Good morning, ladies and gentlemen and welcome to the Saga Communications Fourth Quarter and Year End Earning Release Conference Call. At this time, all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Ed Christian, President and CEO. Sir, the floor is yours..

Tom, thank you so much and we will see you back at the end of the call. Sam is also on with me as historic as this has been. Sam, I wish that I could start the call by playing the Rogers’ theme song. It’s a wonderful day in the neighborhood. I am somewhat aggregated right now and I have to rewrite my remarks and do a number of changes on the spot here.

But I will turn it over to you and just at least sit here and go to my special silent place, so that I am ready when you are going ahead..

I think that’s a good thing too. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial measures.

Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data table. First, I strongly believe that what is going on this morning in our stock is not appropriate. Last I saw we trade down to a low of $21 per share today, we are now at $23.10 on 752 shares trading.

This as I believe the overall market situation is an overreaction to the coronavirus and has no basis in Saga’s actual financial performance. And as Ed has already indicated, it’s extremely frustrating to all of us going on.

As I reported in the press release, excluding political revenue, gross revenue for the fourth quarter and the total year were approximately flat with the respective periods in 2018.

Political revenue for the quarter this year was $535,000 compared to $1.6 million for the quarter last year and $887,000 for all of 2019 compared to $2.9 million for all of 2018. Station operating expense remained a strong point with a decrease of $711,000 for the quarter and $1 million for the year.

On a same station basis, our expense controls resulted in $1.7 million reduction in station operating expenses for the quarter and $4.7 million for the year. Free cash flow was $5.4 million for the quarter and $18.1 million for the year.

Free cash flow for both the quarter and the year were down from the comparable periods in 2018 primarily due to the impact of the reduction in Saga’s deferred tax provision due to a timing difference related to depreciation and amortization between 2018 and 2019.

For the quarter, our deferred tax provision was $320,000 compared to $780,000 last year and for the year it was $1.4 million in 2019 compared to $2.7 million in 2018.

Even with the additional CapEx related expenses associated with our Charleston, Hilton Head and Gainesville Hotel acquisitions, along with the Norfolk Tower build that we have previously talked about, our CapEx was $1.1 million for the fourth quarter and $5.7 million for the year. For the year 2018, CapEx was $5.9 million.

We expect CapEx for 2020 to be between $5 million and $5.5 million. To better understand our calculations of free cash flow, net income and net income per share we have included a couple of additional reconciliation tables as part of the supplemental financial data section of our press release.

At the end of the quarter, we had $10 million in debt outstanding. Cash on hand at the end of the quarter was $44 million. As of March 9, we had $47 million in cash. Including the recently announced $0.32 per share dividend which will be paid on April 10, 2020, we will have paid over $71 million in dividends since December 3, 2012.

The recently announced dividend is an increase of $0.02 per share, 6.7% and is the third increase in the dividend amount being paid since we started paying regular quarterly dividends July 25, 2014.

We continue to pay regular quarterly cash dividends in the future as well as considering special cash and stock dividends as declared by our Board of Directors. We expect same station operating expenses to be down 2% to 3% for 2020.

One major reason is that for the foreseeable future, we will no longer be subscribing to a national rating service in some of our markets. We expect interest expense for 2020 to be around $700,000. We expect our ongoing tax rate to be 29% to 30%, including an 8% to 10% deferred tax rate. And Ed, with that I will turn back over to you..

Thank you, Sam. I think I have regained some of my composure and we can move forward on that, at least for a little bit. You did a good job summing it up. And now I’d like to add a little detail and color to last year and Q4. As previously reported by our peers in the radio industry, it was not a progressive year. Here is what occurred at Saga.

Some of you listening remember my Q4 and Q1 call last year, I mentioned that I was concerned about some small trends that we have noticed and we are ever watchful and indeed some acceleration occurred in certain trends. The causal effect was for us at Saga to sit down and begin to exercise a plan that we have put together and wrapped away if needed.

It called for change in the way we did business and also a rededication of the community commitment for the two major parts of our business. The first part we noticed that there was a shift in acceleration in how national business was handled by the major groups.

Essentially and we have spoken about this before, national business changed from a purchase of national advertising based on individual merits to a commodity sale. Again, we are going to repeat that. The business changed from a purchase of national advertising based on individual station merits through commodity sale.

Essentially, bulk buying at rates that were shockingly low based on quantity. It was scale in action. The mantra was we have open spots in our inventory and will sell them at any price. We at Saga feel differently in past.

We believe that if we step off our quality side and that’s to the quantity side we have made our first step into the river sticks and from there, there was no return. So, what was our plan then when we looked at this? Now, by the way we still getting national dollars. We are still getting – we didn’t go to zero.

Our national business is slightly off, but we did feel the pain and we are able to notice that bulk playing going on. So what was our plan? It’s not world shaking. You are waiting for some tiffany, it’s not going to really be there, but it’s an emphasis on personal service with knowledgeable professionals who care about helping a customer.

Pardon me, we know this works and we can be better and that’s the thing that we are looking at. We can always do a little bit more. We can always be a little bit better. Here is what we are now doing? So please note it is ongoing. First off, we upped our recruitment of people for sales positions. We are trying something different.

We had our morning talents on all stations, run a series of announcements and it is ongoing, where the talent do a live and unscripted commercial on the opportunities in radio sales.

We found out that on the recruit advertising on our stations for other companies was having tremendous results and we go, duh, why not we do it on their own stations when we are looking for people in broadcasting? And so we upped our recruitment of people for sales positions. And that was a – and that is an ongoing thing.

And I just heard one of the commercials this morning on one of our strengths. Over the years, we tried other methods of recruitment, but honestly, this time with the test and analysis that we do with each candidate for recruitment purposes, the market really outperformed other medium.

Once we hire somebody, we begin sessions on essentially how to sell new clients and how to understand their business? We have great information and also hats off to the Radio Advertising Bureau for complete programs on how to train and educate new sellers. We are also implementing new processes and procedures for performance measurements.

It’s working and our new business count is increasing on a daily basis. It’s a wonderful thing to watch. We also hired Tom Callahan, former Head of the Southern California Broadcasters Association. I have known Tom for about 30 years and Tom is heading up teaching, training, mentoring and performance of our people.

His title was New Business Development, but boy o boy, he does more and he has made a difference in working with all the new hires and really just showing them the way in how to do the truck sales – truck business sales. When I talk about this when I talk about service let me give you give you an example on this.

First off, we did take our conversion in lumps Q3 and Q4 and made a lot of changes. It's effective and when fully implemented, it will prove to be not just for not just Saga, but for the industry.

If others follow a rebirth of quality and responsible advertising will occur clients will be treated to individuals and where specific issues and problems in trust in a helpful and supportive position.

Yes, you can call it counter-selling if you want let me compare it what’s happened in the physician relationship industry with doctors the number of private individual physicians with their own office hence drop markedly, I am sure you will notice that and what’s happened is the new motto was for hospitals to buy group practices call them by different names but nevertheless they are own positions and groups up to some groups I know that they are up to 150 people 150 doctors in a group some are lower and some are more than that.

So the private group practices are either owned by other groups or owned by the hospitals get scale in other words this is the big thing today is scale in today’s medical world if you had an appointment with a group doctor a group doctor is allocated time is 7 minutes starting with the moment he walks into see you and the time when he leaves he has 7 minutes and then he has another two or three minutes to do the notes and two minutes for the notes and one minute to grab his breath and walk into the next office that’s true you are selling doctor but the question is were your questions answered did you come away with somewhat of an empty feeling if it is the same feeling you have when you wait on the phone listening to a banal music and voice unknown tells you that your call was important to us and operators are working with other customer and we will be with you shortly.

I can’t tell you how many times I have heard that with the cable providers in our area in the end you might have your questions answered but do you feel good about it or you still have nagging feeling that nobody cares about you that’s where we make the difference.

In terms of how we build our relationships, it is a very long-term process that will pay long term benefits we started talking close to 30 to 40 years ago promise of providing compelling local radio was creative advertising and I am blemished customer service times have changed Saga, however, has remained its dignity, but has had to compensate just a little to remain both competitive and profitable unfortunately we may not be as we spoke as we once were we are working on this and I would be remiss if I did mention that we are doing recruitment for new radio journalists adds started out amazing but true Saga is hiring radio journalists when newspapers are slashing journalists and radios are eliminating and switching to regional news hubs we want to increase the number of radio news people on our company I am not talking about the news reader but I am talking about someone who has insight and ability to write and report on local news events and get support of audio with it if we are truly to be local we must make this commitment I will tell you all a short story recently I was listening to a few non Saga radio stations my son was with me and we were listening to several different stations on their stream after about an hour of switching around he said dad I don’t know if I am listening through stations in Jacksonville or Omaha.

Forgetting about your local is a sign of disrespect both for our industry and our listeners will indeed really get ourselves to incident security if we forget to operate our stations with the mandate from the FCC and before that, the FRCC. When you get your license it is given to you to operate.

It is given to you to operate in the public interest, convenience and necessity.

Those words are drummed into college students who are studying broadcasting if there still is that art in college, but the operating in public interest convenience and necessity that was established in the 30s by the Federal Radio Commission when they were starting licensing stations. Well, our changes have been made 75% to 80%.

You still have a little way to go. In addition, we have taken a hard work at our existing digital enhancement group. We were not satisfied with the progress. And frankly, shutter the division, which was housed in Columbus. And we created from bottom up a new division in our corporate office.

To us, radio was the branding agent and digital is the wrap around. I probably shouldn’t share this, because it’s kind of an inside thing. But I refer to this process with the branding from radio into digital as a wraparound as the kiss and tickle method. So we will move on.

We have new systems, new vendors, new procedures, and fully understand the necessity to increase our digital share of revenue with the goal to be 10% of revenue. So you now as a stakeholder have to decide if you want a company with quantity or one with quality and in long lifespan. I normally don’t comment about the present.

I do feel compelled to mention that we thought everything was up and running in February until the word got up that something bad was leaking out of – we are not province in China.

Questions going to be asked, we had experienced cancellations, but we have been able to manage and work with the clients to help provide solutions where we have been hit is in events, concerts, performances, sports and venues where people congregate.

I have a list here just in the last day it is interesting that that automotive is saying, look, we still have sell cars.

Carpet stores are saying, look, we still have to sell carpet but the events is been somewhat troublesome for us especially in sports where they are doing what they are doing we have been hit there but hopefully that is only temporary additionally we have another vulnerability which I want to bring up and we believe to be somewhat in kind of an ouch and we do believe it will be short lived Saga was build around several premises and that is what we wished and did acquire great media properties.

And you have heard it before, state capitals, college towns, non-closable military bases, solid agricultural-based communities. In the high net worth retirement areas now they don’t have to have all five of those categories but they do have to have at least one of them to get a retention on this.

No actually it is more and more colleges and universities have been sending your students home to go to class remotely and when you have 20,30,40 and in the case of the Ohio state University 60,000 students leave the community it does somewhat give pause and interjection to merchants in that community.

This is temporary and could expand to other areas but it does gives us temporary hold about the total effect to Q1 and to spill over into Q2. he vision right there is cloudy right now.

I do believe it's going to be short while and we will get back to business as usual and I hope that will be just limited to that nevertheless couple of events takeaways for you we are profitable and we have good cash or I shouldn’t say that word we have good cash available to us $47 million as of today and prices a little bit, a good dividend.

Right now, I think 4.7% buy away not bad and by the way, it was recently increased the same told you that this is just a reinforcement part of it great portfolio of carefully curated stations in solid markets.

And I hope that I provided some of the color that I spoke about earlier but if you still have unanswered questions, and we'll find out Sam, has got some secret questions there in a moment. Please feel free to call us at Saga I am available Sam is available our people are available. We're very open about it. We would love to talk about radio.

We are frustrated as you are and all we can do is be better and continue to be the voice of reason in our communities to be real journalists and talked about facts in real time, not speculate about the future anything else like that, but provide information for security and value in people’s lives.

And if you do that, they will listen they will depend upon you and then radio advertising works commercial at the end there. Sam, I will toss it back to you and see if there is any questions? Perhaps, you can give it to Tom for our final little speech..

I believe everybody is dumbstruck by the market. We did a very good job as we normally do in our reporting. So I don’t have any questions that we haven’t already talked about. So I will turn it back over to Tom to wrap up the call..

Is it dumbstruck or struck dumb?.

Well, I think either one of those would work well with what’s going on in the market..

What would they say in Indiana, Sam?.

I don’t know. No comment..

Okay. Tom if you are there listening, you can wrap it up..

Thank you very much and thank you ladies and gentlemen. This does conclude today’s conference call. You may now disconnect your phone lines at this time and have a wonderful day. Thank you for your participation..