8-K: Saga Communications Declares Variable Dividend and Reports Mixed 2023 Results

Saga Communications announced a variable dividend of $0.60 per share and reported a decrease in revenue for both the fourth quarter and full year 2023, impacted by lower political advertising revenue.

Summary

• Saga Communications declared a variable dividend of $0.60 per share, payable on April 5, 2024, to shareholders of record on March 18, 2024.
• The total variable dividend payout will be approximately $3.8 million, funded by the company's cash reserves.
• Net revenue for the fourth quarter of 2023 decreased by 3.3% to $29.1 million, compared to $30.1 million in the same period last year.
• The decrease in revenue was primarily due to a significant drop in political advertising revenue, which was $407 thousand this quarter compared to $1.9 million last year.
• Excluding political revenue, the company's gross revenue for the quarter would have increased by approximately 1%.
• Station operating expenses increased by 1.9% to $23.3 million for the quarter.
• Operating income for the quarter was $2.8 million, down from $4.9 million in the same quarter last year.
• Station operating income, a non-GAAP measure, decreased by 17.2% to $7.1 million for the quarter.
• Net income for the quarter was $2.5 million, compared to $4.3 million in the fourth quarter of the previous year.
• Diluted earnings per share were $0.37 for the fourth quarter of 2023.
• For the full year 2023, net revenue decreased by 1.8% to $112.8 million, compared to $114.9 million in 2022.
• Political revenue for the year was $944 thousand, compared to $3.6 million in the previous year.
• Without political revenue, the company's gross revenue for the year would have been approximately flat.
• Station operating expenses increased by 3.0% to $90.2 million for the year.
• Operating income for the year was $11.5 million, down from $13.1 million in the previous year.
• Station operating income decreased by 15.0% to $27.4 million for the year.
• Net income for the year was $9.5 million, compared to $9.2 million in the previous year.
• Diluted earnings per share were $1.52 for the full year 2023.
• The company will pay a regular quarterly cash dividend of $0.25 per share on March 8, 2024.
• The company paid a special cash dividend of $2.00 per share on January 12, 2024.
• The company has paid over $130 million in dividends to shareholders since 2012.
• The company's cash and short-term investments were $40.2 million as of December 31, 2023, and $30.4 million as of March 4, 2024.
• Capital expenditures are expected to be between $5.0 and $5.5 million in 2024.
• The company is acquiring radio stations in Lafayette, IN for $5.3 million, expected to close in the second quarter of 2024.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to decreased revenue and operating income, although the dividend announcement and acquisition are positive. The overall financial performance is weaker than the previous year.

Positives

• The company declared a variable dividend of $0.60 per share, demonstrating a commitment to returning value to shareholders.
• The company has a strong cash position with $40.2 million in cash and short-term investments as of December 31, 2023.
• The company has paid over $130 million in dividends since 2012.
• The company is acquiring new radio stations in Lafayette, IN, which could expand its market presence.
• Capital expenditures decreased from $6.0 million to $4.4 million year over year.

Negatives

• Net revenue decreased by 3.3% for the fourth quarter and 1.8% for the full year, indicating a decline in overall sales.
• Political advertising revenue significantly decreased, impacting both quarterly and annual results.
• Station operating income decreased by 17.2% for the quarter and 15.0% for the year, suggesting a decline in operational profitability.
• Operating income decreased for both the quarter and the full year.
• Net income decreased for the quarter.

Risks

• The company's performance is susceptible to fluctuations in political advertising revenue.
• The radio broadcast industry is facing challenges from digital media and changing consumer habits.
• The company's future performance is subject to economic changes and industry-specific risks.
• The company's capital expenditure plans could impact cash flow.

Future Outlook

The company intends to pay regular quarterly cash dividends in the future and will consider special cash dividends, variable dividends, and stock buybacks. The company expects to spend approximately $5.0 to $5.5 million for capital expenditures during 2024. The acquisition of radio stations in Lafayette, IN is expected to close during the second quarter of 2024.

Management Comments

• The Board of Directors declared a variable dividend of $0.60 per share in conjunction with the company's variable dividend policy.
• The variable dividend will be funded by cash on the company's balance sheet.
• The company intends to pay regular quarterly cash dividends in the future.
• The Board of Directors will also continue to consider declaring special cash dividends, variable dividends and stock buybacks in the future.
• The company expects to spend approximately $5.0 to $5.5 million for capital expenditures during 2024.

Industry Context

The results reflect the ongoing challenges in the radio broadcasting industry, particularly the impact of reduced political advertising revenue. The company's focus on digital and non-traditional revenue initiatives is a response to these industry trends. The acquisition of new stations is a common strategy for growth in the industry.

Comparison to Industry Standards

• Saga's performance is mixed compared to other radio broadcasting companies. While some companies have seen growth in digital revenue, Saga's core radio business is facing headwinds.
• Companies like iHeartMedia and Cumulus Media have also reported challenges in traditional radio revenue, but have been more aggressive in diversifying into digital and podcasting.
• Saga's dividend policy is more generous than some of its peers, which may be attractive to income-focused investors.
• The decrease in political revenue is a common theme across the industry, as the 2023 election cycle was less active than previous years.
• Saga's capital expenditure plans are in line with industry averages for maintaining and upgrading broadcast infrastructure.

Stakeholder Impact

• Shareholders will receive a variable dividend of $0.60 per share.
• Shareholders will receive a regular quarterly dividend of $0.25 per share.
• Employees may be impacted by the company's financial performance and strategic decisions.
• Customers may see changes in the company's offerings as it focuses on digital and non-traditional revenue initiatives.
• Suppliers may be impacted by the company's capital expenditure plans.

Next Steps

• The company will pay a regular quarterly cash dividend on March 8, 2024.
• The company will pay a variable dividend on April 5, 2024.
• The acquisition of radio stations in Lafayette, IN is expected to close in the second quarter of 2024.
• The company will hold a conference call on March 7, 2024, to discuss the results.

Key Dates

Keywords

dividends, radio, revenue, financial results, broadcasting, Saga Communications, political advertising, EBITDA, capital expenditures