Saga Communications’ Earnings Call: Digital Focus Amid Challenges

Saga Communications ((SGA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Saga Communications Navigates Challenges with Strategic Digital Focus

Saga Communications is navigating a challenging radio advertising market with a strategic focus on digital and blended advertising, which has shown promising revenue growth and potential for future expansion. However, declines in overall revenue and increased operating expenses present significant challenges.

Blended Advertising Strategy Success

Saga’s blended advertising strategy has proven successful, leading to a significant new revenue stream. The company reported a $5.7 million increase in local direct blended orders and a 27% year-over-year increase in overall radio and digital spend for advertisers who opted for blended products. This strategy highlights Saga’s ability to adapt to the evolving advertising landscape.

Interactive and E-commerce Revenue Growth

The company has seen strong growth in its digital and online initiatives, with gross interactive revenue increasing by 20.9% to $11.6 million for the year. Additionally, e-commerce revenue grew by $904,000 to $2.4 million, underscoring Saga’s successful expansion into digital markets.

Dividend Payments and Strong Cash Position

Saga has demonstrated financial stability by paying over $137 million in dividends since 2012 and maintaining a robust cash position with $27.8 million in cash and short-term investments at year-end. This strong financial footing allows the company to explore strategic opportunities.

Potential Asset Sales for Stock Buybacks

In a move to enhance shareholder value, Saga is considering selling non-core assets, such as radio towers. The proceeds from these sales could potentially be used for stock buybacks, reflecting the company’s commitment to returning value to its shareholders.

Decline in Net Revenue and Operating Income

Despite strategic initiatives, Saga faced a 2.2% decrease in net revenue for the year, totaling $110.3 million, with operating income dropping to $2.4 million. Excluding political revenue, the gross revenue decline would have been approximately 4.3%, highlighting the challenges in the current market.

Increase in Operating Expenses

Saga’s station operating expenses increased by 4.5% for the year to $94.3 million, driven by compensation-related costs and investments in interactive initiatives. This rise in expenses poses a challenge to the company’s profitability.

Challenges in Radio Advertising Market

The radio advertising market is experiencing a downturn, with pacing for the first quarter down mid to high single digits. Advertisers not purchasing blended products saw a 13% year-over-year drop in radio spend, indicating broader industry challenges.

Forward-Looking Guidance

Saga Communications provided guidance for 2025, highlighting a strategic focus on digital advertising. The company anticipates capital expenditures of $4 million to $4.5 million and aims to reduce existing expenses by 1% to 2%. Saga plans to leverage its strong financial position for potential asset sales to fund stock buybacks and expects revenue growth improvement starting in the second quarter of 2025.

In conclusion, Saga Communications is strategically navigating a challenging market with a focus on digital and blended advertising. While the company faces revenue and expense challenges, its strong financial position and strategic initiatives provide a foundation for potential growth and shareholder value enhancement.