Digital Gains Not Yet Offsetting Radio Weakness At Saga. | Story

Saga Communications reported a softer first quarter as declines in traditional advertising revenue continued to outweigh gains in digital revenue, underscoring the ongoing pressure facing legacy radio broadcasters even as the company pushes deeper into its digital transformation strategy.

Net revenue fell 5.6% to $22.9 million for the quarter ended March 31, down from $24.2 million a year earlier. Station operating expense was essentially flat at $22 million, reflecting continued cost discipline. The company reported an operating loss of $3.3 million compared to a $2.3 million loss in the same period last year, while net loss widened to $2.4 million, or 38 cents per diluted share.

Digital revenue rose 25.2% year-over-year to $4.4 million, an increase of roughly $900,000. CFO Sam Bush said the gains highlight momentum in Saga’s digital initiatives but remain insufficient to offset declines in traditional local, agency and national advertising categories that continue to dominate overall revenue.

“We continue to have aways to go before the increases in digital revenue is larger than decline in traditional broadcast revenue,” Bush said during the company’s earnings call.

Looking ahead, Saga said second-quarter pacing is currently expected to finish down in the high single digits, while digital revenue is pacing up 10.2%, signaling continued divergence between legacy and digital performance trends.

Executives spent much of the call outlining the company’s “blended” advertising strategy, which integrates traditional radio campaigns with digital services such as search engine marketing, display advertising and social media campaigns. CEO Chris Forgy described the shift as “remodeling a home while we’re still living in the home,” emphasizing both the operational complexity and cultural change required inside the company.

“Saga is a customer-first company, not a digital-first company,” Forgy said, adding that the blended approach is intended to preserve the strengths of local radio while enhancing advertiser outcomes through digital tools.

Key internal metrics suggested progress in that strategy. Digital-only blended revenue increased more than $1 million year-over-year, a 103% gain. Revenue from blended local direct campaigns rose 29%, while the average blended radio buy was 70% larger than a non-blended buy. Overall, blended campaigns were roughly three times larger than traditional radio-only orders, according to the company.

However, Saga also acknowledged continued attrition in its legacy advertising base, gaining 158 blended accounts while losing 419 non-blended accounts, a sign of ongoing structural change in its client mix.

Combined blended radio and digital revenue totaled $3.6 million during the quarter, up 59% from the prior year.

To support the transition, Saga is increasing investments in staffing, infrastructure and digital support systems. Station operating expenses are expected to rise between 1.5% and 2.5% during 2026, driven largely by digital expansion efforts, which are expected to add about $1.5 million in market-level expenses this year.

“The expense of this initiative will initially be more costly than the revenue will bring,” Bush said. “But it is a necessary expenditure to be competitive with other digital companies.”

Management expects revenue growth tied to these investments to begin outpacing related costs in the third or early fourth quarter of 2026, signaling a longer-term payoff horizon for the strategy.

Saga’s digital portfolio showed mixed but generally strong performance. E-commerce revenue rose 23.2%, with April marking a record month at $347,000 and trailing 12-month revenue approaching $3 million. Search engine marketing revenue surged 105%, display advertising increased 120%, and social media revenue rose 108%, reflecting continued advertiser demand for performance-based digital channels.

Not all digital segments were positive. National streaming revenue declined 31.5%, which management attributed to changes involving third-party provider processes and algorithms. Local streaming revenue fell 7%, while online news revenue also declined 7.2%.

Saga ended the quarter with $30.4 million in cash and short-term investments, compared to $27.8 million as of May 4, maintaining flexibility to fund ongoing transformation efforts. The company also continued monetizing non-core assets, including the sale of excess land at an Iowa tower site for more than $200,000 and a former Springfield, Massachusetts studio property for approximately $500,000.

The company paid a quarterly dividend of 25 cents per share totaling about $1.6 million and declared another 25-cent dividend payable June 12. Since 2012, Saga says it has returned more than $145 million to shareholders through dividends.

Despite continued pressure on traditional radio advertising, CEO Chris Forgy said Saga remains committed to investing through the downturn rather than pulling back, framing the strategy as essential to long-term competitiveness in a rapidly changing media landscape.