not own or operate for the entire comparable period, combined with an increase of $2,115,000 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 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 advertising and promotion expenses of $938,000, $659,000, $360,000, $219,000, and $116,000, respectively, partially offset by decreases in music licensing expenses of $146,000, respectively, from the comparable period in 2023.

We had operating income for the nine months ended September 30, 2024, of $1,371,000 compared to $8,693,000 for the nine months ended September 30, 2023, a decrease of $7,322,000.

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 $1,204,000 and an increase in other operating (income) expense, net of $901,000.

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.

The increase in corporate general and administrative expenses was primarily due to increases in stock-based compensation, compensation-related expenses, computer software and cyber security expenses and travel-related expenses of $704,000, $414,000, $255,000 and $153,000, respectively, partially offset by decreases in insurance related costs and other consulting expenses of $196,000 and $74,000, respectively.

In 2024, we recorded a loss on the sale of fixed assets and intangibles of $1,026,000 compared to a loss on the sale of fixed assets of $125,000 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 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.

We generated net income of $2,191,000 ($0.35 per share on a fully diluted basis) during the nine months ended September 30, 2024, compared to $6,999,000 ($1.15 per share on a fully diluted basis) for the nine months ended September 30, 2023 ended, a decrease of $4,808,000.

The decrease in net income is primarily due to the decrease in operating income, described above, an increase in interest expense of $105,000, a decrease in interest income of $218,000 partially offset by an increase in other income of $1,092,000 and a decrease in income tax expense of $1,745,000.

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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 increase in other income is due to the $1,133,000 received related to the sale of an investment in BMI and $78,000 in insurance proceeds received as a result of weather-related damages.

The gain on sale of investment and gain on insurance claims are 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.

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Debt Arrangements and Debt Service Requirements

On December 19, 2022, we entered into a Third Amendment to our Credit Facility, (the “Third Amendment”), which extended the maturity date to December 19, 2027, reduced the lenders to JPMorgan Chase Bank, N.A., and the Huntington National Bank (the “Lenders”), established an interest rate equal to the secured overnight financing rate (“SOFR”) as administered by the SOFR Administrator (currently established as the Federal Reserve Bank of New York) as the interest base and increased the basis points.

On December 19, 2022, we entered into the Third Amendment to our Credit Facility, (the “Third Amendment”), which extended the maturity date to December 19, 2027, reduced the lenders to JPMorgan Chase Bank, N.A., and the Huntington National Bank (the “Lenders”), established an interest rate equal to the secured overnight financing rate (“SOFR”) as administered by the SOFR Administrator (currently established as the Federal Reserve Bank of New York) as the interest base, and increased the basis points.

We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility.

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These debt issuance costs are included in other assets, net in the consolidated balance sheets.

As a result of the Second Amendment, the Company incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized.

As a result of the Second Amendment to our Credit Facility, the Company incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized.

As a result of the Third Amendment, the Company incurred an additional $161,000 of transaction fees related to the Credit Facility that were capitalized.

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 (5.33% at June 30, 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 (5.16% at September 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.

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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 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.

The Credit Facility contains a number of financial covenants (all of which we were in compliance with at September 30, 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 had $5,000,000 debt outstanding at September 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 September 30, 2024 and December 31, 2023, respectively.

Sources and Uses of Cash

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.

During the nine months ended September 30, 2024 and 2023, we had net cash flows from operating activities of $10,141,000 and $13,921,000, 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, 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.

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

During the three and nine months ended September 30, 2024, 715 shares were retained for the payment of withholding taxes for $11,000 related to the vesting of restricted stock.

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, 2024 were $2,574,000 ($2,637,000 in 2023).

Our capital expenditures, exclusive of acquisitions, for the nine months ended September 30, 2024 were $3,199,000 ($3,397,000 in 2023).

We anticipate capital expenditures in 2024 to be approximately $4.0 million to $4.5 million, which we expect to finance through funds generated from operations.

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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.

The Company closed on this transaction on May 31, 2024, using funds from operations and borrowings under our credit agreement, of $5,832,000, which included the purchase price of $5,300,000, the purchase of $499,000 in accounts receivable and transactional costs of approximately $121,000 offset by $88,000 in certain closing adjustments..

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

These dividends totaling $1.35 per share and approximately $8.5 million were paid or accrued as of September 30, 2024.

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

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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