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Saga Communications (SGA) Q1 2025 Earnings: Navigating Challenges with Digital Momentum

Clyde MorganSunday, May 11, 2025 6:10 am ET

66min read

Saga Communications, Inc. (SGA), a regional media company with a portfolio of radio stations and digital platforms, reported its Q1 2025 earnings on May 8, 2025. While the results highlighted persistent headwinds in traditional radio revenue, the company’s focus on digital growth and disciplined capital allocation provided a glimpse of resilience. Below, we dissect the key takeaways and evaluate SGA’s investment potential.

Financial Performance: Mixed Signals in Core Operations

Revenue Decline: Total net revenue fell 4.3% to $24.2 million in Q1 2025, driven by a 6.6% drop in same-station revenue to $23.6 million. This underscores ongoing challenges in the radio broadcasting sector, where ad spending continues to shift toward digital platforms.
Cost Management: Station operating expenses decreased 2.2% to $22.0 million, with same-station expenses down 5.0% to $21.3 million. This discipline narrowed the operating loss to $2.3 million, a marginal improvement from $2.4 million in Q1 2024.
Net Loss Stability: The net loss remained flat at $1.6 million, with a diluted loss per share of $0.25, consistent with prior-year results.

Digital Growth: A Silver Lining in an Otherwise Strained Quarter

The report’s brightest spot was Saga’s progress in digital revenue streams:
- Digital Ad Revenue: As of May 8, 2025, digital ad revenue (search, display, and social) reached $5.3 million, surpassing the full-year 2024 total of $5.0 million.
- Interactive Revenue: Total interactive revenue (including streaming, e-commerce, and online news) stood at $12.5 million by May 8, up from $14.2 million in 2024. Online news revenue nearly doubled year-over-year to $562,000.
- Profitability: Interactive revenue carries a 51% profit margin (excluding sales commissions), far exceeding traditional radio margins.

CEO Chris Forge emphasized a “blended strategy” combining radio with digital channels to capture 5% of digital ad spend in Saga’s 28 markets. This could position the company to double gross revenue in 18–24 months, provided execution stays on track.

Balance Sheet Strength and Capital Allocation

Liquidity: Cash and short-term investments rose to $27.2 million by May 5, 2025, with minimal debt ($5.0 million in long-term debt). A leverage ratio of 0.49 reflects financial flexibility.
Dividends and Buybacks: SGA maintained its $0.25 quarterly dividend, totaling $1.6 million in Q1. Since 2012, the company has returned $137 million in dividends and $58 million in stock buybacks, signaling commitment to shareholders. Plans to allocate proceeds from non-core asset sales (e.g., tower sites) toward further buybacks add a potential tailwind for equity holders.

Risks and Challenges

Traditional Revenue Decline: Radio ad revenue remains under pressure, with Q2 pacing down mid-single digits. April was off “high single digits,” though May improved to “low single digits,” and June is expected to flatten.
Proxy Contest Costs: Legal expenses of $110,000 in Q1 and additional Q2 costs from a shareholder dispute add short-term pressure.
Market Competition: The shift to digital advertising continues to disrupt traditional radio, requiring sustained investment in new platforms.

Investor Sentiment: Mixed Institutional Activity

Institutional investors are divided:
- GATE CITY CAPITAL MANAGEMENT increased its stake by 94.5% in late 2024.
- ACUITAS INVESTMENTS and ROYCE & ASSOCIATES exited entirely, suggesting caution about near-term prospects.

Conclusion: A Buy with a Long-Term Lens

Saga Communications faces near-term headwinds in its core business but is positioning itself for growth through digital innovation. Key positives include:
1. Digital Momentum: The $5.3 million digital ad revenue milestone and 51% profit margin in interactive revenue signal scalability.
2. Strong Balance Sheet: With $27.2 million in cash and a leverage ratio of 0.49, SGA has room to invest in growth or return capital to shareholders.
3. Dividend Discipline: The $0.25 quarterly dividend remains sustainable given stable net losses and cash reserves.

However, risks persist:
- Traditional revenue declines could accelerate if digital adoption lags expectations.
- The proxy contest and legal costs may weigh on Q2 results.

For investors, SGA presents a compelling long-term opportunity at current prices. With a market cap of ~$200 million and a P/E ratio (if earnings turn positive) likely below peers, the stock offers asymmetric upside if digital initiatives succeed. Short-term volatility may test patience, but the blend of cash flow, shareholder returns, and growth potential makes SGA worth watching.

Final Take: Hold for the long game. Digital growth and disciplined capital allocation could transform SGA from a radio relic into a hybrid media leader.

Data as of May 2025. Past performance is not indicative of future results.

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