Saga Communications, Inc. — Q2 2021 Form 10-Q
Business context and reporting period. Unaudited results for the three and six months ended June 30, 2021, compared with the corresponding 2020 periods. Saga operates radio broadcast properties in 27 markets, with 79 FM and 35 AM stations and 79 metro signals. Local advertising is the principal revenue source.
Key financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Net operating revenue | $28.0 million | $16.9 million | $50.3 million | $42.9 million |
| Operating income (loss) | $4.6 million | $(8.7) million | $5.5 million | $(6.5) million |
| Net income (loss) | $3.3 million | $(4.9) million | $4.0 million | $(3.2) million |
| Diluted EPS | $0.54 | $(0.82) | $0.67 | $(0.54) |
| Operating cash flow | Not reported by quarter | $9.2 million | $8.3 million |
Margins and liquidity. Operating margin, calculated from reported revenue and operating income, was approximately 16.5% in Q2 2021 and 10.9% for the first half. Cash and cash equivalents were $59.4 million at June 30, up from $51.4 million at year-end 2020. Current assets were $79.1 million versus current liabilities of $16.7 million. Six-month cash flow from operations less property-and-equipment purchases was approximately $7.7 million. These calculated figures are not company-reported non-GAAP measures.
Debt. Long-term debt was $10.0 million, unchanged from year-end. The $70 million revolving facility had approximately $60 million of unused capacity; it matures June 27, 2023. The company reported compliance with its financial covenants. Net cash exceeded drawn debt by approximately $49.4 million.
Material changes versus prior comparable periods
- Q2 revenue increased 66.3% year over year; first-half revenue increased 17.3%. Management attributed the improvement primarily to recovery from unusually weak 2020 advertising and event activity amid COVID-19 disruptions.
- First-half broadcast advertising revenue was $45.0 million, digital advertising $2.6 million, and other revenue $2.8 million. Q2 increases included local and national advertising, digital revenue, and events as in-person activity resumed.
- First-half station operating expenses fell 2.2% and corporate general and administrative expenses fell 18.9%. Q2 station expenses rose 12.7%, including higher commissions, health costs, audience survey expenses, and music licensing fees.
- Results benefited from the absence of the $3.8 million noncash broadcast-license impairment recorded in 2020. First-half 2020 results also included a $1.4 million gain on sale of property; other operating income was therefore lower in 2021.
Outlook, commentary, risks, and unusual items
- Management said markets were operating at effectively full capacity, with health protocols varying by state, and that the company had resumed non-spot events. It remained optimistic about advertising revenue exiting Q2, while noting that the duration and business effects of COVID-19 remained uncertain.
- Management expects 2021 capital expenditures of approximately $4.0–$4.5 million, funded from operations. It expects lower political advertising in 2021 because of fewer elections in most markets.
- The company declared a $0.16-per-share quarterly dividend in June, approximately $0.96 million, paid July 16, 2021. Share repurchases remained suspended; approximately $18.8 million of authorization remained.
- A January 2021 acquisition of two Clarksville, Tennessee broadcast properties cost $175,000. The company recorded a $250,000 insurance gain in Q1 for antenna damage and anticipated an additional $290,000 of proceeds and gain in Q3.
- Risks include the continuing pandemic and economic conditions, competition from traditional and new media, advertising demand, audience trends, regulatory matters, cyberattacks, natural disasters, and dependence on several key markets. Five largest markets generated about 39% of first-half revenue. Management said no interim intangible-asset impairment trigger had occurred, but adverse market conditions could require future charges.
- Management said ordinary-course claims are not expected to materially affect the financial statements; no material changes to previously disclosed risk factors were reported. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Compare the sharp year-over-year rebound with 2020’s pandemic-affected base and assess whether advertising and event recovery is continuing.
- Verify the timing and realization of the anticipated additional $290,000 antenna-insurance recovery.
- Check the dividend record-date inconsistency in the filing: the dividend note states June 30, 2020, while management’s discussion says June 30, 2021.
- Monitor covenant compliance, the June 2023 credit-facility maturity, capital spending, and any resumption of share repurchases.
- Track impairment assumptions and concentration in the five largest markets, alongside COVID-19, advertising, technology, and regulatory risks.