Salem media group, inc. announces fourth quarter 2020 total revenue of $64.5 million
Irving, texas--(business wire)--salem media group, inc. (nasdaq: salm) released its results for the three and twelve months ended december 31, 2020. fourth quarter 2020 highlights net broadcast revenue increased 5.9% compared to the third quarter of 2020 and decreased 4.8% compared to the fourth quarter of 2019; total broadcast advertising/spot revenue increased 21.1% compared to the third quarter of 2020 and decreased 10.5% compared to the fourth quarter of 2019; station operating income (“soi”) (1) increased 6.7% compared to the third quarter of 2020 and decreased 5.3% compared to the fourth quarter of 2019; digital media revenue increased 14.6% compared to the third quarter of 2020 and increased 14.5% compared to the fourth quarter of 2019; combined digital revenue, which includes digital revenue in the broadcast division and digital division, increased 2.9% compared to the third quarter of 2020 and increased 24.8% compared to the fourth quarter of 2019; combined digital revenue represents 28.0% of fourth quarter 2020 total revenue combined digital revenue represents 28.0% of fourth quarter 2020 total revenue adjusted ebitda increased 3.0% compared to the third quarter of 2020 and decreased 3.0% compared to the fourth quarter of 2019; and $6.3 million in cash at december 31, 2020 and $19.9 million net availability on the asset based revolving credit facility (“abl facility”) fourth quarter 2020 results for the quarter ended december 31, 2020 compared to the quarter ended december 31, 2019: consolidated total revenue decreased 0.2% to $64.5 million from $64.6 million; total operating expenses decreased 7.7% to $58.1 million from $63.0 million; operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (1) increased 0.3% to $54.6 million from $54.4 million; operating income increased 283.0% to $6.4 million from $1.7 million; the company’s net income increased $7.8 million to $3.3 million, or $0.12 net income per diluted share compared to a net loss of $4.5 million, or $0.17 net loss per share; ebitda (1) increased 42.1% to $9.8 million from $6.9 million; adjusted ebitda (1) decreased 3.0% to $9.9 million from $10.2 million; and net cash used by operating activities decreased to $0.3 million from net cash provided by operating activities of $2.5 million. broadcast net broadcast revenue decreased 4.8% to $48.1 million from $50.5 million; soi (1) decreased 5.3% to $11.8 million from $12.5 million; same station (1) net broadcast revenue decreased 4.0% to $47.7 million from $49.8 million; and same station soi (1) decreased 7.1% to $11.9 million from $12.9 million. digital media digital media revenue increased 14.5% to $11.2 million from $9.8 million; and digital media operating income (1) increased 31.6% to $2.6 million from $2.0 million. publishing publishing revenue increased 19.0% to $5.2 million from $4.3 million; and publishing operating loss (1) decreased 60.8% to $0.4 million from $0.9 million. included in the results for the quarter ended december 31, 2020 are: a $0.1 million net loss on the disposition of assets which reflects various fixed asset disposals; and a $0.1 million non-cash compensation charge related to the expensing of stock options. included in the results for the quarter ended december 31, 2019 are: a $2.4 million impairment charge ($1.8 million, net of tax, or $0.07 per share) related to the goodwill in both the company’s digital media and publishing reporting segments; a $1.0 million impairment charge ($0.7 million, net of tax, or $0.03 per share), of which $17,000 related to impairment of mastheads, and the remainder to broadcast licenses. impairments were recorded in the company’s tampa, florida market; a $1.1 million ($0.8 million, net of tax, or $0.03 per share) net loss on the disposition of assets which includes a $1.5 million estimated pre-tax loss for the pending sale of radio station wbzw-am in orlando, florida, offset by a $0.5 million reduction of the loss recorded for the sale of nine radio stations based on the actual closing costs incurred and a reconciliation of total station assets to assets included in the sale; a $1.2 million gain ($0.9 million, net of tax, or $0.03 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; and a $0.2 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options primarily consisting of: $0.1 million non-cash compensation charge included in corporate expenses; and the remaining $0.1 million non-cash compensation charge included in broadcast and digital media. $0.1 million non-cash compensation charge included in corporate expenses; and the remaining $0.1 million non-cash compensation charge included in broadcast and digital media. per share numbers are calculated based on 26,791,353 diluted weighted average shares for the quarter ended december 31, 2020, and 26,683,363 diluted weighted average shares for the quarter ended december 31, 2019. year to date 2020 results for the twelve months ended december 31, 2020 compared to the twelve months ended december 31, 2019: consolidated total revenue decreased 7.0% to $236.2 million from $253.9 million; total operating expenses decreased 6.9% to $244.0 million from $262.1 million; operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (1) decreased 3.0% to $210.5 million from $217.1 million; the company’s net operating loss decreased 5.5% to $7.8 million from $8.2 million; the company’s net loss increased to $54.1 million, or $2.03 net loss per share from $27.8 million, or $1.05 net loss per share; ebitda (1) decreased 33.7% to $6.3 million from $9.6 million; adjusted ebitda (1) decreased 30.3% to $25.8 million from $37.0 million; and net cash provided by operating activities increased 34.3% to $22.9 million from $17.0 million. broadcast net broadcast revenue decreased 7.9% to $178.1 million from $193.3 million; soi (1) decreased 15.3% to $37.2 million from $43.9 million; same station (1) net broadcast revenue decreased 5.9% to $175.4 million from $186.4 million; and same station soi (1) decreased 16.8% to $37.6 million from $45.2 million. digital media digital media revenue increased 1.1% to $39.6 million from $39.2 million; and digital media operating income (1) decreased 5.9% to $7.9 million from $8.4 million. publishing publishing revenue decreased 13.4% to $18.5 million from $21.4 million; and publishing operating loss (1) increased 259.6% to $3.4 million from $1.0 million. included in the results for the twelve months ended december 31, 2020 are: a $1.6 million ($1.2 million, net of tax, or $0.04 per share) net loss on the disposition of assets which includes a $1.4 million estimated pre-tax loss for the write-off of miami assets as a result of the company’s plan to exit the market and reflects various fixed asset disposals; a $17.3 million impairment charge ($12.8 million, net of tax, or $0.48 per share), of which $0.3 million related to impairment of mastheads, and the remainder to broadcast licenses due to the financial impact of the covid-19 pandemic; a $0.3 million impairment charge ($0.2 million, net of tax, or $0.01 per share) related to the company’s goodwill; and a $0.3 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options primarily consisting of: $0.1 million non-cash compensation charge included in corporate expenses; $0.1 million non-cash compensation charge included in broadcast operating expenses; and the remaining $0.1 million non-cash compensation charge included in digital media and publishing operating expenses. $0.1 million non-cash compensation charge included in corporate expenses; $0.1 million non-cash compensation charge included in broadcast operating expenses; and the remaining $0.1 million non-cash compensation charge included in digital media and publishing operating expenses. included in the results for the twelve months ended december 31, 2019 are: a $22.3 million ($16.5 million, net of tax, or $0.62 per share) net loss on the disposition of assets which includes: a $9.4 million pre-tax loss for the sale of nine radio stations wafs-am in atlanta, georgia, wwdj-am in boston, massachusetts, whkz-am in cleveland, ohio, kexb-am (formerly ktno-am) in dallas, texas, kdmt-am in denver, colorado, ktek-am in houston, texas, krdy-am in san antonio, texas and kxfn-am and wsdz-am in st. louis, missouri; a $4.7 million pre-tax loss from the sale of four radio stations wwmi-am and wlcc-am in tampa, florida and wzab-am and wocn-am (formerly wkat-am) in miami, florida; a $3.8 million pre-tax loss on the sale of radio station wspz-am in washington, d.c., a $1.5 million estimated pre-tax loss for the pending sale of radio station wbzw-am in orlando, florida; a $1.6 million pre-tax loss from the sale of radio station wdyz-am (formerly worl-am) in orlando, florida; a $1.3 million pre-tax loss on the exchange of radio station kkol-am in seattle, washington for kpam-am in portland, oregon; a $0.2 million pre-tax loss on the sale mike turner’s line of investment products; a $0.2 million pre-tax loss on the sale of humanevents.com; a $0.4 million pre-tax gain on the sale of a portion of land on the company’s transmitter site in miami, florida; and a $0.1 million pre-tax gain on the sale of newport natural health; a $9.4 million pre-tax loss for the sale of nine radio stations wafs-am in atlanta, georgia, wwdj-am in boston, massachusetts, whkz-am in cleveland, ohio, kexb-am (formerly ktno-am) in dallas, texas, kdmt-am in denver, colorado, ktek-am in houston, texas, krdy-am in san antonio, texas and kxfn-am and wsdz-am in st. louis, missouri; a $4.7 million pre-tax loss from the sale of four radio stations wwmi-am and wlcc-am in tampa, florida and wzab-am and wocn-am (formerly wkat-am) in miami, florida; a $3.8 million pre-tax loss on the sale of radio station wspz-am in washington, d.c., a $1.5 million estimated pre-tax loss for the pending sale of radio station wbzw-am in orlando, florida; a $1.6 million pre-tax loss from the sale of radio station wdyz-am (formerly worl-am) in orlando, florida; a $1.3 million pre-tax loss on the exchange of radio station kkol-am in seattle, washington for kpam-am in portland, oregon; a $0.2 million pre-tax loss on the sale mike turner’s line of investment products; a $0.2 million pre-tax loss on the sale of humanevents.com; a $0.4 million pre-tax gain on the sale of a portion of land on the company’s transmitter site in miami, florida; and a $0.1 million pre-tax gain on the sale of newport natural health; a $2.9 million impairment charge ($2.2 million, net of tax, and $0.08 per share) of which $17,000 related to impairment of mastheads and the remainder to broadcast licenses. impairments were recorded in the company’s louisville, philadelphia, portland, san francisco and tampa markets; a $2.4 million impairment charge ($1.8 million, net of tax, or $0.07 per share) related to the goodwill in both the company’s digital media and publishing reporting segments; a $1.7 million gain ($1.2 million, net of tax, or $0.05 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; a $0.2 million one-time expense ($0.1 million, net of tax) associated with the adoption of asc 842 and a $1.5 million non-cash compensation charge ($1.1 million, net of tax, or $0.04 per share) related to the expensing of stock options and restricted stock primarily consisting of: $0.9 million non-cash compensation charge included in corporate expenses; $0.5 million non-cash compensation charge included in broadcast operating expenses; and the remaining $0.1 million non-cash compensation charge included in digital media and publishing operating expenses. $0.9 million non-cash compensation charge included in corporate expenses; $0.5 million non-cash compensation charge included in broadcast operating expenses; and the remaining $0.1 million non-cash compensation charge included in digital media and publishing operating expenses. per share numbers are calculated based on 26,683,363 diluted weighted average shares for the twelve months ended december 31, 2020, and 26,502,934 diluted weighted average shares for the twelve months ended december 31, 2019. balance sheet as of december 31, 2020, the company had $216.3 million outstanding on the 6.75% senior secured notes due 2024 (the “notes”) and $5.0 million outstanding on the abl facility. acquisitions and divestitures there were no transactions completed since october 1, 2020: pending transactions: in january 2021, the company applied for $11.2 million in ppp loans available under the caa for the company’s radio station clusters and its networks. the company has received $8.4 million in funding and expect to receive the remaining amount in the next several weeks. on february 4, 2021, the company entered into an asset purchase agreement (“apa”) to acquire kdia-am and kdya-am in san francisco, california for $0.6 million. the purchase is subject to the approval of the fcc and is expected to close in the first half of 2021. on september 10, 2020, the company entered an apa to sell radio station wkat-am and an fm translator in miami, florida, for $3.5 million in cash. the company will exit the miami market upon the close of this transaction. the company entered a local marketing agreement under which the buyer will being programming the station in november 2020. the company recognized an estimated pre-tax loss of approximately $1.4 million during the quarter ending september 30, 2020, which reflects the sale price as compared to the carrying value of the assets sold, the estimated closing costs, and the write-off of the remaining miami assets as a result of exiting this market. this transaction is subject to the approval of the fcc and is expected to close during the first half of 2021. on february 5, 2020, the company entered an apa with word broadcasting to sell radio stations wfia-am, wfia-fm and wgtk-am in louisville, kentucky for $4.0 million with credits applied from amounts previously paid, including a portion of the monthly fees paid under a time brokerage agreement (“tba.”) due to changes in debt markets, the transaction was not funded, and it is uncertain when, or if, the transaction will close. word broadcasting continues to program the stations under a tba that began in january 2017. conference call information salem will host a teleconference to discuss its results on march 4, 2021 at 12:00 p.m. central time. to access the teleconference, please dial (877) 524-8416, and then ask to be joined into the salem media group fourth quarter 2020 call or listen via the investor relations portion of the company’s website, located at investor.salemmedia.com. a replay of the teleconference will be available through march 18, 2021 and can be heard by dialing (877) 660-6853, passcode 13714419 or on the investor relations portion of the company’s website, located at investor.salemmedia.com. follow us on twitter @salemmediagrp. a reconciliation of non-gaap operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to the most directly comparable gaap measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-gaap financial measure, in particular, the change in the estimated fair value of earn-out consideration, impairments and gains or losses from the disposition of fixed assets. the company expects the variability of the above charges may have a significant, and potentially unpredictable, impact on its future gaap financial results. about salem media group, inc. salem media group is america’s leading multimedia company specializing in christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. each day salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. with its unique programming focus, salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the christian and conservative media landscape. learn more about salem media group, inc., at www.salemmedia.com, facebook and twitter (@salemmediagrp). forward-looking statements statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the private securities litigation reform act of 1995. actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of salem to close and integrate announced transactions, market acceptance of salem’s radio station formats, competition from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in salem's reports on forms 10-k, 10-q, 8-k and other filings filed with or furnished to the securities and exchange commission. readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events. (1) regulation g management uses certain non-gaap financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements. the company uses these non-gaap financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs. the company’s presentation of these non-gaap financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with gaap. regulation g defines and prescribes the conditions under which certain non-gaap financial information may be presented in this earnings release. the company closely monitors ebitda, adjusted ebitda, station operating income (“soi”), same station net broadcast revenue, same station broadcast operating expenses, same station operating income, digital media operating income, publishing operating income (loss), and operating expenses excluding gains or losses on the disposition of assets, stock-based compensation, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation and amortization, all of which are non-gaap financial measures. the company believes that these non-gaap financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance. these non-gaap financial measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance. the company defines station operating income (“soi”) as net broadcast revenue minus broadcast operating expenses. the company defines digital media operating income as net digital media revenue minus digital media operating expenses. the company defines publishing operating income (loss) as net publishing revenue minus publishing operating expenses. the company defines ebitda as net income before interest, taxes, depreciation, and amortization. the company defines adjusted ebitda as ebitda before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before gain on bargain purchase, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. soi, digital media operating income, publishing operating income (loss), ebitda and adjusted ebitda are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. soi, digital media operating income, publishing operating income (loss), ebitda and adjusted ebitda are not measures of liquidity or of performance in accordance with gaap and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with gaap. the company’s definitions of soi, digital media operating income, publishing operating income (loss), ebitda and adjusted ebitda are not necessarily comparable to similarly titled measures reported by other companies. the company defines adjusted free cash flow as adjusted ebitda less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. the company considers adjusted free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. a limitation of adjusted free cash flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. the company uses adjusted free cash flow, a non-gaap liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. the company’s presentation of adjusted free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with gaap. the company’s definition of adjusted free cash flow is not necessarily comparable to similarly titled measures reported by other companies. the company defines same station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. the company defines same station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. the company defines same station soi as same station net broadcast revenue less same station broadcast operating expenses. same station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. same station operating results for a full calendar year are calculated as the sum of the same station-results for each of the four quarters of that year. the company uses same station operating results, a non-gaap financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business. the company believes that same station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format. the company’s presentation of same station operating results is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with gaap. the company’s definition of same station operating results is not necessarily comparable to similarly titled measures reported by other companies. for all non-gaap financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another. the supplemental information tables that follow the condensed consolidated financial statements provide reconciliations of the non-gaap financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with gaap. the company uses non-gaap financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. the company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with gaap. salem media group, inc. condensed consolidated statements of operations (in thousands, except share and per share data) three months ended twelve months ended december 31, december 31, 2019 2020 2019 2020 (unaudited) net broadcast revenue $ 50,485 $ 48,086 $ 193,339 $ 178,127 net digital media revenue 9,816 11,238 39,165 39,593 net publishing revenue 4,332 5,153 21,394 18,519 total revenue 64,633 64,477 253,898 236,239 operating expenses: broadcast operating expenses 37,973 36,238 149,439 140,942 digital media operating expenses 7,813 8,602 30,801 31,725 publishing operating expenses 5,236 5,507 22,348 21,950 unallocated corporate expenses 3,554 4,285 15,940 16,194 change in the estimated fair value of contingent earn-out consideration (1) — (41) (12) impairment of indefinite-lived long-term assets other than goodwill 1,010 — 2,925 17,254 impairment of goodwill 2,427 — 2,427 307 depreciation and amortization 3,838 3,372 15,934 14,058 net (gain) loss on the disposition of assets 1,114 81 22,326 1,575 total operating expenses 62,964 58,085 262,099 243,993 operating income (loss) 1,669 6,392 (8,201) (7,754) other income (expense): interest income 1 — 2 1 interest expense (4,290) (4,006) (17,496) (16,075) gain on early retirement of long-term debt 1,244 — 1,670 49 net miscellaneous income and (expenses) 144 36 163 (9) net income (loss) before income taxes (1,232) 2,422 (23,862) (23,788) provision for (benefit from) income taxes 3,280 (906) 3,977 30,274 net income (loss) $ (4,512) $ 3,328 $ (27,839) $ (54,062) basic income (loss) per share class a and class b common stock $ (0.17) $ 0.12 $ (1.05) $ (2.03) diluted income (loss) per share class a and class b common stock $ (0.17) $ 0.12 $ (1.05) $ (2.03) basic weighted average class a and class b common stock shares outstanding 26,683,363 26,683,363 26,502,934 26,683,363 diluted weighted average class a and class b common stock shares outstanding 26,683,363 26,791,353 26,502,934 26,683,363 salem media group, inc. condensed consolidated balance sheets (in thousands) december 31, 2019 december 31, 2020 (unaudited) assets cash $ 6 $ 6,325 trade accounts receivable, net 30,824 24,469 other current assets 10,893 15,002 property and equipment, net 87,673 79,122 operating and financing lease right-of-use assets 54,730 48,355 intangible assets, net 369,216 347,547 deferred financing costs 224 213 other assets 4,864 3,538 total assets $ 558,430 $ 524,571 liabilities and stockholders’ equity current liabilities $ 53,134 $ 50,860 long-term debt 216,468 213,764 operating and financing lease liabilities, less current portion 54,174 47,847 deferred income taxes 38,778 68,883 other liabilities 6,213 7,938 stockholders’ equity 189,663 135,279 total liabilities and stockholders’ equity $ 558,430 $ 524,571 salem media group, inc. condensed consolidated statements of stockholders’ equity (dollars in thousands, except share and per share data) class a class b common stock common stock additional paid-in accumulated treasury shares amount shares amount capital deficit stock total stockholders’ equity, december 31, 2019 23,447,317 $ 227 5,553,696 $ 56 $ 246,680 $ (23,294) $(34,006) $ 189,663 stock-based compensation — — — — 103 — — 103 cash distributions — — — — — (667) — (667) net loss — — — — — (55,204) — (55,204) stockholders’ equity, march 31, 2020 23,447,317 $ 227 5,553,696 $ 56 $ 246,783 $ (79,165) $(34,006) $ 133,895 distributions per share $ 0.025 $ 0.025 stock-based compensation — — — — 96 — — 96 net loss — — — — — (2,515) — (2,515) stockholders’ equity, june 30, 2020 23,447,317 $ 227 5,553,696 $ 56 $ 246,879 $ (81,680) $(34,006) $ 131,476 stock-based compensation — — — — 74 — — 74 net income — — — — — 329 — 329 stockholders’ equity, september 30, 2020 23,447,317 $ 227 5,553,696 $ 56 $ 246,953 $ (81,351) $(34,006) $ 131,879 stock-based compensation — — — — 72 — — 72 net income — — — — — 3,328 — 3,328 stockholders’ equity, december 31, 2020 23,447,317 $ 227 5,553,696 $ 56 $ 247,025 $ (78,023) $(34,006) $ 135,279 salem media group, inc. condensed consolidated statements of stockholders’ equity (cont’d) (dollars in thousands, except share and per share data) class a class b common stock common stock additional paid-in accumulated treasury shares amount shares amount capital earnings (deficit) stock total stockholders’ equity, december 31, 2018 22,950,066 $ 227 5,553,696 $ 56 $ 245,220 $ 10,372 $(34,006) $ 221,869 stock-based compensation — — — — 176 — — 176 cash distributions — — — — — (1,702) — (1,702) net income — — — — — 322 — 322 stockholders’ equity, march 31, 2019 22,950,066 $ 227 5,553,696 $ 56 $ 245,396 $ 8,992 $(34,006) $ 220,665 distributions per share $ 0.065 $ 0.065 stock-based compensation — — — — 936 — — 936 options exercised 200 — — — — — — — lapse of restricted shares 389,061 — — — — — — — cash distributions — — — — — (1,728) — (1,728) net loss — — — — — (3,644) — (3,644) stockholders’ equity, june 30, 2019 23,339,327 $ 227 5,553,696 $ 56 $ 246,332 $ 3,620 $(34,006) $ 216,229 distributions per share $ 0.065 $ 0.065 stock-based compensation — — — — 177 — — 177 options exercised — — — — — — — — lapse of restricted shares 41,323 — — — — — — — cash distributions — — — — — (1,730) — (1,730) net loss — — — — — (20,005) — (20,005) stockholders’ equity, september 30, 2019 23,380,650 $ 227 5,553,696 $ 56 $ 246,509 $ (18,115) $(34,006) $ 194,671 distributions per share $ 0.065 $ 0.065 stock-based compensation — — — — 171 — — 171 options exercised — — — — — — — — lapse of restricted shares 66,667 — — — — — — — cash distributions — — — — — (667) — (667) net loss — — — — — (4,512) — (4,512) stockholders’ equity, december 31, 2019 23,447,317 $ 227 5,553,696 $ 56 $ 246,680 $ (23,294) $(34,006) $ 189,663 distributions per share $ 0.025 $ 0.025 salem media group, inc. condensed consolidated statements of cash flows (dollars in thousands) (unaudited) three months ended december 31, twelve months ended december 31, 2019 2020 2019 2020 operating activities net income (loss) $ (4,512) $ 3,328 $ (27,839) $ (54,062) adjustments to reconcile net income (loss) to net cash provided by operating activities: non-cash stock-based compensation 171 72 1,460 345 depreciation and amortization 3,838 3,372 15,934 14,058 amortization of deferred financing costs 294 214 1,060 889 non-cash lease expense 2,291 2,210 9,026 8,955 accretion of acquisition-related deferred payments and contingent consideration 3 — 5 — provision for bad debts 659 217 2,066 4,339 deferred income taxes 3,019 (849) 3,506 30,105 impairment of indefinite-lived long-term assets other than goodwill 1,010 — 2,925 17,254 impairment of goodwill 2,427 — 2,427 307 change in the estimated fair value of contingent earn-out consideration (1) — (41) (12) net (gain) loss on the disposition of assets 1,114 81 22,326 1,575 gain on early retirement of long-term debt (1,244) — (1,670) (49) changes in operating assets and liabilities: accounts receivable and unbilled revenue 1,768 (1,049) (595) 1,516 inventories (68) 123 (440) 222 prepaid expenses and other current assets 279 386 617 (957) accounts payable and accrued expenses (6,513) (2,030) (2,009) 3,841 operating lease liabilities (2,129) (2,758) (10,112) (9,154) contract liabilities 53 (3,011) (1,657) 2,263 deferred rent income (79) (40) (209) (308) other liabilities (18) (562) (34) 1,692 income taxes payable 177 2 264 32 net cash provided by (used in) operating activities $ 2,539 $ (294) $ 17,010 $ 22,851 investing activities cash paid for capital expenditures net of tenant improvement allowances (1,693) (1,051) (7,757) (4,616) capital expenditures reimbursable under tenant improvement allowances and trade agreements (25) (11) (28) (151) purchases of broadcast assets and radio stations — — (35) — purchases of digital media businesses and assets — — (1,250) (400) proceeds from sale of assets 16,539 1 20,741 189 proceeds from the cash surrender value of life insurance policies — — — 2,363 other (13) 24 (738) (329) net cash provided by (used in) investing activities $ 14,808 $ (1,037) $ 10,933 $ (2,944) financing activities payments to repurchase 6.75% senior secured notes (10,628) — (16,751) (3,392) proceeds from borrowings under abl facility 25,423 1,268 111,790 39,894 payments on abl facility (31,062) (12,868) (119,024) (47,320) refund (payments) of debt issuance costs (1) (17) (44) (141) payments of acquisition-related contingent earn-out consideration — (7) — (7) payments on financing lease liabilities (18) (18) (83) (70) payment of cash distribution on common stock (667) — (5,827) (667) book overdraft (395) — 1,885 (1,885) net cash used in financing activities $ (17,348) $ (11,642) $ (28,054) $ (13,588) net increase (decrease) in cash and cash equivalents $ (1) $ (12,973) $ (111) $ 6,319 cash and cash equivalents at beginning of year 7 19,298 117 6 cash and cash equivalents at end of period $ 6 $ 6,325 $ 6 $ 6,325 salem media group, inc. supplemental information (in thousands) three months ended twelve months ended december 31, december 31, 2019 2020 2019 2020 (unaudited) reconciliation of total operating expenses to operating expenses excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments and depreciation and amortization expense (recurring operating expenses) operating expenses $ 62,964 $ 58,085 $ 262,099 $ 243,993 less depreciation and amortization expense (3,838) (3,372) (15,934) (14,058) less change in estimated fair value of contingent earn-out consideration 1 — 41 12 less impairment of indefinite-lived long-term assets other than goodwill (1,010) — (2,925) (17,254) less impairment of goodwill (2,427) — (2,427) (307) less net gain (loss) on the disposition of assets (1,114) (81) (22,326) (1,575) less stock-based compensation expense (171) (72) (1,460) (345) total recurring operating expenses $ 54,405 $ 54,560 $ 217,068 $ 210,466 reconciliation of net broadcast revenue to same station net broadcast revenue net broadcast revenue $ 50,485 $ 48,086 $ 193,339 $ 178,127 net broadcast revenue – acquisitions — — — — net broadcast revenue – dispositions (478) (148) (4,820) (220) net broadcast revenue – format change (250) (191) (2,124) (2,519) same station net broadcast revenue $ 49,757 $ 47,747 $ 186,395 $ 175,388 reconciliation of broadcast operating expenses to same station broadcast operating expenses broadcast operating expenses $ 37,973 $ 36,238 $ 149,439 $ 140,942 broadcast operating expenses – acquisitions (1) — (1) (2) broadcast operating expenses – dispositions (914) (264) (6,075) (374) broadcast operating expenses – format change (160) (172) (2,174) (2,792) same station broadcast operating expenses $ 36,898 $ 35,802 $ 141,189 $ 137,774 reconciliation of soi to same station soi station operating income $ 12,512 $ 11,848 $ 43,900 $ 37,185 station operating loss – acquisitions 1 — 1 2 station operating loss – dispositions 436 116 1,255 154 station operating (income) loss – format change (90) (19) 50 273 same station - station operating income $ 12,859 $ 11,945 $ 45,206 $ 37,614 salem media group, inc. supplemental information (in thousands) three months ended twelve months ended december 31, december 31, 2019 2020 2019 2020 (unaudited) calculation of station operating income, digital media operating income and publishing operating loss net broadcast revenue $ 50,485 $ 48,086 $ 193,339 $ 178,127 less broadcast operating expenses (37,973) (36,238) (149,439) (140,942) station operating income $ 12,512 $ 11,848 $ 43,900 $ 37,185 net digital media revenue $ 9,816 $ 11,238 $ 39,165 $ 39,593 less digital media operating expenses (7,813) (8,602) (30,801) (31,725) digital media operating income $ 2,003 $ 2,636 $ 8,364 $ 7,868 net publishing revenue $ 4,332 $ 5,153 $ 21,394 $ 18,519 less publishing operating expenses (5,236) (5,507) (22,348) (21,950) publishing operating loss $ (904) $ (354) $ (954) $ (3,431) the company defines ebitda (1) as net income (loss) before interest, taxes, depreciation, and amortization. the table below presents a reconciliation of ebitda (1) to net income (loss), the most directly comparable gaap measure. ebitda (1) is a non-gaap financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with gaap. the company defines adjusted ebitda (1) as ebitda (1) before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. the table below presents a reconciliation of adjusted ebitda (1) to net income (loss), the most directly comparable gaap measure. adjusted ebitda (1) is a non-gaap financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with gaap. three months ended december 31, twelve months ended december 31, 2019 2020 2019 2020 (unaudited) net income (loss) $ (4,512) $ 3,328 $ (27,839) $ (54,062) plus interest expense, net of capitalized interest 4,290 4,006 17,496 16,075 plus provision for (benefit from) income taxes 3,280 (906) 3,977 30,274 plus depreciation and amortization 3,838 3,372 15,934 14,058 less interest income (1) — (2) (1) ebitda $ 6,895 $ 9,800 $ 9,566 $ 6,344 less net (gain) loss on the disposition of assets 1,114 81 22,326 1,575 less change in the estimated fair value of contingent earn-out consideration (1) — (41) (12) plus impairment of indefinite-lived long-term assets other than goodwill 1,010 — 2,925 17,254 plus impairment of goodwill 2,427 — 2,427 307 plus (gain) on early retirement of long- term debt (1,244) — (1,670) (49) plus net miscellaneous (income) and expenses (144) (36) (163) 9 plus non-cash stock-based compensation 171 72 1,460 345 plus asc 842 lease adoption — — 171 — adjusted ebitda $ 10,228 $ 9,917 $ 37,001 $ 25,773 the company defines adjusted free cash flow (1) as adjusted ebitda (1) less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. the company considers adjusted free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. a limitation of adjusted free cash flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. the company uses adjusted free cash flow, a non-gaap liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. the company’s presentation of adjusted free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with gaap. the company’s definition of adjusted free cash flow is not necessarily comparable to similarly titled measures reported by other companies. the table below presents a reconciliation of adjusted free cash flow to net cash provided by operating activities, the most directly comparable gaap measure. adjusted free cash flow is a non-gaap liquidity measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with gaap. salem media group, inc. supplemental information (in thousands) three months ended twelve months ended december 31, december 31, 2019 2020 2019 2020 (unaudited) net cash provided (used) by operating activities $ 2,539 $ (294) $ 17,010 $ 22,851 non-cash stock-based compensation (171) (72) (1,460) (345) depreciation and amortization (3,838) (3,372) (15,934) (14,058) amortization of deferred financing costs (294) (214) (1,060) (889) non-cash lease expense (2,291) (2,210) (9,026) (8,955) accretion of acquisition-related deferred payments and contingent earn-out consideration (3) — (5) — provision for bad debts (659) (217) (2,066) (4,339) deferred income taxes (3,019) 849 (3,506) (30,105) change in the estimated fair value of contingent earn-out consideration 1 — 41 12 impairment of indefinite-lived long-term assets other than goodwill (1,010) — (2,925) (17,254) impairment of goodwill (2,427) — (2,427) (307) gain (loss) on the disposition of assets (1,114) (81) (22,326) (1,575) gain (loss) on early retirement of debt 1,244 — 1,670 49 changes in operating assets and liabilities: accounts receivable and unbilled revenue (1,768) 1,049 595 (1,516) inventories 68 (123) 440 (222) prepaid expenses and other current assets (279) (386) (617) 957 accounts payable and accrued expenses 6,513 2,030 2,009 (3,841) contract liabilities (53) 3,011 1,657 (2,263) operating lease liabilities (deferred rent) 2,129 2,758 10,112 9,154 deferred rent income 79 40 209 308 other liabilities 18 562 34 (1,692) income taxes payable (177) (2) (264) (32) net income (loss) $ (4,512) $ 3,328 $ (27,839) $ (54,062) plus interest expense, net of capitalized interest 4,290 4,006 17,496 16,075 plus provision for income taxes 3,280 (906) 3,977 30,274 plus depreciation and amortization 3,838 3,372 15,934 14,058 less interest income (1) — (2) (1) ebitda $ 6,895 $ 9,800 $ 9,566 $ 6,344 plus (gain) loss on the disposition of assets 1,114 81 22,326 1,575 plus change in the estimated fair value of contingent earn- out consideration (1) — (41) (12) plus impairment of indefinite-lived long-term assets other than goodwill 1,010 — 2,925 17,254 plus impairment of goodwill 2,427 — 2,427 307 plus (gain) on the early retirement of long-term debt (1,244) — (1,670) (49) plus net miscellaneous (income) and expenses (144) (36) (163) 9 plus non-cash stock-based compensation 171 72 1,460 345 plus asc 842 lease adoption — — 171 — adjusted ebitda $ 10,228 $ 9,917 $ 37,001 $ 25,773 less net cash paid for capital expenditures (1) (1,693) (1,051) (7,757) (4,616) plus cash (paid) received for taxes (85) 59 (207) (137) less cash paid for interest, net of capitalized interest (7,964) (7,428) (16,539) (15,165) adjusted free cash flow $ 486 $ 1,497 $ 12,498 $ 5,855 selected debt data outstanding at december 31, 2020 applicable interest rate senior secured notes due 2024 (1) $ 216,341,000 6.75% asset-based revolving credit facility (2) 5,000,000 2.50% (1) $216.3 million notes with semi-annual interest payments at an annual rate of 6.75%. (2) outstanding borrowings under the abl facility, with interest payments due at libor plus 1.5% to 2.0% per annum with a libor floor of $0.5% or prime rate plus 0.5% to 1.0% per annum.
