Company Overview

Saga Communications is a media company that owns and operates radio stations and related digital media properties in 27 markets across the United States. As of March 31, 2024, Saga owns or operates 79 FM stations, 31 AM stations, and 78 metro signals.

Saga generates the majority of its revenue from the sale of local radio advertising airtime. For the first quarter of 2024, approximately 90% of the company’s gross revenue came from local advertising sales.

Financial Highlights

Financial Metric	Q1 2024	Q1 2023	Change
Revenue	$24.7 million	$25.3 million	-2.5%
Operating Income	-$2.4 million	$0.9 million	-367.1%
Net Income	-$1.6 million	$0.9 million	-271.4%
Earnings Per Share	-$0.25	$0.15	-266.7%

• Saga’s revenue declined 2.5% compared to Q1 2023, driven by lower local advertising sales
• Operating income swung to a loss due to lower revenue and higher expenses
• Net income dropped significantly on lower operating income
• Earnings per share decreased in line with lower net income

Revenue Analysis

Saga’s revenue declined by $0.6 million or 2.5% compared to the first quarter of 2023. Key drivers included:

• A $1.2 million decrease in gross local advertising revenue
• A $0.2 million decrease in non-advertising revenue
• Partially offset by a $0.6 million increase in digital advertising revenue
• And a $0.1 million increase in political advertising

The decreases in local and non-advertising revenue impacted a number of Saga’s markets, especially some of its larger markets like Columbus, Des Moines, Milwaukee, and Norfolk.

Expense Analysis

Total expenses increased by $1.8 million or 5.5% over Q1 2023:

• Station operating expenses rose $1.3 million or 5.9%, driven primarily by higher compensation, bad debt, healthcare, streaming, survey expenses, insurance, repairs and maintenance, and music licensing costs
• Corporate G&A expenses increased $0.5 million or 19.6%, due mainly to higher stock compensation, personnel costs, travel expenses, and legal fees
• Other operating expenses were $0.9 million higher than Q1 2023 due to losses on the sale of certain station assets

Profitability Analysis

The combination of declining revenues and increasing expenses led to a $3.3 million decrease in operating income compared to Q1 2023. In addition, income tax expense was $0.9 million lower due to the pretax loss in Q1 2024.

As a result, net income dropped by $2.5 million and earnings per share declined by $0.40 compared to the first quarter of the prior year.

Cash Flow and Balance Sheet

• Saga generated $3.8 million of cash flow from operations in Q1 2024 to fund investing activities and dividends
• The company has approximately $50 million of available borrowing capacity under its $100 million revolving credit facility
• Saga paid $5.3 million in dividends in the first quarter of 2024
• Capital expenditures were $1.1 million in Q1 2024 and are expected to range from $5-5.5 million for the full year

Outlook

• Saga is continuing to expand its digital media presence to provide listeners with online and mobile access
• The company is actively evaluating opportunities to expand its platform through additional radio station acquisitions
• Saga faces an uncertain economic environment with high inflation which could negatively impact advertising demand
• However, smaller markets like Saga’s may be more resilient in a downturn compared to major metropolitan markets

In summary, Saga Communications experienced declining profitability in the first quarter of 2024 driven by softness in advertising revenue and expense growth. The company continues to diversify its business into digital channels while maintaining a strong balance sheet to support growth initiatives. Economic conditions remain a source of uncertainty heading into the rest of 2024.