Saga munications(SGA) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited interim financial statements and management's analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the reporting period Condensed Consolidated Balance Sheets Details the company's assets, liabilities, and shareholders' equity at the end of the reporting period Condensed Consolidated Balance Sheets (In thousands) | Item | March 31, 2025 | December 31, 2024 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $17,947 | $18,860 | $(913) | | Total current assets | $45,606 | $47,086 | $(1,480) | | Net property and equipment | $51,337 | $51,907 | $(570) | | Total assets | $219,305 | $221,725 | $(2,420) | | Total current liabilities | $16,768 | $16,558 | $210 | | Total liabilities | $55,745 | $55,803 | $(58) | | Total shareholders' equity | $163,560 | $165,922 | $(2,362) | Condensed Consolidated Statements of Operations Summarizes revenues, expenses, and the resulting net loss for the three-month period Condensed Consolidated Statements of Operations (In thousands, except per share data) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net operating revenue | $24,212 | $25,294 | $(1,082) | | Station operating expenses | $21,963 | $22,459 | $(496) | | Corporate general and administrative | $3,167 | $3,083 | $84 | | Operating loss | $(2,298) | $(2,417) | $119 | | Net loss | $(1,575) | $(1,577) | $2 | | Basic loss per share | $(0.25) | $(0.25) | $0 | | Diluted loss per share | $(0.25) | $(0.25) | $0 | | Dividends declared per share | $0.25 | $0.25 | $0 | Condensed Consolidated Statements of Stockholders' Equity Reports the changes in the value of stockholders' equity over the three-month period Changes in Stockholders' Equity (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | $(1,575) | $(1,577) | | Dividends declared per common share | $(1,604) | $(5,321) | | Compensation expense related to restricted stock awards | $527 | $453 | | 401(k) plan contribution | $290 | $268 | | Balance at March 31, 2025 | $163,560 | $164,372 | Condensed Consolidated Statements of Cash Flows Outlines the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $1,364 | $3,803 | $(2,439) | | Net cash (used in) provided by investing activities | $(673) | $860 | $(1,533) | | Net cash used in financing activities | $(1,604) | $(14,068) | $12,464 | | Net decrease in cash and cash equivalents | $(913) | $(9,405) | $8,492 | | Cash and cash equivalents, end of period | $17,947 | $20,177 | $(2,230) | Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed disclosures and explanations for the items presented in the financial statements 1. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim information and Form 10-Q instructions, not including all annual statement footnotes[20] - The Company owns or operates broadcast properties in 28 markets, including 82 FM and 31 AM radio stations and 79 metro signals[22] - Earnings per share is calculated using the two-class method, allocating earnings to common shares and participating securities (restricted stock units)[24] - Held-to-maturity U.S. Treasury Bills were $9.0 million at March 31, 2025, and $8.9 million at December 31, 2024, recorded at amortized cost[28] - Allowance for credit losses increased to $1,136,000 at March 31, 2025, from $1,071,000 at December 31, 2024[31] - The Company operates as one reportable business segment (Radio) across twenty-eight markets, with the CEO acting as the Chief Operating Decision Maker[33] Significant Departmental Expenses (In thousands) | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Programming and Technical | $7,204 | $7,179 | | Station General and Administrative | $7,152 | $7,392 | | Selling | $5,161 | $5,478 | | Interactive | $1,665 | $1,529 | | Other | $781 | $881 | | Total Station Operating Expense | $21,963 | $22,459 | 2. Recent Accounting Pronouncements Discusses newly issued accounting standards and their potential impact on the company's financials - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after January 1, 2025, requiring expanded income tax disclosures[38] - ASU 2024-03 (Expense Disaggregation) is effective for annual periods beginning January 1, 2027, and interim periods beginning after January 1, 2028, requiring disclosures about specific expense types[39] 3. Revenue Details the sources of revenue and disaggregates them by type for the reporting period - Primary revenue sources include Broadcast Advertising, Interactive Advertising (digital initiatives), and Other Revenue (concerts, events, tower rent)[41][42][43] Disaggregation of Revenue (In thousands) | Type of Revenue | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Broadcast Advertising Revenue, net | $18,854 | $20,482 | $(1,628) | | Digital Advertising Revenue | $3,495 | $3,079 | $416 | | Other Revenue | $1,863 | $1,733 | $130 | | Net Revenue | $24,212 | $25,294 | $(1,082) | 4. Broadcast Licenses, Goodwill and Other Intangible Assets Describes the company's policies for accounting for and testing impairment of intangible assets - Broadcast licenses and goodwill are evaluated for impairment annually or more frequently if triggering events occur, using discounted cash flow approaches[48][49] - No interim impairment tests were necessitated during the three months ended March 31, 2025, as no triggering events were identified[51] - Intangible assets with finite lives are amortized using the straight-line method over their useful lives (1 to 26 years)[53] 5. Common Stock and Treasury Stock Provides information on the company's stock structure, dividend rights, and share buy-back program - Following the passing of the founder, all Class B shares automatically converted to Class A shares; no Class B shares are currently issued or outstanding[55] - Shareholders are entitled to receive dividends as declared by the Board, with equal dividends for all common stock classes[56] - The Company has a Stock Buy-Back Program with $17.7 million remaining authorization as of March 31, 2025[62] - No shares were repurchased under the Stock Buy-Back Program during the three months ended March 31, 2025, or 2024[64] 6. Leases Discloses details about the company's operating leases, including assets, liabilities, and expenses - Right-of-use (ROU) assets were $6.6 million at March 31, 2025, down from $6.9 million at December 31, 2024[66] - Lease liabilities were $6.8 million at March 31, 2025, down from $7.3 million at December 31, 2024[66] - Total lease expense for the three months ended March 31, 2025, was $480,000, compared to $475,000 in the prior year period[67] Minimum Annual Rental Commitments (In thousands) | Year | Amount | | :--- | :--- | | 2025 (a) | $1,357 | | 2026 | $1,805 | | 2027 | $1,622 | | 2028 | $1,200 | | 2029 | $730 | | Thereafter | $1,464 | | Total lease payments (b) | $8,178 | | Less: Interest (c) | $1,344 | | Present value of lease liabilities (d) | $6,834 | 7. Acquisitions and Dispositions Reports on recent acquisitions and disposals of assets, including their financial impact - In February 2025, the FCC license for WVAX-AM was canceled, resulting in a $19,000 loss on disposal[73] - In February 2024, the Company agreed to purchase assets of six radio stations in Lafayette, Indiana, for $5.3 million, closing in May 2024 for a total of $5,832,000 including transactional costs[74] - In March 2024, WYSE-AM and two translators were sold for $10,000, resulting in a $147,000 loss[76] - In March 2024, the FCC license for KBAI-AM was canceled, resulting in an $800,000 loss[78] Pro Forma Consolidated Results of Operations (In thousands, except per share data) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net operating revenue | $24,212 | $25,922 | | Operating loss | $(2,298) | $(2,454) | | Net loss | $(1,575) | $(1,654) | | Basic loss per share | $(0.25) | $(0.26) | | Diluted loss per share | $(0.25) | $(0.26) | 8. Income Taxes Explains the calculation of the income tax benefit and the effective tax rate for the period - An income tax benefit of $585,000 was recorded for Q1 2025, compared to $580,000 for Q1 2024[84] - The effective tax rate was approximately 27.1% for Q1 2025, slightly up from 26.9% for Q1 2024[84] 9. Stock-Based Compensation Details the company's incentive compensation plans and related expenses for stock-based awards - The 2023 Incentive Compensation Plan replaced the Second Restated 2005 Plan, authorizing up to 600,000 shares of Class A Common Stock for awards[88] - Total compensation expense related to restricted stock-based arrangements was $527,000 for Q1 2025, up from $453,000 for Q1 2024[93] - No stock options were granted or outstanding during 2025 or 2024[89] 10. Long-Term Debt Outlines the terms of the company's credit facility and its outstanding debt obligations - Long-term debt from the revolving credit facility remained at $5,000,000 at both March 31, 2025, and December 31, 2024[94] - The Credit Facility's maturity date was extended to December 19, 2027, with interest rates based on SOFR (4.41% at March 31, 2025) plus a spread[94][97] - The Company had approximately $45 million of unused borrowing capacity under the Revolving Credit Facility at March 31, 2025, and December 31, 2024[98] 11. Litigation States the company's position on any material legal proceedings - Management believes the Company is not a party to any current legal proceedings material to its financial condition[100] 12. Dividends Describes the company's dividend policy and payments made during the period - A quarterly cash dividend of approximately $1.6 million was paid in Q1 2025[101] - In 2024, the Company declared four quarterly cash dividends and a variable dividend totaling $1.60 per share, amounting to approximately $10.0 million[101] - The Company intends to declare regular quarterly and variable cash dividends, and may implement stock buybacks, subject to Board discretion and financial performance[102] 13. Commitments and Contingencies Discloses known commitments and potential liabilities not yet recorded on the balance sheet - The Company accrued necessary expenses related to the passing of its founder, Edward K. Christian, including a $500,000 income tax obligation for his estate in Q4 2024[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results Cautionary Note Regarding Forward-Looking Statements Warns that forward-looking statements are subject to risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from forecasts[105] - Future factors include adverse changes in interest rates, financial leverage, dependence on key personnel/stations, economic conditions, market volatility, competition, regulatory changes, technological advances, cyber-attacks, and geopolitical events[105] Introduction Provides context for the Management's Discussion and Analysis section - The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the annual report on Form 10-K[106] Critical Accounting Policies and Estimates Highlights the most significant accounting policies and estimates used by management - No significant changes to critical accounting policies were made since the December 31, 2024, annual report[107] - The Company uses non-GAAP financial measures like 'station operating income' to assess market performance, which is not a substitute for GAAP results[108][109] Financial Condition and Results of Operations Analyzes the company's business operations, revenue sources, and market performance - Saga Communications is a media company primarily engaged in acquiring, developing, and operating broadcast properties, including 82 FM and 31 AM radio stations and 79 metro signals in 28 markets[110] - Radio stations' primary revenue comes from advertising sales, with approximately 90% from local advertising for the three months ended March 31, 2025 and 2024[111][112] - Advertising expenditures are typically lowest in the first quarter, and political revenue is expected to decrease in 2025 due to fewer elections[113] - The Company's digital strategy focuses on 'Blended Advertising' to provide simple digital solutions (SEM, SEO, Targeted Display) in conjunction with radio for local advertisers[121] Percentage of Consolidated Net Operating Revenue by Key Market | Market | Q1 2025 | Q1 2024 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | Charleston, South Carolina | 6 % | 7 % | 6 % | 6 % | | Columbus, Ohio | 7 % | 8 % | 8 % | 9 % | | Des Moines, Iowa | 4 % | 5 % | 5 % | 5 % | | Milwaukee, Wisconsin | 12 % | 11 % | 12 % | 11 % | | Norfolk, Virginia | 5 % | 5 % | 5 % | 6 % | | Combined Top 5 Markets | 34 % | 36 % | 36 % | 37 % | Percentage of Consolidated Station Operating Income by Key Market | Market | Q1 2025 | Q1 2024 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | :--- | | Charleston, South Carolina | 9 % | 10 % | 7 % | 5 % | | Columbus, Ohio | — % | 6 % | 5 % | 10 % | | Des Moines, Iowa | (5)% | 2 % | 3 % | 4 % | | Milwaukee, Wisconsin | 31 % | 15 % | 17 % | 12 % | | Norfolk, Virginia | 2 % | 5 % | 5 % | 9 % | | Combined Top 5 Markets | 37 % | 38 % | 37 % | 40 % | Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024 Provides a comparative analysis of financial performance for the current and prior-year quarters Key Financial Performance Comparison (In thousands, except percentages and per share information) | Item | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net operating revenue | $24,212 | $25,294 | $(1,082) | (4.3)% | | Station operating expenses | $21,963 | $22,459 | $(496) | (2.2)% | | Corporate general and administrative | $3,167 | $3,083 | $84 | 2.7 % | | Depreciation and amortization | $1,326 | $1,198 | $128 | 10.7 % | | Other operating expense, net | $54 | $971 | $(917) | N/M | | Operating loss | $(2,298) | $(2,417) | $119 | (4.9)% | | Interest expense | $107 | $43 | $64 | 148.8 % | | Interest income | $(222) | $(303) | $81 | N/M | | Other income | $(23) | — | $(23) | N/M | | Loss before income tax expense | $(2,160) | $(2,157) | $(3) | 0.1 % | | Income tax (benefit) expense | $(585) | $(580) | $(5) | 0.9 % | | Net loss | $(1,575) | $(1,577) | $2 | (0.1)% | | Earnings (loss) per share (diluted) | $(0.25) | $(0.25) | $— | — % | - Net operating revenue decreased by $1,082,000 (4.3%) YoY, driven by a $1,677,000 decrease in same-station revenue, partially offset by $595,000 from newly acquired stations[127] - Same-station revenue decline was primarily due to decreases in gross local revenue ($1,815,000) and gross national revenue ($432,000), partially offset by increases in gross interactive revenue ($342,000) and non-spot revenue ($97,000)[127] - Station operating expense decreased by $496,000 (2.2%) YoY, mainly due to a $1,115,000 decrease in same-station expenses, offset by $619,000 from new stations[128] - The decrease in same-station operating expense was driven by lower compensation-related expenses, bad debt, digital services, advertising, and repairs/maintenance[128] - Operating loss improved by $119,000, primarily due to a $917,000 decrease in other operating expense (lower loss on asset sales) partially offset by increased corporate G&A and depreciation/amortization[129] - Net loss slightly improved by $2,000, driven by the operating income increase, higher other income (insurance proceeds), and increased tax benefit, partially offset by higher interest expense and lower interest income[130] Liquidity and Capital Resources Discusses the company's cash flow, debt, capital expenditures, and ability to fund operations - The Credit Facility's maturity was extended to December 19, 2027, with interest rates tied to SOFR[131][134] - The Company had $5,000,000 in debt outstanding at March 31, 2025, and December 31, 2024, related to the Lafayette acquisition[136] - Unused borrowing capacity under the Revolving Credit Facility was approximately $45 million at March 31, 2025, and December 31, 2024[137] - Net cash provided by operating activities was $1,364,000 for Q1 2025, down from $3,803,000 for Q1 2024[138] - The Stock Buy-Back Program has a remaining authorization of $17.7 million; no shares were repurchased in Q1 2025, but the Company intends to use proceeds from non-core asset sales for future buybacks[139] - Capital expenditures for Q1 2025 were $696,000, with anticipated full-year 2025 capital expenditures of $4.0 million to $4.5 million, expected to be financed by operations[140] - A quarterly cash dividend of approximately $1.6 million was paid in Q1 2025[142] Summary Disclosures About Contractual Obligations and Commercial Commitments Summarizes future cash obligations from contracts and commercial commitments - Future cash obligations include Credit Facility terms, operating leases, programming contracts, and employment agreements[145] - Contractual cash obligations are anticipated to be financed through operations or additional borrowings under the Credit Facility[146] Recent Accounting Pronouncements Refers to the notes section for information on new accounting standards - Recent accounting pronouncements are described in Note 2 to the financial statements[147] Inflation Comments on the current and potential impact of inflation on the company's operations - The impact of inflation has not been significant to date, but the Company is observing higher costs for goods and services[148] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to the Company's annual report for a comprehensive discussion of market risk - No material changes to market risk information have occurred since the December 31, 2024, annual report on Form 10-K[149] Item 4. Controls and Procedures Management concluded that disclosure controls were not effective due to material weaknesses in internal control - Disclosure controls and procedures were deemed not effective as of March 31, 2025[150] - Material weakness identified in internal control over financial reporting: Ineffective controls over Broadcast Revenue Reconciliations due to lack of monitoring and segregation of duties within the Traffic Management system[151] - Material weakness identified in internal control over financial reporting: Ineffective controls over Digital Revenue Reconciliations due to lack of monitoring and documentation procedures[152] - Management is actively implementing remediation plans outlined in the 2024 Annual Report on Form 10-K, but the material weakness is not yet fully remediated as of March 31, 2025[155] - Despite the material weakness, management believes the Condensed Consolidated Financial Statements fairly present the Company's financial position and results[156] PART II OTHER INFORMATION Contains other required disclosures, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The Company is not currently a party to any material legal proceedings - The Company is not a party to any current legal proceedings material to its financial condition[160] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed - No material changes to risk factors have occurred since the December 31, 2024, annual report on Form 10-K[161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company made no unregistered sales of equity securities and did not repurchase any shares - No unregistered sales of equity securities were made during the fiscal quarter ended March 31, 2025[162] Class A Common Stock Repurchases (Three Months Ended March 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program | | :--- | :--- | :--- | :--- | :--- | | January 1 - January 31, 2025 | — | $— | — | $17,686,383 | | February 1 - February 28, 2025 | — | $— | — | $17,686,383 | | March 1 - March 31, 2025 | — | $— | — | $17,686,383 | | Total | — | $— | — | $17,686,383 | - The Company has a Stock Buy-Back Program with $17.7 million remaining authorization for Class A Common Stock repurchases[165] Item 5. Other Information No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading arrangements - No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2025[164] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q - Exhibits include certifications (31.1, 31.2, 32) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[166] SIGNATURES The report is duly signed on behalf of Saga Communications, Inc - The report was signed by Samuel D. Bush (EVP, CFO, Treasurer) and Catherine A. Bobinski (SVP, Chief Accounting Officer, Corporate Controller) on May 9, 2025[170]