Salem Communications Q3 2006 Earnings Call Transcript

| About: Salem Media (SALM)

Salem Communications Corporation (NASDAQ:SALM)

Q3 2006 Earnings Call

November 3, 2006 12:00 pm ET

Executives

Eric Jones - Investor Relations

Ed Atsinger - President and CEO

Evan Masyr - Vice President of Accounting and Finance

David Evans - EVP, Business Development and CFO

Analysts

James Dix - Deutsche Bank

Victor Miller - Bear Stearns

Bishop Cheen - Wachovia Securities

Lee Westerfield - BMO Capital Markets

John Klim - Credit Suisse

Jim Goss - Barrington Research

Bobby Melnick - Terrier Partners

Operator

Good afternoon. My name is Denise, and I will be your conference operator today. At this time, I would like to welcome everyone to the Salem Communications Third Quarter 2006 Earnings Release Conference Call. (Operator Instructions).

It is now my pleasure to turn the floor over to your host Mr. Eric Jones of Investor Relations. Sir, the floor is yours.

Eric Jones

Right. Welcome and thank you for joining us today for Salem Communications third quarter 2006 earnings call. As a reminder if you get disconnected at any time, you can dial in to 973-935-8511 or listen from our website at salem.cc. We will begin in just a moment with opening comments from our President and CEO, Edward Atsinger; and Vice President of Accounting and Finance, Evan Masyr. After their opening comments, our conference call operator will come back on the line to instruct you on how to submit questions. David Evans, Executive Vice President, Business Development and CFO will participate in the question-and-answer portion of our call.

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 format, competition in the radio broadcast, internet and publishing industries and 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 statement 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 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 generally accepted accounting principles is available on the Investor Relations portion of the company’s website, 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 Ed Atsinger.

Ed Atsinger

Thank you, Eric, and thank all of you for joining us for today’s conference call. During the third quarter, we continue to serve the audience interested in Christian and family themes and conservative values radio content on both our radio platforms, Internet and publishing platforms. We achieved 9% increase in total revenue for the third quarter. This 9% increase was comprised of 4% increase in net broadcasting revenue and 104% increase in non-broadcast revenue.

Let’s look at the specifics of these results in the third quarter in the context of the activities related to the performance of each of our radio formats, our internet business and our publishing business. Our fastest growing radio format for the quarter occurred in our 31 News Talk stations, which serve 8 of the top 10 and 19 of the top 25 markets. Stations in this format contributed 14% of our total revenue for the quarter and achieved a 20% increase in net broadcasting revenue compared to the same quarter last year. On a same-station basis, net broadcasting revenue increased 15%. Significant contributors to these results were our News Talk stations in Chicago, Dallas, Miami and Phoenix. Our News Talk platform is the least developed element of our radio business with 28 of our 31 News Talk stations achieving SOI margins of less than 30% in Q3. We continue to invest in this platform and there is substantial revenue and profit upside as we develop these stations to maturity.

One way we are investing in this platform is by adding known local programming talent. During the third quarter, we added local shows to our Chicago station and our Phoenix News Talk station. We are also investing additional money in marketing and promotion in the fourth quarter in markets including Los Angeles, Chicago, Dallas, Phoenix, Portland, and Louisville. This combination of investment in local programming talent and additional marketing and promotion is an important step in driving our News Talk stations towards maturity.

We have 13 stations programmed in our Contemporary Christian Music format and they contributed 20% of our total revenue for the quarter. Same station CCM revenue increased 1% for Q3 2006 compared to Q3 2005. The slow revenue growth was due to the overall weak radio advertising environment and revenue softness at our stations in Atlanta, Cleveland and Portland. KLTY in Dallas, our flagship CCM station, grew revenue 6% and tied for the number two ranking in the Dallas market among females 25-54, the station’s target demographic.

As you know, one of our key goals is to replicate KLTY’s success at our other newer CCM stations, specifically, I think, stations in Atlanta, Portland, Cleveland, and Sacramento.

As said before, that we expect the FISH station in Atlanta to be the first of this group to achieve similar ratings and power ratio success and we have been focusing on achieving this in that market as well as the others.

In the just released summer Arbitron we saw a strong indication that this strategy is working in the target demographic females 25-54 WFSH Atlanta tied for the number five ranking in the summer Arbitron compared to a rank of number eleven in the spring Arbitron. Our goal at WFSH like KLTY is to be consistently ranked in the top five among those stations serving the target demographic. If we can take this top five ranking in Atlanta and continue it for successive books, this will be a positive development for 2007 and beyond.

Our foundational format is Christian Teaching & Talk. These stations are unique because they drive half of their revenue from block programming, the sale of block programming time. We have 44 stations programmed in this format, which contributed 47% of our total revenue for the quarter. These stations achieved same station revenue growth of 1%. We continue to see weakness in local and national advertising sales, which combined -- which these two combined were down 7%. Offsetting this decline in advertising revenue from block programming on our Christian Teaching & Talk stations, we saw a growth of 8% for the quarter on a same station basis and this contributed 57% of the revenue on these stations or 27% of our total revenue.

During the quarter, we entered into agreements to exit the Jacksonville market by selling our three remaining stations in that market for $2.8 million, excluding exchange transactions we have entered into agreements to sell six stations this year for $16.3 million. As we have mentioned, there are additional stations that we intend to sell. However, this is taking time as we seek to maximize the prices and shareholder value. I will keep you updated as this situation progresses.

Let me finish my prepared remarks by discussing our Internet and publishing businesses. For the quarter, non-broadcast revenue increased to 104.1% to $5.4 million or 9% of our total revenue. Our non-broadcast operating income decreased from $0.2 million to $0.1 million. Revenue growth was the result of recent acquisitions on our on-demand publisher Xulon Press; two magazines, Singing News and Preaching; and the Internet sites, CrossDaily.com and TownHall.com as well as organic growth from our Christian content Internet business. Non-broadcast media profitability was down slightly due to continued investment and further development of our Internet platform and on some revenue softness at CCM magazine.

Our Internet business continues to see substantial growth. Our Christian content websites increased average monthly page views by 38% compared to Q3 '05 to an average of 57 million page views. Our conservative opinion website TownHall.com, which was generating 12 million page views per month when we acquired it in May 2006 already grew its average monthly page views to 24 million for the quarter. In total, page views increased 96% to 81 million page views across the entire network. We were able to translate the overall growth in page views in the Internet revenue growth of 60% to $0.7 million and increased profit by 59% to $0.4 million. We are bullish on our prospects with the Internet and we are confident we have established a solid foundation for continued growth in 2007.

As a targeted niche broadcaster, the integration of our proven traditional media platform with new media offers substantial growth opportunities and gives us the ability to become a leading multi-media creator, aggregator and distributor of faith, family and values content. And we think the third quarter growth in the internet business is a good indication of this using our traditional radio platform to drive page views over a very short period of time, particularly on our conservative talk sites.

Let me now turn the call over to Evan Masyr for a more detailed discussion of our third quarter 2006 results and our fourth quarter 2006 guidance.

Evan Masyr

Thank you, Ed. Our results for the third quarter of 2006 were issued in a press release earlier today and are available on the investor relations portion of our website. I will briefly review these results. Total revenue for the third quarter increased 9% to $57.9 million and adjusted EBITDA increased 5% to $15.9 million. Net broadcasting revenue grew 4% to $52.5 million and SOI increased 4% to $20.7 million. On a same-station basis, net broadcasting revenue grew 1% and SOI was flat.

Let me provide some detail by revenue type on a same station basis comparing our third quarter of '06 to the third quarter of 2005. Beginning with block programming, same station revenue grew 7% to $17.6 million. Same station local advertising revenue declined by 3% to $21.6 million. This decline was principally due to overall weakness in the radio advertising industry. Same station national advertising revenue including spot and network revenue was flat at $8.1 million. Finally, other revenue which includes infomercials, increased by 6% to $3.2 million. Included in our same-station numbers is broadcasting revenue from 88 of our radio stations in our network, representing 96% of our net broadcasting revenue.

Within our portfolio of stations, our start-up and early development staged stations, which were originally purchased for approximately $234 million, generated a loss of $0.6 million for the 12-month period ended June 30, 2006. There is substantial upside if we can take these stations to maturity.

Turning to our balance sheet, as of September 30 of 2006, the company had net debt of $370.2 million and was in compliance with the covenants of its credit facilities and bond indentures. The company's bank leverage ratio was 6.11 versus a compliance covenant of 6.75 and its bond leverage ratio was 5.49 versus a compliance covenant of 7.0.

We had $29.1 million outstanding on our $75 million revolver as of September 30, 2006.

During the quarter, we completed the redemption of the remainder of our outstanding 9% senior subordinated notes, paid a special cash dividend of $0.60 per share or approximately $14.6 million in total and repurchased 511,250 shares of our Class A common stock for approximately $5.5 million at an average price of $10.82 per share.

Looking at the fourth quarter of 2006, Salem is projecting total revenue to be between $58.5 and $59 million compared to fourth quarter 2005 total revenue of $53.9 million; adjusted EBITDA to be between $13.5 million and $14.0 million compared to fourth quarter 2005 adjusted EBITDA of $15.4 million; and net income per diluted share to be approximately $0.02.

Our fourth quarter 2006 outlook includes non-cash compensation expense related to the adoption of FAS 123R, based on stock options currently outstanding, of $800,000. Fourth quarter 2006 outlook reflects the following, same station net broadcasting revenue increasing to $51.7 million to $52.2 million from a base of $50.6 million in the fourth quarter of 2005, reflecting low single digit growth; non-broadcast revenue increasing to approximately $5.9 million from a base of $3 million in the fourth quarter of last year; same station SOI declining to $17.8 million to $18.3 million from a base of $20 million in fourth quarter of 2005; increased marketing costs on our News Talk stations in Los Angeles, Chicago, Dallas, Phoenix, Portland and Louisville, and increased programming costs in Chicago, Dallas and Phoenix. Additional investment in these marketing and programming efforts in the fourth quarter totals approximately $1 million; continued growth from our core block programming business and our underdeveloped radio stations, particularly our News Talk stations; ongoing softness in the radio advertising market; fixed costs associated with recently acquired stations in the Detroit, Honolulu, Miami, Omaha, Sacramento and Tampa markets; and the impact of recent acquisition, exchange and divestiture transactions.

That concludes our prepared remarks. We'd now like to open the floor for questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And we'll take our first question from James Dix of Deutsche Bank. Please go ahead.

James Dix - Deutsche Bank

Good morning, everyone. Just a couple of questions. First on the revenue side, do you have any specific expectations on political revenue for the fourth quarter? Secondly, in terms of the impact of the higher fixed costs on the stations, Evan, which you outlined, any way to quantify what that impact is year-over-year in terms of OpEx from those additional stations at fixed cost increment? And then, just turning to the online efforts you have, is there any way of translating those page views into impressions for CPM purposes? I mean, what CPMs are you getting on your online traffic, or is that not how you're selling it? I'm just trying to understand a little bit better the revenue model there, and the potential for growth.

Evan Masyr

David Evans is with us, and I'll let him deal with some of these. I would just simply say, on the political side, we've seen some pretty good activity. It was quite late this year. We thought it would break a little earlier. It broke late in October. It continues obviously through today. I don’t have the final count, but there has been a substantial surge of political revenue that has come in, and we'll be able to quantify it fairly soon. We can't do it with great specificity right now.

David Evans

I am going to estimate that political revenue between Q3 and Q4 is going to approximate round about $1 million, could be a little higher, could be a little lower, everything is very late. So, we are continuing to track and monitor it, and won't have a final number until probably the end of the month. In terms about higher fixed costs from the market that Evan mentioned, Detroit, Honolulu, Miami, Omaha, Sacramento and Tampa, I don't have those numbers handy. We can probably talk about them a little bit offline, James.

James Dix - Deutsche Bank

Okay.

David Evans

But don't have those specifics handy. In terms of our online effort, our relationship of page views to impressions, we have probably -- I'm going to try getting three impressions per page view. We sell through a combination of cost per impression, cost per lead, so I don't have a specific metric for you on that front. But, that's the relationship of impressions to pages.

James Dix - Deutsche Bank

Okay, great. Thank you.

Operator

Thank you. Our next question is coming from Victor Miller of Bear Stearns. Please go ahead.

Victor Miller - Bear Stearns

Good morning. And thanks for taking the question, First of all, could you talk a little bit about just your expense? When you look at the guidance you provided, all in revenue up about midpoint 8% or so expense-base up more than double that leading to the SOI kind of declining in the almost low double-digit range. Talk about, if you look at the $6 million of incremental midpoint guidance in expenses that you have, can you break that down more granularly so we can get a sense the way you are allocating that? Secondly, I looked at your grid that you provide and you've obviously showed about $2 million of incremental revenue between your radio stations, I am talking about your SOI grid. What's interesting is that 14 of the stations, 15 of the stations have actually moved up in that grid, yet the revenue kind of only followed up by 2 million. So, I am wondering how you could have that many stations, kind of, move up in terms of the margin and does that imply -- maybe there is some cost things going on in that part of the business? Thanks.

David Evans

In terms of expense increases, the largest element of expense increase is new local programming and marketing and promotion costs on our News Talk stations, approximately $1 million there. Second largest, kind of, new expense area is, we've added four, five, six news sellers to national sales organization. We added them during the course of this year, so they're still ramping up in terms of their sales contribution. And the third element in terms of expense increase is just the normal kind of inflation type increases that a company expects. In terms of the SOI grid, it looks like a number of stations have moved up to that mature category, it really is a game of inches vis-à-vis being just shy of 40% -- just shy of 50% and another 50%, so a number of Christian Teaching Talk stations moved up from one bucket to the other, but in terms of dollar impact, in fact pretty minor.

Victor Miller - Bear Stearns

Thank you.

Operator

Thank you. Our next question comes from Bishop Cheen of Wachovia Securities. Please go ahead. Your line is live.

Bishop Cheen - Wachovia Securities

Can you hear me now?

Ed Atsinger

Yes, we can.

Bishop Cheen - Wachovia Securities

[I feel like the Verizon guy], sorry about that. Dave, Evan and Ed, thanks for taking the call. This is the first time in my recent memory of following Salem that I can remember, there is not a whole line of acquisitions pending most close out here, pretty mild on the acquisition and divestiture sheet, and you correct me if I am wrong. Should we look at that as more normalized going forward? And secondly, now that you guys are experienced in certainly turning around radio properties that are suppose to be great [pick up] and you know a thing or two about non-radio assets well with the web and other strategic acquisitions, can you say which kind of asset that you have marketed seem to respond better or upside quicker, whether your web assets or web-based assets have been surprising or one way or the other in terms of how long they take to turn?

Ed Atsinger

Well, I think that our recent experience with TownHall has been somewhat instructive. We acquired it in May, had about 12 million page views. We did a makeover on it. We had actually, if you recall from our prior call, we reported that we have been working on our own site, which we were going to call beyondthenews.com, and we had spent $0.5 million on it at the point that the TownHall acquisition became available. We were able to roll most of the work that we had done on beyondthenews.com into TownHall.com and we acquired this I said in May and we rolled it out with this makeover on the 4th of July, which we obviously pick for promotional purposes and did push our promotional effort on the radio platform, particularly the existing News Talk stations and the syndicated talent that we employ. And, we saw a dramatic increase in page views. It doubled actually within a month or two and we reported that a minute ago. Now, part of our strategy has always been to integrate the media, the old -- the traditional radio platform with some of the new media and even the publishing, which is not really new media, but which takes on kind of an interesting dynamic when combined with the radio platform as a promotional vehicle and the internet. There is a dynamic interaction that we believe exists there and I think the experience with TownHall demonstrates that.

Now, one of the challenges is always to get your -- for example to get your website sticky, you want them to be where you want them to be before you want to spend a lot of time and energy promoting them, and we've been selective about that, but whenever we have done it when we have felt the sites are where we want them to be, we've had very good results. So, how do you explain that, you'll say, well the internet has got the most growth potential, I think it probably does, but the thing it's driving, it is that traditional media platform. So, you can't have the one without the other in terms of our strategy.

The Christian teaching talk format continues as you'll see from the results of your report to do quite well and block programming is very vibrant and you have to sometimes develop new talent. We have a huge potential pool of new talent in each of the cities that we are in. We develop local organizations and are often able to take them nationally or just simply develop them as a local alternative in the markets they are in. And, there is still good upside there. We still see good growth there. So, if we can find -- if we can find an acquisition, Bishop, that is a Christian teaching talk possibility or one that's already in format, we certainly would zero in on that, and we did that recently in the case of Detroit and Orlando and both of those properties are doing very well. We are very pleased with them. We had to do quite a bit of investment in Detroit in terms of the plant and we knew that going in. We actually programmed almost $1.5 million of capital improvements there because there were some deficiencies, but that has paid off very well, and those properties continue to produce very well, they seem to be impervious to some extent to some of these other competitive pressures. So, I don't know if that answers your question very specifically, but perhaps it sheds a bit of light on our thinking.

Bishop Cheen - Wachovia Securities

Oh, it does. You are -- I think the answer is you are going to continue to be fairly democratic [expression] in the way that you go forward for your accretive potential?

Ed Atsinger

Yeah, we have had some acquisition opportunities in the last quarter. We spent a lot of time looking at them. At this point, we are being very selective. Before we make further investments -- we expect our due diligence has to suggest that we can get to an accretive position pretty quickly. So we are being very selective and we feel that we can be because we think we have a good critical mass with the existing platform, much of the aggressive acquisition activity in past years was necessary we felt to get to critical mass. And so you asked if this period would be more normative, and I think in some respects, yes, and certainly we're going to be very selective going forward. But when those opportunities arise that we see a good opportunity, we know they will be accretive, we will move and we will try to acquire those kinds of profits.

Bishop Cheen - Wachovia Securities

That is helpful. Thank you Ed.

Operator

Thank you. Our next question is coming from Lee Westerfield of BMO Capital Markets. Please go ahead.

Lee Westerfield - BMO Capital Markets

Thank you gentlemen. Good morning. Just two questions for me. First, and it is just undoubtedly a little early to ask in the process, but what climate you are anticipating going into the block programming period of (inaudible) and whether there is any tenure or change resulting in the post election or the evangelical side or any sense that you have of change in the marketplace for block programming as we open that renewal period? The second question is financially related. Going into 2007, I -- maybe I'd characterize it this way, 2006 you held in balance all of the priorities you outlined any way of share buyback, special dividend, reducing leverage, and doing acquisitions on the Internet site and elsewhere, in terms of prioritization for 2007, would you anticipate your leverage ratio at the end of 2007, all things being equal in terms of acquisition opportunities this year versus last year? All things being equal would you leverage below or next year at the end of the year versus where it stands presently, essentially that's the question, do you prioritize improving your capital -- your debt structure quality versus return by its shareholders?

Ed Atsinger

Well, with regard to your first question, the block programming, the renewal process, it seems to be going pretty much according to script. We don’t see any major dislocations. There are always a few little bumps along the way, but there is still as robust demand for time, there is very robust demand for key time slots. So, you always have stronger demand for your prime times, which are always taken and so it's a matter of very few -- very few refusals to take rate increases. But I don’t see anything unusual. I think we will get a rate increase when it's all said and done that will be consistent with what we've seen over the last few years.

With regard to 2007 versus 2006, I would expect to see a leverage ratio lower by the end of 2007. Our goal is to -- those priorities that you outlined certainly were main priorities, but I do think that we'd like the leverage ratio to be lower and we are working on getting it lower; just how low, I don’t know, but I suspect that there will be some substantial material improvement there.

Lee Westerfield - BMO Capital Markets

That's clear. Thank you very much.

Operator

Thank you. (Operator Instructions). We have our next question coming from John Klim of Credit Suisse. Please go ahead.

John Klim - Credit Suisse

Hi. Good morning. You discussed the potential for distributing your content by a video broadband and how big you believe that revenue stream could become? And then have you signed any deals with mobile phone carriers to distribute content? Thanks.

Ed Atsinger

I missed the last part of that, have you signed any deals --

David Evans

Yeah. Just in terms of those two areas, we have launched our own Christian video portal, LightSource.com. I think at this point, 28 of our ministry clients are now broadcasting on LightSource.com. So, we do see video as an opportunity. That website by the way is already profitable with the signing of those ministers. So, it works rather like a Christian Teaching & Talk radio station. At this point in time, I couldn’t tell you what the size of that opportunity is. We know there is an opportunity and we are going after it and we are bringing programming onboard. Vis-à-vis mobile telephony, we have not signed any deals to distribute our content over the mobile phone. We do have a couple of advertising partners to kind of start off early development stage, Christian content mobile telephone providers, and what we have determined to do at this stage is to advertise those companies products as opposed to do anything ourselves. We are obviously looking at that area. It's going to be a growth area, but at this stage nothing signed.

John Klim - Credit Suisse

Right. Thanks Dave.

David Evans

Okay.

Operator

Thank you. Our next question is coming from Jim Goss of Barrington Research. Please go ahead sir.

Jim Goss - Barrington Research

Thank you. You alluded to higher marketing and programming cost in your fourth quarter outlook, and I was wondering if those were likely to remain issues in as 2007 gets underway, and that your key radio growth lately has been in the conservative News Talk side which is, tends to be a higher cost format I would think and may be that's partly mitigated by your Salem radio network usage? And as in the side you might talk about the types of profit margins on the News Talk stations versus your other formats? And that's it.

Ed Atsinger

I suspect there will be continued marketing expenses in particular associated with the News Talk stations. We've commented for a number of quarters that we have a substantial number of stations that are in an undeveloped or early stage in their development when measured by their profit margin, and frankly to get these stations to maturity will require a continued marketing effort. They are going to be underdeveloped forever if we don't put a little bit of marketing effort behind them. Early on you like to get the product stabilized and get it the way you want it before you market it too aggressively. So, we are stepping up marketing out because we like -- we like where those stations are product-wise.

The other expense that will continue through 2007 is the local talent expense. Most of these stations are programmed with syndicated product and it's our syndicated product and as you commented or speculated, yes it is less expensive to do it with our own product. But I do think that in certain situations particularly the larger markets, if the opportunity presents itself to develop a local program, particularly in morning drive, but also to some extent afternoon drive, we have to look at that, and to take those stations further and to be able to track good sales talent and all of the other things you need to take those stations to maturely, you really are going to be better off if you can get a strong local program. Now we've developed, we've done this rollout in Chicago -- we will have substantial additional expenditures associated with that in 2007. We begin to get a return -- a good return on that investment in subsequent years. That isn't to say there won't be profitability there, but it will hurt the profitability we would have had if we went forward with the Syndicated product.

But we have a better future of 2008 and beyond by developing the local presence. It drives spot sales in a lot of ways, it helps promotion, and when you are in those major markets, it's a better use of that asset to develop strong local talent. You've got to find the talent, you've got to negotiate good deals, that's not always possible that you can't find good talent, or you can't get them under contract at the right price, you're better off with your Syndicated talent. So, in some markets we stick with the syndicated talent.

So, you will see continued expense in 2007 in those areas, but we do -- we are seeing payoff, and we are confident that as we effectively market those stations, we will begin to get to higher audience share which we can translate into higher revenue.

Jim Goss - Barrington Research

And -- well thanks. It basically means you might have an upper bias on the top line but there could be some compromise on the margin line just because of those cost issues?

David Evans

Maybe in the short-term, yes. I think, where do we target these News Talk stations at maturity, I think -- we think, we believe we can get to a 35% to 40% margin on those stations, a pretty attractive margin. But to get there, you have to build the (inaudible) audience for the radio station in order to grow ratings and that's the corn priority. But News Talk is our biggest opportunity in terms of revenue growth, in terms of a profit growth but it requires an investment today and to get where we want to with those radio stations.

Jim Goss - Barrington Research

Thanks very much.

Operator

Thank you. (Operator Instructions). We have our next question coming from Bobby Melnick of Terrier Partners. Please go ahead.

Bobby Melnick - Terrier Partners

What's comprehensive cost of this company is being public place?

Ed Atsinger

About $1.5 million per year in terms of public company costs that would go away if we were no longer public and the bulk of that is costs related to Sarbanes Oxley.

Bobby Melnick - Terrier Partners

I am wondering what the company's thoughts are given the climate in terms of all the other companies -- excuse me, many of your peers exploring the public private issue given that the public marketplace at this stage of the cycle values the stations at discount to the private market and particularly in Salem's case where based on my numbers, you are now trading at 5.7 times adjusted BCF -- excuse me, SOI and given your gigantic corporate 7.6 times EBITDA, which is still roughly discount toward to what the private market value fetches for these things, partly that's a function of your missing numbers and going from being the industry leading grower to being one of the industry laggards
in terms of growers, possibly it may be a function of your changing your stories in terms of maturity cycle and the steps to growing the new stock in some of your underdeveloped stations. But the question not only becomes, what's the purpose of this stations, you are not really looking to raise capital for acquisition purposes of remaining public at this stage, and I just would be curious to know whether this is something that you and the Board explore or whether this is just something when you see some of your peers in the industry exploring these things you, kind of, acknowledge passively, but really don't think much about?

Ed Atsinger

Well, we certainly have constantly examined those options and we are very much aware of the increasing cost of being a public company, and the $1.5 billion cost of compliance primarily was Sarbanes Oxley, is a bit of a bitter pill, because we think it's an unfair burden on smaller companies, the result of the few folks that play fast and lose with the rules or has penalized the whole industry. It was an overreaction, but we have to live with it as long as we are public. It's a question, Bobby, and we -- it's one that we certainly are looking at. We recently received notice of the SEC's new rules on executive compensation, got a 32 page executive summary of these rules -- 32 pages in the executive summary with this kind of bureaucratic nonsense, get the company as our size to define our philosophy of compensation with great specificity, takes all the entrepreneurial flair out of it. It's almost like a bureaucrat is trying to steer your company, and so, yes, I think it is an area that we have looked at and we will continue to explore and if we get to a place where we make that decision, obviously we will make those announcements. But at this point it's something that we are looking at, we are weighing the cost of compliance, we are looking at options that we might take to reduce those costs. And so the answer is yes, it's a suggestion that you have made that we certainly have looked at and thought about. I'll take a little issue with you saying that we have been a company that was leading in growth, to one that now is lagging. I still think we compare pretty favorably with our peers in the industry, certainly in terms of revenue growth on same station basis. The guidance that we have given for fourth quarter does show substantial growth, but we do have the underdeveloped stations and we think of marketing. Investment is now necessary and we have not changed our strategy. We think there is good upside on the CCM side if we can continue to make progress in duplicating the KLTY success in these other markets. We saw very good movement in that direction in Atlanta, and I expect to see Atlanta begin to flex its muscles in 2007. I think, we will make continued substantial progress. I do think the News Talk side will continue to grow and we will get those stations moving toward maturity. We are very positive about our Internet actions. The growth figures -- revenue growth figures are impressive. The page views are encouraging. They validate the strategy that we have adopted, when we felt that if we could get the right niche Internet assets and use our radio platform to drive page views that revenue would follow and it does follow. We've found almost perfect correlation between the growth in page views and the growth in revenue. We haven't been able to take full advantage of it in the TownHall situation just because the page views came so rapidly. Within 60 days, we doubled the page views. It usually takes about a year to fully exploit the page view growth into revenue growth. But I think our basic strategy and the basic growth areas that we've targeted in the past remain valid, and we will continue to go forward on those. I hope that's response of your question.

Operator

Thank you. Seeing there are no further questions, I would now like to turn the floor back to Ed Atsinger for any closing remarks.

Ed Atsinger

Well again, I thank you for joining us for the call. We will look forward to your joining us again for our next conference call on fourth quarter results and, again, thank you and good bye.

Operator

Thank you. This does conclude today's Salem Communications conference call. You may now disconnect your lines and have a wonderful day.

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