Saga Communications has issued an update to shareholders on its “ongoing execution of its strategic plan” in advance of its earnings call on March 11.

The company notes the following strategic actions are being taken:

• Prioritizing a cost-effective digital strategy. The Company continues to pursue a digital strategy that has been carefully curated to focus on the needs of the consumer based on a deep understanding of consumer behavior in a digital advertising market that is ripe for disruption. Saga’s “Click, Visit, Call and Search” approach provides the advertiser with easy to understand and use solutions that help improve sales and retain consumers. The Company’s digital strategy differentiates itself from other digital solutions by providing higher margins and lower attrition customer focused offerings compared to the product-oriented offerings that currently exist.
• Aligning costs and operating verticals. The Company committed during its annual budget review and approval process to identify potential efficiencies in operations that will enhance profitability without impacting our core operating strengths. The Company wishes to reiterate that while many of these actions are underway, we are actively seeking further opportunities to cut costs and increase profitability.
• Enhancing our corporate governance and continuing to refresh Saga’s Board of Directors. The Company continues to be committed to board refreshment and is currently in the process of recruiting a board member with significant digital marketing experience.
• Evaluating non-core asset sales and stock repurchases. The Company continues its ongoing efforts to evaluate non-core asset sales with an intent to maximize value from these assets. Dependent on market and economic conditions, proceeds will be used for stock buybacks such as open market, block trades and other forms of buyback, dividends, and other shareholder enhancing strategies.

Saga says its Board of Directors and management team “are working closely together to successfully execute the Company’s long-term strategy and realize value for its shareholders. Saga’s largest shareholder, TowerView LLC, is represented on the Board by Michael Schechter, and is fully supportive of the Company’s strategic direction. The Company also regularly engages with its other investors and appreciates their continued support of Saga.”

The update comes as shareholder Gate City Capital Management has submitted a notice to nominate four candidates for election to the Board of Directors at Saga’s 2025 annual shareholder meeting. The companys says, “Saga has attempted to engage constructively with Gate City and will continue to do so. Regrettably, Gate City appears to misunderstand Saga’s business, the changing landscape in which the Company operates, and the strategy Saga is pursuing. Gate City’s filings with the Securities and Exchange Commission (“SEC”) regarding Saga are based on faulty assumptions and contain numerous unfounded assertions that could mislead the Company’s shareholders.”

Saga CEO Chris Forgy said, “Since Saga’s founding in 1986, we have endeavored to create and sustain a platform for which we can successfully acquire, develop, and operate broadcast properties with a focus on providing opportunities complimentary to our core radio business, including digital, e-commerce, local on-line news services and non-traditional revenue initiatives. At present, Saga owns 82 FM radio stations, 31 AM radio stations, and 79 metro signals serving 28 markets. While we are proud of all that we have accomplished, we recognize that in a constantly evolving industry there is always more work to be done. As such, we remain committed to building positive relationships with our audiences and clients and positively impacting the local communities we serve, all while delivering robust value to our shareholders. Over the past year, we have taken and continue to take tangible steps to improve our financial results, increase our profitability, and strengthen our corporate governance.”

Gate City Capital Management has been increasing its stake in Saga in recent months purchasing 240,609 shares of the company’s Class A common stock on December 31, 2024 for a weighted average price of approximately $11.25 per share. Currently holding 863,845 voting shares or 13.8% of the company, Gate City sent the following letter to Saga Chairman Warren Lada in January:

Over the past year, Gate City has been disappointed by the Company’s financial results and subsequent decline in Saga’s share price. Our team attributes the reduction in profitability to a sharp increase in expenses as Saga pursues a digital strategy. Based on the questions I poised to the board and management team at the annual meeting, this additional spending appears to have been made with little consideration to the return on investment of these expenditures and with few financial targets in place to determine whether this spending ultimately proved successful. The increase in digital spending also appears to have been rushed, as evidenced by the elevated level of turnover observed for digital employees and the recent termination of the relationship with a digital services partner that was not profitable for Saga. The capital allocation policies of Saga have also been disappointing, with Saga overpaying for the recent acquisition and failing to repurchase any meaningful shares despite a large decline in the share price.

To reverse these disappointing results, Gate City proposes the following value-accretive policies:

· Significantly reduce spending on digital initiatives and partner with a third party that possesses the resources and expertise required to successfully execute the Company’s digital strategy.
· Implement a cost cutting program to better align Station Operating Expenses with revenues and return Corporate, General, and Administrative expenses to under $10 million annually.
· Commit to refreshing the Board of Directors.
· Revise management’s incentive compensation structure to incorporate value-enhancing financial metrics such as free cash flow generation and return on invested capital to align with long-term shareholder value creation.
· Utilize the Company’s cash balance to aggressively repurchase stock at or near current prices and initiate negotiations with the Edward K. Christian Trust to purchase the trust’s remaining shares.
· Discontinue the pursuit of any new acquisitions until Saga’s profitability returns to historical levels and the Company’s valuation more accurately reflects its intrinsic value.

Gate City sought to have their founder/Portfolio Manager Michael Melby and partner Nicholas Bodnar along with Emmis EVP/CFO/Treasurer Ryan Hornaday and The Weather Channel CFO Christopher Young nominated to the board. Following a conversation between Gate City and Saga on February 10, Gate City sent a letter to Saga on February 11 informing them of the intent to nominate four directors at the upcoming 2025 annual meeting. Representatives from Gate City and Saga subsequently entered into formal negotiations to appoint one of Gate City’s potential nominees to the Saga Board of Directors but oncluded without a formal agreement on March 4. Gate City said to the SEC, “Given the failure to reach a negotiated settlement of these issues, Gate City is exploring a variety of its options. Gate City remains disappointed in the Company’s pursuit of a digital transformation strategy that Gate City believes is likely to prove value destructive for shareholders ”