Saga increases profits, open to acquisitions


Saga Communications, Inc.The net revenue pulled in by Saga Communications during Q2 2012 wasn’t exactly flat, but an increase of 0.7% isn’t going to set Wall Street aflame. However, a tighter corporate belt led to a better-than-expected increase in free cash flow.

Revenues amounted to $33M; free cash flow was up 7.3% to $6.8M compared to $6.3M in Q2 2011. Expenses were down 4.6% to $22M. Not surprisingly, television, which is benefitting from the upside of the medium’s two-year cycle, did better than radio, rising 8% compared to 1%.

Saga honcho Ed Christian commented, “Local was up, national was down.” He then discussed an “old product category” – back to school, and noted that it is rebounding. The spending boost comes even while consumers are worried about the economy and watching their spending. He noted that people in the Midwest are very concerned about the drought and what it will do to prices. One consumer strategy he’s hearing about is getting one more year out of an older vehicle. It’s all about feelings, he noted…people in the Midwest are nervous about pricing, and pretty soon that means everybody will be nervous about it, and it will influence advertising, in this case adversely.

The importance of the Midwest, according to Christian, is simply that it affects the company, and it also makes it hard for us to predict how Saga will do in 2013 and 2014.

Christian noted that the Saga strategy on expenses is to operate good stations that do not indulge in “conspicuous consumption.”

On the political front, Christian said, “We’re blessed with a business model that holds its own with audiences. We’re buoyed by what we do,” said Christian. He noted that political is starting to roll in – it comes fast and unpredictably. National issue ads will be starting up, battleground states will get hot.

Asked about joining iHeart, Christian said, “They really haven’t asked me if I want to get involved in it.” He said it’s a good aggregator, one of the two, but Saga is unsure about joining and would have to look at the economics. But it’s moot at the moment since the company remains uninvited, Christian guesses because of its relative lack of size.

As for free cash flow plans, Christian noted that the deal market “…is beginning to show signs of cracking and breaking up.” He said the company is certainly open to considering acquisitions. It is also looking into the possibility of dividends.

Wells Fargo analyst Marci Ryvicker said radio results were worse than expected, but performance was ahead of expectations for television revenue and expenses.