SAGA COMMUNICATIONS INC

Previous wording

We are a media company primarily engaged in acquiring, developing and operating broadcast properties including opportunities complimentary to our core radio business including digital, e-commerce and non-traditional revenue initiatives. We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. We review acquisition opportunities on an ongoing basis. For additional information with respect to acquisitions, see “Liquidity and Capital Resources” below. We own or operate broadcast properties in 27 markets, including 79 FM and 31 AM radio stations and 78 metro signals.

Current wording

We are a media company primarily engaged in acquiring, developing and operating broadcast properties including opportunities complimentary to our core radio business including digital, e-commerce and non-traditional revenue initiatives. We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. We review acquisition opportunities on an ongoing basis. For additional information with respect to acquisitions, see “Liquidity and Capital Resources” below. We own or operate broadcast properties in 28 markets, including 82 FM and 32 AM radio stations and 79 metro signals.

Previous wording

Most advertising contracts are short-term and generally run for a few weeks only. 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. To generate national advertising sales, we engage independent advertising sales representative firms that specialize in national sales for each of our broadcast markets.

Current wording

Most advertising contracts are short-term and generally run for a few weeks only. 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. To generate national advertising sales, we engage independent advertising sales representative firms that specialize in national sales for each of our broadcast markets.

Previous wording

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.

Current wording

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.

Previous wording

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; 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. 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.

Current wording

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; 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.

Previous wording

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

Current wording

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:

Previous wording

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.

Current wording

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.

Previous wording

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; Columbus, Ohio; Des Moines, Iowa; Manchester, New Hampshire; Milwaukee, Wisconsin; 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.

Current wording

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.

Previous wording

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. In 2024, we recorded a loss on the sale of fixed assets and intangibles of $971,000 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).

Current wording

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).

Previous wording

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%. 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

Current wording

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 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.

Previous wording

We have no debt outstanding at December 31, 2023 or March 31, 2024.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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. 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. There can be no assurance that we would be able to effect any such transactions on favorable terms, if at all.

Current wording

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. There can be no assurance that we would be able to effect any such transactions on favorable terms, if at all.

Previous wording

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. 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.

Current wording

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. 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.

Previous wording

Our capital expenditures, exclusive of acquisitions, for the three months ended March 31, 2024 were $1,050,000 ($1,362,000 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.

Current wording

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.

Previous wording

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.

Current wording

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, 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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. 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.