When it comes to quarterly earnings calls, Ed Christian, the CEO of radio industry pure-play Saga Communications, always seems to keep a financial report card post-mortem assessment entertaining and full of poignant tales.
For Saga’s Q3 2019 earnings call, Christian delivered a lengthy soliloquy replete with tales involving Iceland and fishing, and hall of fame football coach Vince Lombardi.
At the end of the day, however, the stories couldn’t hide the biggest takeaway: Saga’s sputtering, and Christian’s not pleased.
Joined by CFO Sam Bush for the two-person earnings party, Christian lamented that his company had just completed an “unsatisfactory” quarter.
Why? Same-station net operating revenue fell to $30.25 million, from $31.65 million, as same-station operating income dipped to $4.73 million, from $5.32 million.
On a consolidated basis, actual net operating revenue slipped to $31.27 million, from $31.65 million. Net income declined to $3.3 million (56 cents per share) from $3.7 million (62 cents).
Before launching into his long, uninterrupted discussion on the health of radio and where Saga stands, Bush noted a few highlights of the company’s Q3: revenue was flat, ex-political. This came despite a $779,000 reduction in station operating expenses during the quarter, on a same-station basis.
Christian then began talking, noting how Q4 looks soft “due to the headwinds of last year’s political spending.” Without mincing words, he says so far this year, “political has been very disappointing.”
Christian was hoping political would have picked up in 2019. It hasn’t.
He then blamed a portion of the revenue dip on some of the radio industry’s larger companies that he believes are taking more national business in a way Saga would prefer to stay away from: some competitors are going after share, not rate.
“We have gone 180 degrees on this, and radio is on a downward trajectory on this,” Christian lamented. “That’s their prerogative … I don’t condemn them on this. But, we provide value instead of bulk distribution. We still feel and absorb the pain of missing these buys because we aren’t rate competitive — nor will we be.”
Christian added that Saga “would rather build a business by working directly with clients.”
And, he says similar situations are present at local advertising agencies.
Another headwind for Saga is the economy. In farm states where it has stations, tariffs imposed by the Trump Administration, along with poor weather, have created a difficult economic situation. Christian then noted consumer debt concerns he and Bush have been eyeing.
What is the solution for companies like Saga?
This is where famed Green Bay Packers coach Lombardi was mentioned by Christian. During a difficult season, a particular bad game had ended. What did he do? Lombardi addressed his players in the Packers locker room by declaring the team had to get back to basics. “He picked up the pigskin and said, ‘Gentlemen, this is a football,'” Christian said. “We need to pick up the teaching with our sellers and practice, practice, practice.”
Christian spoke at length about turning to the basics of radio while training the sales associate on how to best sell local direct, as they are not getting agency revenue, to build longer-term relationships with clients.
Christian also shared a story about bed bugs, and how a mattress dealer was tied in to a promotion — something that demonstrates how Christian and his team are discovering new uses for an old medium.
Then, he ventured to Iceland to talk about the fishing industry.
There was a point, and it tied in to Christian’s conviction that the radio business fundamentals are strong, but that the industry must not sit “idly by” while the world changes around it.
Doing so would disappoint Saga’s investors.
— With reports from Radio Ink
