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SALEM MEDIA GROUP, INC. /DE/ (SALM)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 revenue was $68.813M (-0.5% YoY), net loss was $2.207M (–$0.08 diluted EPS), operating income was $1.634M, and Adjusted EBITDA was $7.266M. Results outperformed prior Q4 guidance that had called for a 3–5% YoY revenue decline, aided by stronger-than-expected publishing titles and political ad spend .
  • Broadcast revenue rose 4.5% to $53.295M (SOI $10.140M), while Digital Media revenue fell 10.3% to $10.368M (operating income $1.697M) and Publishing revenue fell 21.3% to $5.150M (operating loss $0.551M). Political revenue reached $2.1M in Q4 vs $0.5M in Q4’21 .
  • Operating expenses (recurring) increased 5.7% YoY to $61.597M, with operating income down 92% YoY to $1.634M, reflecting a $2.325M Q4 impairment and higher expenses; adjusted EBITDA fell 33% YoY to $7.266M .
  • Q1 2023 outlook: revenue flat to -2% vs Q1’22 ($62.6M) and recurring OpEx +7–10% vs $55.8M. Balance sheet at 12/31/22: $114.7M 2028 notes, $39.0M 2024 notes, and $9.0M ABL outstanding; leverage ratio 4.88. Management subsequently initiated an issuance of $44.7M 2028 notes to retire the remaining 2024 notes (post-Q4) .
  • Near-term catalysts: stronger political advertising and resilient block programming; offset by national digital headwinds from social platform algorithm changes and third‑party cookie deprecation; continued investment in Salem News Channel and expansion into Miami Spanish-language conservative news/talk .

What Went Well and What Went Wrong

What Went Well

  • Broadcast segment growth and political strength: Broadcast revenue +4.5% YoY to $53.295M and political revenue rose to $2.1M vs $0.5M in Q4’21, supporting network and national spot demand .
  • Digital initiatives within Broadcast: Broadcast digital revenue grew 14% in Q4; management reiterated digital as “the best source of future growth” and a continued focus for investment .
  • Resilient block programming: Block programming revenue up 3.4% in Q4, led by National Christian ministry revenue (+4.8% in Q4; +9.7% for FY), highlighting durable demand for limited programming time .

What Went Wrong

  • National Digital headwinds: Digital Media revenue declined 10.3% and operating income fell 44% YoY, driven by Facebook algorithm changes reducing political content distribution and third‑party cookie blocking pressuring CPMs amid a weaker ad market .
  • Publishing softness: Publishing revenue fell 21.3% YoY and swung to a $0.551M operating loss on a lighter release slate vs a very strong Q4’21; though titles like Ted Cruz’s “Justice Corrupted” and Eric Metaxas’ “Letter to the American Church” performed well, the slate remained smaller than last year .
  • Margin pressure from expenses and impairments: Operating income fell 92% YoY to $1.634M on higher expenses (recurring +5.7%) and a $2.325M broadcast license impairment; adjusted EBITDA decreased 33% YoY to $7.266M .

Financial Results

Consolidated performance (sequential trend)

MetricQ2 2022Q3 2022Q4 2022
Revenue ($M)$68.682 $66.862 $68.813
Net Income (Loss) ($M)$9.117 $(11.885) $(2.207)
Diluted EPS ($)$0.33 $(0.44) $(0.08)
Operating Income ($M)$7.328 $(8.784) $1.634
EBITDA ($M)$14.465 $(5.667) $4.876
Adjusted EBITDA ($M)$11.688 $2.300 $7.266

Segment breakdown (Q4 2021 vs Q4 2022)

SegmentQ4 2021 ($M)Q4 2022 ($M)
Broadcast revenue$51.021 $53.295
Station Operating Income (SOI)$12.269 $10.140
Digital Media revenue$11.561 $10.368
Digital Media Operating Income$3.044 $1.697
Publishing revenue$6.547 $5.150
Publishing Operating Income (Loss)$0.171 $(0.551)

KPIs and balance sheet

KPI / Balance SheetQ4 2021Q4 2022
Political revenue (Q4, $M)$0.5 $2.1
Same-Station SOI (Q4, $M)$12.245 $10.328
Total Debt (end of period, $M)$159.4 (9/30/22) $162.7 (12/31/22)
2028 Notes outstanding ($M)$114.731 (9/30/22) $114.731 (12/31/22)
2024 Notes outstanding ($M)$44.685 (9/30/22) $39.035 (12/31/22)
ABL outstanding ($M)$0.0 (9/30/22) $9.0 (12/31/22)
Leverage ratio (12/31/22)—4.88

Notes: Management indicated post-Q4 issuance of $44.7M 2028 notes to retire the remaining 2024 notes (expected to close post-call) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Revenue YoY growthQ4 2022-3% to -5% vs Q4’21 -0.5% (actual) Outperformed guidance
Recurring OpEx YoY growthQ4 2022+4% to +7% vs Q4’21 +5.7% (actual) In line
Revenue vs prior yearQ1 2023—Flat to -2% vs Q1’22 ($62.6M) New
Recurring OpEx vs prior yearQ1 2023—+7% to +10% vs $55.8M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2022)Trend
Digital initiatives & monetizationQ2: Combined digital +14.5%; broadcast digital +27.9% (Salem Surround, SalemNOW, Podcasts driving) . Q3: National digital pressured by Facebook algorithm changes and 3rd‑party cookie blocking .Broadcast digital +14%; combined digital flat; digital remains best long-term growth vector despite macro and platform headwinds .Mixed: growth in broadcast digital, pressure in national digital .
Political advertisingQ2 political $1.5M; pacing above 2018/2020 . Q3 political $1.5M; strong midterm cycle .Q4 political $2.1M vs $0.5M in Q4’21 .Up into Q4 .
Publishing slateQ2: back-half weighted; Q2 down on lack of big titles . Q3: moved “2000 Mules” book to Q4; division down .Q4: Titles from Ted Cruz and Eric Metaxas performed, but segment revenue -21% and operating loss .Softer vs tough comps .
Macro / ad marketQ3: “Challenging quarter” with economic slowdown; spot softness, mortgage category weak .CEO: “slowing down of the overall economy” impacting ad-driven revenue; local spot weaker than national/network; mortgage category still soft .Worsened into Q4 .
Leverage & refinancingQ2: leverage 3.97; bond repurchases . Q3: leverage 4.38; total debt $159.4M .12/31/22 total debt $162.7M; leverage 4.88; plan to issue $44.7M 2028 notes to retire 2024 notes .Near-term higher leverage; steps to term out maturities .
M&A / Market ExpansionQ2: Denver land sale; Retirement Media acquisition . Q3: Agreements to acquire three Miami AMs; DayTradeSPY .Closed KKOL-AM (Seattle) and ISI Publishing in Q4; closed Miami stations Jan ’23; acquired George Gilder newsletter Feb ’23 .Continued tuck-ins, Miami buildout .

Management Commentary

  • “One thing that you'll hear throughout the call today is the slowing down of the overall economy and its impact on Salem, particularly on ad-driven revenue.”
  • “Overall digital revenue was flat in the quarter and is nearly 30% of total revenue… we still see digital revenue as the best source of future growth and where we will continue to invest our financial resources.”
  • “The revenue decline is due to Facebook… feature less political content… [and] blocking access to third-party cookie information… hurting digital advertising CPMs.”
  • “Our #1 use for free cash flow this year will continue to be pay down debt… we will continue to focus on paying down debt and deleveraging.”
  • “We will be issuing $44.7 million in new 7.125% 2028 notes to take out the remaining 6.75% 2024 notes… expect everything to close by the end of the month.”

Q&A Highlights

  • Pricing and demand: Block programming price increase of just under 3% for 2023; block programming remains resilient .
  • Near-term revenue cadence: January sluggish; February improved; early March tracking better, but overall industry headwinds persist; mortgage advertising remains weak .
  • Mix dynamics: National/network stronger than local in Q1, aided by Salem Podcast Network and Salem News Channel momentum; political lifted national spot in Q4 .
  • Capital allocation: Priority remains debt reduction; free cash flow directed to deleveraging .
  • Guidance variance: Q4 revenue did better than prior guide due to stronger publishing titles and better political than expected .
  • Expense outlook: Q1’23 expense growth (+7–10%) tied to investment in digital sales capacity and in-house fulfillment infrastructure; leveraging talent availability from broader tech layoffs .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2022 revenue and EPS was not available at the time of retrieval; as a result, we cannot provide a consensus beat/miss comparison at this time.
  • One covering analyst (NOBLE Capital) noted on the call that Salem “beat my estimates,” but this is not a proxy for consensus and should not be extrapolated .
  • Given actuals vs prior guidance (revenue down 0.5% vs -3% to -5% guided), models may adjust upward for Q4 revenue and political contribution, while incorporating higher recurring OpEx and continued national digital pressure .

Key Takeaways for Investors

  • Q4 revenue modestly outperformed prior guidance on stronger political and better-than-expected publishing, but margins compressed on expense growth and impairments; Adjusted EBITDA of $7.266M highlights ongoing profitability despite macro headwinds .
  • Broadcast remains the anchor (4.5% revenue growth), supported by political and block programming resilience; watch network/national vs local spread in early 2023 as management sees national ahead of local .
  • National Digital is the pressure point (–10.3% revenue; lower operating income) due to platform and privacy shifts; Salem’s strategy is to invest in owned-and-operated inventory and in-house fulfillment to sustain digital margins .
  • 2023 setup: Q1 revenue guide (flat to –2%) and OpEx growth (+7–10%) imply continued macro drag and investment spend; monitor conversion of digital hires into revenue and any tapering in expense growth in H2’23 .
  • Balance sheet actions reduce refinancing risk: plan to term-out remaining 2024 notes into 2028s; however, year-end leverage at 4.88x underscores the importance of sustained EBITDA and cash generation .
  • Expansion into Miami Spanish-language conservative talk and targeted acquisitions broaden reach and diversify revenue, but execution and monetization timelines merit tracking .
  • Tactical: Political cycles and block rate increases support near-term revenue; structurally, resolving national digital headwinds and scaling Salem News Channel/Podcast are key to medium-term multiple and FCF trajectory .