Saga Communications, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparative period is Q1 2021. Saga operates radio and digital media properties in 27 markets, including 79 FM stations, 35 AM stations and 80 metro signals. The filing presents one reportable segment: Radio.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Net operating revenue | $24.967 million | $22.301 million |
| Operating income | $1.710 million | $0.883 million |
| Net income | $1.204 million | $0.758 million |
| Diluted earnings per share | $0.20 | $0.13 |
| Net cash from operating activities | $5.296 million | $5.352 million |
| Cash and cash equivalents | $55.147 million | $54.760 million at Dec. 31, 2021 |
| Total assets | $245.075 million | $247.932 million at Dec. 31, 2021 |
| Total liabilities | $47.333 million | $51.013 million at Dec. 31, 2021 |
- Revenue grew 12.0%; operating income rose 93.7% and net income rose 58.8% year over year. Operating margin was approximately 6.8%, versus 4.0% in Q1 2021; net margin was approximately 4.8%, versus 3.4%.
- Operating cash flow was nearly flat year over year. Investing activities used $0.921 million, primarily for $0.923 million of property and equipment purchases. Financing activities used $3.988 million for dividends; cash increased $0.387 million during the quarter.
- The company had no debt outstanding and reported approximately $50 million of unused capacity on its revolving credit facility. The facility matures June 27, 2023; financial covenants were met at quarter-end.
- Current assets were $72.234 million and current liabilities $15.829 million. Stockholders’ equity was $197.742 million.
Material changes and operating drivers
- Management attributed much of the revenue increase to Q1 2021’s unusually weak, pandemic-affected comparison. Broadcast advertising revenue increased to $21.587 million from $20.007 million; digital advertising revenue increased to $1.749 million from $1.000 million; other revenue increased to $1.631 million from $1.294 million.
- Local gross revenue, interactive revenue and non-spot revenue increased; national gross revenue declined. Management cited resumed events and growth in streaming and website content revenue.
- Station operating expenses increased 8.7% to $20.568 million. Higher survey, commissions, healthcare, compensation, interactive services, barter, music licensing and bad debt costs were cited. Corporate G&A increased 10.5% to $2.694 million.
- Interest expense declined to $32,000 from $73,000 following repayment of the remaining revolving-credit balance in October 2021. Q1 2021 other income included an insurance-related gain from antenna damage; 2022 other income was minimal.
Outlook, risks and other notable items
- No quantified revenue or earnings guidance was provided. Management anticipated increased political advertising in 2022 due to elections and forecast 2022 capital expenditures of approximately $5.5–$6.0 million, expected to be funded from operations.
- Management said inflation had not significantly affected operations to date but that higher inflation was beginning to affect costs. Other identified risks include economic and advertising-market conditions, COVID-19 effects, energy costs, competition from new media, audience trends, regulation, cybersecurity, acquisition integration and market concentration.
- Five largest markets represented approximately 39% of consolidated revenue in Q1 2022; the five largest markets accounted for approximately 44% of station operating income, as defined by the company.
- The board declared a $0.16-per-share quarterly dividend, approximately $970,000 in total, payable April 8, 2022. Q1 cash dividends paid of $3.988 million related to dividends declared in December 2021, including a special dividend.
- The company closed on its WIZZ-AM and translator acquisition on April 6, 2022. Management reported no interim impairment trigger, no material legal proceedings, and no material changes to previously disclosed risk factors. Disclosure controls were judged effective.
Important facts for investors to verify
- Whether revenue growth persists beyond the pandemic-affected prior-year comparison, and whether expected political advertising contributes meaningfully.
- Whether rising operating costs, including inflation-sensitive expenses, continue to outpace revenue growth.
- Cash available after planned capital expenditures, dividends and acquisitions, and the terms and June 2023 maturity of the revolving facility.
- Exposure to the five largest markets and the sensitivity of broadcast-license values to future market conditions; impairment could materially affect results.
- The filing gives no quantified full-year earnings or revenue outlook; treat the capital-spending estimate as management’s stated plan, not a broader earnings forecast.