Beasley Broadcast Group Inc (BBGI) 2009 Q3 法說會逐字稿

Good morning and welcome to the Beasley Broadcast Group third quarter 2009 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 our 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 third quarter results and our markets. Beasley Broadcast Group recorded an improvement in third quarter revenue comparisons, relative to the previous quarters this year. And our continue focus on expense discipline enabled the Company to generate another quarter of operating profitability, despite the continued headwinds presented by the challenging economic environment.

In addition, on August 25th, we closed on the sale of two Las Vegas stations, which generated a pretax gain of approximately 1.7 million. As a result of the sale, we're reporting both actual and same-station revenue, operating expense, and SOI for the quarter. The same-station results exclude the two stations that were sold in Las Vegas for the quarter, and the comparable period of 2008.

Now, for the quarter, actual net revenue decreased 20%. Same-station revenue decreased 19%. These third quarter revenue levels reflect declines across all markets, with our largest markets, Miami, Philly, and Las Vegas, accounting for approximately 66% of the overall decline. Also to note, on a comparative basis, the Company booked about 420,000 in political advertising in third quarter '08, and the lack of such revenue in the third quarter of '09 accounted for 1% of the year-over-year revenue decline.

In the five of our 11 markets that report to Miller Kaplan, our clusters slightly underperformed their markets on a combined basis, as total revenue in these markets declined 17% compared to our stations, which decreased 19% on a same-station basis. These five clusters account for 73% of our total revenue.

Locally, we outperformed the markets with our stations down about 17%, compared to the markets which were down 19%. National continues to be a disappointment, as our stations were down 36%, compared with our markets down 15%. And Bruce is going to spend some time addressing the reasons why national continues to underperform.

According to Miller Kaplan, the Philly market declined 15%, compared to our station cluster, which decreased 16%. While our stations continued to underperform the Philly market, we're pleased with their progress, especially on a local basis, as our cluster declined 13%, compared to the market which decreased 19%. We expect our cluster to perform at least inline with the Philly market in the near term.

In Miami, total market revenue declined 14%, while our cluster declined 23%. And this is primarily due to national revenue for the stations which declined about 50% in the quarter versus the market, which was down 13%. Our Las Vegas station cluster outperformed the market. However, the market continues to remain among the most economically challenged in the country, with total market revenue down 28%, compared to our stations, which were down 23%. And we're starting to see some positive signs in our Fort Meyers cluster, as our cluster outperformed the market for the third quarter in a row, and our Augusta cluster also resumed its record of exceeding the markets.

Despite the ongoing challenges in the current environment, BBGI recorded another quarter of growth from our digital initiative, with revenue from these sources increasing 12%. Actual station operating expenses decreased about 19% for the quarter, and on a same-station basis the expenses decreased about 18%. And SOI for the quarter decreased 24%. Same-station SOI decreased about 22%.

Corporate G&A, excluding stock-based compensation expense, was 1.6 million for the quarter. This reflects a decrease of 12%. And this reduction reflects lower comp expense and other cost-cutting measures. Stock-based compensation expense was 235,000 for the quarter, or a 37% decrease from third quarter of '08.

Interest expense for the quarter increased 34%. And this reflects increased borrowing costs. During the quarter, we make repayments totaling 17.2 million against the credit facility, and this includes 15.25 million from the proceeds of the sale of our two Vegas stations. And over the trailing 12-month period ending September 30, 2009, we've reduced our debt by 25.2 million. There were no current cash taxes for the quarter.

And turning to the balance sheet, total bank debt was 153.8 million. And the latest trailing 12-month consolidated operating cash flow was 22.1 million for a leverage ratio of 6.99 times. And this compares to our covenant level of 7.1 times, and this remains in place through June 30, 2010. Cash on hand at the end of the quarter was 5.3 million. We spent 130,000 in CapEx for the quarter. And year-to-date, we've spent about $0.5 million.

To conclude, today's report highlights the ability of our station and Corporate personnel to effectively manage our portfolio stations in this environment. And why this discipline and focus positions us to benefit, as we're starting to see radio ad demand returning.

I thank you very much, and I'll now turn it over to Bruce.

Good morning, and thank you, Caroline. My comments this morning will cover Beasley's performance, relative to its markets, particularly on a national basis, the current environment and our positioning going forward.

Overall, the recession's impact on advertising spending continued to challenge the radio industry during the third quarter of '09. On the top line Beasley's third quarter net sales reflected spending declines from retail, auto, restaurants, and healthcare, and those are our top four ad categories, and underperformance buyer group on a national sales level, particularly in Miami and Philadelphia.

However, Beasley's revenue comparison in the third quarter improved relative to the '09 first and second quarters. And based on what we are seeing at this time, we expect the fourth quarter revenue comparison to improve over the third quarter.

In anticipation of the economic and advertising downturn, we exercised prudent expense management, while operating with a top-line strategy that focused on some basics that are within our control, like continuing to build our interactive operations, ensuring that our sales teams are well-trained and aggressive in demonstrating radio's values to our advertisers. Also, stimulating advertiser demand through promotions, such as our one-day sales, special programs, and NTR events, and keeping a close watch on inventory and pricing to ensure that we maintain competitive of this in our markets.

These factors contributed to our success in driving the local revenue ahead of our markets. While national is a much smaller component of our overall revenue mix, we are intent on generating national revenue at our clusters that is at least inline with our markets. We've been addressing the national issue for several quarters, following the switch to Katz as our rep firm in late '08. And I attribute Beasley's third quarter national sales underperformance to the transition.

Because this transition took place in late '08, we weren't included in certain annual national ad buys, and in some markets some of our national business that was being offered was at rates below what we were achieving from local business.

In addition, we weren't flexible enough with inventory in some markets to allow for some short-form buys. We held extensive discussions with Katz personnel and Katz senior management on selling BBGI to national advertisers and believe we will see improvements on this front beginning in the current quarter and throughout 2010.

Furthermore, with PPM now the currency in Miami as of June, we are seeing solid ratings for Power 96, our rhythmic CHR station, and KISS, our country station, which bodes well for our national revenue in that market, though, WQAM, our sports talk station in the market, has trended lower in PPM when you compare it to the diary method.

Our situation in terms of underperformance in national sales in Philadelphia's more a reflection of the issues Arbitron had with their 25-to-54 sampling, and meters moving in and out of the sample, which impacted ratings on our Heritage country station. With reported ratings declined earlier this year, we experienced a significant drop in rates. However, Arbitron's improved listener samples, we are looking for continued progress in Q4 to bring our overall cluster performance back in line with the market.

On our clusters that outperformed their markets, Augusta did so based on its solid seven-station lineup and the local team which does a great job in that market. While the Las Vegas market remains severely challenged, we attribute our cluster's outperformance in Q3 to the leadership of Tom Humm, a Las Vegas native and now are Market Manager since last fall.

After Las Vegas, Fort Meyers-Naples remains one of weakest markets, and we've outperformed there again based on improved spring ratings which drove higher rates. Our coastal Carolina stations also had a good summer book, and we expect continued performance there on outperforming the markets.

Despite the macroeconomic conditions in '09, our market positions in Miami and Philadelphia, our largest markets, remain strong. In addition, our mid-sized markets, which are less dependent on national advertising, continue to command leading revenue share relative to their competitors.

While the economic outlook remains uncertain, we were pleased to see initial improvements in our advertising activity in third quarter, and are confident that Beasley is well-positioned to benefit from healthier levels of overall advertising spending, including political revenue in 2010.

Now, with that, we'll address some of the questions that have been emailed to us from the investment community. And Caroline, if you'll read the first question and identify who it came from.

Thanks, Bruce. We have received a number of questions from Jim Boyle. So, we'll take a few of these. The first one, Jim wanted to know how third quarter month-by-month performed. So, just to review that, July, our stations were down 23%. August, we were down 22%. And September, on a same-station basis, we were down 17%. So, you could see a gradual improvement as we went on in the quarter.

His next question was if we saw gradual improvement in third quarter. What about fourth quarter? And as Bruce addressed in his remarks, we are seeing gradual improvement in fourth quarter. Just want to clarify that. We did have about 1.5 million in political advertising last year. So, excluding this impact, we do expect to see improvement in fourth quarter.

Bruce, this next question would be for you. "Did Cash for Clunkers help our Q3 revenue?"

Yes. The Cash for Clunkers, Jim, did. We did see some improvement in auto, but it wasn't across all markets.

And then, he wants to know about rate card integrity, or rate card discipline, now versus a year ago.

Let's see. With demand improving, we are seeing better rate card integrity than we did earlier in the year, and late last year. So, that seems to be some positive news there.

And then, we are in the large- and mid-sized markets. They're much different than market size the past few years from your vantage point, Bruce.

Yes. For the past few years, larger markets have been impacted more nationally than the smaller ones, over the years. However, we do see national moving in the right direction in our larger markets, and we believe that aspect leaves us an additional opportunity, given the underperformance of our stations in our larger markets.

And then, finally, he had asked about our top ad categories and how they performed in Q3. Retail was our number-one category. It was down 25%. Auto, number 2, down 45%, restaurants, number 3, down 7%, and health, which is number 4, was down 1%.

This will conclude the questions. I think we've addressed most of the questions that have come through, and this will conclude our conference call. So, I want to thank everyone for calling in, and should you have any questions, feel free to call Bruce or myself. Thank you very much.