Evan Masyr - Executive VP & CFO Edward Atsinger - Founder, Chief Executive Officer & Director David Evans - President of Interactive and Publishing.

Lisa Springer - Singular Research Michael Kupinski - NOBLE Financial.

Greetings, and welcome to the Salem Media Group Third Quarter 2017 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Evan Masyr. Thank you, you may begin..

Thank you, operator, and thank you all for joining us today for Salem Media Group's Third Quarter 2017 Earnings Call. As a reminder, if you get disconnected at any time, you can dial back in or listen from our website at www.salemmedia.com.

With me today are Edward Atsinger, Chief Executive Officer; and David Evans, President of Interactive and Publishing. David Santrella, President of Broadcast Media is traveling today, but he is on the line as well. We'll begin in just a moment with our prepared remarks.

Once we are done, the conference call operator will come back on the line to instruct you on how to submit questions. Please be advised that statements made on this call 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.

These forward-looking statements are based on currently available information. Actual results may differ materially from those anticipated, and reported results should not be considered an indication of future performance.

We do not intend and undertake no obligation to update our forward-looking statements, including forecasts of future performance, the potential for growth of existing markets, the opening of new markets or the potential growth from future acquisitions.

More information on risks and uncertainties that may affect our business and our financial results are included in our annual report on Form 10-K and other public filings we have made with the Securities and Exchange Commission.

This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically station operating income or SOI, EBITDA and adjusted EBITDA.

In conformity with Regulation G, information required to accompany the disclosure of non-GAAP financial measures is available on the Investor Relations portion of the company's website at www.salemmedia.com. With that, I'll now turn the call over to Edward Atsinger..

Always a Rebel; and Stephen Coonts', The Armageddon File. On the self-publishing side, Salem Author Services had an 18% decline in revenue.

That business is headquartered in Orlando and Hurricane Irma caused the business to be completely closed for six business days during the quarter, and in preparation and recovery also during the quarter for another 4 days. This obviously, negatively impacted revenue as we were effectively unable to do business for almost 2 weeks.

We did enhance our Digital business by making several small acquisitions during the quarter. We added 2 assets to our financial publication business. The first was TradersCrux for $300,000, which closed on July 6. On August 31, we acquired Intelligence Report.

We paid no cash at closing for this asset, but assumed their subscriber liability of $2.9 million. Also on August 31, we purchased TeacherTube, a video sharing website geared toward the education industry. We paid $1.1 million for that asset. We also acquired some broadcast assets during the quarter.

On July 24, we closed on the last of our previously announced FM translators. This one was acquired for $40,000, and will be used to translate KDZR-AM in Portland, Oregon.

Finally, on September 15, we acquired real property, including land and towers associated with radio stations WSPZ-AM and WMAL-AM in the Washington, DC metro area for $1.5 million in cash. On the same day, we entered into an agreement to acquire radio station WSPZ-AM for $600,000, and we began to operate that station under a lease agreement.

And then on September 30, we paid $1.7 million in quarterly dividends or $0.065 per share at $0.26 per share, annually that represents an attractive 4.4% dividend yield based upon our current stock price. With that, I'll turn the call back to Evan, who can give you more detail on the quarter and provide some guidance for the fourth quarter of 2017.

Evan?.

Great. Thank you, Ed. For the third quarter total revenue decreased 8.2% to $65.4 million, operating expenses on a recurring basis decreased 4.7% to $55.9 million and adjusted EBITDA decreased 24.2% to $9.6 million.

Net broadcast revenue decreased 5.1% to $48.4 million and broadcast operating expenses decreased 1.1% to $37 million, resulting in a 16.4% decline in station operating income to $11.4 million. On a same-station basis, net broadcast revenue decreased 4.6% to $48.3 million, and SOI decreased 16.7% to $11.4 million.

These same-station results include broadcast revenue from 114 of our 119 radio stations in our network operations, and represents 99.8% of our net broadcast revenue. I'll briefly now review our performance of our strategic formats. 41 of our radio stations are programmed in our foundational Christian-teaching and talk format.

These stations contribute 42% of total broadcast revenue and decreased 6% for the quarter. Our 32 news talk stations had a decrease of 2% in revenue for the quarter, and overall these stations contribute 18% of total broadcast revenue.

Revenue from our 13 contemporary Christian music stations contributed 21% of total broadcast revenue and decreased 4% for the quarter. Our network revenue decreased 3.5% for the quarter and represents 9% of total broadcast revenue. Revenue from our digital media business decreased 12.9% to $10.4 million and represents 16% of our total revenue.

And finally, publishing revenue decreased 20.2% to $6.6 million and represents 10% of our total revenue. As of September 30, we had $255 million outstanding on our 6.75% notes and $6.6 million outstanding on the revolver. Our leverage ratio was 5.31.

For the fourth quarter, we are projecting total revenue to decline between 4% and 6% from fourth quarter 2016 total revenue of $70.7 million. Excluding the impact of political revenue and the revenue of the eliminated loss-making magazines, we would be projecting revenue decline to be between 1% and 3%.

The company is also projecting operating expenses before gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in estimated fair value of continued earn-out consideration, impairments, depreciation expense and amortization expense, to be between flat and a decline of 3% compared to fourth quarter expenses -- 2016 non-GAAP operating expenses of $55.5 million.

This concludes our prepared remarks, and we would now like to answer any questions. I'll turn it back to you operator..

[Operator Instructions] Our first question is from Lisa Springer with Singular Research..

Could you provide a little more color around the performance in network revenues, which were up last quarter, but were down this quarter?.

One of the components of driving network revenue decline was political. We had a good third quarter political with respect to political spending, third quarter of last year and not this year. But the network still continues to perform pretty well for us..

Yes, we say it stayed central as a -- if you took political out of Q3 for the network, that individual business unit would actually be up over prior quarter 3..

Our next question is with Michael Kupinski with NOBLE Financial..

I have a couple of questions. First of all, did you quantify the impact of the hurricanes and by dollar amount? I know that you gave us percentages and so forth.

But is there a dollar amount that you had?.

Yes, Mike the impact of the hurricane was probably about $350,000 in the quarter..

Okay. And in terms of the block programming as you go into next year, I think you usually give your rate increases in January.

Have you determined what your rate increases are going to be for next year?.

Dave, you might want to -- Dave Santrella might want to comment on it [and then if you want,] you talk to Chris..

Yes, Michael. It is Dave Santrella. Our rate increases depending on where the client is buying the majority of their time, those are going to average somewhere in the 3% range..

Okay. And in terms of -- you'd indicated that there is a number of books that you look likes it's going to have a better fourth quarter. Typically, how does the books tend to perform in biannual election years? Because I know that they tend to have a little bit of a lift when you have election periods.

But how do they tend to perform in biannual elections?.

So, if you kind of go back over the years and look at the trend lines, even-numbered years typically do on average 9% than better than odd-numbered years. And presidential election years are always going to do better than midterm years. But midterm is always better than odd-numbered years. I don't know if that gives you the color you need..

Yes, definitely.

And do you have visibility on the titles for next year at this point?.

Yes. We've -- we'll publish somewhere between 50 and 55 books next year. We've got visibility at this point into 80% to 90% of those titles. We don't have full visibility into the back end of next year. We've got good visibility into the first half. And I don't want to get into specific titles at this point.

But we feel pretty good about the schedule that's developing..

Michael, one wild card about the off year is the Trump factor and 2 of these books that will release in the fourth quarter focus on the Trump factor. So we'll see, it might do a little bit better than typical..

Yes.

And then typically, how many books did you have in the last biannual election if I use that as the comparison?.

We've increased the number of books we're publishing somewhat, I'd say, in the last midterm election, we probably published between 40 and 45 titles compared to projecting 50 to 55 for next year. Now the difference isn't in political. The number of political titles will be about the same. We'll publish, give or take, 10 Christian titles next year.

Back in '14 that number would have been, I think, 1 title. We announced last year that we were expanding beyond political into Christian titles. We thought we could leverage our Christian radio and Christian digital platform. So next year will be the first year with a full slate of Christian titles.

So that is the principal difference between '14 and '18 for our book publishing business. And that's also the difference between '17 and '18..

Got you.

What are you seeing in terms of spot radio, happening right now? What does that looks like? Is there are any particular, I would imagine [inaudible] what's going on in spot radio?.

Michael, you were breaking up. Can you please try repeating that question, I couldn't follow it..

Sorry, I'm traveling today. So -- spot radio.

What's going on with spot radio, particularly by category? If there is any particular categories of weakness or strength?.

Yes, Dave Santrella, you can take that..

Yes, Michael, in Q3, the typicals, auto and financial, which are typically big, those were down about 3.5% each for us, education was down about 8%, health care was down a little, but was down 9%.

Concert business, which is big for us in Q3 in some of our own concerts, those were down about 7% and that has a lot to do with kind of luck of the draw when it comes to weather. If we have really good weather, we get good attendance and good revenue. If we don't, we don't.

Going forward, again, as Ed mentioned, because KLTY is on an uptick again, we do anticipate to see an uptick in our local spot, particularly in that market. And that drives a lot of jump..

This concludes our question-and-answer session. I would now like to turn the conference back over to Edward Atsinger for closing remarks..

Thank you, operator. Again, thanks to all of you for joining us on the call. We look forward to visiting with you again when we report on Q4 in year-end..

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation..