Saga Communications, Inc. Class A Stock

Good day, everyone, and welcome to the Saga Communications Second Quarter Earnings Release and Conference Call. [Operator Instructions] 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.

Thank you, Matthew. And once again, thank you to everyone who has taken the time to join Saga Communications 2026 Q2 Earnings Call. We appreciate your continued support, your interest and your participation in Saga Communications Inc. what we believe is the best media company on the planet. Before my remarks, I'm going to surrender the floor to Sam, but only for a moment, Sam. So okay, comfortable. And then I'll be back with my comments shortly thereafter. Sam?

Thank you, Chris. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors 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 June 30, 2026, net revenue decreased $1.8 million or 6.5% to $26.4 million compared to $28.2 million last year. .

Station operating expense increased $1.2 million or 5.4% for the quarter or 3.9% excluding the noncash rent expense. We incurred the noncash rent expense as a result of the tower sale we previously we have discussed on previous calls. I will add more detail in a few minutes as well as talk more about station operating expenses in general as we continue to make progress on our digital initiatives. It is important to note that even with the revenue challenges we are facing and the added expenses that we are incurring with our ongoing digital transformation, we reported station operating income for the quarter of $3 million and operating income of $623,000 while this is not where we want it to be, it is a part of the challenge as Chris says, of remodeling the house while we are still living in it.

Chris will add more color to various revenue line items, both traditional and digital in his comments. For the 6-month period ended June 30, 2026, net revenue decreased $3.2 million or 6% to $49.3 million. Station operating expense increased $1.3 million or 2.8% for the 6 months or 1.9%, excluding the noncash tower rent expense. Gross political revenue for the second quarter this year was $450,000 compared to $50,000 for the same period last year. and $725,000 compared to $321,000 for the 6-month period ended June 30. For the remainder of the year, we currently have another $1.1 million in gross political revenue sold.

This compares to gross political revenue of $650,000 for the total year in 2025 and $3.3 million for the total year in 2024. In addition to the noncash tower rent expense mentioned above, station operating expenses were also impacted by our sales manager, digital managed campaign manager and related digital fulfillment team hiring initiatives. During the second quarter, we hired 9 sales managers we hired sales managers in 9 of our markets, increasing station operating expense by approximately $146,000 for the quarter and 6-month period. We also continued our hiring of digital campaign managers and related fulfillment team members in the second quarter, which added 211,000 to station operating expenses and $20,000 for the 6-month period.

Operating income also reflects an impact from the tower sale as we transferred leases on the towers we sold. These leases were generating approximately $200,000 in revenue per quarter, as we've previously reported. We 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 and the noncash tower rental expense. Our corporate, general and administrative expense was down 13% or $398,000 for the quarter and 9.4% or $589,000 for the 6-month period. We expect that our corporate, general and administrative expense to be approximately $11.8 million to $12 million for 2026 compared with $12.3 million last year. As stated in our year-end filings, the company closed on the sale of telecommunications towers and related property on October 17, 2025, the purchase agreement and related lease documents were amended during the second quarter of this year to align the previously executed documents with the intended economic substance of the transaction.

The structure of the transaction allowed us to be able to defer taxes related to the gain on the $5.4 million noncash proceeds from the sale over the 25-year term of lease agreements. We are reporting in our financial statements a noncash tower rent expense and noncash interest income. The press release, our forthcoming 10-Q, which will be filed tomorrow and my previous comments as well as our previous public disclosures give a more detailed explanation of this complex transaction. The key takeaway is that we were able to monetize a number of our towers, maintain the ability to use those same towers for our ongoing operations and not incur any cash tower rent unlike other tower sale transactions, that have been in the industry. We did not leverage the future tower rent expenses that might have been incurred to obtain the increased liquidity that the tower sale afforded us.

The company paid a quarterly dividend of $0.25 per share on June 12, 2026. The aggregate value of the quarterly dividend was approximately $1.6 million. 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's balance sheet reflected $27.8 million in cash and short-term investments as of June 30, 2026 and $22.9 million as of August 10, 2020. The reduction in cash and short-term investments was primarily due to the repayment in full of the $5 million we had outstanding under our revolving credit agreement. After repayment of the $5 million and after evaluating our cash position, short-term investments, expected operating cash flows and anticipated liquidity needs, we terminated our existing credit agreement as it would have given us less flexibility to use our cash and short-term investments relative to paying dividends. share repurchases, investments in our digital initiatives, capital expenditures or other strategic opportunities.

We will put a new agreement in place when it makes sense as we continue with our transformation. For the quarter ended June 30, 2026, the company recorded capital expenditures of $1.3 million, which was comparable to the same period last year. For the 6-month period, capital expenditures were $2 million which was also comparable to the same period last year. The company expects to spend approximately $3 million to $3.5 million in capital expenditures during 2026. In addition to the tower sale, which generated $10.5 million in cash we've also stated that we've been working to evaluate our noncore assets with the intent of monetizing those assets at a value that is higher than is recognized in Saga's stock price.

This allows us from a cash perspective to offset the cash spent on some, if not all, the capital expenses and operational expenses increases required to operate our core business as well as invest in our digital transformation. Since the fourth quarter of last year, we have sold or our selling, including a scheduled closing tomorrow on a property in South Carolina, 6 noncore properties for proceeds of over $4 million. This includes Saga Farma, Sarasota House, which sold for $1.7 million and an unused tower site in Portland, Maine for $1 million. Revenue for the third quarter is pacing down mid-single digits with digital up mid- to high single digits.

Without political, we are pacing down mid- to high single digits. With the addition of the sales managers we have hired, we expect to see an increased productivity in both our traditional and digital revenue efforts. From a monthly perspective, we have begun to see some improvement. With and without political gross revenue for July and August, we were down high single digits in pacing. While September was up single low single digits gross and down low single digits without political.

October was up mid-single digits growth and down low single digits without political. Again, this shows some improvement as we move through third quarter and begin to move into the fourth quarter. The sales manager and digital campaign managers and related fulfillment team hiring initiatives will allow our media advisers to have more direct hands on involvement with the sales resources they need to increase their levels of productivity, while the digital campaign managers and related fulfillment team initiative will allow them to spend more time calling on existing and potential clients to solicit new business as they now have the assistance they need to help build the unique lined 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 return blended clients.

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 Chris, I'll turn it back over to you.

Thank you, Sam. As you've heard Sam say, we are, as the industry is facing headwinds. Traditional advertising verticals are experiencing real challenges, not so much from an audience consumption standpoint, but more from a monetization standpoint. For Saga, our traditional verticals, local, national and nontraditional revenue are all experiencing double-digit declaring year-over-year and for the quarter ending June 2026. Year-over-year, local revenue was down 11% year-to-date and was down 11.2% for the quarter.

National revenue was down 19.5% year-to-date and was down 25% for the quarter. Nontraditional revenue was down 12.9% year-to-date and was down 16.4% for the quarter. Conversely, Saga's blended digital strategy, you've heard so much about and that our teams have been building for the last 3 years. It includes search, display, SEO, social, managed e-mail and OTT and CTV was up year-over-year. 76.4% for the 6 months ending June 2026, and blended was up 60.8% for the quarter year-over-year. E-commerce was up 15.2% year-to-date and was up 10.7% for the quarter. For the 6 months ending June 30, 2026, Digital as a percentage of gross revenue was 19% compared to 14% during the same period in 2025.

Year-over-year, all other digital revenue was down 8.4% year-to-date and was down 9.6% for the quarter. Three-plus years ago, Sage's mission was to build a digital platform that honored and grew our traditional core competency, which is radio. It was to provide people, products and processes necessary to compete in a very crowded, competitive and profitable digital space. One that sat by the way, as I've said many times, at least 2 years late to the patio. We set out to create a practical digital platform that was easy to understand, easy to buy, easy to execute, easy to measure, easy to renew and always focused on the journey a consumer takes when they interact with a product or service and deliver it with clarity, simplicity, transparency and speed to market.

And as Sam said earlier on this call, and I have said many times before, we're still remodeling a house while we're still living in the house. Along the way on this renovation project, we've had to relocate a few wells here and there have had to change out a framing crew or 2. We've improved our supply chains and even upgraded our remodeling products we use. And during all this process, 1 thing has remained constant, the foundation, foundation strong, stable and steadfast and that commitment to the customer to get them wanted found and chosen more often and do it with what we do best, radio.

That foundation is strong and is here to withstand the strongest of stores. So more specifically, this is what Saga has been up to since our last earnings call. In the area of getting customers found we brought all of our search tools in-house and have 3 full-time search specialists to procure, implement and optimize all of Saga search campaigns. In the area of getting customers chosen, we've hired and trained 10 digital campaign managers and hired 9 directors of sales spread over 9 specific Saga markets who are in need of one. We then partnered with Marketo and NST for all of Sana's other digital fulfillment products other than search. Marketron has already so solution for radio traffic and billing and it's a much improved and robust digital fulfillment solution.

So the migration was natural for Saga to move our digital fulfillment directly to ST. This migration provides consistency, better preparation and speed to market for our leaders, our digital campaign managers and our media advisers. Tage is also pleased to announce it is forge the partnership with Barrel and associates. Gordon Borrell and his team are now working with our leadership and sales teams to give us more visibility into the markets in which we operate. Questions will be asked like, where is the available money, how much money or is currently spending.

And why are they spending it where they're spending it? What is our share of the spend? How do we get more of it and how do we acquire, retain, grow, revenue in the categories of business that are buying most. We will accomplish this by maximizing available programmatic revenue, growing solid share of available revenue and in video by expanding our offerings to reflect multi-sources of opportunistic revenue by focusing on our share of market and not dollar volume by growing our share of specific categories of business and thus share of wallet and by effectively executing a surgical-like sales strategy.

In essence, the Boral partnership provides sole data, market and advertiser visibility, all pointing us towards a North Compass. to allow our customers to better compete and allow Saga to complete the journey of the consumer. We also promoted Paula Mali, Saga's former President and GM of Charleston, South Carolina cluster to the position of Senior Vice President of Revenue Development. Paul's focus will be on traditional, nontraditional and digital revenue. During the call's time in Charleston, he was instrumental in charging success in Sage's blended digital strategy, and we're excited to have them in this position.

We've also solicited the talent and mines of our Saga extremely gifted talented leaders and employees. One team member developed and introduced an AI lead gen solution that Saga is using today. to help our media groups as well as our digital solutions get wanted, found and chosen more often. Another Saga team member also using AI created both a search calculator and a proposal writing solution that allows Saga's media advisers to create customer-focused proposals, complete with a problem to solve and a solution in virtually 1/2 of the time it previously took to create the very same proposal, again, speed to market. All these pivots along with the migration of other third-party solutions to be in-house, make Saga its leaders and its media advisers more efficient, more effective, fast and profitable.

So we've talked about praise a media environment conducive to the success of getting our customers wanted, found and chosen more often. Thus far, we've covered getting found and chosen, but we haven't discussed getting wanted. I really saved the best for last in this category for a good reason. This is why those of us who are in this crazy business wake up and do what we do every day. This falls into the category of getting our customers wanted. In other words, that's top of funnel, that's traditional media and more specifically, that's radio.

And from my vantage point, I'm really seeing a growing migration or a return to traditional media and more specifically to radio, advertisers seem to be seeking simplicity, clarity, transparency, familiarity and a connection to the community. That's what advertisers are wanting more and more of. And that's what radio delivers, particularly in our Saga markets. On that note, I'd like to share some very exciting news to me today. Saga radio stations have been very active in their respective communities.

And in the industry from and in the industry. For the first half of 2026 in the spring, WMG, FM in Springfield, Illinois, won the coveted NAB Service to America Award. In Ocala, WOGK FM was recognized as the favorite radio station and midday personality, Lewis Stokes, was recognized as the favorite on-air personality in the Greater Gainesville Ocala area in Florida. And we've seen a lot of this type of recognition across all of Sonos footprint and continue to see it. Also, Saga recently enjoyed counting for nominations for the 2027 Marconi awards. First, we had Milwaukee, Wisconsin WHO and the hog was nominated for a large market station of the year. Portland, May, late show with Kelly and Todd were nominated for medium market Personality of the Year and WPR in Heartland was also nominated for medium Market Station of the Year in Jonesboro, Arkansas, the Stafford and Free go show on KDX-YFM,-104.9 Fox was nominated for small market personalities of the year.

Also, during the first half of 2026 saw the markets raised nearly $4 million in their local communities for their communities. Now that is giving back and connecting with our local communities. Finally, in this just last week, the University of Florida College of Journalism and Communication and so Communications announced a landmark 7-year joint sales partnership. The sales agreement expands Saudi's broadcast footprint in the Ocala Gainesville, Florida market. The new lineup of stations consist of WOGKFM,WRUS, AM and FM and Wind as well as the University of Flora Gator Sports Network.

This joint sales agreement extends beyond traditional sales representation by creating opportunities for advertisers for students for faculty and industry professionals to work together on initiatives and strategic partnerships involving the broadcast facilities themselves as well as broadcast media sales, digital media, audience development, sports media, content strategy, internships, mentorships and industry events and a number of other areas that prepare students for careers in the evolving media landscape.

In other words, this strategic and accretive sales partnership, along with everything else discussed today, really reflects Saga's commitment to investing in both our present and in our future. by working with outstanding hyperlocal media properties as well as investing in our next generation of media professionals. And if the passion, excitement and commitment for traditional media and the desire for learning and growth that exists with the nearly 3,000 students in the University of Florida School of Journalism and communication is any indication radio and traditional media, though it may be facing some headwinds today, looks really very bright for tomorrow. So the processes have been refined streamline and people or set. The training is larger and the larger investment in infrastructure is in place.

Our radio foundation is solid, all news left to do is to it's about execution and monetization of what we built. Thank you again for your time and your interest and support of some communications, what we believe is the best media company on the planet.

Stan, do we have any questions?

We did get a question we did get a few questions in, Chris, most of which I think we've talked about, there was questions about current pacings, and I believe I gave a pretty full disclosure on that for Q3 and then actually into the early portion of Q4. thoughts on political. I reported the numbers we have so far, including what we have booked through the rest of the year. But I do think based on the lump-of calls we're getting from markets relative to all the things that go with political lowest unit rates filing in the FCC online public files, things like that, that we're seeing a lot of perspective legal dollars that have not been booked yet.

So I'm encouraged that we'll see an increase in political dollars as we get closer to the actual elections as opposed to the primaries and so forth. Then I think the biggest question, there were some other questions about digital, which you have talked about already relative to the prospects for growth in digital and where we are with digital. But then I think you just helped to emphasize that 1 of the questions came in. Does the company feel that it has the right feature sets to be successful in digital?

Or are there additional products and services that need to be invested into.

Well, as I stated, most of the major investments in Med May, we're already real strong in search and display, as referenced in my statement about the growth of the blend which primarily deals with search and display and radio. And we will adjust and add to our digital offerings as this ever-changing digital landscape continues to change, and it will. But it's always going to be based on what the customer needs to compete and to better compete in a competitive marketplace, whether it's with social media, video display and much of the other things I spoke about, we'll make those shifts as the client needs are dictated or dictate.

We will shift and expand as the market does and make them take real shift.

I think that's good. And with that, I don't think we have any other questions. So Matthew, I think you can go ahead and wrap up the call.

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

Good day, everyone, and welcome to the Saga Communications First Quarter 2026 Conference Call and Earnings Release.

[Operator Instructions]

It is now my pleasure to hand the floor over to your host, Chris Forgy. Sir, the floor is yours.

Thank you, Matt, and thank you to everyone who has taken the time to join Saga's 2026 Q1 Earnings Call. We appreciate your continued support, your interest and your participation in Saga Communications, what we believe is the best media company on the planet.

With that, I'm going to turn it over to Sam Bush, our Executive Vice President and Chief Financial Officer. Sam, the floor is yours for now until I take it back from you.

Very good. Thank you, Chris. This call will contain forward-looking statements about our future performance and results of operations that involve the risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. 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 attached in the selected financial data tables.

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.

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?

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?

Do you mind if I take that one?

No, absolutely.

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.

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?

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.

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

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.

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.

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

Thank you, Matt.

Good day, everyone, and welcome to the Saga Communications Fourth Quarter and Year-End 2025 Earnings Release and Conference Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Chris Forgy. Sir, the floor is yours.

Thank you, Matt, and it's good to have you again as our host for the conference call. And I want to thank everyone who's taken the time to join Saga's 2025 Q4 and year-end earnings call. Trust me when I say it is great to be here with all of you today. We appreciate your continued support, your interest and your participation in Saga Communications. What we believe is the best media company on the planet and not to mention the most pristine balance sheet to match. So before I make my remarks, I'd like to turn the floor over to our Saga's EVP and CFO, Sam Bush for his comments. Sam?

Thank you, Chris. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. 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 attached in the selected financial data tables.

For the quarter ended December 31, 2025, net revenue decreased $2.7 million or 9.3% to $26.5 million compared to $29.2 million last year. A large part of the decline in the quarter was due to reduced political revenue. For the quarter in 2025, gross political revenue was $254,000 compared to $2 million for the fourth quarter of last year. Station operating expense decreased 1.9% or approximately $400,000 to $22.9 million for the 3-month period. For the 12-month period ended December 31, 2025, net revenue decreased $5.8 million or 5.1% to $107.1 million compared to $112.9 million last year. Almost half of the decrease was due to reduced political revenue. For the year in 2025, gross political revenue was $650,000 compared to $3.3 million for 2024. Station operating expense was flat with 2024 at $91.8 million.

We had 2 unusual factors that negatively impacted our fourth quarter and year-end results. A noncash impairment charge as well as the previously disclosed retroactive industry-wide rate settlement with 2 of the music licensing organizations. Recorded in the fourth quarter and also impacting the year ended December 31, 2025, we recorded a noncash impairment charge of $20.4 million, which included a charge of $19.2 million, which represents all the remaining goodwill that was previously included on our balance sheet, along with a charge of $1.2 million representing a reduction in the value of our FCC licenses in one of our markets. We recorded an operating loss of $9.5 million compared to operating income of $1 million for the fourth quarter.

Without the impairment charge, operating income would have been $10.9 million for the quarter. We reported a net loss of $6.9 million for the fourth quarter compared to net income of $1.3 million last year. Without the impairment charge, we would have reported a net income of $8.2 million or $1.27 per share compared to $0.20 per share for the same period last year. For the year ended December 31, 2025, we recorded an operating loss of $11 million compared to operating income of $2.4 million for 2024. Without the impairment charge, operating income would have been $9.4 million for 2025. We reported a net loss of $7.9 million for the year ended December 31, 2025, compared to net income of $3.5 million last year. Without the impairment charge, we would have reported a net income of $7.2 million or $1.11 per share compared to $0.55 per share for the same period last year.

The music licensing settlement also impacted the operating income as it increased year-end 2025 station operating expense by $2.2 million. Station operating expense for the year would have decreased by 2% in comparison to 2024 instead of being flat year-over-year. We spoke about this more in our third quarter release and conference call. As stated in the press release, the company closed on the sale of telecommunications towers and related property on October 17, 2025. This has actually been in the works for quite a few years. And finally, we're able to get the transaction we thought was the best for us and move forward on it and pulled the trigger on the closing. We recognized a gain of $11.6 million. The total proceeds including both cash and noncash, was $15.1 million.

The noncash proceeds are the recognized value of the long-term nominal cost leases we entered into as a part of the transaction as we continue to operate at each of the sites we sold. 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 the transfer of 1 final tower. We anticipate this transfer will take place in the second quarter of 2026. This transaction allowed the company to monetize 24 own towers that were not reaching the full potential of tower space leased to external tower space users.

Additionally, the towers were monetized at a significantly higher valuation than was being recognized in the company's overall market valuation. We will have a noncash expense reported of approximately $50,000 per quarter in 2026 or $200,000 for the year based on the accounting treatment required to record the noncash gain given the favorable lease terms we have as we continue to operate on the towers we sold. The company paid a quarterly dividend of $0.25 per share on December 12, 2025. The aggregate value of the quarterly dividend was approximately $1.6 million. The company declared a quarterly dividend of $0.25 per share on February 12, 2026, with a record date of February 26, 2026 and a payable date of March 20, 2026. With the most recent declared dividend, Saga will have paid over $143 million in dividends to shareholders since the first special dividend was paid in 2012.

The company also repurchased 219,326 shares of its Class A common stock for $2.5 million during the year ended December 31, 2025. The company intends to pay regular quarterly cash dividends in the future. Consistent with its strategic objective of maintaining a strong balance sheet, and with returning value to our shareholders, the Board of Directors will also continue to consider declaring special cash dividends, variable dividends and stock buybacks in the future. The company's balance sheet reflects $31.8 million in cash and short-term investments as of December 31, 2025, and $31.5 million as of March 9, 2026. The company expects to spend approximately $3.5 million to $4.5 million for capital expenditures during 2026.

I want to emphasize that for the quarter, total Interactive revenue was up 25.8% and for the year up 19.1%. The first quarter is currently pacing down mid-single digits with Interactive up 26.4%. We still have a ways to go before the increases in interactive revenue outpaced the decline in traditional broadcast revenue. Including political revenue, the second quarter is currently pacing down, and we expect to end up down mid-single digits. We are expecting return to revenue growth, including political in the second half of 2026 with revenue increasing in the range of mid-single digits.

To increase the pace of the transition, 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 developing 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 return blended clients.

The expense of this initiative will initially be more costly than the revenue it will bring in, but it is a necessary expenditure to be competitive with other digital companies and to better serve our clients in meeting their advertising needs. In totality, this will increase our market expenses $1.5 million for 2026. We have already hired most of the digital infrastructure team and are in the process of finding the right individuals for sales and campaign management. These hires will occur in the second and third quarters. We expect that having the infrastructure team in-house will reduce our digital fulfillment costs going forward. All said, we believe Saga is in a strong financial position to improve profitability as our digital initiative improves both local radio and interactive revenue.

We currently expect that our station operating expense will be flat for the year as compared to 2025 when not considering the digital initiative expenses and up 3% to 4% when including an estimate for the digital initiative. We anticipate that the annual corporate general and administrative expenses will be approximately $12.3 million for 2026 and flat to 2025. And with that, Chris, I will turn it back over to you.

Thank you, Sam. Great job. Some of you may remember the 1990s uncelebrated film produced by Saturday Night Lives, Lorne Michaels. It was written by Steve Martin, a Canadian. It was called the 3 Amigos, and it featured Chevy Chase, Martin Short and Steve Martin. I won't bore you with the story, but there was a time when Saga also had its own version of the 3 Amigos. In fact, they call themselves that. These 3 Amigos consisted of Saga's founder, Ed Christian, and 2 of his closest friends and consiglieres Dave Stone and Al Lucareli. Unfortunately, all of these amigos have passed on.

But the message that the last living member of the Saga amigos gave may before he passed still lives today and drives Saga's operational culture. Just 3.5 short years ago, at Ed Christian's Wake, Al Lucarelli sat down next to me after almost everybody had left the wake and said these words to me. And I quote "Chris, as only the second President and CEO of Saga's ever known, whatever you decide to do next, do it fast, do it with force and do it with purpose." We immediately want to work on the transformational change we've been talking about on these earnings calls for the past 3 years.

We began to diversify our top line mix of deliverables, including our e-commerce platform, which is up 16% year-over-year and has created $2.5 million in local direct revenue in our Saga markets in 2025. Our 17 hyperlocal online news sites to complement and add credibility to our over-the-air news product grew year-over-year by 18% and contributed over $2.5 million in revenue and delivered a 31% margin, excluding sales commissions. The 2 blended solutions we use most to get advertisers wanted found and chosen, which are search and display. Search was up 59% year-over-year and generated $2.2 million and targeted display was up year-over-year, 44.8% and accounted for nearly $3.5 million.

Online streaming went from a revenue stream designed really simply to over offset third-party streaming costs to transform itself into a robust vertical we rely on heavily. This stream was up 8.6% year-on-year in total. And in all of the digital revenue initiatives, as Sam mentioned earlier, we were up 19.1% year-over-year and growing. We then put into action special capital allocation and capital management plan, which included an ongoing quarterly dividend of $0.25 per share, three $2 special dividends paid to our shareholders on 10/21 of '22, January 13, '23 and January 12, '24 and followed by a $0.60 variable dividend paid on April 7, 2024.

Next began a longer-term capital allocation strategy, which included a stock buyback plan. We did this by providing the means to fund this buyback without depleting any of our operational cash on hand or by adding any additional debt to our balance sheet. This entire project and then some was accounted for selling 22 of our Saga's tower sites. This plan also allows Saga to provide additional research and development and the resources necessary to develop our own growing digital platform. While this was going on, we also began and has since continued the process of expanding and diversifying Saga's Board of Directors. We also began to look for ways to cut local market expenses to create a more nimble and efficient operation while we were building the infrastructure of our digital platform. Expense reductions totaled over $1.4 million. We also began the process of selling several nonproductive assets to allow us to obtain a monetized value for the assets that is higher than the amounts recognized in the company's overall market valuation.

One example is we listed for sale, the company's owned home located in Sarasota, Florida. This process was delayed, however, due to the timing of several hurricanes that ravaged the Gulf Coast. That has settled down and the market looks much more healthy for a sale. And finally and most importantly, after observing the iterations and reiterations of both our own and those of our brethren, we continue to settle in and teach and train our leadership team and our media advisers on what we refer to now as the blend. The blend is an advertiser focused, not product-focused approach. That relies on a few things we knew and a few other observations we made along the way.

Saga's digital transformation strategy is an advertiser first approach that also honors, protects and grows our core competency, which is and always is radio. Now this is not easy. As I've said before, it's been very taxing on our entire operation. It's transformational, but growth requires change and change requires conflict. So so far, the juice is worth the squeeze. So how do we do this? First, by accepting and counting on the fact that radio always and only leads to a search. Radio always and only leads to research, and that's okay. Saga's digital strategy is designed to get our advertisers wanted, found and chosen more often by persuading more buyers and consumers to click on their website, call or visit their business and to search them online.

You may wonder, so why sometimes the overzealous confidence in your plan, it really comes from what we know, as I mentioned earlier. And according to eMarketer, of the hundreds of billions of dollars that are spent each year in advertising, nearly 75% of these dollars are being spent on digital advertising. That number is expected to climb over 80% in 2029, just a few short years. Yet radio as an industry has laid claim to a pedestrian 0.067 or a little more than 0.5% of the digital advertising dollars that are spent, which totals in the neighborhood of $2 billion in digital ad revenue. We, radio cannot win or even compete with an approach like this. So we have to do something different. So there's clearly a significant increase in digital ad spending, and it's growing and these buyers are frustrated with unmet needs.

They don't like what they're buying or who they have to buy it from. They claim they trust local radio salespeople for most of their market knowledge and advice that aren't buying it from us. Thus, education and training is key for our leadership and for our media advisers. There are too many providers with too many conflicting solutions and businesses don't know who to trust. So in this disruptive market, we need to provide simplicity, clarity and transparency to wins. And there's also a shift happening in the way consumers are buying today in the consumer behavior.

Advertising strategies haven't caught up with the journey people take when they buy. There's a gap of tech meets human behavior. The blend closes that -- so in closing, the impact of all the work we have done in training, research and development and overall transformation. Not to mention the results we've seen, has galvanized our Board of Directors, our corporate team, our market leadership teams, our media advisers, our business offices, our on-air teams of content creators and our directors of content creation to finish what we started, hence, the accretive investment Sam discussed and the acquisition of people and expertise to allow us to continue to provide and build a digital strategy that is easy to understand, easy to buy, easy to execute, easy to measure and easy to renew and to buy.

So again, as Al Lucarelli said, "Chris, whatever you do, do it fast, do it with purpose and do it with force." That is what we've anticipated doing and have been doing for the last 3.5 years, and we'll continue to do until the job is finished. Sam, do we have any questions?

First, not today. But I think we can turn it back over to Matt to wrap up.

Thank you again for joining us on the Saga Q4 and year-end earnings call. We really appreciate it. I personally appreciate it. And again, trust me when I say, I'm more than happy and grateful to be here on this call today. Thank you so much.

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

Good day, everyone, and welcome to Saga Communications Third Quarter 2025 Earnings Release and Conference Call.

[Operator Instructions]

It is now my pleasure to hand the floor over to your host, Chris Forgy. Sir, the floor is yours.

Thank you, Matt, and thank you to your dulcet tones. And thank you to everyone who has taken the time to join Saga's 2025 Q3 Earnings Call. We appreciate your continued interest and support and your participation in Saga Communications, what we believe is the best media company on the planet. I'm here with Sam Bush, and today represents 28 years of Sam doing Saga earnings call. So Sam, congratulations.

And with that, I'm going to relinquish the floor to you for now, and I'll save my remarks for later in the call.

Thank you, Chris. This call will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. 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 attached in the selected financial data tables.

For the quarter ended September 30, 2025, net revenue decreased $528,000 or 1.8% to $28.2 million compared to $28.7 million last year. Station operating expense increased $2 million to $24.7 million for the 3-month period. As reported in the press release, this increase was primarily the result of an industry-wide settlement with 2 of the music licensing organizations we are licensed by. In mid-August, the Radio Music License Committee, which Saga is a member of, announced separate rate-setting settlements with ASCAP and BMI. The settlements established license fees, which applied retroactively for the periods from January 1, 2022, through September 30, 2025, and on a go-forward basis through December 31, 2029.

In September, we booked $1.7 million for the periods from January 1, 2022, to December 31, 2024, and another $407,000 for the 9-month period ending September 30, 2025. The fourth quarter impact of the increased rates will be approximately $135,000 over our previously projected music licensing fees. We reported an operating loss of $626,000 for the quarter, which without the settlement would have been an operating income of $1.5 million compared to $1.6 million for the same period last year. We also reported station operating income, which is a non-GAAP financial measure, of $3.5 million for the quarter.

Without the settlement, station operating income would have been $5.6 million for the quarter compared to $6 million for the same period last year. It is important to note that the company would have reported net income for the quarter without the music licensing settlement. For the quarter, gross broadcast revenue included NTR, nontraditional revenue, which is mostly events we are involved in, decreased $1.8 million or 6.8%, while our gross interactive revenue increased $1.1 million or 32.6%.

Gross political revenue was $73,000 for the quarter this year compared to $677,000 last year. For the third quarter this year, the increase in our interactive revenue made up almost the entire decrease in our broadcast revenue when adjusted for political. I think Chris is going to emphasize this again but we're in radio, so repetition is always a good thing. And I just want to say again, for the third quarter this year, the increase in our interactive revenue made up almost the entire decrease in our broadcast revenue when adjusted for political.

For the 9-month period ended September 30, 2025, net revenue decreased $3.1 million or 3.7% to $80.6 million compared to $83.7 million last year. I won't go through the 9-month numbers that were reported in the press release other than to indicate that without the music licensing settlements, station operating expense would have decreased $1.7 million instead of the reported increase of $390,000.

Without the settlement, operating income would have been $574,000 instead of an operating loss of $1.5 million and station operating income, again, a non-GAAP measure, would have been $13.8 million instead of $11.7 million.

Also without the settlement on a same-station basis for the 9 months ended September 30, 2025, station operating expense would have decreased 3.9% or $2.6 million. Corporate expenses decreased $80,000 for the quarter and increased $74,000 for the 9 months ended September 30, 2025. Corporate expenses included $226,000 for the 9-month period relating to a potential proxy contest initiated earlier this year by one Saga shareholder. This has been disclosed in our previous public filings.

The decrease in other operating expense for the 9 months ended September 30, 2025, compared to the same period in 2024 is primarily due to the sale of a nonproductive AM station along with 2 translators in Asheville, North Carolina, the sale of WNDN, FM in Chiefland, Florida and the shutting down of a nonproductive AM station in Bellingham, Washington in 2024. The decrease in other income is due to a onetime gain in 2024 related to the sale of Saga's equity investment in BMI when the organization was sold.

In addition to what Saga and I have already said -- in addition to what I've already said, I want to emphasize that for the quarter, total interactive revenue was up 32.6% and for the 9-month period, up 17.1% with a 54% profit margin for both the quarter and the 9-month period, excluding sales commissions for the quarter and for the year.

Pacing for the fourth quarter is currently tough as we are up against $2 million in political we booked in the fourth quarter of last year. This was $1.6 million in October, $389,000 in November and $10,000 in December. For the fourth quarter, we are currently pacing down approximately 11%, including political and 4.7% when political is excluded.

On a positive note, our interactive pacing is strong for the fourth quarter being up 32% as of now. The company paid a quarterly dividend of $0.25 per share on September 19, 2025. The total dividend paid was approximately $1.6 million. To date, Saga has paid over $140 million in dividends to shareholders since the first special dividend was paid in 2012 as well as has bought back over $58 million in Saga stock.

The company intends to pay regular quarterly cash dividends in the future. Further, as part of our overall capital allocation plan for 2025 and beyond and as stated in the press release on October 17, 2025, the company entered into an agreement to sell telecommunications towers and related property and other assets located at 22 sites for a total cash purchase price of approximately $10.7 million.

Sales proceeds net of brokerage commissions and certain adjustments in the amount of approximately $8.7 million were paid to the company, with the remaining cash proceeds of $1.8 million, representing 4 sites being deposited into an escrow account pending final landlord consents to assign the ground leases where the towers are located. We also entered into long-term leases at each of the sites to allow us continued use of the towers at a nominal cost. We are continuing to work through the tax and accounting implications of this transaction, which will be disclosed in our future filings.

As we have previously stated, we intend to use a portion of the proceeds from the sale to fund stock buybacks, which may include open market purchases, block trades or other forms of buybacks. All said, we believe Saga is in a strong financial position to improve profitability as our digital initiative improves both local radio and interactive revenue.

The company's balance sheet reflects $26.3 million in cash and short-term investments as of September 30, 2025, and $34.2 million as of November 3, 2025. We currently expect to spend between $3.25 million to $3.75 million for capital expenditures in 2025. We currently expect that our station operating expense will be flat for the year as compared to 2024. This takes into consideration the expense reductions we have made, offset by the music license fee settlement with ASCAP and BMI as well as for our continued investment in our ongoing revenue initiatives. Without the music licensing settlement expense, we would expect station operating expense to decrease by 2% to 3%. We anticipate that the annual corporate general and administrative expense will be approximately $12 million for 2025 compared to $12.4 million in 2024.

And with that, Chris, I'll turn it back over to you.

Did you say crass? That's kind of crass, Sam. Congratulations anyway on your 28 years of earnings calls. Over the past several years and we have -- past several months, I'm sorry, Saga's elite group of leaders and employees, Saga's corporate team and Saga's Board of Directors have been extremely busy in the Saga verse. Since early this year, we have been diligently installing Saga's blended digital strategy, including the comprehensive training and development of Saga's market leaders, sales managers, media advisers, on-air content creators and our directors of content creation.

We've made additional strategic investments in R&D and resources to assist our team members to run faster in the Saga's blended strategy. This in order to achieve our objective of 2x gross revenue, most of it digital, in 18 to 24 months by capturing just 5% of the available search and display dollars available in our 27 Saga markets. We've added acumen and expertise to our Saga Board of Directors with expertise in digital, M&A and the financial audit and consulting space. We are committed to sell one tower and the land the tower is on to a local developer as well as some excess land we own.

And we are also in the process of listing and selling the company-owned home in Sarasota, Florida following multiple hurricanes that pounded Florida's West Coast. And we have completed, as Sam said, the sale of several Saga towers, not because we needed the money but because of a larger strategic plan to return value to shareholders through stock buybacks and other capital allocation. This while continuing Saga's robust quarterly dividend strategy.

As a part of the tower sale, I would like to personally thank and show our appreciation to Executive Vice President and CFO, Sam Bush; Senior Vice President and Controller, Cathy Bobinski; Vice President of Engineering, Tom Atkins; Vice President of Finance and Board Secretary, Katie Semivan; and Financial analysts, Cynthia Loerlein and [indiscernible], for their efforts to help us complete the sale of these towers. This was a Herculean effort and it's much appreciated and it's still continuing. We're not quite done yet.

Finally, we have -- we finally have and continue to make strategic expense reductions at the market and the corporate levels to allow us to reinvest in our transformational digital strategy to enable us to be more nimble. We're also selectively utilizing, as we've stated earlier, in AI to help improve efficiency and performance and to cut costs and to increase margins.

And over the next few months, we will continue to bring much of our digital deliverables into the house to allow us to better serve our team members and ultimately, our customers, again, to provide efficiencies, increase scalability and increase margins, all of which will require the acquisition of people to accomplish this feat. Saga has come a long way in a very short period of time, yet we are far from finished.

To fully understand how far we've come and why we believe Saga's blended strategy will work, we really need to go back to the beginning to the principles of what Saga was built on in the first place when Ed Christian founded the company. Internally, we refer to this with an old Latin phrase, Finis Ab Origine Pendet, which means the end hangs on the beginning. Saga focuses on small and medium markets. Case in point, 21 of our 27 markets are smaller than Market 100. Our acquisition strategy focused on markets with state capitals, state universities, nonclosable military bases, strong ag business, large retirement communities with high net worth like we have in the villages in Ocala, Florida.

And on the ground, Saga's market employees are known, liked and trusted in the local communities in which they serve. We pour ourselves into the local marketplace. Our leaders get involved in city government, raise money for important causes where money raised stays in the local community. We get belly to belly with influencers and decision-makers to move local business forward.

Saga is really woven into the fabric of the communities in which we serve. But the name Saga has never mentioned. It's all about our local media groups and the name like the Columbus Media Group, for example. Finally, Saga does on average $1 million to $1.5 million more a month in local direct revenue than we do in local agency revenue. And as we stated, local direct revenue is the primary driver to Saga's blended strategy. I hope this is starting to make sense to you now.

Saga was 10 years late to the digital party. We started this digital transformation way behind the curve, and we have the luxury of observing and learning from iterations and reiterations of our broadcast brethren. From a digital advertising perspective, Saga is really a cash flush start-up. And what we know is this, the local advertising market is overdue for disruption. And it just so happens that Saga Communications operates in the size markets where we can have strong impact and influence on the local communities in which we operate, and that includes the advertising community.

These local advertising markets are ripe for disruption. Why? Because businesses are pouring more and more money into digital advertising every year but the rapid growth of digital budgets has outpaced the ability of advertisers to completely understand them and to use them effectively. There are too many digital providers and too many conflicting solutions. Businesses don't know who to trust. In this case, trust, simplicity, clarity with a click visit call and search approach, focused on the consumer journey, not the product-based selling that usually takes place wins.

And advertisers are fed up with ineffective campaigns and empty promises. They don't really like what they are buying, know what they're buying, and they don't really like who they're buying it from. And there's a shift in consumer behavior. Advertising strategies haven't caught up with the journey people take when they buy.

In other words, search and display is broken and there is a gap where tech meets human behavior. So focusing on the influence of the ads on the real consumer journey when a consumer interacts with a product or service will allow us, we believe, to not only win the market but also redefine it. And internally, we have begun seeing measurable returns on the yeoman's efforts that our team members have put into this transformation, and I want to underscore yeoman's efforts. We have found that local direct advertisers who were not pitched to blend, we lose 29% of our existing radio business that we had. And with local direct advertisers that bought a blended product, their radio spend increased by 9% and their overall radio and blended spend increased by 27%. Now we just simply need to scale it.

And finally, this biggest and most encouraging news comes from Sam's report that he mentioned not once but twice, and I'm going to mention it a third time because frequency sales. And again, the biggest and most encouraging news comes from Sam's report. During today's earnings call, and to make sure you didn't miss it, I'm going to make sure you didn't miss it. This above all else, proves that there are green shoots popping up as it relates to our digital transformation. The blend is gaining momentum.

Again, for the third quarter 2025, the increase in Saga's interactive revenue made up almost completely the decrease in our broadcast revenue when you adjust for political. The question has always been, can we run fast enough in the blend to outrun the downdraft in the sector? Well, hope is not a strategy, and this may be an indication that perhaps we can.

But make no mistake, although we are still in the infant stages of our digital transformation, this transformation is hard, really hard. It's taxing and it's working. We have the very best, most committed and passionate team of broadcasters I have ever had the pleasure of working with and serving, and they are the engine that make the blended transformation a reality.

Thank you to all of you again for your time and your interest and your support and involvement in Saga Communications what we believe to be the best media company on the planet. Sam, do we have any questions?

We did. We got questions from 3 different shareholders and an analyst. And I'll start with Michael Kupinski's question from NOBLE Capital. The first 2, he had 3 questions but the first 2 are interrelated, so I'm going to read both of them and let you address them jointly. Can you give us some color on the tone of the market, pacings into the upcoming quarter, local spot versus digital versus national? And then the second part of that is, while Saga does not get a lot of national advertising, it had been a key revenue growth driver for the company. How is this category performing going forward?

So I'll address the last vertical first. National is weak in the fourth quarter. And it has had a little bit of a tradition in coming in later and later, which impacts our forward pacing. And Saga has 2 outstanding national sales managers and Tom Howe and Bruce Werner and a really proactive partner in Katz Radio. Unfortunately, we don't really control a lot of what happens in that vertical. As Sam mentioned, overall, total revenue pacing, excluding political, is down 4.7% for the quarter. Local pacing is consistent across the quarter, and digital pacing is still pacing plus 32% for the quarter, which is why we are running to the Saga's digital transformation in the first place. I hope that answered the question.

I think it made a great start towards it. Historically, advertisers reacted favorably in anticipation of Fed rate cuts given the favorable influence they had on the economy. As we have seen in many radio company results, the Fed rate action has had no impact and the radio spot advertising remains weak. Any thoughts on why there is this anomaly?

Well, first of all, Sam, I don't believe it's an anomaly. And by no means, what I'm about to say is directed at the person who asked this question, and it's the economy, stupid. On Main Street, there's a delayed reaction, in my opinion, to rate cuts by the Fed. In our world, rate cuts impact our 2 largest economic indicators as to how radio will perform going forward, and they are housing starts and auto purchases. The 50 basis points reduction the Fed has dribbled out, kicking and screaming, simply has not gotten to Main Street just yet. We believe spot radio's downdraft is more a function of the macro decline in the sector and not the rate cuts or lack thereof. And as I said, not really based on the interest rate reduction.

Very good. Thank you, Chris. We did have 2 additional questions from 2 shareholders, and I'm going to combine them because they were similar in nature or augmented each other. There was a question as to why there wasn't a concrete plan for a buyback, including timing and amounts once the tower sale closed. And I would say there was a number of complexities to the tower sale. And we, Saga had very specific expectations for the final terms and conditions as well as there were certain real estate transfer issues that had to be dealt with and are still being dealt with, shown by the fact that 4 of our towers, the sites are still in escrow, and we're working through, which we will work through but we're working through the timing and the complexities of getting the real estate aspects of those transactions, those pieces of the transactions closed.

It wasn't until days before the closing that we actually felt comfortable with the final sale proceeds. As Chris stated, we didn't sell the towers because we needed the money. We sold them because it was the right thing to do from a capital allocation standpoint. So again, we didn't feel comfortable with the amount until a couple of days before the closing and as to what the final sales proceeds would be and when the closing would take place.

And that's information that was necessary -- is necessary for the Board to know when considering final buyback plans. Buybacks are still a priority for a portion of these proceeds as we have previously stated. There will be more clarity to this in the near future as the Board continues to look at the amount and timing and make some final decisions.

And I think that's it. We appreciate all of you joining, and I think we can turn it back over to Matt to wrap up the call.

Thank you, Matt.

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