Edward Atsinger - Chief Executive Officer David Santrella - President of Broadcast Media David Evans - President of Interactive and Publishing Evan Masyr - Executive Vice President, Chief Financial Officer.

Greetings! And welcome to the Salem Media Group, Fourth Quarter 2019 Earnings Call. At this time all participants are in a listen-only. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to our host, Evan Masyr, Executive Vice President and Chief Financial Officer. Thank you, you may begin..

Thank you and thank you all for joining us today for Salem Media Group's fourth quarter 2019 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 in the room today is Edward Atsinger, Chief Executive Officer.

Both David Santrella, President of Broadcast Media and David Evans, President of Interactive and Publishing are remote but on the call 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 future growth of existing markets, the opening of new markets or the potential growth from future acquisitions.

This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically Station Operating Income or SOI, EBITDA, adjusted EBITDA and adjusted free cash flow.

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. I’ll now turn the call over to Edward Atsinger. Ed..

Facebook, Google, Twitter, and Big Tech's War on Conservatives by Peter Hasson. A number of good titles will be released as we get closer to the latter part of the election cycle. We’re particularly enthused about the upcoming release from Diamond and Silk, the duo that’s taking the country by storm. .

We used the proceeds of those sales to pay down our debt, both on the revolver and the bonds. During the quarter we use $10.6 million of the proceeds to buy $12.1 million of bonds in the open market. This resulted in a reduction of our leverage ratio from 6.57 at the end of the third quarter to 6.18 at the end of this year.

Let me conclude with a discussion of our cash distribution, and given the level of debt and the elevated leverage ratio the Board of Directors concluded in December, the cash distribution of $0.065 per quarter and $0.26 per year was too high. The board voted to reduce the payout rate by 62% to $0.025 per quarter or $0.10 per year.

This will result in an increased cash available to continue reducing debt. And we announced earlier this week that the Board approved another $0.025 per share of cash distribution payable, to be made on March 31. Even at this reduced level this represents a 9.2% dividend yield based upon the current stock price.

And with that, Evan I'll turn the call back to you for additional details on the quarter's performance and to provide guidance for Q1, 2020. .

Great! Thank you, Ed. For the fourth quarter total revenue decreased 3.8% to $64.6 million. Operating expenses on a recurring basis decreased 2.2% to $54.4 million, which resulted in a 11.6% decrease in adjusted EBITDA to $10.2 million.

Net broadcast revenues decreased 1.2% to $50.5 million and broadcast operating expenses decreased 1.3% to $38 million, resulting in station operating income of $12.5 million, a decline of 0.8%. On a same station basis, net broadcast revenue increased 1.2% to $49.4 million and SOI decreased 0.5% to $12.8 million.

These same station results include broadcast revenue from 95 of our 100 radio stations and our network operations and represents 97.8% of net broadcasting revenue. I'll briefly review revenue performance on our strategic formats. 37 of our radio stations are programed in our foundation of Christian teaching and talk format.

These station's contributed 38% of total broadcast revenues and decreased 6.5% for the quarter. Our 32 news talk stations had a decrease of 3.0% in revenue for the quarter, and some of this decrease was due to the lack of political revenue as Ed already talked about. Overall, these stations contributed 20% of total Broadcast revenue.

Revenue from our 12 contemporary Christian music stations contributed 19% of total Broadcast revenue and decreased 4.1% for the quarter. Our network revenue increased 7.6% for the quarter and represents 10% of total Broadcast revenue. Revenue from our national Digital Media business decreased 15.0% to $9.8 million and represents 15% of total revenue.

Our Publishing revenue decreased 5.1% to $4.3 million and represents 7% of total revenue. As of December 31st we had $219.8 million outstanding on our bonds and $12.4 million outstanding under the revolver.

Our leverage ratio was 6.18 and for the first quarter of 2020, we are projecting total revenue to be between flat and a decrease of 2% compared to first quarter 2019 total revenue of $60.5 million. Excluding the impact of recent acquisitions and dispositions, we are projecting total revenue to be between flat and an increase of 2%.

We're also projecting operating expenses before gains or losses on disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out considerations, impairments, depreciation expense and amortization expense to be between flat and an increase of 3% compared to the first quarter of 2019 non-GAAP operating expenses of $53.0 million.

With that, that concludes our prepared remarks and we would now like to answer any questions.

Operator?.

Thank you [Operator Instructions]. And our first question comes from Michael Kupinski with NOBLE Capital Markets. Please state your question..

Thank you. A couple of questions here. Regarding your guidance for the first quarter, can you give us a sense of how much political you may have received in the quarter, you know for some radio broadcasters they were giving some thoughts on the political.

I was wondering, embedded into your guidance, if you can just talk a bit about it if there’s a certain level of political in those numbers?.

Yeah, I don't expect a significant amount of political in the first quarter. If you think about where a majority of the political spending has been thus far, certainly on the presidential side, has been on the democratic side and we have not seen much. But I would expect probably for the quarter it will be a couple of hundred thousand dollars. .

In terms of the full year, have you guys given some thought about what you might anticipate in terms of political, any internal thoughts there?.

The only thing – political, as you know is difficult to predict. I guess if you look at what we've done in the last two election cycles, have been north of $4 million. I don't know where the key races are going to be relative to where our stations are, but to get something in that range seems to make sense to us. .

And then can you give us a sense in the publishing side. I'm just - how many titles that maybe you are anticipating this year versus your, you know the past election cycles, if that's the way to look at it.

I know that this is kind of always a hit and miss type of – you know with popular books and things like that, we never really have a quick way of knowing, but maybe looking at it in terms of the number of titles. .

So we will publish a similar number of titles in 2020 compared to 2019. In total it's going to be about 55 titles between political, Christian and history titles. We think we got a pretty good lineup; we’re very excited about Diamond and Silk. Election year is typically a little better than non-election years.

So we are expecting a little bit of growth in 2019 and we’ll be dependent upon the big two or three titles. .

Then in terms of the self-publishing segment, you indicated some staffing issues there. I was just wondering if can kind of explain a little bit better how that impacted the business, whether or not you're seeing competitiveness in that business and how things are just bearing overall.

Just kind of gives us a sense of outside and some issues that you may have had in the last quarter, whether or not these are ongoing issues or should we actually see those now back on a better growth trajectory..

Well, the self-publishing business has been – it’s certainly a mature business. We did have difficulty retaining a full sale staff during 2019 and the sales staff is critical in terms of acquiring author.

When an author decides to self-publish, you know there is a process we have to go through to convince them that you are the right publisher to work with and that sales team is critical. We lost some key members, and it took some time to replace them. We are fully staffed again and we think 2020 will be better than 2019. .

One, on your block programming, what type of rate increases that you're passing through in January? And then secondly, just kind of give us a sense of what the pacing of that business is like in the first quarter?.

Yeah, the block programming was up in 2% to 3% in terms of rate increases.

We had very favorable renewals with – in fact I don’t know Michael that I can think of any cancellations that we took coming into the New Year that we are competing against a few ministries that exited last year in Q1, but we have great renewals this year and fair rate increases. So we're really pleased with that and that's going well.

And then of course the other driver, of course as Evan mentioned was Salem Surround. So what we're doing local, on the local digital front is a revenue driver right now. .

Got yeah. The last question I promise. Going back to the digital business, I know that there's some you know secular headwinds there, but traditionally in the past you got a lift, a nice little lift up through the traffic given you know election year.

I was just wondering, if we looked in the past cycles, do we anticipate that there's going to be a lift this year or do you think that's going to be muted just because of the competitive issues?.

I think there will be a surge in website traffic in September, October and the first week of November, but the third isn’t going to be as big as prior years, because there’s been so much in hosting from the last couple of years with the Supreme Court nominations, with the impeachment fight [ph], you know page views have been on the fire for the last year or two.

But still there will be a surge post the election, but it’s not going to be as big a percentage growth as in prior cycles..

Got you! Thank you. That’s all I have. Thanks. .

Thanks Michael. .

Thank you. I'll now turn the call back to Edward Atsinger for closing remarks. .

Again, thanks to all of you for joining the call. We’ll look forward to visiting with you again when we report on Q1, 2020 results. .

Thank you. This concludes today's call. All parties may disconnect.

Have a good evening!.