Saga Communications Q1 2026 Earnings Call Transcript

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Provided by Quartr
May 7, 2026

Key Takeaways

  • Negative Sentiment: Net revenue declined 5.6% year‑over‑year to $22.9M (total gross down ~6%) and the company says Q2 is pacing down high single digits, signaling continued pressure on traditional ad sales.
  • Positive Sentiment: Digital revenue grew 25.2% to $4.4M, with strong blended/digital metrics (digital‑only blended +103%, SEM +105%, display +120%, social +108%) and blended radio+digital revenue up 59% to $3.6M.
  • Negative Sentiment: Customer churn is material — the company gained 158 blended accounts but lost 419 non‑blended accounts in Q1, which contributed to the overall revenue decline.
  • Neutral Sentiment: Management is adding ~ $1.5M of market expenses in 2026 to build digital infrastructure and hire staff; they expect this short‑term cost drag to be offset by revenue in Q3–early Q4 2026 when in‑house digital capabilities ramp.
  • Positive Sentiment: Balance sheet and capital actions support liquidity and returns — sale of towers recognized an $11.6M gain (net cash ~$9.8M), cash of ~$27.8M as of May 4, 2026, and the board continues a $0.25 quarterly dividend with intent to maintain regular payouts.
AI Generated. May Contain Errors.
Earnings Conference Call
Saga Communications Q1 2026
00:00 / 00:00

There are 3 speakers on the call.

Speaker 1

Good day, everyone, welcome to the Saga Communications first quarter 2026 conference call and earnings release. At this time, all participants are placed on a listen-only mode. It is now my pleasure to hand the floor over to your host, Chris Forgy. Sir, the floor is yours.

Operator

Thank you, Matt, and thank you to everyone who has taken the time to join Saga's 2026 Q1 earnings call. We appreciate your continued support, your interest, and your participation in Saga Communications. Again, what we believe is the best media company on the planet. With that, I'm going to turn it over to Sam Bush, our Executive Vice President and Chief Financial Officer. Sam, the floor is yours for now until I take it back from you.

Speaker 2

Very good. Thank you, Chris. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. This call will also contain a discussion of certain non-GAAP financial measures. Reconciliation for all the non-GAAP financial measures to the most directly comparable GAAP measure are attached in the selected financial data tables. For the quarter ended March 31st, 2026, net revenue decreased $1.3 million or 5.6% to $22.9 million compared to $24.2 million last year. Political was not a factor in the quarter, as for the 1st quarter in 2025, gross political revenue was $271,000 compared to $275,000 in 2026.

Speaker 2

For 2026, we currently have $1.4 million in gross political revenue on our books, compared to gross political revenue of $650,000 for the whole year in 2025 and $3.3 million for the year in 2024. Digital revenue was up $900,000 or 25.2% to $4.4 million for the first quarter of 2026 compared to $3.5 million for the same period last year. This growth was not enough to surpass the decline in our traditional advertising revenue, including national, local direct, and local agency. Other income was down approximately $200,000. This was primarily due to the reduction in rental income we previously received for the tower sites we sold in the fourth quarter last year.

Speaker 2

Chris will be adding more color to the various revenue line items, both traditional and digital, in his upcoming comments. Station operating expenses were approximately flat with the same quarter last year at $22 million. We do expect our station operating expense to increase 1.5%-2.5% for the year when including the added expenses that we are taking on to build out the infrastructure related to our digital transformation. We continue to expect that our corporate general and administrative expense to be approximately flat with last year at $12.3 million. As stated in our year-end filings for the company closed on the sale of telecommunications towers and related properties on October 17, 2025, recognizing a gain of $11.6 million. The total proceeds, including both cash and non-cash, were $15.1 million.

Speaker 2

The net cash proceeds from the sale after expenses was $9.8 million. This does not include the approximately $400,000 being held in an escrow account pending finalizing the landlord's consent to transfer of one final tower. We anticipate this transfer will take place in the second quarter of 2026. Due to the sale and our continued ability to operate as we historically have at these tower sites we sold, we have a non-cash expense report of approximately $50,000 in station operating expense in the first quarter. We will continue to have a non-cash expense based on the accounting treatment required to record the non-cash gain in each of our future quarters, which will be disclosed in our ongoing releases and filings. The company paid a quarterly dividend of $0.25 per share during the first quarter on March 20, 2026.

Speaker 2

The aggregate value of the quarterly dividend was approximately $1.6 million. The company also issued a press release this morning simultaneous with our earnings release that Saga's board of directors declared a quarterly dividend of $0.25 per share on May 6, 2026, with a record date of May 22, 2026, and a payable date of June 12, 2026. With the most recent declared dividend, Saga will have paid over $145 million in dividends to shareholders since the first special dividend was paid in 2012. The company intends to continue to pay regular quarterly cash dividends in the future. The company's balance sheet reflects $30.4 million in cash and short-term investments as of March 31, 2025, and $27.8 million as of May 4, 2026.

Speaker 2

For the quarter ended March 31st, 2026, the company recorded capital expenditures of $780,000 compared to $700,000 for the same period last year. The company expects to expend approximately $3.5 million on capital expenditures during 2026. We also continue to evaluate our non-productive assets with the intent of monetizing those assets at a value that is higher than is recognized in Saga's stock price. This also allows us, from a cash perspective, to offset the cash spend on some, if not all, of the capital expenditures required to continue to operate our core business as well as invest in our digital transformation.

Speaker 2

As reported in the fourth quarter, we sold excess land at one of our Iowa tower sites for a little over $200,000, and at the end of this quarter, we sold our old studio site in Springfield, Mass for approximately $500,000. We expect to be able to report more on this initiative with our second quarter earnings release. The second quarter is currently pacing down high single digits with digital up 10.2%.

Speaker 2

We continue to have a ways to go before the increases in digital revenue is larger than the decline in traditional broadcast revenue. To increase the pace of the transformation, we are continuing to move forward with a plan to add resources to build the digital infrastructure we need to process the interactive orders that the blended sales process is creating, as well as to provide our local management teams in a number of markets that don't already have them with sales managers as well as digital campaign managers. This will allow our media advisors to spend more time calling on existing and potential clients to solicit new business, as they will now have the assistance they need to help build the unique blended campaigns that are required to grow our digital business and mitigate the decline in radio ad spend.

Speaker 2

It also allows us to have the talent to monitor the performance of the blended campaigns, which will allow us to retain a higher percentage of blended clients. The expense of this initiative will initially be more costly than the revenue it will bring, but it is a necessary expenditure to be competitive with other digital companies and to better serve our clients in meeting their advertising needs. In totality, this will increase our market expenses approximately $1.5 million for 2026. We have already hired most of the corporate digital staff and are in the process of continuing to find the right individuals at a market level. All said, we believe Saga is in a strong financial position to improve profitability as our digital initiative improves both local radio and digital revenue.

Speaker 2

With Chris, I'll turn it back over to you.

Operator

Thank you, Sam. Constant, sustained, intensive training. Teaching, coaching, inspiring, and encouraging. These are the clearly stated behaviors that make up the prescription for success for broadcasters in the digital space. Saga has spent the better part of two and a half years doing just that with our general managers, sales managers, media advisors, content creators in all of our 27 markets. It has been challenging, to be honest. Recently, I spoke with 16 of our Saga general managers. That's about half of all of our Saga general managers in total. During that discussion, I conducted a quick survey. I asked the question: how long have each of you been in the broadcast business?

Operator

Each of the 16 leaders gave their answer. Then I tallied the totals and discovered that the leaders in just those 16 Saga markets had been in the business we love for a total of 594 years. 594 years of acquired skills, knowledge, expertise, intuition, instincts, acumen, and other skills and abilities. You know, traditionally, radio professionals have been very successful and have made a lot of money for their organizations and for themselves over the years on just 5%-7% of the total ad spend. Parenthetically, 5%-7% has been radio's share of the total advertising pie for some time and has now settled in at about 5%. Now with the digital age, there seems to be an element of fear to change or maybe a fear of loss on the part of broadcasters.

Operator

Times have changed. Thus, what Saga and other broadcasters have been aggressively doing is to expand the knowledge base. In Saga's case, expand the knowledge base in the 594 collective years of acquired skills, knowledge, expertise, intuition, instincts, acumen, and finally, success. This while at the same time continuing to blunt the onslaught of a macro downdraft in the traditional advertising sector. That's a tall order, and we're progressing on getting it done. In essence, we have been remodeling a home while we're still living in the home. If any of you have ever done that, you know it's rather disruptive. In this case, old habits die hard. In the digital space, it can be confusing and alluring with all the new bright, shiny options that exist.

Operator

Thus, it is also critical for us as leaders and operators to avoid the urge to focus or try to focus on too much. As I have said on previous earnings calls, we chose this path of transformational change out of desire for growth and out of necessity. We believe, and have seen evidence of it, that a local digital advertising market that remains is ripe for disruption. Here's what we see. I've shared some of this with you before. There's an ongoing increase in digital advertising dollars, and the rapid growth of digital budgets has outpaced the ability of the advertisers to use them effectively. There are frustrated buyers with unmet needs. The ineffective evergreen, as we call it, set-it-and-forget-it campaigns and empty promises create a lack of trust with what the advertiser is buying and with who they are buying it from.

Operator

There are too many providers and too many conflicting solutions. Everybody's got a new and bright, shiny answer. Buyers are confused. Thus our media advisors must be properly trained and equipped with the right resources so they can then provide the clarity and simplicity to help our customers be successful. Finally, many of the digital offerings out there focus too much on the products and not enough on the real journey the consumer goes on once they engage with a product or service. To be clear, Saga is a customer-first company, not a digital-first company. We are a customer-first, not a digital-first company. Our blended process honors and respects and grows local radio and allows Saga's core business to do the magic it has always been known for. Radio gets the advertiser wanted and always leads to a search.

Operator

Search gets the advertiser found, and display gets the advertiser chosen. In concept, it's simple. Saga's blended digital process is easy to understand, easy to buy, easy to execute, easy to measure, and ultimately easy to rebuy. Now it comes back to the feet of the leadership, and it is our job to make enough of the right blended sales calls, saying the right things to the right people with frequency. To assist with these objectives, we've deployed a lead gen solution to help Saga's media advisors and media groups get wanted, found, and chosen. You noticed I said, to help Saga's media advisors and media groups get wanted, found, and chosen. In essence, we are applying the blended strategy to our own enterprise. Practice what we preach.

Operator

Now, after a couple of years of training, conversations we're having are much different than they ever were two years ago. Our leaders continue to put in the work, and they are becoming experts. We believe they have learned and know more about consumer behavior and digital advertising than they ever even realized. The other day, one of our leaders said to me, "It's more important to get it right than it is to be right." We are beginning to get it right.

Operator

In the process of getting it right, and in our quest to catch up with our broadcast brethren after being late to the digital party and attempting to forge a path no one has ever forged before successfully, we may have made some of the training and coaching and inspiring and encouraging a bit too complicated and perhaps tried to focus on a little too much with those leaders with the 594 plus collective years of broadcast experience. These leaders who are then charged with teaching, coaching, inspiring, and encouraging others in their organization to go out and tell the story to the consumers and to our customers, so they can benefit from the story itself. With us, clarity and simplicity also applies. It applies to us during our training process.

Operator

Going forward, we've shifted slightly to not ignore or forgo the traditional radio and radio advertising that has served so many in the Sagaverse for so long, and to ignore it just because it's not blended or doesn't include search or display. Every conversation, every interaction with an advertiser is another opportunity to have a blended conversation that could lead to a sale and success for our customer. We are and will continue to sell e-com, online news, endorsements, promotions, events, and create impeccable spec creative. Be great storytellers who tell persuasive stories that allow the customer to see themselves in that story. Be intense and curious listeners, and help our customers solve problems. Use the 594 years of experience gained by our leaders to accomplish this.

Operator

All of that being said, at a time when traditional advertising is extremely challenging and some broadcasters are looking to divest partially or completely and cut expenses or perhaps hang on just long enough for deregulation to become a thing. Saga, with the support of management and the board of directors, continues to invest in the ongoing training, resources, and people power necessary to acquire, retain, and grow our revenue. We continue to see green sprouts of success as we remodel the house that we're currently living in. Now speed of execution is what we need. When I got into the business, we called it wearing out your shoe leather. I don't think they call it that anymore, but that's what we called it then. These are some of the green sprouts we're seeing.

Operator

For example, Saga's digital-only blended revenue was up over $1 million, a 103% increase year-over-year, Q1 2025 versus Q1 2026. Local direct revenue that was attached to a blended product. The blended products being search and display was up year-over-year Q1 2025 versus Q1 2026, 29%. The average blended local direct radio buy is 70% larger than the average non-blended local direct radio buy. The average total blended buy per client is three times larger than the average non-blended local radio buy. Year-over-year Q1 2025 versus Q1 2026, we gained 158 blended accounts and lost 419 accounts. Significant attrition is real. Let me say that again. We gained 158 blended accounts and lost 419 non-blended accounts. Attrition is real.

Operator

Revenue from blended digital and radio together in Q1 2026 was $3.6 million and was up $1.3 million over Q1 2025. If you do the math, that was up 59% year-over-year, quarter-over-quarter. Unfortunately, as Sam mentioned, even with the lift in blended performance, which consists primarily of search and display, we did not yet offset the delta in overall performance for the 3 months ending 3/31/2026. Saga finished down 6% in total gross revenue and down 5.6% in total net revenue. As forecasted, digital expenses over the same period increased $649,000 due to the addition of digital people, training, digital products, resources for several of our Saga markets.

Operator

This investment in infrastructure and people will ultimately enable us to bring several outsourced products in-house to allow us to increase Saga's operating margins on many of the digital products we offer. During this transition, however, there will be a brief overlap in time where we will be training in-house employees and continuing to use third-party providers, and we'll be doing it simultaneously, training and then deploying. This, along with the increase in general digital expenses, will not be, for any means, a long-term proposition. We need these short-term investments in order to compete in an extremely competitive and ever-changing digital marketplace. There will certainly be a ramp-up period for those, for that revenue to catch up and surpass the expense lift. We anticipate this crossover period to take place in the third and early fourth quarters of 2026.

Operator

At that point, our plan is that the investments made will become accreted. As far as Saga's other terribly important revenue initiatives are concerned, ones that we've talked about on virtually every earnings call, for the quarter ending March 31, 2026, local e-commerce revenue was up 23.2%. Looking ahead, April e-commerce registered a record month of $347,000. January through April, e-commerce is performing up 24% year-over-year for the full month period. The 12-month trailing revenue on e-com platform is nearly $3 million. The Best of Digital program was up 15% year-over-year for Q1 2025. However, national streaming revenue during the period ending 3/31/2026 was down 31.5%. This was due primarily to a change in third-party provider processes and a change in algorithms.

Operator

Mobile streaming was up 116%, and local streaming revenue was down 7%. Online news sites were also down for the quarter 7.2%. Despite this decline in national streaming, local streaming, and the online news, Saga experienced a large lift in overall digital revenue. All in, interactive digital revenue for the period ending 3/31/2026, as Samuel D. Bush mentioned, was up 25.2%. More specifically, SEM and search was up 105% year-over-year, quarter-over-quarter. Targeted display was up 120% year-over-year, quarter-over-quarter. Social media was up 108% year-over-year and quarter-over-quarter.

Operator

In closing, the reach and frequency and intrusive magic of radio, along with search and display, coupled with hundreds of years of experience from Saga's broadcasters, bring the best of all worlds together and enable us to change with the times. It enables us to honor the past and guide the future. That's how we move from simply changing with the times to leading through them together. Thank you again for your time, your interest, and support of Saga Communications, what we believe to be the best media company on the planet. Sam, are there any questions?

Speaker 2

Yes. Yes, Chris, we did get a few questions. Start with the first one. Are there efficiency initiatives or automation efforts underway to protect margins?

Operator

You mind if I take that one?

Speaker 2

Nope. Absolutely.

Operator

Okay. We continue to bring digital offerings currently provided, as I mentioned, by third-party providers in-house. This ultimately decreases the costs and increases margins. We also deployed AI in our on-air and online products and efforts, including our online news, as well as other products and services, that really are used to create operational efficiencies, and we'll continue to do that.

Speaker 2

Very good. Thank you, Chris. There's two questions that I'm gonna kind of roll together, I'll reiterate what I've already said. The first in there about political revenue. What are your expectations for political ad revenue this cycle compared to prior elections, as well as how much of political revenue is already booked or visible at this stage? I'd already indicated that, from a political standpoint, that we currently have $1.4 million in gross political revenue on our books compared to last year, our total political revenue was $650,000 for the year in 2025. In 2024, it was $3.3 million.

Speaker 2

We are expecting to continue to see. It's nice to see we already have $1.4 million booked for the year, and we are expecting to see that pick up as we progress into what is more of the political spending time, and that's, you know, late third quarter and early fourth quarter as we go into the actual elections. Next question, Chris, was for you. What are the biggest risks to your business over the next 12 to 24 months?

Operator

Okay. We mentioned it on the earnings call just a moment ago. Clearly, it's speed of execution. Some of the risks that are out there that are concerns we control and others we don't. Like, for example, the speed and intensity of the macro downdraft in the traditional advertising sector. Really more importantly, can our markets effectively execute what they've been taught and do it with speed, authority, and frequency? That, to me, is the biggest risk over the next 12 to 24 months to Saga that I see currently seeing.

Speaker 2

Very good. Thank you, Chris. What KPI should investors focus on to measure the progress we make in our digital transformation strategy?

Operator

If I was an investor, which I am, the KPIs I would use and the ones that we're encouraging our leaders and our trainers to use is we measure the lift in search, display, and local direct because those are all the drivers. That's aside from local and local agency and national and all the others. Certainly, we always measure those. In terms of transformational growth in the blended space, it's the KPIs are search growth, display growth, and local direct growth.

Speaker 2

Very good. One final question, which I'll address. Do we anticipate further consolidation in the radio industry, and where does Saga fit? As we all know, a lot of eyes, including ours, are on the FCC, whether it is continued ownership limit waivers, as we've seen recently, or an overall change in ownership rules. Our first priority will be to become stronger in the markets we already serve. We're not focused on expanding just to get bigger. In reality, only time will tell where Saga fits if there is further consolidation in the industry. We obviously, as I said, are all, like a lot of people, watching the FCC and see what actions they take as we proceed through this year. I think with that.

Operator

Very good.

Speaker 2

Matt, we can turn it back over to you to wrap up.

Speaker 1

Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Speaker 2

Thank you, Matt.

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