SALM

Salem Communications Corporation (SALM)

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Exchange: NASDAQ
Industry: Consumer Services
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Salem Communications Corp. (SALM)

Q1 2008 Earnings Call

May 8, 208 5:00 pm ET

Executives

Edward Atsinger – Chief Executive Officer

Evan Masyr – Chief Financial Officer and Senior Vice President

Eric Halvorson – President and Chief Operating Officer

Analysts

Michael McGaffery – (inaudible) Capital

Bishop Sheen - Wachovia

Victor Miller - Bear Stearns

Presentation

Operator

At this time I would like to welcome everyone to the Salem Communications first quarter 2008 earnings call. (Operator Instructions) It is now my great pleasure to turn the floor over to your host, Mr. Evan Masyr.

Evan Masyr

Thank you for joining us today for our first quarter 2008 earnings call. As a reminder, if you get disconnected at any time, you can dial in to 973-582-2717 or listen from our website, www.salem.cc.

I am joined today by our Chief Executive Officer, Edward Atsinger and our President and Chief Operating Officer, Eric Halvorson. We will begin in just a moment with opening comments from Ed and Eric. I will then provide a brief financial overview. After our prepared remarks, our conference call operator will come back on the line to instruct you on how to submit questions.

Please be advised that statements made on this call that relate to future plans, events, financial results, prospects, or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including, but not limited to:

Market acceptance of Salem’s radio formats;

Competition in the radio broadcast, Internet and publishing industries;

New technologies;

Adverse economic conditions;

And other risks and uncertainties detailed from time to time in Salem’s reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission.

Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically station operating income, EBITDA and adjusted EBITDA.

In conformity with Regulation G, information required to accompany the disclosure of non-GAAP financial measures, including a reconciliation of such non-GAAP financial measures included in this conference call to the most directly comparable financial measures prepared in accordance with GAAP, is available on the Investor Relations portion of the Company’s website at www.salem.cc as part of the current report on Form 8-K and earnings release issued by Salem earlier today.

I will now turn the call over to Edward Atsinger.

Edward Atsinger

Thank you, Evan and thank all of you for joining us for our first quarter 2008 earnings call. Before Eric and Evan update you on our specific results for the quarter, I’d like to make a few preliminary comments.

Since our last call, we’ve entered into an agreement to sell KKMO-AM in Seattle, Washington for approximately $3.7 million with the cash flow the station generated in 2007, the sales price represents a multiple of about 9 times cash flow.

We are still pursuing opportunities to sell additional properties, particularly those that are non-strategic and/or non-performing or underperforming.

Last October we launched in Denver a fourth strategic format, Spanish language Christian Teaching and Talk. We now have this format in 4 markets: Denver, Atlanta, Boston and Sacramento and we will be adding a fifth station to this format in Seattle in the near future.

The early results have been encouraging as we have been facing more than 10% ahead of our internal budget. We are evaluating the other stations in our portfolio to see if there might be some additional opportunities for this format.

The most significant issue in radio continues to be inability to grow revenues in the current environment. This situation is being driven by the overall slowing of the economy; a loss of liquidity in the financial services industry and a related slump in the housing market.

As we’ve said before, but it needs to be mentioned again, the mortgage business in home improvement categories have been particularly hard hit and they have historically been important advertisers for sale. I noted that some of our other radio peers have also had similar challenges.

We don’t expect much improvement in these areas for at least a couple of quarters; consequently we are devoting a lot of our time and attention to analyzing and paring back our budgets on the expense side.

Furthermore, with the slowdown in the economy we are reducing much of our discretionary spending, particularly as it relates to marketing and promotional cost and capital expenditures.

So with those preliminary comments, let me turn the call over to Eric Halvorson for a discussion of our first quarter operating results.

Eric Halvorson

Thanks Ed. For the first quarter total revenue decreased by 1%; this was comprised of a 3% decrease in net broadcasting revenue and a 16% increase in non-broadcast revenue.

We have 43 stations that are programmed in our foundational Christian Teaching and Talk format. These stations contributed 46% of our total revenue. Our block programming revenue, which accounted for 64% on the revenue on these stations, decreased approximately one half of 1% due to certain program cancellations that have yet to be replaced.

Overall net broadcasting revenue for these stations was down by 6% compared to the prior year, directly attributable to a 17% decline in advertising revenue. This decline is primarily due to weakness in national spot advertising and continued softness in local spot advertising in a few key markets, notably New York, Los Angles and Washington DC.

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