Saga (SGA) Q1 2026 Earnings Call Transcript

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DATE

Thursday, May 7, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Christopher Forgy
• Chief Financial Officer — Samuel D. Bush

TAKEAWAYS

• Net Revenue -- $22.9 million, down $1.3 million, or 5.6%, driven by declines in traditional advertising that were not offset by digital gains.
• Digital Revenue -- $4.4 million, up $900,000, or 25.2%, with SEM and search up 105%, targeted display up 120%, and social media up 108%.
• Blended Digital and Radio Revenue -- $3.6 million, an increase of $1.3 million, or 59% year over year, noted as a composite of digital and radio product sales.
• Digital-Only Blended Revenue -- Up over $1 million, a 103% rise year over year, indicating rapid blended product adoption.
• Blended Account Dynamics -- 158 blended client accounts gained, 419 non-blended accounts lost, revealing a shift in client base and net attrition.
• Local Direct Blended Revenue -- Up 29% year over year; average local direct blended buy is 70% larger than non-blended counterparts.
• Station Operating Expenses -- Approximately flat at $22 million; full-year forecast raised 1.5%-2.5% due to digital infrastructure spend.
• Corporate, General, and Administrative Expense -- Expected flat at $12.3 million for the year.
• Dividend -- Quarterly dividend of $0.25 per share paid March 20, 2026, total value approximately $1.6 million; next dividend declared for June 12, 2026.
• Cash and Short-Term Investments -- $30.4 million as of March 31, 2026, declining to $27.8 million by May 4, 2026.
• Capital Expenditures -- $780,000 in the quarter versus $700,000 prior year; $3.5 million planned for full year.
• Tower Sale Proceeds -- $15.1 million total, $11.6 million recognized pre-tax gain, $9.8 million net cash proceeds, with $400,000 held in escrow pending one final site transfer.
• Political Revenue -- $1.4 million booked YTD, compared to $650,000 for all of 2025 and $3.3 million in 2024; expectations for additional bookings as election season approaches.
• Second Quarter Revenue Pace -- Overall revenue “down high single digits” while digital revenue is pacing up 10.2%.
• Marketing Expense Increase -- Marketing expenses to rise by approximately $1.5 million in 2026, linked to digital transformation initiatives.
• Local E-Commerce Growth -- Up 23.2% in the quarter, with January through April showing 24% growth and trailing 12-month e-commerce revenue nearing $3 million.
• Streaming Revenue -- National streaming declined 31.5%, mobile streaming rose 116%, local streaming down 7%, and online news sites down 7.2%.
• Efficiency Initiatives -- CEO Forgy said, "We continue to bring digital offerings currently provided...by third-party providers in-house...decreases the cost and increases margins." AI has been deployed for operational efficiencies in on-air, online news, and related products.
• KPIs for Transformation -- CEO Forgy cited “search growth, display growth and local direct growth” as main KPIs for monitoring digital strategy progress.

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RISKS

• CEO Forgy said, "clearly, it's speed of execution. Some of the risks that are out there that concern us, we control and others we don't, like, for example, the speed and intensity of the macro downdraft in the traditional advertising sector."
• High account attrition reported with 419 non-blended accounts lost versus 158 blended accounts gained.
• Ongoing increase in digital and marketing expenses is expected to outpace initial digital revenue gains until late in the year, resulting in temporary margin pressure.
• CEO Forgy referenced potential confusion and hesitancy in adopting digital change among radio professionals, which could impact transformation efforts.

SUMMARY

Saga Communications (NASDAQ:SGA) management reported that digital and blended product revenues grew rapidly but did not fully offset sizeable declines in traditional advertising. Strategic investments in digital infrastructure, staffing, and in-housing capabilities are increasing operating costs during the transition, with anticipated margin improvement once revenue growth overtakes expense escalation. The account mix is shifting as net blended clients rise but overall account attrition accelerates, challenging near-term growth. Capital from tower and land sales enhances liquidity, supporting ongoing investment and steady dividend payments. Market-facing guidance flags continued digital outperformance but an overall revenue decline in the current quarter, reinforcing the near-term importance of accelerating digital transformation and retention metrics.

• Management stated, "we anticipate this crossover period to take place in the third and early fourth quarters of 2026," referencing expected timing for digital investments to become accretive.
• The company stressed continued evaluation and planned monetization of nonproductive assets to fund core operations and capital spending.
• The dividend philosophy remains unchanged, with cumulative shareholder distributions surpassing $145 million since 2012 and a stated intent to continue regular quarterly dividends.
• Management emphasized a "customer-first" approach, with blended digital and radio products central to the go-forward strategy and measured through increases in search, display, and local direct revenue.

INDUSTRY GLOSSARY

• Blended Product: Combination of traditional radio, search, display, and digital advertising within a single client campaign, designed to increase client spend and retention.
• SEM: Search Engine Marketing; targeted paid online advertising via search platforms, cited as a key digital performance driver for Saga Communications.

Full Conference Call Transcript

For the quarter ended March 31, 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 first quarter in 2025, gross political revenue was $271,000 compared to $275,000 in 2026. 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. Also, 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. 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% to 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 noncash, were $15.1 million. 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 these tower sites we sold, we have a noncash expense recorded of approximately $50,000 in station operating expense in the first quarter. We will continue to have a noncash expense based on the accounting treatment required to record the noncash 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. 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, (sic) [ 2026 ] and $27.8 million as of May 4, 2026. For the quarter ended March 31, 2026, the company recorded capital expenditures of $780,000 compared to $700,000 for the same period last year. The company expects to spend approximately $3.5 million on capital expenditures during 2026. We also continue to evaluate our nonproductive 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. 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%.

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 advisers 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. 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 the 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 be better -- and to better serve our clients in meeting their advertising needs. In totality, this will increase our marketing 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. And with that, Chris, I'll turn it back over to you.

Christopher Forgy: 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 2.5 years doing just that with our general managers, sales managers, media advisers, content creators in all of our 27 markets. And 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. And during that discussion, I conducted a quick survey. I asked the question, how long have each of you been in the broadcast business?

Each of the 16 leaders gave their answer, and I then 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. 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% to 7% of the total ad spend. Parenthetically, 5% to 7% has been radio share of the total advertising pie for some time and has now settled in at about 5%.

And 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. But 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. And in this case, old habits die hard. And in the digital space, it can be confusing and alluring with all the new bright shiny options that exist. 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 at a 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. There are too many providers and too many conflicting solutions. Everybody's got a new and bright shiny answer. So buyers are confused.

Thus our media advisers 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. And 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, always leads to a search. 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. So now it comes back to the feet of 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. So to assist with these objectives, we've deployed a lead gen solution to help Saga's media advisers and media groups get wanted found and chosen.

You noticed I said to help Saga's media advisers and media groups get wanted found and chosen. In essence, we are applying the blended strategy to our own enterprise. Practice what we've preached. And now after a couple of years of training, conversations we're having are much different than they ever were 2 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 realize. The other day, one of our leaders said to me, it's more important to get it right than it is to be right, and we are beginning to get it right.

And 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, 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.

So with us, clarity and simplicity also applies. It applies to us during our training process. So going forward, we've shifted slightly to not ignore or forego the traditional radio and radio advertising that has served so many in the Saga verse for so long and to ignore it just because it's not blended or doesn't include search and 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-comm, 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 that help our customers solve problems and use those 594 years of experience gained by our leaders to accomplish this. Now 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 and resources and people power necessary to acquire, retain and grow our revenue. And we continue to see green sprouts of success as we remodel the house that we're currently living in. And 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 you call it that anymore. That's what we call it then. These are some of the green sprouts we're seeing. 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 3x 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. So significant attrition is real. Let me say that again, we gained 158 blended accounts and lost 419 non-blended accounts. Attrition is real.

And revenue from blended and digital -- excuse me, 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 3/31/26. 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.

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. And 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. And we anticipate this crossover period to take place in the third and early fourth quarters of 2026. At that point, our plan is that the investments made will become accretive. As far as Saga's other terribly important revenue initiatives are concerned and 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%. And looking ahead, April e-commerce registered a record month of $347,000. And January through April, e-commerce is performing up 24% year-over-year for the 4-month period.

And the 12-month trailing revenue on e-com platform is nearly $3 million. The vest of digital program was up 15% year-over-year for Q1 2025 (sic) [ 2026]. However, national streaming revenue during the period ending 3/31/26 was down 31.5%. This was due primarily to a change in third-party provider processes and a change in algorithms. 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 3/31/26, as Sam 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, and social media was up 108% year-over-year and quarter-over-quarter. So 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 engage 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?

Samuel D. Bush: Yes, Chris, we did get a few questions. I'll start with the first one. Are there efficiency initiatives or automation efforts underway to protect margins?

Christopher Forgy: Do you mind if I take that one?

Samuel D. Bush: No, absolutely.

Christopher Forgy: Okay. We continue to bring digital offerings currently provided, as I mentioned, by third-party providers in-house. This ultimately decreases the cost and increases margins. We've 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.

Samuel D. Bush: Very good. Thank you, Chris. There's 2 questions that I'm going to kind of roll together, and I'll reiterate what I've already said. The first, and they're 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. And in 2024, it was $3.3 million.

So we are expecting to continue to see -- it's nice to see we already have the $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 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?

Christopher Forgy: Okay. So we mentioned it on the call -- on the earnings call just a moment ago. But clearly, it's speed of execution. Some of the risks that are out there that concern us, we control and others we don't, like, for example, the speed and intensity of the macro downdraft in the traditional advertising sector. But 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.

Samuel D. Bush: Very good. Thank you, Chris. What KPIs should investors focus on to measure the progress we make in our transformation -- digital transformation strategy?

Christopher Forgy: If I was an investor, which I am, I would -- 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 aside from local and local agency and national and all the others. But certainly, we always measure those. But in terms of transformational growth in the blended space, if the KPIs are search growth, display growth and local direct growth.

Samuel D. Bush: Very good. And one final question, which I'll address. Do we anticipate further consolidation in the radio industry? And where does Saga fit? Now 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.

And 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. And I think with that, Matt, we can turn it back over to you to wrap up.

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

Samuel D. Bush: Thank you, Matt.

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