Release – Salem Media Group (SALM) – Announces First Quarter 2021 Total Revenue of $59.4 Million

Posted on May 7, 2021 by Admin

Salem Media Group, Inc. Announces First Quarter 2021 Total Revenue of $59.4 Million

IRVING, Texas–(BUSINESS WIRE)– Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three months ended March 31, 2021.

First Quarter 2021 Results

For the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020:

Consolidated

Total revenue increased 1.9% to $59.4 million from $58.3 million;
Total operating expenses decreased 27.9% to $55.0 million from $76.3 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 6.2% to $51.4 million from $54.8 million;
Operating income was $4.4 million compared to an operating loss of $18.0 million;
Net income was $0.3 million, or $0.01 net income per diluted share compared to a net loss of $55.2 million, or $2.07 net loss per share;
EBITDA (1) was $7.5 million compared to a loss of $14.3 million;
Adjusted EBITDA (1) increased 131.1% to $7.9 million from $3.4 million; and
Net cash used by operating activities increased 18.9% to $9.2 million from $7.7 million.

Broadcast

Net broadcast revenue decreased 2.5% to $44.0 million from $45.2 million;
Station Operating Income (“SOI”) (1) increased 36.3% to $10.7 million from $7.9 million;
Same Station (1) net broadcast revenue decreased 1.9% to $43.9 million from $44.8 million; and
Same Station SOI (1) increased 32.1% to $10.9 million from $8.2 million.

Digital Media

Digital media revenue increased 5.7% to $9.6 million from $9.1 million; and
Digital Media Operating Income (1) increased 21.6% to $0.9 million from $0.8 million.

Publishing

Publishing revenue increased 43.4% to $5.7 million from $4.0 million; and
Publishing Operating Income (1) was $0.5 million compared to a loss of $1.1 million.

Included in the results for the quarter ended March 31, 2021 are:

A $0.3 million ($0.2 million, net of tax, or $0.01 per share) net loss on the disposition of assets relates to the additional loss recorded at closing on the sale of radio station WKAT-AM and FM translator in Miami, Florida; and
A $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options.

Included in the results for the quarter ended March 31, 2020 are:

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 $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options.

Per share numbers are calculated based on 27,138,773 diluted weighted average shares for the quarter ended March 31, 2021, and 26,683,363 diluted weighted average shares for the quarter ended March 31, 2020.

Balance Sheet

As of March 31, 2021, the company had $216.3 million outstanding on the 6.75% senior secured notes due 2024 (the “Notes”) and no balance outstanding on the Asset Based Revolving Credit Facility (“ABL Facility”). The company received $11.2 million in aggregate principal amount of Paycheck Protection Plan (“PPP”) loans through the Small Business Administration that were available to our radio stations and networks under the Consolidated Appropriations Act.

Shelf Registration Statement and At-the-Market Facility

In April 2021, the company filed a prospectus supplement to our shelf registration statement on Form S-3 with the SEC covering the offering, issuance and sale of up to $15.0 million of the Company’s Class A Common Stock pursuant to an at-the-market facility, with B. Riley Securities, Inc. acting as sales agent.

Acquisitions and Divestitures

The following transactions were completed since January 1, 2021:

On April 28, 2021, the company closed on the acquisition of the Centerline New Media domain and digital assets for $1.3 million of cash. The digital content library will be operated within Salem Web Network’s church products division.
On March 18, 2021, the company sold radio station WKAT-AM and an FM translator in Miami, Florida for $3.5 million in cash. The company collected $3.2 million in cash upon closing and entered a promissory note for $0.3 million in cash due one year from the closing date.
On March 8, 2021, the company acquired the Triple Threat Trader newsletter. The company paid no cash at the time of closing and assumed deferred subscription liabilities of $0.1 million. As part of the purchase agreement, the company may pay up to an additional $11,000 in contingent earn-out consideration over the next two years based on the achievement of certain revenue benchmarks.

Pending transactions:

On April 20, 2021, the company entered into an Asset Purchase Agreement (“APA”) to sell Singing News Magazine and Singing News Radio (formerly Solid Gospel Network) for $0.1 million in cash. The buyer will assume the deferred subscription liability of $0.4 million. The sale is expected to close in the second quarter of 2021.
On April 10, 2021, the company entered into an agreement to sell approximately 34 acres of land in Lewisville, Texas, currently being used as the transmitter site for Company owned radio station KSKY-AM, for $12.1 million in cash. The company will retain enough of the property in the southwest corner of the site to operate the station. Following a due diligence period and satisfaction of several contingencies, the company expects to close on this transaction in the third quarter of 2021.
On February 4, 2021, the company entered into an APA to acquire KDIA-AM and KDYA-AM in San Francisco, California for $0.6 million in cash. The company paid $0.1 million in cash to an escrow account with $0.5 million of cash due upon closing. The purchase is subject to the approval of the FCC and is expected to close in the first half of 2021.
On February 5, 2020, the company entered into an APA with Word Broadcasting to sell radio stations WFIA-AM, WFIA-FM and WGTK-AM in Louisville, Kentucky for $4.0 million with a $250,000 credit applied to the sale price if closing occurs before March 31, 2020. Additionally, Word Broadcasting would receive a credit toward the purchase price of a sum equal to the monthly fees paid under the TBA that began in January 2017 for months 4-29 of the TBA and a sum equal to $2,000 per month for each monthly fee payment for months 30 and thereafter of the TBA; and a credit of the $450,000 option payment. The company estimated the loss on sale to be approximately $0.5 million net of tax if the sale closed by March 31, 2020 and $0.3 million net of tax if the sale closes later. Due to changes in debt markets, the transaction was not funded and it is uncertain when or if the transaction will close.

Conference Call Information

Salem will host a teleconference to discuss its results on May 6, 2021 at 4:00 p.m. Central Time. To access the teleconference, please dial (877) 524-8416, and then ask to be joined into the Salem Media Group First Quarter 2021 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 May 20, 2021 and can be heard by dialing (877) 660-6853, passcode 13717857 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.

Second Quarter 2021 Outlook

For the second quarter of 2021, the company is projecting total revenue to increase between 13% and 15% from second quarter 2020 total revenue of $52.9 million. The company is also projecting operating expenses before gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to increase between 6% and 9% compared to the second quarter of 2020 non-GAAP operating expenses of $50.1 million.

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 are 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
		March 31,
		2020			2021
		(Unaudited)
Net broadcast revenue		$	45,180		$	44,048
Net digital media revenue			9,104			9,619
Net publishing revenue			3,966			5,686
Total revenue			58,250			59,353
Operating expenses:
	Broadcast operating expenses		37,327			33,343
	Digital media operating expenses		8,326			8,673
	Publishing operating expenses		5,062			5,205
	Unallocated corporate expenses		4,210			4,288
	Change in the estimated fair value of contingent earn-out consideration		(5	)		—
	Impairment of indefinite-lived long-term assets other than goodwill		17,254			—
	Impairment of goodwill		307			—
	Depreciation and amortization		3,700			3,170
	Net (gain) loss on the disposition of assets		79			318
Total operating expenses			76,260			54,997
Operating income (loss)			(18,010	)		4,356
Other income (expense):
	Interest income		—			1
	Interest expense		(4,032	)		(3,926	)
	Gain on early retirement of long-term debt		49			—
	Net miscellaneous income and (expenses)		(52	)		22
Net income (loss) before income taxes			(22,045	)		453
Provision for income taxes			33,159			130
Net income (loss)		$	(55,204	)	$	323

Basic earnings (loss) per share Class A and Class B common stock		$	(2.07	)	$	0.01
Diluted earnings (loss) per share Class A and Class B common stock		$	(2.07	)	$	0.01

Basic weighted average Class A and Class B common stock shares outstanding			26,683,363			26,736,639
Diluted weighted average Class A and Class B common stock shares outstanding			26,683,363			27,138,773

Salem Media Group, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

		December 31, 2020		March 31, 2021
				(Unaudited)
Assets
Cash	$	6,325	$	23,394
Trade accounts receivable, net		24,469		22,974
Other current assets		15,002		11,739
Property and equipment, net		79,122		78,598
Operating and financing lease right-of-use assets		48,355		46,646
Intangible assets, net		347,547		347,093
Deferred financing costs		213		187
Other assets		3,538		3,323
Total assets	$	524,571	$	533,954

Liabilities and Stockholders’ Equity
Current liabilities	$	50,860	$	49,280
Long-term debt		213,764		225,143
Operating and financing lease liabilities, less current portion		47,847		46,152
Deferred income taxes		68,883		69,071
Other liabilities		7,938		8,236
Stockholders’ Equity		135,279		136,072
Total liabilities and stockholders’ equity	$	524,571	$	533,954

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		Earnings (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
	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, 2020		23,447,317	$	227		5,553,696	$	56	$	247,025	$	(78,023	)	$	(34,006	)	$	135,279
Stock-based compensation		—		—		—		—		78		—			—			78
Options exercised		185,782		2		—		—		390		—			—			392
Net income		—		—		—		—		—		323			—			323
Stockholders’ equity, March 31, 2021		23,633,099	$	229		5,553,696	$	56	$	247,493	$	(77,700	)	$	(34,006	)	$	136,072

SALEM MEDIA GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
	Three Months Ended March 31,
	2020			2021
OPERATING ACTIVITIES
Net income (loss)	$	(55,204	)	$	323
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash stock-based compensation		103			78
Depreciation and amortization		3,700			3,170
Amortization of deferred financing costs		227			213
Non-cash lease expense		2,252			2,161
Provision for bad debts		1,900			(295	)
Deferred income taxes		33,084			188
Change in the estimated fair value of contingent earn-out consideration		(5	)		—
Impairment of indefinite-lived long-term assets other than goodwill		17,254			—
Impairment of goodwill		307			—
Gain on early retirement of long-term debt		(49	)		—
Net (gain) loss on the disposition of assets		79			318
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		2,419			2,549
Inventories		70			(93	)
Prepaid expenses and other current assets		(587	)		(750	)
Accounts payable and accrued expenses		4,478			2,490
Operating lease liabilities		(2,407	)		(2,497	)
Contract liabilities		133			1,122
Deferred rent income		(84	)		170
Other liabilities		6			29
Income taxes payable		57			21
Net cash provided by operating activities		7,733			9,197
INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances		(1,587	)		(1,859	)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements		(84	)		—
Deposit on broadcast assets and radio station acquisitions		—			(100	)
Proceeds from sale of assets		2			3,501
Other		(428	)		(238	)
Net cash provided by (used in) investing activities		(2,097	)		1,304
FINANCING ACTIVITIES
Payments to repurchase 6.75% Senior Secured Notes		(3,392	)		—
Proceeds from borrowings under ABL Facility		33,319			16
Payments on ABL Facility		(31,745	)		(5,016	)
Proceeds from borrowings under PPP Loans		—			11,195
Payments of debt issuance costs		(1	)		(3	)
Proceeds from the exercise of stock options		—			392
Payments on financing lease liabilities		(18	)		(16	)
Payment of cash distribution on common stock		(667	)		—
Book overdraft		(1,885	)		—
Net cash provided by (used in) financing activities		(4,389	)		6,568
Net increase in cash and cash equivalents		1,247			17,069
Cash and cash equivalents at beginning of year		6			6,325
Cash and cash equivalents at end of period	$	1,253		$	23,394

Salem Media Group, Inc.
Supplemental Information
(in thousands)

		Three Months Ended
		March 31,
		2020				2021
		(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	$	76,260			$		54,997
	Less depreciation and amortization expense		(3,700)					(3,170)
	Less change in estimated fair value of contingent earn-out consideration		5					—
	Less impairment of indefinite-lived long-term assets other than goodwill		(17,254)					—
	Less impairment of goodwill		(307)					—
	Less net (gain) loss on the disposition of assets		(79)					(318)
	Less stock-based compensation expense		(103)					(78)
	Total Recurring Operating Expenses	$	54,822			$		51,431

	Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue
	Net broadcast revenue	$	45,180			$		44,048
	Net broadcast revenue – acquisitions		—					—
	Net broadcast revenue – dispositions		(223)					4
	Net broadcast revenue – format change		(176)					(140)
	Same Station net broadcast revenue	$	44,781			$		43,912

	Broadcast operating expenses	$	37,327			$		33,343
	Broadcast operating expenses – acquisitions		—					—
	Broadcast operating expenses – dispositions		(502)					(106)
	Broadcast operating expenses – format change		(260)					(178)
	Same Station broadcast operating expenses	$	36,565			$		33,059

	Reconciliation of SOI to Same Station SOI
	Station Operating Income	$	7,853			$		10,705
	Station operating loss – acquisitions		—					—
	Station operating loss – dispositions		279					110
	Station operating loss – format change		84					38
	Same Station – Station Operating Income	$	8,216			$		10,853

Salem Media Group, Inc.
Supplemental Information
(in thousands)
				Three Months Ended
				March 31,
				2020			2021
				(Unaudited)
	Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
	Net broadcast revenue			$	45,180		$		44,048
	Less broadcast operating expenses				(37,327)				(33,343)
	Station Operating Income			$	7,853		$		10,705

	Net digital media revenue			$	9,104		$		9,619
	Less digital media operating expenses				(8,326)				(8,673)
	Digital Media Operating Income			$	778		$		946

	Net publishing revenue			$	3,966		$		5,686
	Less publishing operating expenses				(5,062)				(5,205)
	Publishing Operating Income (Loss)			$	(1,096)		$		481

The company defines EBITDA (1) as net income 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.

Salem Media Group, Inc.
Supplemental Information
(in thousands)
	Three Months Ended
	March 31,
	2020			2021
		(Unaudited)
Net income (loss)	$	(55,204	)	$	323
Plus interest expense, net of capitalized interest		4,032			3,926
Plus provision for income taxes		33,159			130
Plus depreciation and amortization		3,700			3,170
Less interest income		—			(1	)
EBITDA	$	(14,313	)	$	7,548
Less net (gain) loss on the disposition of assets		79			318
Less change in the estimated fair value of contingent earn-out consideration		(5	)		—
Plus impairment of indefinite-lived long-term assets other than goodwill		17,254			—
Plus impairment of goodwill		307			—
Plus gain on early retirement of long-term debt		(49	)		—
Plus net miscellaneous income and expenses		52			(22	)
Plus non-cash stock-based compensation		103			78
Adjusted EBITDA	$	3,428		$	7,922

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
	March 31,
	2020		2021
		(Unaudited)
Net cash provided by operating activities	$	7,733	$	9,197
Non-cash stock-based compensation		(103)		(78)
Depreciation and amortization		(3,700)		(3,170)
Amortization of deferred financing costs		(227)		(213)
Non-cash lease expense		(2,252)		(2,161)
Provision for bad debts		(1,900)		295
Deferred income taxes		(33,084)		(188)
Change in the estimated fair value of contingent earn- out consideration		5		—
Impairment of indefinite-lived long-term assets other than goodwill		(17,254)		—
Impairment of goodwill		(307)		—
Net (gain) loss on the disposition of assets		(79)		(318)
Gain on early retirement of long-term debt		49		—
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		(2,419)		(2,549)
Inventories		(70)		93
Prepaid expenses and other current assets		587		750
Accounts payable and accrued expenses		(4,478)		(2,490)
Contract liabilities		(133)		(1,122)
Operating lease liabilities (deferred rent)		2,407		2,497
Deferred rent income		84		(170)
Other liabilities		(6)		(29)
Income taxes payable		(57)		(21)
Net income (loss)	$	(55,204)	$	323
Plus interest expense, net of capitalized interest		4,032		3,926
Plus provision for (benefit from) income taxes		33,159		(79)
Plus depreciation and amortization		3,700		3,170
Less interest income		—		(1)
EBITDA	$	(14,313)	$	7,548
Plus net (gain) loss on the disposition of assets		79		318
Plus change in the estimated fair value of contingent earn-out consideration		(5)		—
Plus impairment of indefinite-lived long-term assets other than goodwill		17,254		—
Plus impairment of goodwill		307		—
Plus gain on early retirement of long-term debt		(49)		—
Plus net miscellaneous income and expenses		52		(22)
Plus non-cash stock-based compensation		103		78
Adjusted EBITDA	$	3,428	$	7,922
Less net cash paid for capital expenditures (1)		(1,587)		(1,859)
Plus cash received (paid for) taxes		(18)		79
Less cash paid for interest, net of capitalized interest		(165)		(53)
Adjusted Free Cash Flow	$	1,658	$	6,089

(1)

Net cash paid for capital expenditures reflects actual cash payments net of cash reimbursements under tenant improvement allowances and net of property and equipment acquired in trade transactions.

Selected Debt Data		Outstanding at	Applicable Interest Rate
Selected Debt Data		March 31, 2021	Applicable Interest Rate
Senior Secured Notes due 2024 (1)	$	216,341,000	6.75%
Asset-based revolving credit facility (2)	$	—	—%
Small Business Administration Paycheck Protection Plan loans (3)	$	11,194,895	1.00%

(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 spread ranging from Base Rate plus 0.50% to 1.00% for base rate borrowings and LIBOR plus 1.50% to 2.00% for LIBOR rate borrowings.
(3)		The PPP loans accrue interest at 1% annually and mature in five years for any amount that is not forgiven.

Evan D. Masyr
Executive Vice President and Chief
Financial Officer
(805) 384-4512
evan@salemmedia.com

Source: Salem Media Group, Inc.

Salem Media Group (SALM) – Announces First Quarter 2021 Total Revenue of $59.4 Million

Posted on May 7, 2021 by Admin

Salem Media Group, Inc. Announces First Quarter 2021 Total Revenue of $59.4 Million

IRVING, Texas–(BUSINESS WIRE)– Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three months ended March 31, 2021.

First Quarter 2021 Results

For the quarter ended March 31, 2021 compared to the quarter ended March 31, 2020:

Consolidated

Total revenue increased 1.9% to $59.4 million from $58.3 million;
Total operating expenses decreased 27.9% to $55.0 million from $76.3 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 6.2% to $51.4 million from $54.8 million;
Operating income was $4.4 million compared to an operating loss of $18.0 million;
Net income was $0.3 million, or $0.01 net income per diluted share compared to a net loss of $55.2 million, or $2.07 net loss per share;
EBITDA (1) was $7.5 million compared to a loss of $14.3 million;
Adjusted EBITDA (1) increased 131.1% to $7.9 million from $3.4 million; and
Net cash used by operating activities increased 18.9% to $9.2 million from $7.7 million.

Broadcast

Net broadcast revenue decreased 2.5% to $44.0 million from $45.2 million;
Station Operating Income (“SOI”) (1) increased 36.3% to $10.7 million from $7.9 million;
Same Station (1) net broadcast revenue decreased 1.9% to $43.9 million from $44.8 million; and
Same Station SOI (1) increased 32.1% to $10.9 million from $8.2 million.

Digital Media

Digital media revenue increased 5.7% to $9.6 million from $9.1 million; and
Digital Media Operating Income (1) increased 21.6% to $0.9 million from $0.8 million.

Publishing

Publishing revenue increased 43.4% to $5.7 million from $4.0 million; and
Publishing Operating Income (1) was $0.5 million compared to a loss of $1.1 million.

Included in the results for the quarter ended March 31, 2021 are:

A $0.3 million ($0.2 million, net of tax, or $0.01 per share) net loss on the disposition of assets relates to the additional loss recorded at closing on the sale of radio station WKAT-AM and FM translator in Miami, Florida; and
A $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options.

Included in the results for the quarter ended March 31, 2020 are:

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 $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options.

Balance Sheet

Shelf Registration Statement and At-the-Market Facility

Acquisitions and Divestitures

The following transactions were completed since January 1, 2021:

On April 28, 2021, the company closed on the acquisition of the Centerline New Media domain and digital assets for $1.3 million of cash. The digital content library will be operated within Salem Web Network’s church products division.
On March 18, 2021, the company sold radio station WKAT-AM and an FM translator in Miami, Florida for $3.5 million in cash. The company collected $3.2 million in cash upon closing and entered a promissory note for $0.3 million in cash due one year from the closing date.
On March 8, 2021, the company acquired the Triple Threat Trader newsletter. The company paid no cash at the time of closing and assumed deferred subscription liabilities of $0.1 million. As part of the purchase agreement, the company may pay up to an additional $11,000 in contingent earn-out consideration over the next two years based on the achievement of certain revenue benchmarks.

Pending transactions:

On April 20, 2021, the company entered into an Asset Purchase Agreement (“APA”) to sell Singing News Magazine and Singing News Radio (formerly Solid Gospel Network) for $0.1 million in cash. The buyer will assume the deferred subscription liability of $0.4 million. The sale is expected to close in the second quarter of 2021.
On April 10, 2021, the company entered into an agreement to sell approximately 34 acres of land in Lewisville, Texas, currently being used as the transmitter site for Company owned radio station KSKY-AM, for $12.1 million in cash. The company will retain enough of the property in the southwest corner of the site to operate the station. Following a due diligence period and satisfaction of several contingencies, the company expects to close on this transaction in the third quarter of 2021.
On February 4, 2021, the company entered into an APA to acquire KDIA-AM and KDYA-AM in San Francisco, California for $0.6 million in cash. The company paid $0.1 million in cash to an escrow account with $0.5 million of cash due upon closing. The purchase is subject to the approval of the FCC and is expected to close in the first half of 2021.
On February 5, 2020, the company entered into an APA with Word Broadcasting to sell radio stations WFIA-AM, WFIA-FM and WGTK-AM in Louisville, Kentucky for $4.0 million with a $250,000 credit applied to the sale price if closing occurs before March 31, 2020. Additionally, Word Broadcasting would receive a credit toward the purchase price of a sum equal to the monthly fees paid under the TBA that began in January 2017 for months 4-29 of the TBA and a sum equal to $2,000 per month for each monthly fee payment for months 30 and thereafter of the TBA; and a credit of the $450,000 option payment. The company estimated the loss on sale to be approximately $0.5 million net of tax if the sale closed by March 31, 2020 and $0.3 million net of tax if the sale closes later. Due to changes in debt markets, the transaction was not funded and it is uncertain when or if the transaction will close.

Conference Call Information

Second Quarter 2021 Outlook

About Salem Media Group, Inc.

Forward-Looking Statements

(1) Regulation G

Salem Media Group, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)

		Three Months Ended
		March 31,
		2020			2021
		(Unaudited)
Net broadcast revenue		$	45,180		$	44,048
Net digital media revenue			9,104			9,619
Net publishing revenue			3,966			5,686
Total revenue			58,250			59,353
Operating expenses:
	Broadcast operating expenses		37,327			33,343
	Digital media operating expenses		8,326			8,673
	Publishing operating expenses		5,062			5,205
	Unallocated corporate expenses		4,210			4,288
	Change in the estimated fair value of contingent earn-out consideration		(5	)		—
	Impairment of indefinite-lived long-term assets other than goodwill		17,254			—
	Impairment of goodwill		307			—
	Depreciation and amortization		3,700			3,170
	Net (gain) loss on the disposition of assets		79			318
Total operating expenses			76,260			54,997
Operating income (loss)			(18,010	)		4,356
Other income (expense):
	Interest income		—			1
	Interest expense		(4,032	)		(3,926	)
	Gain on early retirement of long-term debt		49			—
	Net miscellaneous income and (expenses)		(52	)		22
Net income (loss) before income taxes			(22,045	)		453
Provision for income taxes			33,159			130
Net income (loss)		$	(55,204	)	$	323

Basic earnings (loss) per share Class A and Class B common stock		$	(2.07	)	$	0.01
Diluted earnings (loss) per share Class A and Class B common stock		$	(2.07	)	$	0.01

Basic weighted average Class A and Class B common stock shares outstanding			26,683,363			26,736,639
Diluted weighted average Class A and Class B common stock shares outstanding			26,683,363			27,138,773

Salem Media Group, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

		December 31, 2020		March 31, 2021
				(Unaudited)
Assets
Cash	$	6,325	$	23,394
Trade accounts receivable, net		24,469		22,974
Other current assets		15,002		11,739
Property and equipment, net		79,122		78,598
Operating and financing lease right-of-use assets		48,355		46,646
Intangible assets, net		347,547		347,093
Deferred financing costs		213		187
Other assets		3,538		3,323
Total assets	$	524,571	$	533,954

Liabilities and Stockholders’ Equity
Current liabilities	$	50,860	$	49,280
Long-term debt		213,764		225,143
Operating and financing lease liabilities, less current portion		47,847		46,152
Deferred income taxes		68,883		69,071
Other liabilities		7,938		8,236
Stockholders’ Equity		135,279		136,072
Total liabilities and stockholders’ equity	$	524,571	$	533,954

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		Earnings (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
	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, 2020		23,447,317	$	227		5,553,696	$	56	$	247,025	$	(78,023	)	$	(34,006	)	$	135,279
Stock-based compensation		—		—		—		—		78		—			—			78
Options exercised		185,782		2		—		—		390		—			—			392
Net income		—		—		—		—		—		323			—			323
Stockholders’ equity, March 31, 2021		23,633,099	$	229		5,553,696	$	56	$	247,493	$	(77,700	)	$	(34,006	)	$	136,072

SALEM MEDIA GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
	Three Months Ended March 31,
	2020			2021
OPERATING ACTIVITIES
Net income (loss)	$	(55,204	)	$	323
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash stock-based compensation		103			78
Depreciation and amortization		3,700			3,170
Amortization of deferred financing costs		227			213
Non-cash lease expense		2,252			2,161
Provision for bad debts		1,900			(295	)
Deferred income taxes		33,084			188
Change in the estimated fair value of contingent earn-out consideration		(5	)		—
Impairment of indefinite-lived long-term assets other than goodwill		17,254			—
Impairment of goodwill		307			—
Gain on early retirement of long-term debt		(49	)		—
Net (gain) loss on the disposition of assets		79			318
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		2,419			2,549
Inventories		70			(93	)
Prepaid expenses and other current assets		(587	)		(750	)
Accounts payable and accrued expenses		4,478			2,490
Operating lease liabilities		(2,407	)		(2,497	)
Contract liabilities		133			1,122
Deferred rent income		(84	)		170
Other liabilities		6			29
Income taxes payable		57			21
Net cash provided by operating activities		7,733			9,197
INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances		(1,587	)		(1,859	)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements		(84	)		—
Deposit on broadcast assets and radio station acquisitions		—			(100	)
Proceeds from sale of assets		2			3,501
Other		(428	)		(238	)
Net cash provided by (used in) investing activities		(2,097	)		1,304
FINANCING ACTIVITIES
Payments to repurchase 6.75% Senior Secured Notes		(3,392	)		—
Proceeds from borrowings under ABL Facility		33,319			16
Payments on ABL Facility		(31,745	)		(5,016	)
Proceeds from borrowings under PPP Loans		—			11,195
Payments of debt issuance costs		(1	)		(3	)
Proceeds from the exercise of stock options		—			392
Payments on financing lease liabilities		(18	)		(16	)
Payment of cash distribution on common stock		(667	)		—
Book overdraft		(1,885	)		—
Net cash provided by (used in) financing activities		(4,389	)		6,568
Net increase in cash and cash equivalents		1,247			17,069
Cash and cash equivalents at beginning of year		6			6,325
Cash and cash equivalents at end of period	$	1,253		$	23,394

Salem Media Group, Inc.
Supplemental Information
(in thousands)

		Three Months Ended
		March 31,
		2020				2021
		(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	$	76,260			$		54,997
	Less depreciation and amortization expense		(3,700)					(3,170)
	Less change in estimated fair value of contingent earn-out consideration		5					—
	Less impairment of indefinite-lived long-term assets other than goodwill		(17,254)					—
	Less impairment of goodwill		(307)					—
	Less net (gain) loss on the disposition of assets		(79)					(318)
	Less stock-based compensation expense		(103)					(78)
	Total Recurring Operating Expenses	$	54,822			$		51,431

	Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue
	Net broadcast revenue	$	45,180			$		44,048
	Net broadcast revenue – acquisitions		—					—
	Net broadcast revenue – dispositions		(223)					4
	Net broadcast revenue – format change		(176)					(140)
	Same Station net broadcast revenue	$	44,781			$		43,912

	Broadcast operating expenses	$	37,327			$		33,343
	Broadcast operating expenses – acquisitions		—					—
	Broadcast operating expenses – dispositions		(502)					(106)
	Broadcast operating expenses – format change		(260)					(178)
	Same Station broadcast operating expenses	$	36,565			$		33,059

	Reconciliation of SOI to Same Station SOI
	Station Operating Income	$	7,853			$		10,705
	Station operating loss – acquisitions		—					—
	Station operating loss – dispositions		279					110
	Station operating loss – format change		84					38
	Same Station – Station Operating Income	$	8,216			$		10,853

Salem Media Group, Inc.
Supplemental Information
(in thousands)
				Three Months Ended
				March 31,
				2020			2021
				(Unaudited)
	Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
	Net broadcast revenue			$	45,180		$		44,048
	Less broadcast operating expenses				(37,327)				(33,343)
	Station Operating Income			$	7,853		$		10,705

	Net digital media revenue			$	9,104		$		9,619
	Less digital media operating expenses				(8,326)				(8,673)
	Digital Media Operating Income			$	778		$		946

	Net publishing revenue			$	3,966		$		5,686
	Less publishing operating expenses				(5,062)				(5,205)
	Publishing Operating Income (Loss)			$	(1,096)		$		481

Salem Media Group, Inc.
Supplemental Information
(in thousands)
	Three Months Ended
	March 31,
	2020			2021
		(Unaudited)
Net income (loss)	$	(55,204	)	$	323
Plus interest expense, net of capitalized interest		4,032			3,926
Plus provision for income taxes		33,159			130
Plus depreciation and amortization		3,700			3,170
Less interest income		—			(1	)
EBITDA	$	(14,313	)	$	7,548
Less net (gain) loss on the disposition of assets		79			318
Less change in the estimated fair value of contingent earn-out consideration		(5	)		—
Plus impairment of indefinite-lived long-term assets other than goodwill		17,254			—
Plus impairment of goodwill		307			—
Plus gain on early retirement of long-term debt		(49	)		—
Plus net miscellaneous income and expenses		52			(22	)
Plus non-cash stock-based compensation		103			78
Adjusted EBITDA	$	3,428		$	7,922

Salem Media Group, Inc.
Supplemental Information
(in thousands)

	Three Months Ended
	March 31,
	2020		2021
		(Unaudited)
Net cash provided by operating activities	$	7,733	$	9,197
Non-cash stock-based compensation		(103)		(78)
Depreciation and amortization		(3,700)		(3,170)
Amortization of deferred financing costs		(227)		(213)
Non-cash lease expense		(2,252)		(2,161)
Provision for bad debts		(1,900)		295
Deferred income taxes		(33,084)		(188)
Change in the estimated fair value of contingent earn- out consideration		5		—
Impairment of indefinite-lived long-term assets other than goodwill		(17,254)		—
Impairment of goodwill		(307)		—
Net (gain) loss on the disposition of assets		(79)		(318)
Gain on early retirement of long-term debt		49		—
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		(2,419)		(2,549)
Inventories		(70)		93
Prepaid expenses and other current assets		587		750
Accounts payable and accrued expenses		(4,478)		(2,490)
Contract liabilities		(133)		(1,122)
Operating lease liabilities (deferred rent)		2,407		2,497
Deferred rent income		84		(170)
Other liabilities		(6)		(29)
Income taxes payable		(57)		(21)
Net income (loss)	$	(55,204)	$	323
Plus interest expense, net of capitalized interest		4,032		3,926
Plus provision for (benefit from) income taxes		33,159		(79)
Plus depreciation and amortization		3,700		3,170
Less interest income		—		(1)
EBITDA	$	(14,313)	$	7,548
Plus net (gain) loss on the disposition of assets		79		318
Plus change in the estimated fair value of contingent earn-out consideration		(5)		—
Plus impairment of indefinite-lived long-term assets other than goodwill		17,254		—
Plus impairment of goodwill		307		—
Plus gain on early retirement of long-term debt		(49)		—
Plus net miscellaneous income and expenses		52		(22)
Plus non-cash stock-based compensation		103		78
Adjusted EBITDA	$	3,428	$	7,922
Less net cash paid for capital expenditures (1)		(1,587)		(1,859)
Plus cash received (paid for) taxes		(18)		79
Less cash paid for interest, net of capitalized interest		(165)		(53)
Adjusted Free Cash Flow	$	1,658	$	6,089

(1)

Net cash paid for capital expenditures reflects actual cash payments net of cash reimbursements under tenant improvement allowances and net of property and equipment acquired in trade transactions.

Selected Debt Data		Outstanding at	Applicable Interest Rate
Selected Debt Data		March 31, 2021	Applicable Interest Rate
Senior Secured Notes due 2024 (1)	$	216,341,000	6.75%
Asset-based revolving credit facility (2)	$	—	—%
Small Business Administration Paycheck Protection Plan loans (3)	$	11,194,895	1.00%

(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 spread ranging from Base Rate plus 0.50% to 1.00% for base rate borrowings and LIBOR plus 1.50% to 2.00% for LIBOR rate borrowings.
(3)		The PPP loans accrue interest at 1% annually and mature in five years for any amount that is not forgiven.

Evan D. Masyr
Executive Vice President and Chief
Financial Officer
(805) 384-4512
evan@salemmedia.com

Source: Salem Media Group, Inc.

Cumulus Media Inc. (CMLS) – An Ebullient Advertising Picture Emerges

Posted on May 6, 2021 by Admin

Thursday, May 06, 2021

Cumulus Media Inc. (CMLS)
An Ebullient Advertising Picture Emerges

CUMULUS MEDIA, Inc. (NASDAQ: CMLS) is a leading audio-first media and entertainment company delivering premium content to over a quarter billion people every month — wherever and whenever they want it. CUMULUS MEDIA engages listeners with high-quality local programming through 428 owned-and-operated stations across 87 markets; delivers nationally-syndicated sports, news, talk, and entertainment programming from iconic brands including the NFL, the NCAA, the Masters, the Olympics, the GRAMMYS, the American Country Music Awards, and many other world-class partners across nearly 8,000 affiliated stations through Westwood One, the largest audio network in America; and inspires listeners through its rapidly growing network of original podcasts that are smart, entertaining and thought-provoking. CUMULUS MEDIA provides advertisers with local impact and national reach through on-air, digital, mobile, and voice-activated media solutions, as well as access to integrated digital marketing services, powerful influencers, and live event experiences. CUMULUS MEDIA is the only audio media company to provide marketers with local and national advertising performance guarantees.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Q1 overachieves. Q1 revenues of $201.7 million exceed our $185.0 million estimate on stronger than expected Spot and Digital revenue. Cash flow, as measured by adj. EBITDA, was better than expected due to stronger revenues and expense reduction, $8.9 million versus our loss estimate of $650,000.

Q2 pacings appear encouraging. The tone of Radio advertising has significantly improved, with Q2 pacing up a strong 35%. We believe that pacings will further improve throughout the quarter and our 51% Q2 revenue growth estimate appears achievable. We are raising our Q2 adj. EBITDA estimate from $21.1 million to $24.6 million to reflect better cost savings …

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.

Gray Television Inc. (GTN) – Leapfrogs Into The Super Broadcast League

Posted on May 4, 2021 by Admin

Tuesday, May 04, 2021

Gray Television Inc. (GTN)
Leapfrogs Into The “Super” Broadcast League

Gray Television, Inc. operates as a television broadcast company in the United States. As of April 6, 2010, it operated 36 television stations in 30 markets, including 17 affiliated with CBS Inc.; 10 affiliated with the National Broadcasting Company, Inc.; 8 affiliated with the American Broadcasting Company (ABC); and 1 affiliated with FOX Entertainment Group, Inc. (FOX). The company also operated 39 digital second channels comprising 1 affiliated with ABC, 4 affiliated with FOX, 7 affiliated with CW Network, LLC, 18 affiliated with Twentieth Television, Inc., 2 affiliated with Universal Sports Network, and 7 local news/weather channels. Gray Television, Inc. was founded in 1897 and is headquartered in Atlanta, Georgia.

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Gains national scale. The company will leap frog into the big leagues covering 36% of US TV households, without the UHF discount rule, upon the planned purchase of Meredith’s TV group. The purchase price of $2.7 billion represents 7.9 times blended 2019/2020 cash flow, after synergies, a reasonable price, in our view. The deal is expected to close year end 2021.

Move viewed favorably. The Meredith stations dovetail nicely with the company’s existing stations and creates significant scale in many States, including Nevada, Arizona, Missouri, positioning it well for Political advertising. The company plans to sell only one overlap station in Flint, MI, to expedite regulatory approval, which is expected …

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

Gray Television Inc. (GTN) – Leapfrogs Into The “Super” Broadcast League

Posted on May 4, 2021 by Admin

Tuesday, May 04, 2021

Gray Television Inc. (GTN)
Leapfrogs Into The “Super” Broadcast League

Michael Kupinski, Director of Research, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

Online Media is Within an Hour of Becoming Main-Stream Media

Posted on April 30, 2021 by Admin

Online Media is Within an Hour of Becoming Main-Stream Media

The clock is ticking on broadcast radio and TV as the technology is becoming dated relative to the greatly accelerated use of mobile devices and growth (albeit slower) of desktop computing.

Since 2011, media consumption for U.S. adults is up 20% across all categories.

One of those categories has grown by 460%. To have earned that growth, quite a bit of erosion was from TV and traditional radio.

Have you guessed which outlet has grown so dramatically?

An average of 4 hours and 12 minutes is spent on mobile devices compared to only 45 minutes just ten years ago.

Take a look at the graphic below; it demonstrates just how quickly habits change.

Graphics by Visual Capitalist

From a business perspective, adaption is key to growth and critical for survival. In this case, understanding and satisfying changing audience preferences need to be part of the business plans of all doing business in the industry(s) represented above.

Photo by Allen, no changes were made


What’s the Future of Media Consumption	Esports Investors Better Able to Evaluate Stocks

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Release – Gray Television (GTN) – Sells Divestiture Stations From Quincy Media Transaction to Allen Media for $380 Million

Posted on April 29, 2021 by Admin

Gray Sells Divestiture Stations From Quincy Media Transaction to Allen Media for $380 Million

ATLANTA, April 29, 2021 (GLOBE NEWSWIRE) — Gray Television, Inc. (“Gray”) (NYSE: GTN) today reached an agreement to divest certain television stations currently owned by Quincy Media, Inc. (“Quincy”) to Byron Allen’s Allen Media Broadcasting, LLC (“Allen Media”) for $380 million dollars in cash. Allen Media, which owns and operates local television stations in twelve markets, also owns 12 networks including The Weather Channel and the free-streaming service Local Now. Allen Media Group was founded by Byron Allen in 1993.

Earlier this year, Gray reached an agreement to acquire Quincy for $925 million in cash. To facilitate regulatory approvals for this transaction, Gray agreed to sell to Allen Media the following television stations currently owned by Quincy, each of which operates in a market in which Gray also owns and operates a television station:

KVOA (NBC), Tucson, Arizona (Nielsen DMA Rank 64)
WKOW (ABC), Madison, Wisconsin (DMA 81)
WSIL / KPOB (ABC), Paducah, Kentucky- Harrisburg, Illinois (DMA 84)
KWWL (NBC), Cedar Rapids, Iowa (DMA 92)
WXOW / WQOW (ABC), La Crosse-Eau Claire, Wisconsin (DMA 129)
WAOW / WMOW (ABC), Wausau-Rhinelander, Wisconsin (DMA 136)
WREX (NBC), Rockford, Illinois (DMA 139)

Gray’s acquisition of Quincy and Gray’s sale of the foregoing Quincy stations to Allen Media will close simultaneously. As such, at no time will Gray own, control or operate any of the divestiture television stations. Gray expects to close these transactions following receipt of regulatory and other approvals in the third quarter of 2021.

“I truly appreciate Gray and Quincy, two of the best broadcast groups in the business, working with us to acquire and transfer these amazing assets. Over the past year-and-a-half, we’ve invested close to $1 billion to acquire best-in-class, top-tier, broadcast network affiliates,” said Byron Allen, Founder/Chairman/CEO of Allen Media Group. “We plan to invest approximately ten billion dollars to acquire more ABC, CBS, NBC, and FOX television stations over the next two years with the goal of being the largest broadcast television group in America. All of our media assets, including these broadcast television stations, will work in concert to amplify our free-streaming service, Local Now.”

“We are thrilled to facilitate the transfer of these fine Quincy television stations to Byron Allen and Allen Media Group, who we are confident will continue the strong commitments to journalism and localism that have distinguished these stations under Quincy’s outstanding stewardship,” said Gray’s Executive Chairman and CEO Hilton H. Howell.

About Gray Television

Gray Television, headquartered in Atlanta, Georgia, is the largest owner of top-rated local television stations and digital assets in the United States. Upon the closing of its acquisition of Quincy Media, Inc., Gray will own television stations serving 102 television markets that collectively reach 25.4 percent of US television households, including the number-one ranked television station in 77 markets and the first and/or second highest ranked television station in 93 markets according to Comscore’s average all-day ratings for calendar year 2020. Gray also owns video program production, marketing, and digital businesses including Raycom Sports, Tupelo Honey, and RTM Studios, the producer of PowerNation programs and content and is the majority owner of Swirl Films.

Wells Fargo Securities, LLC served as financial advisor to Gray.

About Allen Media Group / Entertainment Studios

Chairman and CEO Byron Allen founded Allen Media Group/Entertainment Studios in 1993. Headquartered in Los Angeles, it has offices in New York, Chicago, Atlanta, and Raleigh. Allen Media Group owns 23 ABC-NBC-CBS-FOX network affiliate broadcast television stations and ten 24-hour HD television networks serving nearly 180 million subscribers: THE WEATHER CHANNEL, PETS.TV, COMEDY.TV, RECIPE.TV, CARS.TV, ES.TV, MYDESTINATION.TV, JUSTICE CENTRAL.TV, THEGRIO.TV, and THIS TV. Allen Media Group will add its eleventh network, THE WEATHER CHANNEL EN ESPANOL in 2021. Allen Media Group also owns LOCAL NOW and THE GRIO free-streaming AVOD services, powered by THE WEATHER CHANNEL and content partners, which delivers real-time, hyper-local news, weather, traffic, sports, and lifestyle information. Allen Media Group also produces, distributes, and sells advertising for 67 television programs, making it one of the largest independent producers/distributors of first-run syndicated television programming for broadcast television stations. Allen Media Group International Television continues to extend its corporate branding and content around the globe. It currently has active license agreements and programming in South Africa, The United Arab Emirates, Australia, The Bahamas, Canada and New Zealand. With a library of over 5,000 hours of owned content across multiple genres, Allen Media Group provides video content to broadcast television stations, cable television networks, mobile devices, multimedia platforms, and the World Wide Web. Our mission is to provide excellent programming to our viewers, online users, and Fortune 500 advertising partners.

Entertainment Studios Motion Pictures is a full-service, theatrical motion picture distribution company specializing in wide release commercial content. ESMP released 2017’s highest-grossing independent movie, the shark thriller 47 METERS DOWN, which grossed over $44.3 million. In 2018, ESMP also released the critically-acclaimed and commercially successful Western HOSTILES, the historic mystery-thriller CHAPPAQUIDDICK and the sequel to 47 METERS DOWN, 47 METERS DOWN: UNCAGED. The digital distribution unit of Entertainment Studios Motion Pictures, Freestyle Digital Media, is a premiere multi-platform distributor with direct partnerships across all major cable, digital and streaming platforms. Capitalizing on a robust infrastructure, proven track record and a veteran sales team, Freestyle Digital Media is a true home for independent films.

In 2016, Allen Media Group purchased The Grio, a highly-rated digital video-centric news community platform devoted to providing AfricanAmericans with compelling stories and perspectives currently underrepresented in existing national news outlets. The Grio features aggregated and original video packages, news articles and opinion pieces on topics that include breaking news, politics, health, business and entertainment. Originally launched in 2009, the platform was then purchased by NBC News in 2010. The digital platform remains focused on curating exciting digital content and currently has more than 100 million annual visitors. For more information, visit: www.entertainmentstudios.com

Gray Contacts:

www.gray.tv
Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

Allen Media Group Contact:
Eric Peterkofsky
Allen Media Group/Entertainment Studios
310-277-3500 x124 eric@es.tv

Source: Gray Television

Gray Television (GTN) – Sells Divestiture Stations From Quincy Media Transaction to Allen Media for $380 Million

Posted on April 29, 2021 by Admin

Gray Sells Divestiture Stations From Quincy Media Transaction to Allen Media for $380 Million

About Gray Television

Wells Fargo Securities, LLC served as financial advisor to Gray.

About Allen Media Group / Entertainment Studios

Gray Contacts:

www.gray.tv
Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

Allen Media Group Contact:
Eric Peterkofsky
Allen Media Group/Entertainment Studios
310-277-3500 x124 eric@es.tv

Source: Gray Television

Esports Investors are Now Better Able to Evaluate Performance Comparisons

Posted on April 29, 2021 by Admin

Investors are Handed More Tools to Evaluate Esports and iGaming Performance

As the esports, gaming, and iGaming sector of digital media and technology grow, so does investor interest and the attention paid to measuring its performance relative to other media and technology sectors. Measurement tools now include indexes that can be used as a proxy for the industry segment to assist investors in determining the segment’s performance relative to other business sectors or to understand how well a company did relative to those operating in the same industry.

Indexes Worth Attention

Last year on April 30, Roundhill Investments launched what they say is the first iGaming index. The Roundhill Sports Betting & iGaming Index is designed to track the performance of the sports betting and iGaming industry globally. The Index consists of a tiered weight portfolio of internationally listed companies that are involved in the sports betting & iGaming industry. The index’s valuation increased by 17.92% during the first quarter of 2021. By comparison, the S&P 500 index experienced a 6.2% increase. The two largest weightings represented 8.77%, they are Entain PLC (ENT LN) and DraftKings, Inc. (DKNG).

In the category of esports, MVIS introduced their Global Video Gaming & eSports Index in July of 2018, with a full look back to January 2015. This index’s universe weighs less on gambling-associated companies — focusing primarily on those with at least 50% of their revenues from video gaming and/or eSports. This includes developers and related software/hardware, streaming services, and those involved in eSports events. The index declined 2.7% over the first quarter. There are currently 25 components in the measurement, the top two holdings have a weighting of 16.54%, they are NVIDIA Corp. (NVDA) and Sea Ltd. (SE).

A more inclusive index was launched at the start of 2021 by Noble Capital Markets. Details of the Noble Esports and iGaming Index, which includes components of the other two indexes are found in a recently released report. According to their Digital, Media &
Entertainment Industry Quarterly Report from April 19 written by Michael Kupinski, Director of Research, the index is now formulated by 16 publicly traded companies, with the two largest companies in the sector, Flutter Entertainment (ISE: FLTRl) and DraftKings (ticker DKNG).

The Esports/Gaming Noble Index added 42.7% in the first quarter of 2021. The esports and iGaming section of the report drilled down and discussed strong performance by some of the index components, including Draft Kings, up 32.7% and BRAG, up 47%, The strongest stock performances within the Noble Esports and iGaming Index were from AESE, up 82.3%, SLGG, up 148.8%, SCR, up 124.5%, EGLX, up 106.2%, and, finally, GMBL (eSports Entertainment), Noble very closely follows, was up 136.4%.

Take-Away

Sports is changing in much the same way communication, media, transportation, and other industries have evolved to include new outlets. At some point, the new subsets reach a tipping point, and best serve investors if they have their own separate sets of measures. After all, as with all change, they may provide opportunities for investors. The different approaches by Roundhill Investments, MVIS, and Noble Capital Markets also help investors better grasp where performance has been and where strength and weakness can be capitalized on.

Suggested Content:


eSports Entertainment Group, NobleCon17 Presentation (Video)	eSports Entertainment Group Virtual Road Show (Video)


Esports: Show me the Money!	What’s the Future of Entertainment Consumption?

Sources:

Noble, Digital, Media & Entertainment Industry Quarterly Report

Roundhill Sports Betting & iGaming Index

MVIS Video Gaming and Esports

Photo Credit: Helix eSports

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Digital Advertising Continues its Double Digital Growth – Noble Capital Markets Media Sector Review – April 2021

Posted on April 29, 2021 by Admin

Digital Advertising Continues its Double Digital Growth

Noble Capital Markets Media Sector Review – April 2021

Growth was fueled by a strong rebound in digital advertising in the second half of the year, in which $80B, or 57% of the year’s total was booked.

Digital advertising of $45.6B in 4Q 2020 was the highest quarterly revenue number ever. For perspective, the $80B of ad spend in the second half of 2020 was equivalent to the entirety of U.S. digital advertising in all of 2016.

By quarter, digital advertising increased by 10.5% year-over-year in 1Q 2020, decreased by 5.2% in 2Q 2020 (when Covid-19 first hit), reaccelerated to 11.7% growth in 3Q 2020, and finished exceptionally strong with 28.7% growth in 4Q 2020. Fourth quarter digital ad spend benefited from an influx of political advertising, but the bigger impact may have come from a “use or lose it” mindset, in which ad budgets that weren’t spent earlier in the year were available to spend in the fourth quarter.

More importantly, digital ad spend in the U.S. was not just confined to the “duopoly” of Google and Facebook, or the “tripoloy” of Google, Facebook and Amazon Advertising. According to the IAB, digital advertising revenues among the Top 10 companies grew by 14% in the U.S., as their share of ad spend increased to 78% in 2020 from 77% in 2019. Ad spend from the fifteen next largest companies (companies 11-25) increased by 2.4% to $8B. The remaining companies in the PwC universe were able to post revenue growth of 8.3% to $22B in 2020 from $20.3B in 2019. The key take-away is that the size of the “open internet” (after the “walled gardens” of the top 10 companies) remains a sizable addressable market ($30B+ in the U.S. alone) and grew at an attractive rate of 7% (when excluding the top 10), despite what we believe was a double-digit decline in ad spend in 2Q 2020.

OUTLOOK – INTERNET AND DIGITAL MEDIA

INTERNET AND DIGITAL MEDIA COMMENTARY

Introducing Noble’s Esports and iGaming Index

Noble’s quarterly media newsletter has always covered seven distinct segments: four digital media sectors (Digital Media, Ad Tech, Marketing Tech, and Social Media) and three traditional media sectors (TV, Radio and Publishing). With this edition, we are adding an Esports and iGaming sector, as advertising and sponsorships are key revenue categories for many esports companies. Over time, we expect sports betting and Esports betting to become larger revenue drivers of industry growth.

We have added 16 publicly traded companies to our new Esports and iGaming Index and comp sheet, with the two largest companies in the sector, Flutter Entertainment (ISE: FLTR, the owner of FanDuel) and DraftKings (ticker DKNG) accounting for 80% of the sector’s market cap. Many companies in the sector are experiencing tremendous revenue growth (except for those that host live events) with organic growth augmented by acquisitions, and negative EBITDA margins as companies invest for growth. Of the 16 companies in the sector, four are expected to generate positive EBITDA in 2021, while six companies are projected to do so in 2022.

Internet and Digital Media Stocks Perform In-Line with the Market

Internet and digital media stocks generally performed well in the first quarter, with the exception of Marketing Tech stocks. In a quarter in which the S&P 500 finished up 6%, Noble’s Digital Media (+13%) and Esports & iGaming (+12%) Indices outperformed, while our Social Media Index (+5%) performed in-line with the market and the Ad Tech (-1%) and MarTech (-5%) Indices underperformed the broader market. Notable gains were recorded by Inuvo (INUV; +125%); Enthusiast Gaming (TSX: EGLX; +106%), Travelzoo (TZOO; +78%), Pubmatic (PUBM; +76%) and Criteo (CRTO; +69%).

We believe the underperformance of the MarTech stocks reflects a rotation out of stocks where Covid-19 acted as an accelerant to long-term trends into stocks that will benefit from the economic recovery. For the latest twelve months (LTM), every Internet and Digital Media sector outperformed the S&P 500 (+54%), led by our Ad Tech Index (+305%), followed by Esports & iGaming (+193%); Social Media (+84%), Digital Media (+76%) and Marketing Tech (+65%).

Internet and Digital Media M&A Activity Off to a Strong Start in 2021

In the first quarter of 2021, Noble tracked 167 M&A transactions in the Internet and Digital Media sector, up 8% over the 154 transactions we tracked in the first quarter of 2020. The most active sectors included Digital Content (54 deals), Marketing Technology (43), Agency & Analytics (29) and Advertising Technology (16). Within the digital content sector, the most active subsector were companies in the gaming sector, such as game studios or mobile game developers. There were $6.0B worth of M&A in the gaming/entertainment sector, with the largest being Electonics Art’s nearly $2.0B acquisition of mobile game developer Glu Mobile, followed by Embracer Group’s $1.4B acquisition of Gearbox Entertainment, as shown in the PDF in the download below.

Within the Marketing Technology segment, the 43 announced deals during the quarter resulted in a reported $3.0 billion in transaction value. Active subsectors included 6 deals in the Customer Experience Management space, and 4 deals each in the CRM (Customer Relationship Management) and CDP (Customer Data Platforms) sectors. The largest MarTech deals were Twilio’s $2.9B acquisition of Segment, the market leading customer data platform, and Facebook’s $1.0B acquisition of Kustomer, which would provide Facebook with customer service tools for businesses on its platform.

Finally, Ad Tech companies saw a resurgence of M&A activity. The sector saw the largest transaction value of all sectors, with $15.9B of deal activity. The two largest transactions involved reverse mergers with SPACs. The largest announced transaction was mobile game/in-app advertising network ironSource’s reverse merger with the SPAC Thoma Bravo Advantage for $10.3B. The second largest transaction was Taboola’s reverse merger with the SPAC ION Acquisition Corp. for $2B. There were two additional in-app advertising deals similar to the ironSource deal: Digital Turbine’s $600M announced acquisition of Fyber N.V. and Digital Turbine’s $356M acquisition of mobile ad network AdColony. These firms are all particularly adept at generating app installs on behalf of their clients, many of whom are in the gaming sector.

OUTLOOK – TRADITIONAL MEDIA

TRADITIONAL MEDIA COMMENTARY

The following is from a recent note by Noble’s Media Equity Research Analyst Michael Kupinski

The Ride May Get A Little Bumpy

Investors appear eager to own companies that may benefit from a post pandemic recovery. To that end, Media & Entertainment stocks outperformed the general market as measured by the S&P 500 Index in the last quarter and for the past year, with many stocks having doubled since November 2020. For the first time in a long while, traditional media companies outpaced the performance of the Digital Media group. The Media outperformance is typical of an early stage economic and advertising recovery for these consumer cyclical stocks. But there may be some headwinds looming. Investors are likely to ponder these questions: Has the recovery in media stock valuations gone too far? How will the stocks react to the prospect of higher inflation? Will advertising continue to rebound with the prospect of increased corporate or personal taxes? How will the stocks perform in a period of rising interest rates? Stocks can climb a “wall of worry”, but it usually means that the road will become bumpier. We expect a lot more volatility for these cyclical stocks in the coming months and quarters. Stock valuations do not appear to be extended, with most stocks trading within historic average five-year trading ranges, but most media stocks have factored in a fairly robust recovery. In addition, for television stocks, there is anticipation that political advertising in 2022 may even exceed that of 2020, an historic political advertising year. It would be unusual for a biennial election year to exceed that of a Presidential election year, but there has already been a record amount of money raised by politicians, PACs, and advocacy groups. For now, we see no reason to be less optimistic on the advertising front given significant economic stimulus.

We believe that media stocks potentially have bigger headwinds with inflation, rising interest rates and taxes. In terms of inflation, historically media companies have been able to raise advertising rates faster than the rate of inflation. This was true until the advent of the internet, when advertising deflation occurred. As such, the story is still out on whether advertising historic trends prevail. Certainly, in an inflationary environment, we would anticipate that there would be a contraction in cash flow multiples. On the tax front, as of now, the discussion relates to tax increases for those making $400,000 or more and for corporate tax rates to rise. State taxes appear to be generally going up as well. Generally, tax increases decrease discretionary disposable income and is negative for advertising. States appear to be seeking additional taxes, however, some even considering taxes on services, such as advertising. This would be a negative, potentially lowering margins for advertising driven companies. Finally, media stocks tend not to do well in periods of rising interest rates, which appears on the horizon.

What are media investors to do? There is a significant amount of stimulus, which should support a robust economic and advertising recovery. We believe that volatility likely will increase and stock valuation multiples likely will contract. As such, it is important for investors to be selective and seek growthier companies. Companies that have developed digital operations and those that are well positioned to grow above average in an economic recovery that may include higher inflation.

Television Broadcasting

What does the Supreme Court Ruling Mean?

On April 1st, the Supreme Court ruled that the Federal Communications Commission (FCC) was within its right to relax media ownership rules, particularly with respect to the newspaper/TV cross ownership, radio/TV cross ownership, the number of radio and television stations an operator could own in a single market, and the number of TV stations an operator could own in a single market. These ownership rules were archaic, but the Supreme Court decision to uphold the FCC’s relaxation of the ownership rules are not likely to change much.

First, many broadcast television companies sold or spun off newspaper operations long ago. This decision was largely based on the fact that public broadcast companies that owned newspapers traded at a discount to peers given the far lower multiple assigned to newspapers. In addition, many broadcasters with newspaper operations saw little synergies.

The Supreme Court decision has more implications on a broadcaster owning two Big Four network stations in a market, commonly called the Big Four rule. The Supreme Court decision paved the way for the FCC to loosen the restriction and allow the ownership of two “big four” network stations in the market. The FCC has rarely done this in the past since the combination would need to serve the public interest. It is unlikely that broadcasters would seek acquisitions to combine “big four” stations in a market given the high hurdle of the “public interest” and, especially with the current administration that has been supportive of keeping ownership rules.

As such, the relaxation of these rules will not likely drive industry consolidation, nor did the Supreme Court ruling drive up media stocks, as some media outlets suggested. Investors are looking for the FCC to further lift television ownership rules, especially the current rule that limits television ownership to 39% of television households. We believe that this would be more important in driving industry consolidation. This is not expected to happen with the current administration. We believe that the recent rise in stock valuations relates to improving fundamentals.

We believe that television investors are buoyed by core advertising gains that are expected in the first quarter and the upcoming easy comparison in the second quarter. On average, we believe that first quarter revenues are likely to be down 1% to 2% due to the heavy influx of political advertising in the first quarter 2020. The first quarter is not typically a huge political quarter, but last year was different, influenced by spending by billionaire Presidential candidate Michael Bloomberg. The second quarter revenue comparisons will be much more favorable given the significantly less political advertising and the year earlier advertising fallout from Covid 19. We estimate that industry mean revenues likely will increase as much as 18% in the second quarter. Looking forward toward the second half, comparisons will be difficult due to the year earlier historic influx of political advertising. All together, we expect Television revenues to be down 2% to 3% for 2021.

The Noble TV index increased a strong 21% in the first quarter, heavily influenced by the volatility in the shares of ViacomCBS. Nonetheless, most Television broadcasters performed well in the first quarter and outperformed the S&P 500. We believe that investors are focused on the advertising recovery, which appears to be underway in the first quarter and into the second quarter. We believe that investors may give some pause in the enthusiasm for broadcast stocks heading into the second half, given the tough revenue comparisons to the year earlier heavy political advertising.

We are not looking for smooth sailing for the stocks in 2021. Nonetheless, we believe that investors should focus on 2022 and the prospect of an historic influx of political advertising. Many broadcasters indicated that political advertising could be greater than the record-breaking amount in 2020. This would be unprecedented, given that political advertising in biennial election years is usually lower than Presidential election years. But there is a close balance of power in the House and Senate and there appears to be a record amount of money already raised by candidates and political action committees. At this time, we anticipate that TV industry revenues will increase 15% in 2022.

As the Broadcast comparable chart indicates, television stocks do not appear to be overvalued, despite the recent outperformance in the market. On average, stocks appear to trade at roughly 8x Enterprise Value/2022E EBITDA. This is within the range of historic trading averages of 8x-12x which suggests there is room for multiple expansion in TV stocks.

Radio Broadcasting

Diving Into Digital

Radio companies leaned into their digital growth strategies in the last quarter, highlighting the contributions of this growth-oriented business which performed well during the pandemic. Digital revenue grew roughly 8% in 2020 and is projected to accelerate to a strong 15% in 2021. The digital growth was significant given that traditional radio advertising declined an estimated 30% in 2020. The compelling digital revenue growth has been fueled by podcasts, but also reflects other digital initiatives such as streaming, programmatic advertising, and subscription businesses. Furthermore, digital revenue is expected to grow an attractive 10% per year for the next several years.

While traditional radio advertising is expected to recover in 2021 as the economy reopens, we expect that traditional radio advertising is likely to struggle to reflect revenue growth thereafter given competition from alternative mediums. We estimate that traditional radio advertising will increase 15% in 2021, not fully recovering from the 30% drop in 2020. As a result, many radio companies are looking toward digital and other growth-oriented businesses, including gambling and esports, as growth drivers.

Some radio companies have accelerated the trajectory of their digital revenue contribution through acquisitions. In March, Entercom, now called Audacy, purchased Podcorn, a company that connects advertisers to podcast content. This recent acquisition follows earlier purchases of Cadence13 and Pineapple Street Studios, establishing the company as a leading player in the podcast space. Notably, podcasting is the fastest growing segment of audio and, according to eMarketer, is expected to increase a strong 41% in 2021. Furthermore, eMarketer projects that by 2024, 29% of digital audio ads will be derived from podcasts. Other companies, like UrbanOne, have looked outside of the audio space for growth. The company doubled down on its interests in casinos, partnering with the Colonial Downs owner to build a casino in Richmond, Virginia.

While companies like Audacy have used acquisitions to accelerate their digital transformation, Townsquare Media has largely grown organically. Notably, with roughly 50% of its revenues derived from digital, Townsquare leads the way in the industry in terms of diversified, growth-oriented revenue streams. Recently, Townsquare management rolled out its digital first strategy. Leading with its digital businesses is a change in strategy from the company’s “Local First” focus. The change is not surprising given the strong growth in its digital businesses over the past year. Townsquare Interactive’s subscription-based business grew 14% in 2020. Furthermore, its programmatic business, Ignite, and other digital advertising revenue streams appear to be accelerating from that growth.

Publishing

Tribune Publishing received a competing offer of $680.8 million, or $18.50 per share, for the company, beating the $634.8 million, or $17.25 per share sweetened offer from the hedge fund, and largest Tribune shareholder, Alden Global Capital. Alden owns 31.6% of the TPCO shares outstanding. The $18.50 per share offer by Newslight, which is run by Stewart Bainum Jr., CEO of Choice Hotels, and Swiss billionaire Hansjoerg Wyss, was surprising, but not unrealistic. Alden agreed to sell the Baltimore Sun to a charity run by Bainum. That deal fell apart and Bainum formed a company to buy all of Tribune.

It appears that Newslight recognizes the sum of the parts valuation that we identified in our January 28, 2021 report, which indicated that the company could be worth as much as $20.75 per share, recognizing the value of its unique newspaper assets and real estate holdings. Splitting up the company appears likely. Mason Slaine, a tech investor that has expressed interest in Tribune’s Florida newspapers, indicated plans to invest $100 million into the Newslight bid. Tribune’s special committee has determined that Newslight’s offer would be a “superior proposal” to the Alden offer.

The move by the Special Committee allows the company to provide information to Newslight, which now can perform due diligence. It appears that Newslight has the financing available to complete their offer. The ball is in Alden’s court to determine if they would sweeten their offer to be “superior” to the Newslight offer. In our view, there is value left on the table to do that, but investors should be mindful that Alden has walked away from the table before with its run at Gannett.

DOWNLOAD THE FULL REPORT (PDF)

Noble Capital Markets Media Newsletter Q1 2021

This newsletter was prepared and provided by Noble Capital Markets, Inc. For any questions and/or requests regarding this news letter, please contact >Chris Ensley

DISCLAIMER

All statements or opinions contained herein that include the words “ we”,“ or “ are solely the responsibility of NOBLE Capital Markets, Inc and do not necessarily reflect statements or opinions expressed by any person or party affiliated with companies mentioned in this report Any opinions expressed herein are subject to change without notice All information provided herein is based on public and non public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on their own appraisal of the implications and risks of such decision This publication is intended for information purposes only and shall not constitute an offer to buy/ sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice Past performance is not indicative of future results.

Please refer to the above PDF for a complete list of disclaimers pertaining to this newsletter

Digital, Media & Entertainment Industry – Quarterly Review & Outlook: What Kind Of Recovery Will It Be?

Posted on April 19, 2021 by Admin

Tuesday, April 19, 2021

Digital, Media & Entertainment Industry
Quarterly Review & Outlook: What Kind Of Recovery Will It Be?

Michael Kupinski, DOR, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to end of report for Analyst Certification & Disclosures

Overview. The Ride May Get A Little Bumpy. Investors appear eager to own companies that may benefit post pandemic. To that end, Media stocks outperformed the general market as measured by the S&P 500 Index in the last quarter and for the past year, with many stocks having doubled since November 2020. The outperformance is typical of an early stage economic and advertising recovery for these consumer cyclical stocks. But, there may be some headwinds looming.

Broadcasting Television. Better Late Than Never. On April 1st, the Supreme Court upheld the relaxation of media ownership rules that the FCC tried to put in place, but was blocked by the Third District Court. These rules largely reflected cross ownership between owning a TV/Newspaper, TV/Radio and the number of radio and TV stations that one entity could own in a market. The Supreme Court ruling was not surprising, but could it pave the way for future FCC action on media ownership?

Broadcast Radio. Diving Into Digital. Radio companies leaned into their digital growth strategies in the last quarter, highlighting the contributions of this growth-oriented business, which performed well even during the pandemic. Townsquare Media appears to be leading the way with nearly 50% of its revenues tied to Digital revenue. Most recently, one of the nation’s largest Radio companies rebranded its name from Entercom to Audacy to change the dynamics of the Radio industry and to recognize the key revenue growth driver for the company.

Publishing. A Sweeter Offer. Tribune receives a competing bid of $18.50 per share, a substantial increase from the $17.25 per share from the Alden Group, which owns roughly 32% of the company. The latest offer inches closer to our original price target of $20.75. The question is whether the Alden Group walks away with an attractive return on its investment, as it did with the firm’s run at Gannett, or sweetens its offer?

Digital, Media & Technology. Taking A Breather? Most Digital Indices under performed the general market in Q1. The exceptions to the overall performance was notable. In this report, we highlight our coverage of Esports Entertainment and the fast growing industries of Esports and iGaming. Noble’s Esports/iGaming Index was up a strong 48% in Q1. While the pandemic adversely affected large stadium, in person tournament play, video gaming substantially increased due to stay at home mandates, What is the outlook post pandemic?

Overview

The Ride May Get A Little Bumpy

Stocks can climb a “wall of worry”, but it usually means that the road will become more bumpy. We look for a lot more volatility in the general market, as well as for these cyclical stocks, in coming months and quarters. In our view, stock valuations do not appear to be extended, with most stocks trading within historic five year trading average ranges. But, most media stocks have factored in a fairly robust recovery. In addition, for television stocks, there is anticipation that political advertising in 2022 may even exceed that of 2020, an historic political advertising year. It would be unusual for a biennial election year to exceed that of a presidential election year, but there has already been a record amount of money raised by politicians, PACs, and advocacy groups. For now, we see no reason to be less optimistic on the advertising front given significant economic stimulus.

We believe that media stocks potentially have bigger headwinds with inflation, rising interest rates and taxes. In terms of inflation, historically media companies have been able to raise advertising rates faster than the rate of inflation. This was true until the advent of the Internet, when advertising deflation occurred. As such, the story is still out on whether advertising historic trends prevail. Certainly, in an inflationary environment, we would anticipate that there would be a contraction in cash flow multiples. On the tax front, as of now, the discussion relates to tax increases for those making $400,000 or more and for corporate tax rates to rise. State taxes appear to be generally going up as well. Generally, tax increases decrease discretionary disposable income and is negative for advertising. States appear to be seeking additional taxes, however, some even considering taxes on services, such as advertising. This would be a negative, potentially lowering margins for advertising driven companies. Finally, media stocks tend not to do well in periods of rising interest rates, which appears on the horizon.

What are media investors to do? There is significant amount of stimulus, which should support a robust economic and advertising recovery. We believe that volatility likely will increase and stock valuation multiples likely will contract. As such, it is important for investors to be selective and seek “growthier” companies. Companies that have developed digital operations and those that are well positioned to grow above average in an economic recovery that may include higher inflation. Such companies in media exist and this report highlights a few of them including our favorites Esports Entertainment, Harte Hanks, Cumulus Media, Salem Media, Townsquare Media, Entravision, Gray Television and E.W. Scripps.

Broadcast Television

What does the Supreme Court Ruling Mean?

On April 1st, the Supreme Court ruled that the Federal Communications Commission (FCC) was within its right to relax media ownership rules, particularly the newspaper/TV cross ownership, radio/TV cross ownership and the number of radio and television stations an operator could own in a single market and the number of TV stations an operator could own in a single market. These ownership rules were archaic. But, the Supreme Court decision to uphold the FCC’s relaxation of the ownership rules is not likely to change much.

The Supreme Court decision has more implications for a broadcaster owning 2 big four network stations in a market, commonly called the Big 4 rule. The Supreme Court decision paved the way for the FCC to loosen the restriction and allow the ownership of 2 “big four” network stations in the market. The FCC has rarely done this in the past since the combination would need to serve the public interest. It is unlikely that broadcasters would seek acquisitions to combine “big four” stations in a market given the high hurdle of the “public interest” and, especially, with the current administration that has been supportive of keeping ownership rules.

Television investors are buoyed by core advertising gains that are expected in the first quarter and the upcoming easy comparison in the second quarter. On average, we believe that first quarter revenues are likely to be down 1% to 2% due to the heavy influx of political advertising in the first quarter 2020. The first quarter is not typically a huge political quarter, but last year was different, influenced by spending by billionaire presidential candidate Michael Bloomberg. Importantly, core advertising is expected to be up in March, which was not a huge political month. This bodes well for good advertising momentum in the second quarter.

The second quarter revenue comparisons will be much more favorable given significantly less political advertising and the year-earlier, advertising fallout from Covid 19. We estimate that industry mean revenues likely will increase as much as 18% in the second quarter. Looking forward toward the second half, comparisons will be difficult due to the year earlier historic influx of political advertising. All together, we expect television mean revenues to be down 2% to 3% for 2021.

The Noble TV index increased a strong 21% in the first quarter, heavily influenced by the volatility in the shares of ViacomCBS. Nonetheless, most television broadcasters performed well in the first quarter and outperformed the S&P 500. We believe that investors are focused on the advertising recovery, which appears to be underway in the first quarter and into the second quarter. We believe that investors may give some pause in the enthusiasm for broadcast stocks heading into the second half, given the tough revenue comparisons to the year earlier heavy political advertising.

So, we are not looking for smooth sailing for the stocks in 2021. Nonetheless, we believe that investors should focus on 2022 and the prospect of an historic influx of political advertising. Many broadcasters indicated that political advertising could be greater than the record-breaking amount in 2020. This would be unprecedented, given that political advertising in biennial election years are usually lower than presidential election years. But there is a close balance of power in the House and Senate and there appears to be a record amount of money already raised by candidates and political groups. At this time, we anticipate that industry mean revenues will increase 15% in 2022.

As the broadcast comparable chart indicates, television stocks do not appear to be overvalued, in spite of the recent out performance in the market. On average, stocks appear to trade at roughly 8 times enterprise value to 2022 cash flow estimates. In our view, this is within the range of historic trading averages between 8 to 12 times. As such, we believe that there is room for upside in the television group and reiterate our Outperform rating. We encourage investors to focus on our current favorites which include Entravision, E.W. Scripps and Gray Television. E.W. Scripps is an attractive political advertising play, but, also as a play on OTT broadcasting. For Gray, there is acquisition-fueled growth prospects. Entravision is an attractive recovery play as well as a play on acquisition fueled growth given its favorable, large cash position.

Broadcast Radio

Diving Into Digital

Radio companies leaned into their digital growth strategies in the last quarter, highlighting the contributions of this growth oriented business which performed well during the pandemic. Digital revenue grew roughly 8% in 2020 and is projected to accelerate to a strong 15% in 2021. The digital growth was significant given that traditional radio advertising declined an estimated 30% in 2020. The compelling digital revenue growth has been fueled by podcasts, but also reflect other digital initiatives including streaming, programmatic, and subscription businesses. Furthermore, digital revenue is expected to grow an attractive 10% for the next several years.

While traditional radio advertising is expected to have a recovery in 2021 as the economy reopens, we expect that traditional radio advertising is likely to struggle to reflect revenue growth thereafter given competition from alternative mediums. We estimate that traditional radio advertising will increase 15% in 2021, not fully recovering from the 30% drop in 2020. As a result, many radio companies are looking toward digital and other growth oriented businesses, including gambling and esports, as growth drivers.

Some radio companies have accelerated the trajectory of their digital revenue contribution through acquisitions. Entercom, now called Audacy, in March, purchased Podcorn, a company that connects advertisers to podcast content. This recent acquisition follows earlier purchases of Cadence13 and Pineapple Street Studios, establishing the company as a leading player in the podcast space. Notably, podcasting is the fastest growing segment of audio and is expected to increase a strong 41% in 2021 as forecasted by eMarketer. Furthermore, eMarketer projects that by 2024, 29% of digital audio ads will be derived from podcasts. Other companies, like UrbanOne, have looked outside of the audio space for growth. The company doubled down on its interests in casinos, partnering with the Colonial Downs owner, to build a casino in Richmond, Virginia.

While companies like Audacy have been playing catch up to transforming toward a digital, or even an entertainment-oriented company, through acquisitions, Townsquare Media has grown largely organically. Notably, with roughly 50% of its revenues derived from digital, Townsquare leads the way in the industry terms of diversified, growth oriented revenue streams. Recently, Townsquare management rolled out its “Digital First” strategy. Leading with its digital businesses is a change in strategy from the company’s “Local First” focus. But, the change is not surprising given the strong growth in its Digital businesses over the past year. Its Interactive subscription based business grew 14% in 2020. Furthermore, its programmatic business, Ignite, and other digital advertising revenue streams appear to be accelerating from that growth.

As we look forward toward 2021, we believe that there will be a radio advertising recovery. Among our favorite radio advertising recovery play is Cumulus Media. Cumulus is expected to benefit from the radio advertising recovery given its less diversified revenue streams. We estimate that the company’s 2021 revenue growth will be roughly 12%. As the comparable chart shows below, the Cumulus shares trade among the lowest multiple of EV to EBITDA of the top tier Radio stocks.

In addition, as a diversified play, one with strong growth prospects in its Digital businesses, investors are encouraged to look at Salem Media. The company has significant Digital growth opportunities with is Salem Surround, its digital ad agency business, and SalemNow, an on demand pay-per-view video platform. Salem Surround, with over 3,000 customers, grew revenues strong double-digits in 2020 and the momentum continues into 2021. Furthermore, the company recently expanded its podcasting business with the launch of Salem Podcasting Network.

Publishing

Tribune Publishing received a competing offer of $680.8 million, or $18.50 per share, for the company, beating the $634.8 million, or $17.25 per share, sweetened offer from hedge fund and largest Tribune shareholder, Alden Global Capital. Alden owns 31.6% of the TPCO shares outstanding. The $18.50 per share offer by Newslight, which is run by Stewart Bainum Jr., CEO of Choice Hotels, and Swiss billionaire Hansjoerg Wyss, was surprising, but not unrealistic. Alden agreed to sell the Baltimore Sun to a charity run by Bainum. That deal fell apart and Bainum formed a company to buy all of Tribune.

It appears that Newslight recognizes the sum of the parts valuation that we identified in our January 28, 2021 report, which indicated that the company could be worth as much as $20.75 per share, on a sum of the parts basis, recognizing the value of its unique newspaper assets and real estate holdings. Splitting up the company appears likely. Mason Slaine, a tech investor that has expressed interest in Tribune’s Florida newspapers, indicated plans to invest $100 million into the Newslight bid. Tribune’s special committee has determined that the Newslight’s offer would be a “superior proposal” to the Alden offer.

So, what’s next and what should investors do? The move by the Special Committee allows the company to provide information to Newslight, which now can perform due diligence. It appears that Newslight has the financing available to complete their offer. The ball is in Alden’s court to determine if they would sweetened their offer to be “superior” to the Newslight offer. In our view, there is value left on the table to do that. But, investors should be mindful that Alden has walked away from the table before with its run at Gannett.

In our view, investors have received the lion share of the upside in the TPCO shares. The prospective upside from here appears relatively modest. As such, investors should consider the opportunity costs of other potential investments. As such, we encourage investors to look at other of our favorite media names.

Digital Media & Technology

Introducing Noble’s Esports and iGaming Index

Noble’s quarterly media newsletter has always covered seven distinct segments: four digital media sectors (Digital Media, Ad Tech, Marketing Tech, and Social Media) three traditional media sectors (TV, Radio and Publishing). With this edition, we are adding an Esports and iGaming sector, as advertising and sponsorships are key revenue categories for many esports companies. Over time, we expect sports betting and Esports betting to become larger revenue drivers of industry growth.

We have added 16 publicly traded companies to our new Esports and iGaming Index and comp sheet, with the two largest companies in the sector, Flutter Entertainment (ISE: FLTR, the owner of FanDuel) and DraftKings (ticker DKNG) accounting for 80% of the sectorâ€™s market cap. Many companies in the sector are experiencing tremendous revenue growth (except for those that host live events) with organic growth augmented by acquisitions, and negative EBITDA margins as companies invest for growth. Of the 16 companies in the sector, four are expected to generate positive EBITDA in 2021, but six companies are projected to do so in 2022.

The Esports/Gaming Noble Index increased 42.7% in the first quarter 2021, reflecting robust gains by several larger cap companies in the index. Companies with strong stock performance include Draft Kings, up 32.7% and BRAG, up 47%, which outperformed the general market as measured by the S&P 500 Index, which increased 5.8% in the comparable time frame. The strongest stock performances were from AESE, up 82.3%, SLGG, up 148.8%, SCR, up 124.5%, EGLX, up 106.2%, and, finally, Esports Entertainment, which is closely followed by Noble, up 136.4%.

Currently, one of our favored plays in the sector is Esports Entertainment. In our view, the company is establishing itself as a vertically integrated esports/gambling company. The company is expected to soon close on its Helix/ggCircuit acquisition, which will be one of the linchpins underscoring the company has a platform play in the space.

Digital Stocks Take A Breather

Most Digital Media sectors under-performed the general market, as measured by the S&P 500 Index, in the first quarter, taking a breather from the strong year earlier stock performance. As the following figure illustrates, all of the digital media sectors outperformed the general market over the past 12 months, with a notably strong performance by the Noble Ad Tech Index, which increased an astounding 305%!

That momentum faded as we entered 2021 as the digital stocks took a breather in the first quarter, with most digital sectors under-performing the general market. Only Noble’s Digital Media Index outperformed in the first quarter 2021, up roughly 13% versus the 6% gain by the S&P 500 Index. Noble’s Digital Media Index includes such company’s as Google, Spotify and Netflix, as well as closely followed Travelzoo. The Travelzoo shares increased a strong 110% from January 4th lows to recent highs in April. We believe that investors sought companies that would benefit as economies reopen, even global economies, and companies specifically related to the travel industry, the hardest hit during the pandemic. The other Digital sectors that under-performed in the first quarter were Noble’s Digital Technology Index, down 5%; Noble’s Ad Tech Index, down 2%; and, finally, Noble’s Social Media Index, up 5%.

Digital Advertising Continues its Double Digital Growth

On April 7, the Internet Advertising Bureau (IAB) released their 2020 internet advertising revenue report in conjunction with PricewaterhouseCoopers (PwC). The report concluded that digital advertising in the U.S. increased by 12.2% to $139.8B in 2020 from $124.6B in 2019. Growth was fueled by a strong rebound in digital advertising in the second half of the year, in which $80B, or 57% of the yearâ€™s total was booked. Digital advertising of $45.6B in 4Q 2020 was the highest quarterly revenue number ever. For perspective, the $80B of ad spend in the second half of 2020 was equivalent to the entirety of U.S. digital advertising in all of 2016.

By quarter, digital advertising increased by 10.5% year-over-year in 1Q 2020, decreased by 5.2% in 2Q 2020 (when Covid-19 first hit), re-accelerated to 11.7% growth in 3Q 2020, and finished exceptionally strong with 28.7% in 4Q 2020. Fourth quarter digital ad spend benefited from an influx of political advertising, but the bigger impact may have come from a â€œuse or lose itâ€? mindset, in which ad budgets that werenâ€™t spent earlier in the year were available to spend in the fourth quarter.

More importantly, digital ad spend in the U.S. was not just confined to the â€œduopolyâ€? of Google and Facebook, or the â€œtripoloyâ€? of Google, Facebook and Amazon Advertising. According to the IAB, digital advertising revenues among the Top 10 companies grew by 14% in the U.S., as their share of ad spend increased to 78% in 2020 from 77% in 2019. Ad spend from the fifteen next largest companies (companies 11-25 increased by 2.4% to $8B. The remaining companies in the PwC universe were able to post revenue growth of 8.3% to $22B in 2020 from $20.3B in 2019. The key take-away is that the size of the â€œopen internetâ€? (after the â€œwalled gardensâ€? of the top 10 companies) remains a sizable addressable market ($30B+ in the U.S. alone) and grew at an attractive rate of 7% (when excluding the top 10), despite what we believe was a double-digit decline in ad spend in 2Q 2020.

Internet and Digital Media M&A Activity Off to a Strong Start in 2021

In the first quarter of 2021, Noble tracked 167 M&A transactions in the internet and digital media sector, up 8% over the 154 transactions we tracked in the first quarter of 2020. The most active sectors included digital content (54 deals), marketing technology (43), agency & analytics (29) and advertising technology (16). Within the digital content sector, the most active subsector were companies in the gaming sector, such as game studios or mobile game developers. There were $6.0B worth of M&A in the gaming/entertainment sector, with the largest being Electonics Artâ€™s nearly $2.0B acquisition of mobile game developer Glu Mobile, followed by Embracer Groupâ€™s $1.4B acquisition of Gearbox Entertainment, as shown below.

Among the stocks in the marketing technology space, investors should take a look at Harte Hanks. After a turbulent 2019 and 2020, the company appears to be on the mend, having restructured many of its vendor agreements, lowered infrastructure costs, and exited low margin businesses. The company has swung toward cash flow positive and has maintained a large cash position. This allows the company to service its debt and unfunded pension liabilities. Now, management appears to focus on driving the top line, a key element toward returning the company toward growth and positive free cash flow. The HRTH shares have had a strong performance so far this year, up 59% from January 4th lows to near current levels. We believe that the strong performance reflected favorable fourth quarter results, which reflected positive adjusted EBITDA.

Companies mentioned in this report:

Cumulus Media

E.W. Scripps

Entravision

Esports Entertainment

Gray Television

Harte Hanks

Salem Media

Townsquare Media

Travelzoo

Tribune Publishing

GENERAL DISCLAIMERS

All statements or opinions contained herein that include the words “we”, “us”, or “our” are solely the responsibility of Noble Capital Markets, Inc.(“Noble”) and do not necessarily reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of such decision.

This publication is intended for information purposes only and shall not constitute an offer to buy/sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile. This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice. Past performance is not indicative of future results.

Noble accepts no liability for loss arising from the use of the material in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Noble. This report is not to be relied upon as a substitute for the exercising of independent judgement. Noble may have published, and may in the future publish, other research reports that are inconsistent with, and reach different conclusions from, the information provided in this report. Noble is under no obligation to bring to the attention of any recipient of this report, any past or future reports. Investors should only consider this report as single factor in making an investment decision.

IMPORTANT DISCLOSURES

This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or discussed to another party, without the written consent of Noble Capital Markets, Inc. (“Noble”). Noble seeks to update its research as appropriate, but may be unable to do so based upon various regulatory constraints. Research reports are not published at regular intervals; publication times and dates are based upon the analyst’s judgement. Noble professionals including traders, salespeople and investment bankers may provide written or oral market commentary, or discuss trading strategies to Noble clients and the Noble proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research report.

The majority of companies that Noble follows are emerging growth companies. Securities in these companies involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Noble research reports may not be suitable for some investors and as such, investors must take extra care and make their own determination of the appropriateness of an investment based upon risk tolerance, investment objectives and financial status.

Company Specific Disclosures

The following disclosures relate to relationships between Noble and the company (the “Company”) covered by the Noble Research Division and referred to in this research report.

Noble is not a market maker in any of the companies mentioned in this report. Noble intends to seek compensation for investment banking services and non-investment banking services (securities and non-securities related) with any or all of the companies mentioned in this report within the next 3 months

ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE

Director of Research. Senior Equity Analyst specializing in Media & Entertainment. 34 years of experience as an analyst. Member of the National Cable Television Society Foundation and the National Association of Broadcasters. BS in Management Science, Computer Science Certificate and MBA specializing in Finance from St. Louis University.

Named WSJ ‘Best on the Street’ Analyst six times.

FINRA licenses 7, 24, 66, 86, 87

WARNING

This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate for any recipient particular investment objectives, financial situation or particular needs. Prior to making any investment decision, recipients should assess, or seek advice from their advisors, on whether any relevant part of this report is appropriate to their individual circumstances. If a recipient was referred to Noble Capital Markets, Inc. by an investment advisor, that advisor may receive a benefit in respect of transactions effected on the recipients behalf, details of which will be available on request in regard to a transaction that involves a personalized securities recommendation. Additional risks associated with the security mentioned in this report that might impede achievement of the target can be found in its initial report issued by Noble Capital Markets, Inc.. This report may not be reproduced, distributed or published for any purpose unless authorized by Noble Capital Markets, Inc..

RESEARCH ANALYST CERTIFICATION

Independence Of View
All views expressed in this report accurately reflect my personal views about the subject securities or issuers.

Receipt of Compensation
No part of my compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed in the public
appearance and/or research report.

Ownership and Material Conflicts of Interest
Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.

NOBLE RATINGS DEFINITIONS	% OF SECURITIES COVERED	% IB CLIENTS
Outperform: potential return is >15% above the current price	78%	31%
Market Perform: potential return is -15% to 15% of the current price	8%	3%
Underperform: potential return is >15% below the current price	0%	0%

NOTE: On August 20, 2018, Noble Capital Markets, Inc. changed the terminology of its ratings (as shown above) from “Buy” to “Outperform”, from “Hold” to “Market Perform” and from “Sell” to “Underperform.” The percentage relationships, as compared to current price (definitions), have remained the same.

Additional information is available upon request. Any recipient of this report that wishes further information regarding the subject company or the disclosure information mentioned herein, should contact Noble Capital Markets, Inc. by mail or phone.

Noble Capital Markets, Inc.
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Boca Raton, FL 33432
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Noble Capital Markets, Inc. is a FINRA (Financial Industry Regulatory Authority) registered broker/dealer.
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Member – SIPC (Securities Investor Protection Corporation)

Report ID: 12200

Release – Gray Television (GTN) – Sets Date For First Quarter Earnings Release And Earnings Conference Call

Posted on April 14, 2021 by Admin

Gray Television Sets Date For First Quarter Earnings Release And Earnings Conference Call

Atlanta, Georgia, April 13, 2021 (GLOBE NEWSWIRE) — . . . Gray Television, Inc. (NYSE: GTN) today announced that it will release its earnings results for the quarter ending March 31, 2021 on Thursday, May 6, 2021.

Earnings Conference Call Information

Gray Television, Inc. will host a conference call to discuss its operating results for the quarter ended March 31, 2021 on Thursday, May 6, 2021. The call will begin at 11:00 a.m. Eastern Time. The live dial-in number is 1-855-493-3489 and the confirmation code is 6866269. The call will be webcast live and available for replay at www.gray.tv. The taped replay of the conference call will be available at 1-855-859-2056 Confirmation Code: 6866269 until June 6, 2021.

About Gray Television

Gray Television is a television broadcast company headquartered in Atlanta, Georgia. Gray is the largest owner of top-rated local television stations and digital assets in the United States (“U.S.”). Gray currently owns and/or operates television stations and leading digital properties in 94 television markets that collectively reach approximately 24% of U.S. television households. During 2020, Gray’s stations were ranked first in 70 markets, and ranked first and/or second in 86 markets, as calculated by Comscore’s audience measurement service. Gray also owns video program production, marketing, and digital businesses including Raycom Sports, Tupelo Honey, and RTM Studios, the producer of PowerNation programs and content, and is the majority owner of Swirl Films.

Gray Contacts:

www.gray.tv
Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

Source: Gray Television

Gray Television (GTN) – Sets Date For First Quarter Earnings Release And Earnings Conference Call

Posted on April 14, 2021 by Admin

Gray Television Sets Date For First Quarter Earnings Release And Earnings Conference Call

Earnings Conference Call Information

About Gray Television

Gray Contacts:

www.gray.tv
Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

Source: Gray Television

Salem Media Group, Inc. Announces First Quarter 2021 Total Revenue of $59.4 Million

Salem Media Group, Inc. Announces First Quarter 2021 Total Revenue of $59.4 Million

Cumulus Media Inc. (CMLS)An Ebullient Advertising Picture Emerges

Gray Television Inc. (GTN)Leapfrogs Into The “Super” Broadcast League

Gray Television Inc. (GTN)Leapfrogs Into The “Super” Broadcast League

Online Media is Within an Hour of Becoming Main-Stream Media

What’s the Future of Media Consumption

Esports Investors Better Able to Evaluate Stocks

Gray Sells Divestiture Stations From Quincy Media Transaction to Allen Media for $380 Million

Gray Sells Divestiture Stations From Quincy Media Transaction to Allen Media for $380 Million

Investors are Handed More Tools to Evaluate Esports and iGaming Performance

eSports Entertainment Group, NobleCon17 Presentation (Video)

eSports Entertainment Group Virtual Road Show (Video)

Esports: Show me the Money!

What’s the Future of Entertainment Consumption?

Digital Advertising Continues its Double Digital Growth

OUTLOOK – INTERNET AND DIGITAL MEDIA

OUTLOOK – TRADITIONAL MEDIA

DOWNLOAD THE FULL REPORT (PDF)

Digital, Media & Entertainment IndustryQuarterly Review & Outlook: What Kind Of Recovery Will It Be?

Gray Television Sets Date For First Quarter Earnings Release And Earnings Conference Call

Gray Television Sets Date For First Quarter Earnings Release And Earnings Conference Call

Cumulus Media Inc. (CMLS)
An Ebullient Advertising Picture Emerges

Gray Television Inc. (GTN)
Leapfrogs Into The “Super” Broadcast League

Gray Television Inc. (GTN)
Leapfrogs Into The “Super” Broadcast League

Digital, Media & Entertainment Industry
Quarterly Review & Outlook: What Kind Of Recovery Will It Be?