Correction: An earlier version of this story incorrectly interpreted Saga’s net income from continuing operations. We apologize for the misunderstanding.
Saga Communications has emerged as one of the darlings of Wall Street for those seeking to invest in broadcast media companies. Now that it is a radio “pure-play,” as it has closed on its sale of its TV properties to Morgan Murphy Media , net income soared.
However, Saga’s net revenue growth was far more tepid, increasing by 1.3%, to $30.3 million for the three months ended Sept. 30.
And, its net income from continuing operations was down.
Some $30.45 million income from discontinued operations — Saga’s former TV stations — accounted for a huge surge in net income in Q3, to $33.42 million ($5.66 per share), from $5.4 million (92 cents).
When isolating net income for continuing operations, it dipped to $2.97 million (50 cents per share) from $3.9 million (66 cents). Additionally, Free Cash Flow dipped to $4.49 million, from $5.44 million. Operating income was $5.5 million, down from $6.8 million in Q3 2016. These results are primarily due to a gain of $1.4 million recognized from the sale of one of Saga’s broadcast towers in Norfolk in Q3 2016.
The financial results are also directly tied to the Sept. 1 completion of the sale of Saga’s television stations for approximately $66.6 million. At the same time, however, Saga reinvested in radio by acquiring Apex radio stations in Charleston and Hilton Head, S.C., for approximately $23 million.
With $25 million in outstanding debt, some $22 million in cash will be used to pay taxes prior to the end of 2017, based on the gain on the sale of Saga’s television assets.
In addition to taxes, Saga intends to utilize the cash for prospective future acquisitions, regular quarterly cash dividends as declared by the Board of Directors, and to consider its use for special cash dividends and stock buybacks.
Investors weren’t kind to Saga executives following the release of the Q3 results: the company’s stock was down 6.1%, to $42.40, as of 3:40pm Eastern.