Beasley Broadcast Group Inc (BBGI) 2002 Q1 法說會逐字稿

This is the Q1 2002 Beasley Broadcast Group earnings release report. We will begin momentarily.

Good morning, ladies and gentlemen. Welcome to the Beasley Broadcast Group first quarter's earnings release. At this time all participants are placed in a listen-only mode and the floor will be opened for questions and comments following the presentation. It's now my pleasure to turn the floor over to your host, Denyse Mesnik. Ma'am, the floor is yours.

Thank you. Good morning. Welcome to Beasley Broadcast Group's 2002 first quarter conference call. Before proceeding, I would like to emphasize that this conference call contains statements of a forward-looking nature relating to the future events, or the future financial results of Beasley Broadcast Group and serves as a point. The company is under no obligation to update these statements or update expectations from prior conversations. Investors are cautioned that such statements are only predictions and that actual event or results may differ materially. In evaluating such statements, investors should specifically consider the various factors which could cause actual events or results to differ materially from those indicated from such forward-looking statements, including the matters set forth in Beasley Broadcast Group's reports and documents filed from time to time with the Securities and Exchange Commission. And with that said, it's now my pleasure to introduce our Chairman and CEO, George Beasley.

Thank you. Ladies and gentlemen, good morning. Welcome to our company's first quarter conference call. Bruce Beasley, Allen Shaw and Caroline Beasley are also on the call to review operations and answer any questions you might have. Today we report financial results both on an actual and same-station basis. For the second straight quarter, it exceeded our expectations. Actual revenues were only down 4% compared to an earlier forecast decline of 13%. All Broadcast cash flow rose 7% from the year-ago quarter, compared to an earlier forecast decline of 16%. On a same-station basis, revenue was off 5%, ECF was up 7%, versus our originally-forecast declines of 13%. I'll take the next few minutes to highlight some of the reasons behind this unexpected performance, and then I will let Caroline, Bruce, and Allen fill in some details. The month of March is, perhaps, the most important month of the first quarter, and it made all of the difference in our quarter-one results. In contrast to February when we issued guidance, cancellation of TV sweeps due to Olympics dampened the regular environment. March turned out to be surprisingly strong across our markets. Additionally, quarter one also benefited from very strong performances at our Philadelphia, and Las Vegas clusters, where station turnarounds are starting to attract some meaningful ad dollars. These results are generally in line with the good news coming from our industry. The entire sector seems to be experiencing more demand for radio advertising. For Beasley, that was certainly the case in the first quarter. Forecast in the second quarter and beyond, however, remains somewhat difficult to predict as our ability is still limited to about two-to-three weeks out. That said, we are very excited about the rest of 2002, and we're eager to return our company to 30%-plus operating margins that we achieved prior to 2001. We just renegotiated our Marlan's sports contract in Miami. That will make a big difference in cash flow going forward. So will continuing the revenue momentum in both Philadelphia and Las Vegas. These three markets alone represent over 60% of our revenue, so even small progress here can make a big difference to the entire company. With that, I will turn the call over to Caroline for financials.

Thank you, George. Good morning. I will address the highlights of the actual same station and pro forma result as well as review the capital structure and give guidance for second quarter. Actual revenues decrease [INAUDIBLE] .7%, and actual BCF increased 6.8%. The actual BCF increase was driven by our Philadelphia cluster, which was up approximately 400% over last year. Our Las Vegas cluster was up approximately 20%. Our margins for the quarter increased from 25 to 28%, and our actual after-tax cash flow increased 44% from 2.8 to $4 million. After-tax cash flow is defined as net income plus depreciation amortization, deferred income tax expansion, or minus income tax benefits. Before the first quarter, we had a net loss of 10.3 million less DNA of 1 million; plus deferred income tax expense of 2.1 million; plus nonrecurring charges of 200,000; plus noncash charges of 11 million; and this includes a gain on hedging instruments of 1.1 million, and the write-down of our intangibles of 12.1 million giving us 4 million in ACTF. Our share increased 45% from 11 to 16 cents, and fully diluted shares remain constant at 24.3 million. On a same-station basis and this includes all of the stations that we owned as of March 31st, 01, so we're only excluding the two FMS in Agusta we required last April from this calculation, revenues decreased 5.2% and cash flow increased 7%, while our margins increased from 24.24% to 27.5%. The revenue decrease is primarily attributable to the elimination of the Internet investment revenues this year over last year. As mentioned in the last conference call, we had approximately 900,000 in Barter revenue last year compared with zero this year. Also, as mentioned in the fourth quarter conference call, the company decided to reduce our exposure in certain NPR events decreasing by 500,000 from last year. But this was BCF neutral. If you exclude the items, revenues would be flat for same station for the quarter, and BCF would be up approximately 25%. On a same-station basis, the margin increase is primarily attributable to the Philadelphia market which saw gains in cash flow at WTTT and XTU. The margins on the developing station increased from minus 10% in first quarter 01 to positive 7% in first quarter 02. As of March 31st, 40% or 17 stations were in the development stage. 33% of our total revenues are generated from these stations, and these stations contributed 9% of our total cash flow for the quarter. Pro forma for the quarter, revenues decreased 5.1% from 26.1 to 24.8 million. Our BCF increased 7.5% from 6.3 to 6.8 million. And our margins increased from 24.2 to 27.5%. On the bottom line for the quarter, we had a net loss of approximately 10.3 million, or 42 cents per share compared to a loss of 2.6 million or 11 cents per share for the prior period. On January 1st, 2002, the company adopted [INAUDIBLE] which eliminates the amortization expense for Goodwill and FCC license. The company as result reported a noncare impairment charge of 12.1 million net of taxes for write-down of certain intangible assets. Had Goodwill and FCC not been amortized in 2001, our EPS would have been 9 cents for first quarter 01 compared with a EPS of 8 cents for first quarter 02. As of March 31st, total senior debt was 202.7 million, and our Ebitda was 31.11 million. Our leverage [INAUDIBLE] haven't with our bank was 7 and one-quarter times. And it was 8% effective rate. Cap-X for quarter was 540,000, of which 443 was maintenance. This compares to first quarter 01 in which we had 682,000 in Cap-X of which 285,000 was maintenance. As far as guidance goes for second quarter, we expect revenues to come in at 27 million, cash DCF to be at 8.5 million, and ATCF to be approximately 13 cent for the quarter. Same station and pro forma will be the same for second quarter. We expect revenues to be down as much as 6%. This decrease is primarily as a result of the reduction in the Barter-related Internet investment revenue of 800,000. We're looking at decreases in rev now in our Fort Myers and Miami markets. The majority of the decrease in Miami results from the lower revenue generated from the Marlans. We signed a new agreement with the Marlans in April and as many of you know, much of the sales on a sports team are presold prior to the preseason opener, and baseball began April 1st. We still anticipate that we'll break even on the Marlans this year in BCF. Adjusting for these items, we would look at a flattish second quarter in revenues. Our cash flow we expect to be up as much as 6%. This increase is a result of the increased cash flow stemming from the renegotiation of the Marlan's contract, as well as increases in cash flow in Philadelphia. These increases were offset by the Barter Internet investment of approximately 800,000 resulting in only a 6% increase in cash flow for the quarter, excluding a Barter piece of the equation, cash flow would increase 19% for the quarter. Our DNA expense for the year we're expecting to be approximately 3.6 million, and for second quarter we're expecting the DNA to be 939,000. This compares with second quarter 01 of 1,196,000 under [FAS142]. Our interest expense we expect to be 18 million for the year, this assumes an effective interest rate of 9% going forward. Our effective tax rate is 40%. However, due to a provision to try up the tax return in first quarter 02, the effective tax rate for all of 2002 will be 34%. This will be the guidance that you receive for second quarter. We undertake no obligation to update this information until the next conference call. I look forward in speaking with you then. Thank you very much, and I will now turn it over to Bruce.

Thank you, Caroline. Due to the timing of the information being released, I don't have complete winter ratings yet, but I will try to highlight a few other operating accomplishments for you. If you need more information, we can cover that in the Q&A that follows. Overall, the climate seems to improved noticeably during Q1. For the first few weeks in March, advertisers started to be more aggressive in terms of placing ad orders in advance. And pressure on TV inventories clearly starting to spill over into radio. We outperformed the market in Philadelphia where our station group's spot revenue were up 44.1%, compared to an increase in the market. Stock performance up 34%, and WPPT 37%. These gains translated into an increase in market revenue share from 5.7% of the previous quarter, to 5.8% today. Our Clusters' power ratio increased from .88 in Q4, to .92. We're starting to carry our own there. In Miami, Cluster spot revenue increased 1.3%, but not as fast as the market which was up 2.3%, while Power PM had solid growth of 13.2%. And in Jacksonville, we didn't grow revenues [INAUDIBLE] than the market, we were up 4.4 while the market was up 11.8. But we managed to increase revenue [INAUDIBLE] by a few points due to strong performances at XNR, and WNCT up over 15%. The power ratio improved here from a 1.81 in Q4 to a 1.95 today. Looking at national versus local, Q4 national advertising was a big factor. On the whole, EP at that was up 19% compared to the 1.8% for our market. That trend was pronounced in our largest markets which suffered in this category during 01. So the pendulum is starting to swing back in our favor. In the local category, we didn't keep pace with our markets on the whole. The loan exception was in Philadelphia. WPPT, our turnaround situation led a 24.6% gain locally which shows we're gaining traction there. The overall mix between national and local remain consistent with approximately 71% of the revenue coming from local, and 19% coming from national, while 10% was from network or NPR. In looking at our top 10 advertisers, auto came back strong for us in Q1 rising over 26% sequentially from Q4 01, and 35% of the top-10 pie. This is unusual since first quarter is traditionally our slowest of the year. But in a year first quarter, it was just 26% of the top 10 pie. So it shows where our strength came from in the quarter and how big that category is for us. On a year-over-year basis, the only major new trends from 01 are the retail which has a percent of the top 10 pie which has risen to 13%, while the beverage category dropped from less than 1% to 3 to 4%. Other categories generally remain stable. And with May sweeps approaching, we're looking for the TV category to pick up substantial compared to last fall or last February. The only winter book on hand prior to today was Philadelphia, soly briefly touch on some of those highlights. WTU as we predicted bounced back from the fall with 35 share adults, 25 to 54. We believe the station will rebound in spring book particularly as we approach our June anniversary concert which is proven to be a big hit with our listener there is in Philadelphia. Despite the ratings, we continue to believe WPPT is on the right track. The research we've done says this format is here to stay. But like any niche programming in the competitive spectrum, you have to promote it. We have aggressively talked up this station since May of last year, but we have another campaign in the works this spring so we're optimistic that we can, once again, put this format into the forefront of our listener's minds. I would like to commend, once again, our local management team for a job well done. As you can see, they've done a tremendous job. And with that said, I would like to turn it over to Allen.

Thank you, Bruce. I will be talking about the Las Vegas market. On a revenue basis, we were very pleased that our Las Vegas cluster outperformed its market in first quarter on an overall basis, up 6.9% versus 3.4%. We were ahead of Q1 last year by approximately $600,000, or 42% growth rate. On ratings basis, our three FM stations in Las Vegas enjoy fall 2001 ratings that were each higher than the same period one year ago. KJUL's 25/54 share was a 3.1 versus a 2.4 in the previous year. KSDJ was 5.1 last fall compared to a 4.9 a year ago. And KKLZ was at a 4.1 versus a 3.4 share 2554 one year ago. The shining star for us in the first quarter was KSDJ, our '80s station. On a spot revenue basis, the station was up 94% during the quarter. Far outpacing the market's 2.7 increase. National was up a very large 242%, and local was up 75%. We're doing a better job of converting the [INAUDIBLE] gains into revenues, the power ratio increased from .9 [INAUDIBLE] to 1.10. KJUL, our soft adult music station, continues to be the top-rated station in the market in the fall ratings, and ranks -- actually tied for third in its target demo of 35-64 adults. KKLZ, our classic rock station ranks number 7, and the target demo of men 25-54, which is not satisfactory to us, so our goal there is really to continue, and we're working very hard right now with a number of strategies to improve KKLZ's programming in the market against its competition in order to more fully realize the great revenue potential at that station. I will turn the call back to George Beasley.

Thank you, Allen. Thank you, Bruce, and thanks, Caroline for your very insightful presentations. I imagine that there are some questions, so operator, let's please open up the call for questions.

Certainly, sir. The floor is now opened for questions. If you do have a question or comment, please press 1, followed by 4 on your touch-tone phones. If you are on a speaker phone, we do ask that you please pick up your handset to minimize background noise. If at any point your question is answered, remove yourself from the cue by pressing the pound key. Our first question or comment is coming from Paul Sweeney of Credit Suisse First boston.

Thank you very much. Good morning. A couple of questions. It looks like both in your first quarter and also in your second quarter you are doing a pretty dramatic job in bringing expenses in line. It looks like you are taking expenses down 7% in the first quarter, and something similar to that in the second quarter. Can you talk about the components of what those cost cuts are and how sustainable they are? And then a second question for you, Bruce, if you could summarize what you think -- how you view your competitive position in Philadelphia? Has PPT been a success? Is it where you want it to be? If not, where do you need to go to be competitive in that market? And is that going to require significant already more promotion? Thanks.

I will take the first part. As far as first quarter goes, first quarter this year we [INAUDIBLE] around 800,000, and advertising and promotional expenses up in Philadelphia WPPT, we spent that much money in getting the format kicked off last year. Those are expenses we did not have this year. That was the big component for first quarter. While we are, you know, certainly watching our costs elsewhere, that was the big component. And second quarter the big component is resulting from the renegotiation of the Marlan's contract. And while I can't go into specifics as we all mentioned earlier, last year we did lose money on this contract. We lost about $3 million, and this year we expect to break even. And that's a direct impact of the expenses because we certainly expect the revenues to be lower this year.

And Paul, as far as WPPT, is it where we want it to be today? Absolutely not. Do we have money budgeted to promote this radio station properly? Yes, we do. We do expect to see this station start to rise back up in the ratings in this competitive arena we're in in Philadelphia.

But is there any evidence from around the country as to the sustainability of this '80s format? I know it was launched last year in a number of high-profile markets, one with some of the experiences around the country?

I can speak to a couple of markets which are ours, Las Vegas and Philadelphia. Vegas seems to have traction. We just completed a couple of big research projects in Philadelphia specifically, while I can't go into the specifics of it due to the competitive nature up there, I can tell that you it answered that question for us, which this station -- this format does have traction, and does have legs in Philadelphia.

Great. Thank you very much.

Thank you.

Thank you, paul.

Our next question is coming from June Marcus of Deutsche Banc.

Thank you. Nice results, guys, and Caroline.

Thank you.

Can you talk a little bit about the second quarter? If you can breakdown April, May, June, if you are seeing different patterns by month, and maybe give us a sense of where you are as a percent of budget for may right now?

Drew, I can speak about April, and on a cash-to-cash basis if you exclude the Barter component that we have outstanding, our April was up about 5%. And for May, given that for us there's still a lot of business being policed in the month, I don't know where we're going to end up in May. But I can tell you as far as sellout goes and that kind of thing, we're going into May right now sold out over 60%. We went into April sold out 54%. So it looks like we're starting to build going into the month, and we see that as positive.

And, Drew, a good part of that is we're starting to see advertising for the sweeps which occur in the month of May, which we haven't seen in a couple of last sweeps.

Bruce, the TV sweeps, it can be, what, 5% or so of revenue? How big can it be?

It could be close to 5, maybe 3 to 5% revenue.

Okay. Great. Thank you very much.

Thank you, drew.

Thank you. Our next question is coming from Lee Westerfield of UBS Warburg.

Good morning, everyone. I just want to focus on a couple of markets first in Fayetteville, vis-a-vis national advertising, if you could break out national and local in that market, and also make a comment about how that market is doing because I think there was a contrary point and a positive one about that. And secondly, if you could make a comment about the strides you've made in Miami relative to the competitive from Cox. Thank you very much.

I will take the first part. That relates to Fayetteville, and Bruce will deal with [INAUDIBLE]. For the quarter, based on PLG Miller Kaplan, the markup for Fayetteville was down, and overall the market was up April because there was a NPR component in there as well. We faired quite well. We performed with the market and were up 8% as well.

Let me add one other thing, you asked about the military. The markets that we are in where there are military bases are very positive because of what the government is looking at doing and probably is doing with increasing the military budgets. There are a lot of positive attitudes from local merchants there in these markets because of that. And in Miami, what we -- what Cox has done is made us a better radio station there. We look at what we're doing, we've gone in and we've realigned the way we approach the morning show. We're more a music station there now which is not a competitive situation because it's not a confidential situation because you can listen to that station over the Internet. We've done in and trimmed our commercial load down drastically, and we've also instituted a 18 in a row to give us more music -- a more music position when you have a competitor that really doesn't have any commercials on the air. We fell comfortable about our future. The biggest part about this is that -- that people need to understand that may not, in Miami, our general managers that been there since we started the radio station. We had four different competitors in the past 15 or 16 or 17 years. Our sales staff has been there on average about 11 of 12 years, and that includes our sales manager, our general sales manager and local sales manager. So we have a tremendous sales staff in that market, as well as a general manager that has seen competitors come and go in the Miami market against Power 96.

I would like to remind our audience, if you do have a question or comment, please press 1 followed by 4 on your touch-tone phones at this time. There appears to be no further questions or comments at this time.

All right. If there are no further questions, we want to thank each of you for joining us today, and until next time, good day to each of you.

Thank you, ladies and gentlemen, for your participation on today's tele-conference. You may disconnect your lines at this time and have a wonderful day!