Saga Communications, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; interim financial statements are unaudited. Saga operates radio stations in 27 markets, including 79 FM and 35 AM stations.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Net operating revenue | $22.3 million | $26.1 million | Down 14.4% |
| Operating income | $0.9 million | $2.2 million | Down 59.3% |
| Net income | $0.8 million | $1.7 million | Down 54.9% |
| Diluted EPS | $0.13 | $0.28 | Down $0.15 |
| Cash from operations | $5.4 million | $5.1 million | Up $0.3 million |
Operating margin was approximately 4.0% versus 8.3%; net margin was approximately 3.4% versus 6.4%. These percentages are calculated from reported figures. Station operating expenses fell 14.8% to $18.9 million, and corporate general and administrative expense fell 19.1% to $2.4 million.
Broadcast advertising revenue was $20.0 million, digital advertising $1.0 million, and other revenue $1.3 million. At March 31, cash was $56.3 million, total current assets $72.9 million, and current liabilities $13.9 million. Long-term debt was $10.0 million; reported unused revolving-credit capacity was approximately $60 million. The company was in compliance with credit-facility covenants. Operating cash flow less $0.5 million of property-and-equipment purchases was approximately $4.8 million. No dividend was declared or paid in the quarter.
Changes and notable items
- Management attributed lower revenue primarily to COVID-19 disruption to advertisers and fewer events; political revenue also declined because 2021 had fewer elections than 2020. Interactive revenue increased, mainly from streaming.
- Lower operating costs partly cushioned the revenue decline. Lower compensation, bad-debt, commission and other expenses were cited; the prior-year period also included a $1.4 million gain on sale of land and a building, contributing to the year-over-year operating-income decline.
- Q1 2021 other income included a $250,000 insurance gain from weather damage to an antenna. Q1 2020 included a $208,000 insurance gain. The company reported no additional goodwill or broadcast-license impairment testing in Q1 2021, citing no new triggering events after its qualitative assessment.
- The company acquired WBQL and W288DQ for $175,000. The quarterly cash dividend remains temporarily suspended, announced in June 2020 in response to COVID-19 uncertainty. No share repurchases occurred in Q1 2021.
Outlook, commentary and risks
Management said markets were operating at effectively full capacity subject to health and safety protocols, and expressed optimism about advertising recovery and resuming events. It cautioned that the duration and business effects of the pandemic remain unpredictable. No specific revenue or earnings guidance was provided. Management expects 2021 capital expenditures of approximately $4.5 million to $5.5 million, funded from operating cash flow, and said it believes operating cash flow can meet debt-service needs.
Risks highlighted include COVID-19 and economic conditions, advertising demand, reliance on key stations and personnel, competition from new media and technology, regulation, acquisitions and integration, natural disasters, leverage and debt service. FCC-license values could be impaired if market conditions underperform estimates. Ordinary-course legal claims are outstanding; management expects they will not materially affect the financial statements. The company reported effective disclosure controls and no material internal-control changes during the quarter.
Important facts for investors to verify
- Whether advertising demand and event activity recover, and how much the Q1 revenue decline reflects pandemic effects versus fewer political elections.
- The sustainability of cost reductions and operating cash flow, particularly as planned capital spending rises to $4.5 million–$5.5 million.
- Credit-facility terms, covenant headroom, and the $60 million of reported unused capacity; the facility matures June 27, 2023.
- Future dividend policy and any resumption of share repurchases; both the dividend suspension and buyback pause remain relevant.
- Any further impairment indicators for broadcast licenses or goodwill, and developments in the disclosed litigation and COVID-related customer credit exposure.