Saga Communications Q3 2026 Earnings Call - Digital Blended Revenue Up 24.9%, But Local and National Ad Declines Drag Total Revenue Down 5.4%

Moderator: Good day, everyone, and welcome to the Saga Communications third quarter earnings release and conference call. 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, President and CEO of Saga. Sir, the floor is yours.

Chris Forgy, President and CEO, Saga Communications: Thank you, Tom. Thank you to everyone who has taken the time to join Saga’s 2026 Q3 earnings call. We appreciate your continued support, your interest, and your participation in Saga Communications, what we still believe is the best media company on the planet. As I was preparing my remarks for today’s call, I was reminded of our founder, Ed Christian, who used to say many times to shareholders and those looking to invest in Saga, "Saga is not a short-term play and is really a longer-term investment, offering slow and steady growth and a deliberate, highly focused, disciplined approach to acquisition, capital management, capital allocation, and to growth." Part of that culture included an aversion to participating, which at that time was considered a digital gold rush.

That position placed Saga 10 to 11 years behind most of its broadcast brethren, migrating towards the windfall of digital revenue. Then three years ago, we started to see the beginnings of a significant downdraft in what we call the macro sector or the traditional advertising sector. We knew we needed to adjust in order to be viable for the future, so we set out to transform our company. As I have said before on these calls, it takes time to construct and implement a strategy that will sustain and scale, and radio remains central to that strategy and to the value we bring to our communities. Our stations have established brands, local audiences, advertising relationships, content capabilities, and community credibility that cannot be replicated quickly or easily. At the same time, our customers increasingly need solutions that extend beyond traditional radio schedules.

Our strategy is therefore to become a broader local media and marketing company, built on the strength of our broadcast platform. We do not view radio and digital as mutually exclusive, however. Radio can generate a broad awareness and intent, while digital products can help target, measure, and convert that interest. The long-term objective is an integrated business in which each capability makes the other one more valuable. So, why is this important today and going forward? Primarily because as we move towards 2030, discussions of digital versus non-digital advertising will, in essence, cease to exist. Projections predict that by 2030, four out of every $5 spent on advertising will involve digital of some kind. Thus, we must integrate and execute. More on that in a minute, but with that, I’m going to briefly relinquish the floor to Sam Bush for his remarks. Sam?

Sam Bush, Chief Financial Officer, Saga Communications: Thank you, Chris. Our remarks today contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the risk factor section of our most recent Form 10-K and 10-Qs. 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 included in the selected financial data tables. For the quarter ended September 30th, 2026, net revenue decreased 5.4%, or $1.5 million, to $26.7 million compared to $28.2 million last year. Station operating expense decreased $427,000, or 1.7% for the quarter, or 2.4% excluding the $154,000 non-cash rent expense associated with the previously disclosed tower sale transaction. We reported station operating income for the quarter of $2.4 million.

For the quarter, we recorded a $9.2 million non-cash impairment charge based on an evaluation of FCC license values. The non-cash charge was driven by an increased discount rate due to interest rate increases, a decrease in operating margins, and reductions in market revenue projections used in the calculation. Including the non-cash impairment charge, the company recorded an operating loss of $9.8 million. Excluding the non-cash impairment charge, the operating loss was $563,000 compared to an operating loss of $626,000 for the same quarter last year. For the nine-month period ended September 30th, 2026, net revenue decreased 5.8% to $75.9 million. Station operating expense increased $832,000, or 1.2% for the nine months, or less than 1% excluding the non-cash tower rent expense of $561,000.

Net revenues for the quarter and year-to-date ended September 30th, 2026, were reduced by $188,000 for the quarter and $564,000 year-to-date due to assigning certain income-producing leases to the buyer on the towers that we sold. Adjusting for the lease revenue, net revenue would have been down 4.7% for the quarter and 5.1% year-to-date. Gross political revenue for the third quarter this year was $1.2 million compared to $73,000 for the same period last year, and $1.9 million compared to $395,000 for the nine-month period ended September 30th. For the remainder of the year, we sold an additional $3.6 million in gross political revenue, which will result in total gross political revenue expected for the year of $5.7 million. This was significantly above what we have experienced in the past years.

The company gross political revenue was $650,000 for the total year in 2025 and $3.3 million for the total year in 2024. Again, the gross political revenue expected for this year is $5.7 million as we finish out the fourth quarter. As we reported in our Q2 earnings call, our local, national, and non-traditional revenue have all experienced double-digit declines year-over-year, and this has continued into the third quarter. Local revenue was down 11% both for the quarter and the nine-month period into September 30th. National revenue was down 13.2% for the quarter and 17.4% for the nine-month period. Non-traditional revenue was down 5% for the quarter and 14.8% year-to-date. A positive to local revenue was that e-commerce was up 5% for the quarter and 11.7% year-to-date.

Saga’s blended digital strategy, which includes search, targeted display, SEO, social, managed email, and video, including OTT and CTV, was up 24.9% for the third quarter and 55% year-to-date. Non-blended digital revenue was down 7% for the quarter and 8% year-to-date, primarily due to declines in our streaming revenue. We did see increases in some of our newer digital initiatives, including mobile streaming and lead generation services. For the nine-month period into September 30th, digital was 19% of gross revenue compared to 16% during the same period in 2025. Digital revenue for that same period was $14.5 million compared to $12.6 million last year. For the third quarter, digital revenue was $4.9 million in 2026 and $4.6 million in 2025. Revenue for the fourth quarter is pacing up 9%. Digital for the fourth quarter is pacing up 10.7%. Without political, we are pacing down 5.7%.

While it is still really early, as of November 9th, revenue for the first quarter 2027 is pacing up 5.8% with political not being a factor. Digital is pacing up 29.5% for the same period. Again, while it’s still early and these are as November 9th’s numbers, that’s very encouraging. For the quarter ended September 30th, 2026, the company recorded capital expenditures of $881,000 compared to $590,000 for the same period last year. For the nine-month period, capital expenditures were $2.9 million, which was comparable to $2.6 million for the same period last year. The company expects to spend approximately $3 million-$3.5 million on capital expenditures this year.

The company, which we usually address this separately because the timing doesn’t work out to be in conjunction with an earnings call, but it’s nice to be able to say that the company paid a quarterly dividend of $0.25 per share on October 16th, 2026. The aggregate value of the quarterly dividend was approximately $1.6 million. Saga’s board of directors yesterday declared a quarterly cash dividend of $0.25 per share, which we are putting out today in this press release, reflecting the board’s continued commitment to a disciplined and balanced approach to capital allocation. The dividend will be paid on December 11th, 2026, to shareholders of record on November 23rd, 2026. The aggregate amount of the payment will be approximately $1.6 million. Including the recently declared dividend, the company will have paid over $148 million in dividends to shareholders since the first special dividend was paid in 2012.

The board regularly evaluates Saga’s capital allocation priorities with a focus on maximizing long-term shareholder value. In maintaining the quarterly dividend, the board determined that the company’s current financial position provides flexibility to continue returning capital to shareholders while also investing in Saga’s strategic priorities and digital transformation, and evaluating other opportunities to deploy capital. The board will continue to assess dividends, share repurchases, investments in the business, and other potential uses of capital based on the relative opportunities available to create long-term shareholder value.

During the third quarter, as part of the company’s previously disclosed capital allocation plan to sell non-core assets, the company closed on the sale of a piece of land we owned in the Hilton Head market, our old Brattleboro, Vermont studio building, and a non-core tower site in Portland, Maine, for cash proceeds of approximately $1.8 million, with a gain on the sale of assets of approximately $1 million. Year to date through September 30th, the plan to sell non-core assets has resulted in total cash proceeds of approximately $4 million, with a gain on the sale of assets of approximately $2.5 million. The amounts stated are exclusive of routine selling costs. The company’s balance sheet reflected $23.5 million in cash and short-term investments as of September 30th, 2026, and $22.4 million as of November 9th, 2026.

We expect our station operating expenses 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 and the non-cash tower rental expense. We expect that our corporate general and administrative expenses to be approximately $11.8 million-$12 million for 2026. 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. I’m going to turn it back over to Chris, as he will provide a lot more insight on where that initiative is going. Thank you, Chris.

Chris Forgy, President and CEO, Saga Communications: Thank you, Sam. Thank you, Sam, very much. Look, our team subscribes to a not now, but right now attitude. We all live today in an immediate gratification society. I get it. As of today, we are not pleased with our results, clearly. We must do better. It is taking longer than we would like to answer that question that we’ve been asking ourselves since we started this journey, and our digital strategy outruns the decline in our traditional business. As you will hear in a moment, we are currently experiencing success in the execution of our blended strategy. The acceleration of our success is increasing. Growth rates are still in double digits, and the transition efforts made are beginning to pay off. As Sam mentioned earlier, digital as a percentage of gross revenue is up three points.

We’re seeing more revenue, more customers, and longer contracts. We will continue to be transparent about the timing, and we will evaluate our progress based on the measurable financial results rather than simply basing it on amount of digital revenue generated. Please understand the time, energy, resources, and fortitude it takes to be successful in a frustrating, confusing, disruptive buyer’s marketplace, a market where 75% of all media spend today is digital, and radio share of media pie continues to hover in that 3.5%-4% range. Saga’s transformational strategy may not be the most popular or even the fastest growing, but it is our path, and we believe it is the right path for Saga’s future.

I read recently, business author Alex Hormozi, in his 42 Rules of Money, said this, "Money loves speed, and wealth loves time." Speed is for generating quick revenue, capturing opportunities, and building early momentum. Fast action, testing, and launching can bring quick cash flow and early wins. Wealth loves time. Lasting financial success comes from patience, consistency, discipline, long-term building. Fact is, we need a little more time for the strategy to completely take hold. Although the results don’t reflect it yet, we remain very encouraged. Our leaders and media advisors are qualifying to present on more advertising money than we’ve ever seen, primarily due to the training and the backend support the company has provided. The opportunities and the wins are growing, as mentioned earlier, at an accelerated rate. They are occurring closer together with more frequency and are occurring in smaller and large markets alike.

One opportunity that is happening as we speak is, we are one of two finalists for a piece of business that would generate $100,000 per month in one of our Saga markets. I don’t know yet if we’re going to win that, but we have a seat at the table because we’ve earned it, and that is significant progress. As I mentioned earlier, I was going to share some other successes with you, and these are just a few that happened in the last two weeks, very recent successes we’ve seen. In Springfield, Massachusetts, we had a $109,000 blended renewal that we won that included radio, targeted display, and this recruitment campaign is only seven months long. In Columbus, Ohio, one of our Columbus’ morning show members gave a lead to our general manager. The initial meeting occurred in late March of 2026.

The client started advertising in April of 2026, and prior to that, they had never spent a dime with us. The initial order was $15,000 a month, or $180,000 annually, and included radio, search, and display. The team managed, optimized, and generated results for the client, and then two weeks ago, this same client awarded Columbus with two additional North Carolina markets for an additional $27,700 per month for a 12-month order of $332,400. In total, this Columbus, Ohio order went from zero in March of 2026 to today at $500,000 annually. In Spencer, Iowa, one of our smallest markets, the team was working with a client, which was a school district that was 165 miles away from Spencer.

For months, the media advisor told the blended story, gained trust, and ultimately won a 2027 order for online learning in the school district, a $15,000 per month order for three months, or $45,000 total. In this, they celebrated their very first blended order. Finally, in Bellingham, Washington, a roofing company in Bellingham, the team presented a blended campaign to a $38,000 per year radio-only client. Recently, they renewed the radio buy, then added $46,000 in search and $90,000 in video to the 2027 campaign. Client spend went from $38,000 radio only to $174,000 annually with a complete blended campaign. That increase from start to finish, currently sits at 357% increase in ad spend. We also experienced big wins in markets like Milwaukee and Portland, Maine, and other markets as well.

In all of these cases, the same thing is taking place. The orders are happening closer together, they’re larger in scope, and they’re happening in both large and smaller markets. All of them, almost to the number, include a great deal of persistence, time, patience, and expertise that we’ve provided our leaders and our media advisors. We continue to dig with diligence, and we are now beginning to break through in many of our Saga markets. I kind of liken this image to something you may have seen where there’s a diamond miner, and he’s digging deep into the mine with his pickaxe. He’s digging and digging, and suddenly he’s tired, and he decides to quit and leaves the mine.

As the picture pans out, it shows that if this miner had dug just a little deeper and for just a little longer, he would have realized all the diamonds his heart desires. He quit before it was quitting time. We’re now in that space, that difficult middle stretch where resolve gets challenged, but the difficult middle stretch is all part of the process. It’s not proof that the process has failed. To be clear, we’re not championing or even asking for blind loyalty to our mission. Our teams must execute, period. As the evidence shows something isn’t working, we will and have already adjusted. Smart course correction makes the plan stronger. Course correction that includes things like strategic expense reductions and the sale of non-core assets, to name a few. There is a difference between adjusting because of evidence and retreating because of impatience or fear.

One builds the company, the other keeps us stuck. We made the transformational decision for good and sound reasons, and those reasons have not gone away. The only way this transformation fails is if we abandon it before adequate time has been given to it to take hold. If you’d indulge me for a minute, the hardest part of any journey is not the journey itself, but it’s resisting the urge to turn back. Quickly, in 1519, Hernán Cortés landed on the coast of Mexico with a few hundred men and a small fleet. The journey it had was long and dangerous and uncertain. Some of his men were already whispering about sailing home, so Cortés destroyed the ships. Legend says he burned them. History says that he had them scuttled and run aground. Either way, the message was the same. There’s no going back.

The only way out is forward. Burning the ships didn’t make the journey easier. It made the decision final. As long as the ships sat in the harbor, every hardship became a debate. Should we keep going? Should we turn back? That debate frankly drains energy, splits teams, and breeds indecision. Once the ships were gone, the question disappeared. All the energy that had gone into doubting went into moving forward. The lesson isn’t reckless. It’s that commitment removes the escape route that fear keeps looking for. Most of us never burn our ships. We keep them really close to us just in case. Here’s what happens. People don’t turn back with their feet first. They turn back with their heads. When the journey gets hard, the mind starts sailing home long before the body does.

The old way starts to look safe and comfortable, even though it was the very thing we left behind. The hardship does something else. It makes us forget why we started in the first place. We remember the struggle of today, but we lose sight of the reason we chose this road to start. Without that reason, the pain feels pointless, and turning back feels sensible. That’s where indecision is born. When this happens, leaders, employees, and supporters lose their focus and fortitude. It doesn’t usually break all at once. It erodes a little each day, and that ships are still sitting there. We made a decision to change because the old way wasn’t going to take us where we needed to go, and our manager saw it.

When the journey got hard, results came slower than we had hoped they would, and some of our people quietly started rowing back to the old and what was once comfortable, not because the old model would work, but because it feels familiar and is not as hard. Fear sets in, and fortitude is lost in this case. We see the same thing with our clients. An advertiser commits to search, display, or audio, and in six weeks, the leads haven’t flooded in yet. They pull the budget and sail back to what they did before, and then they claim advertising doesn’t work. It works. It just turned around before they reached the shore. A new direction never gets the chance to take root when people keep one foot on the ship. Burning the ships doesn’t mean ignoring reality. Of course not.

If the evidence says we need to adjust our route, we adjust. But we adjust by going forward, not by sailing home. The company has adjusted when it was deemed necessary. As stated in our Q2 2026 earnings call, we made changes and adjustments and made investments and partnered with people and companies that we believe will help us with the success of this digital transformation. These partnerships are just a few short months old. At the end of Q2 2026, we partnered with Marketron NXT for all of Saga’s digital fulfillment products other than search. Marketron was already trusted source for Saga’s traffic and billing, and is now a much improved and robust digital fulfillment solution as well. The migration was natural for Saga to move our digital fulfillment to NXT.

This migration provides consistency, better preparation, and speed to market for our leaders, our digital campaign managers, and our media advisors. Saga was also pleased to announce its partnership with Borrell and Associates. Gordon Borrell and his team are now working with our leadership and sales teams to give us more visibility into the markets. As we evolve our transformation strategy, there will be moments where we need to recalibrate. Those course corrections are part of getting it right, not a sign we’re off track. If we do veer off track or off course, we are and continue to be quick to recognize it and adjust. Burning the ships means remember why we came. When it gets hard, go back to the reason, not the old way. Decide once. Stop reopening the question of whether to turn back. That debate is where fortitude leaks out. Commit fully.

One foot on shore and one foot on the ship is the most dangerous place to stand. Give it time. The middle of the journey, where we are right now, is supposed to be a little hard. That’s not proof we’re lost, it’s proof we’re on our way. What we are doing is worthy, and if it were easy, we’d already be there. We don’t look back at the harbor, frankly, because the ships are gone. The only way out is forward, and forward is exactly where we’re going. Thank you to everyone who has taken time to join Saga’s 2026 Q3 earnings call. All of us appreciate your interest in and your support of Saga Communications through this transition. Thank you all very much.

Sam Bush, Chief Financial Officer, Saga Communications: Tom, we’ll turn it back over to you to wrap up the call. Thank you.

Moderator: Thank you. Everyone, this does conclude today’s event. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.