Beasley Broadcast Group Inc (BBGI) 2009 Q1 法說會逐字稿

Good morning and welcome to the Beasley Broadcast Group First Quarter Webcast. Before beginning, I would like to emphasize that this webcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factors section of our most recent Form 10-K. Today's webcast will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of Reg. S-K.

A reconciliation of these non-GAAP measures with their most directly comparable financial measures calculated and presented in accordance with GAAP, can be found in this morning's news announcement and on the Company's website. I'd also remind listeners that following its completion, a replay of today's webcast can be accessed for five days on the Company's website, bbgi.com. Investors can also find a copy of today's press release on the Investors or Press Room sections of the site.

Bruce Beasley, our President and COO, is with me this morning. Our remarks will focus on the first quarter results and our markets, after which we will address questions that were emailed to our Investor Relations inbox, which we have no questions today so we will end after Bruce's comments.

Beasley Broadcast Group operated under very difficult economic conditions in first quarter '09 as the national and local economy slipped into a deeper recession. With advertising a discretionary medium, our quarterly revenues decreased 23% and it's estimated that the industry declined at similar levels. Nevertheless, with our disciplined approach to operations, including company wide expense reductions and focus on our balance sheet, BBGI remained profitable in the first quarter even as we incurred a $525,000 loss on extinguishment of long-term debt.

So as I just mentioned, our revenue decreased 23% and this decline was spread across all but one market with our largest markets, Miami, Philly, and Las Vegas, accounting for approximately 65% of the overall decline.

Reflecting the industry weakness in the first quarter, in five of our 11 markets that report to Miller Kaplan, our clusters performed inline with their market on a combined basis, as total revenue in these markets declined 26% compared to our clusters, which also declined 26%. These five clusters account for 72% of our total revenue. Notably, our clusters outperformed their markets on a local basis with our stations down 25% compared to the markets which were down 27%. However, we underperformed the markets on a national basis with BBGI down 35% compared to the markets down 27%. According to Miller Kaplan, the Philly market declined 21% compared to our station cluster, which decreased about 31%. We attribute our underperformance to the declining ratings being reported over the last year at WXTU. We believe the ratings decrease was caused by the under-indexing of the 3554 demo, as our other Philly stations, most importantly, Wired, outperformed the market.

Bruce discussed this issue in detail on the fourth quarter webcast in March and recently we've seen some progress on the 3554 sampling and expect the revenue trend at XTU to improve. In Miami, total market revenue declined 25%, while our total Miami cluster revenue declined about 20%. The Las Vegas market remains among the most economically challenged in the country with total market revenue declining 37%, compared to our station cluster, which while it outperformed the market was down 35%. Fort Myers also remains extremely weak with quarterly market revenues down 33%, compared to our clusters, again, which outperformed the market declining 23%.

Despite the continued challenging operating environment, we recorded another quarter of growth from our interactive initiatives with revenue from these sources rising 3% and accounting for 5.8% of our total revenue. Station operating expenses decreased 19%. This decline reflects lower sales expenses related to revenue levels and expense discipline across the board, including a wage cut of 5%, implementing a four-day workweek for some employees, and reducing our total workforce by approximately 15% when you compare March '08 to March '09.

Reflecting the first quarter revenue and station operating expenses, station operating income declined 33%. Corporate G&A, excluding stock based compensation expense, was $1.9 million for the quarter and this reflects a decrease of 10.5% which reflects lower compensation expense and other cost-cutting measures. Our stock-based compensation expense for the quarter was down 41% to $300,000 and interest expense for the quarter was down 25%. This primarily reflects lower borrowing cost and voluntary repayments under our credit facility.

During the quarter we made voluntary repayments totaling $1 million and over the trailing 12-month period ending March 31, we've reduced our debt by $13.8 million. Our interest expense will rise during the year as our borrowing costs have increased as a result of the amendment to our credit agreement dated March 13, 2009. As mentioned earlier, we did record a charge for loss on extinguishment of long-term debt of $525,000 and this is in connection with the amendment to our credit agreement, and this is due to reducing the revolver commitment. Our effective tax rate for the quarter was approximately 47% and there were no current cash taxes.

Now, turning to the balance sheet, as of March 31, total bank debt was $173.5 million and the latest trailing 12-month consolidated operating cash flow is $26.1 million for a leverage of 6.7 times. And this compares to our leverage covenant of 7.5 times as of March 31, 2009 and this extends through June 30, 2010. Cash on hand as of March 31 was $4.5 million and we spent $212,000 in CapEx for the quarter.

I believe today's report highlights the ability of our station and corporate personnel to effectively manage our portfolio of stations in this extremely challenging environment, and why this discipline has positioned the company to benefit when radio ad demand returns to normal levels. It's important to note that the company was able to post a profit for the quarter and overcome the 23% decline in revenue.

And I'll now turn it over to Bruce. Thank you very much.

Thank you, Caroline. This morning I'm going to focus my time on bringing additional perspective to some of the elements of Beasley's Q1 performance, recent sales and programming initiatives in some of our major markets. I'm going to update you on the Philly PPM situation and our PPM readiness in Miami and Las Vegas as the technology is being rolled out in these markets this year. Despite current conditions, our market position in our biggest markets, Miami and Philadelphia, remained strong and we're seeing our Las Vegas and Fort Myers cluster outperforming these markets, which continue to be seriously economically challenged based on the impact of their real estate markets.

In addition, our mid-sized markets, which are less dependent on national advertising, continue to command leading revenue share relative to their competitors. Taking a step back and looking at where we are now, I'd say we made some very tough cuts, which have resulted in a leaner organization. We're at the juncture where we are looking for the bottom of the decline and setting our sights on the rebound. Our people have made sacrifices, taken on additional responsibilities, and are working extremely hard as they are committed to our success.

Let me talk about some of the ad category challenges in the industry and for BBGI. It's no secret that the radio industry and Beasley have historically been reliant on retail and auto as our top two categories. In the first quarter of '09, our retail revenue declined approximately 29% while auto dropped 53%. Together these categories accounted for 56% of our first quarter revenue decline. The auto industry's struggles are well documented and we're closing watching Washington, Detroit, and last week's development with Chrysler, to see what plan emerges to rebuild confidence in the industry.

In light of Chrysler's news last week, I'd like to address our exposure related to domestic auto industry receivables. At present, while we have some exposure, it's not that material. Late in the first quarter we saw a bit of loosening of our dealer spending and the overall revenue drop in the month of March was less than February, but it's far too early to declare that auto has stabilized in any way. Dealers are telling us they are looking for the biggest bang for their budgets when it comes to advertising, and that means moving some of their dollars from newspaper to radio and online because they can get more measurable results. We are working hard with local dealers to demonstrate the effectiveness of radio.

The industry also stepped up to challenges of the current environment with the trade publication, Radio, Inc., creating and making available 30 and 60-second spots that encourage listeners to consider buying a car now. It's been reported that these ads were used at 6,200 stations or about 50% of all the U.S. radio stations. It's up to our GMs to use discretion in their markets, but we use some of these spots in some of these markets and we believe innovative initiatives like this demonstrate that the industry and its tremendous reach can play a role in addressing the current challenges.

Looking beyond auto and retail, we had a slight gain in the restaurant category in Q1, as well as some other categories that could be categorized as less sensitive to the economy, such as education, legal, and alcoholic beverages, though healthcare, which would fall in this same bucket, was down about 20%.

As Caroline indicated earlier, first quarter results in the Philadelphia cluster, which had consistently been outperforming the market, were impacted by lingering PPM sample issues at our Heritage country station. With the station's reporting rating position dropping from sixth or seventh to 13th or 14th, we saw a pretty significant drop in rates. However, with Arbitron's recent progress in the 35 to 44 sampling, WXTU has gained its position as a top 10 station and this will allow us to bill again at higher rates and we expect to see this in the second half of the year.

We've recently seen some indications of pressure on inventory in Philadelphia as some large advertisers have come back to us and others in the market offering higher rates to make sure that their spots don't get bumped. We can only hope this is the beginning of a trend.

Turning to Las Vegas, last month we reprogrammed Fresh 102.7 as 102.7 Now, which builds on the success of our Rhythmic CHR stations in Miami and Philadelphia. Targeting 18 to 34-year-old listeners, the station has the benefit of being launched with a very heavy focus on online and digital offerings and listener interaction points. While we have no ratings yet, listener and advertiser interest has been high. PPM was also introduced in Miami last month and will become currency in the market next month. Our Miami programming has similar characteristics to our Philadelphia programming with both clusters featuring strong country and CHR stations.

We are in a regular--we are in regular dialogue with Arbitron on the importance of the sampling and expect that they will not repeat the issues that impacted us in Philadelphia. While the economic outlook remains challenging, we are confident in our station and corporate level personnel to continue to step up in the current environment to ensure that we capitalize on and fortify the strong positions we've built in our markets. Throughout our--through our corporate--our collective efforts, we've made our organization more effective and better positioned for an economic recovery.

I'd like to thank everyone this morning for listening and for your time. And if you have any other questions, please feel free to give us a call here in Naples.