Beasley Broadcast Group Inc (BBGI) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Beasley Broadcast Group fourth quarter 2009 earnings call. At this time all participants are in a listen only mode. And now your host for today's conference, Caroline Beasley. Please begin.

Thank you, Tieronne. Good morning and welcome to the Beasley Broadcast Group fourth quarter 2009 webcast. Before beginning I'd 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 FK. 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 mornings 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 primarily focus on the fourth quarter and 2009 results.

Given the highly unfavorable macroeconomic environment, the last couple of years truly tested management teams at all broadcasters including BBGI. There were many difficult decisions to make, sacrifices at all levels of the organization, and negotiations with talent, suppliers and lenders as everyone recognized the need to work together to address the unprecedented conditions. While 2009 top line results aren't pretty, throughout the year we made steady progress toward our goal of emerging from the recession with a stronger competitive position and an improved business model. In a moment, Bruce will touch on some of the operational highlights of 2009, but I will first review some key financial points for the year.

First, the Company's 2009 annual revenue decreased 20%, however with a proactive focus on managing cost, we were able to mitigate the SOI margin decline to just 1%. On this basis we ended the year on a positive as our SOI margins for the fourth quarter increased by 250 basis points compared to fourth quarter of 2008. Reflecting expense discipline throughout BBGI, the Company generated net income in each quarter of 2009. Additionally, we reduced debt by almost $23 million for the year and improved working capital at year-end by about $1.4 million. Our revenue comparisons in the fourth quarter improved relative to the 2009 first, second, and third quarters and our continued focus on expenses enabled the Company to generate SOI growth in six of our 11 clusters. Please note that as a result of the sale of two Las Vegas stations in third quarter of 2009, we are reporting actual and same station revenue, operating expense, and SOI for the quarter. Same station results exclude the two Las Vegas stations in fourth quarter and full year and in the comparable periods of 2008.

For the fourth quarter, actual net revenue decreased 14% and same station net revenue decreased 12.6%. On a comparative basis, the Company booked about $1.5 million in political advertising and fourth quarter of 2008 and the lack of such revenue accounted for roughly 5% of the 14% decline. The actual and same station fourth quarter revenue reflect declines across all markets accept Boston. However, in the five of our 11 markets that report to Miller Kaplan, our clusters slightly out performed their markets on a combined basis as total revenue in these markets declined 8.9% compared to our stations which is were down 8.6% on a same station basis. I'd note that these five clusters accounted for 75% of our revenue in the fourth quarter. Luckily our stations out performed the markets with our stations down 4.1% compared to the markets which were down 6.6% and nationally our clusters were down almost 31% compared with our markets down 18%.

According to Miller Kaplan, the Philly market declined almost 3% compared to our station cluster which was down almost 4%. We're pleased with the continued progress at our Philly cluster, particularly on a national basis as national revenue increased 2.5% in fourth quarter compared with the market being down 7.5%. In Miami, total market revenue declined 10% while our total Miami cluster revenue declined 14%. This is primarily due to national revenue as local revenue performed in line with the market which was down 2.3%. Our Las Vegas station cluster out performed the market both nationally and locally, however the market continues to remain our most economically challenged with total revenue declining almost 23% compared to our station which was down 3.5% and this is reported on a same station basis. We're starting to see some improvement in the Fort Meyers market as our cluster revenue declined 14.5% for the quarter compared to the market which was down almost 15%. Fort Meyers was another market that faced extreme challenges related to the recession and the decline in Q4 2009 is a significant improvement from just a few quarters ago when the market was down almost 30%. Actual station operating expenses for the quarter decreased 17% and same station operating expenses were down 15%. SOI for the quarter decreased 6% and same station SOI decreased 6.9%.

Corporate G&A for the quarter was down almost 11% and corporate G&A for the year was also down almost 11%. Stock based comp for both the quarter and the year was down 39% and interest expense for the quarter increased 23% and this reflects increased borrowing cost. During the quarter we made repayments totaling $2 million against our credit facility and for the full year-ending 2009, we reduced debt by almost $23 million which includes $15.25 million from the proceeds of the sale of our stations in Las Vegas. Interest expense for the year increased 13% to $10 million reflecting creased borrowing cost and debt reduction remains a key corporate priority. There were no current cash taxes for the quarter.

Turning to the balance sheet, as of the end of the year, total bank debt was $151.8 million and the latest trailing 12 month consolidated operating cash flow was $21.4 million for a leverage ratio of 7.11 times. This compares to our leverage covenant of 7.5 times as of 12-31 and this covenant remains in place through June 30, 2010. We are in discussions with our lenders to Obtain an amendment to the credit agreement and expect to report the outcome in our 2009 10-K filing if not before. Cash on hand at the end of the year was about $6 million. We spent $459,000 in CapEx for the quarter and about $1 million in CapEx for the year. We were pleased to see further improvements in advertising activity in the fourth quarter. With our streamlined cost and operating structure, we expect to benefit from even modest increases in radio ad spend and we're cautiously encouraged by what we're seeing in our markets and recent industry productions for 2010. And with that, I will now turn it over to Bruce.

Thank you, Caroline and good morning, everyone. My comments this morning will address Beasley's standing in key markets, the current environment and our positioning going forward including some comments on our digital initiatives, national and political. As you're starting to hear from broadcasters and as reflected in our Q4 results, ad spending trends improved again this quarter or I'm sorry, again in the last quarter of 2009. Although visibility remains limited, ad trends to continue to move in the right direction and at this time, we expect further improvements in Q1 revenue comparisons relative to Q4.

Over the past year our corporate and station level teams proactively managed for the unprecedented weakness in the ad environment with a goal of preserving profitability by addressing those areas of our operating structure in which we control. Specifically, we grew our interactive business, strengthened our national sales representation, added network affiliations, strengthened programming and ratings and significantly reduced operating expenses. Overall, stripping out the impact of political advertising in last years fourth quarter, Beasley's 2009 fourth quarter same station net revenue was down approximately 8%. The Company's best comparison since early 2008 and well ahead of the 20% plus declines endured in the first nine months of the year. On the top line, Beasley's fourth quarter net sales reflected a 4% gain in healthcare, that's our third largest debt category offset by the absence of political as well as declines from retail, auto and restaurants, our number one, two, and four top ad categories.

In Q4, key Beasley clusters in Philadelphia, Las Vegas, and Augusta continued to show progress as our revenue was down low single digits and while we made further progress on national, finding our largest markets still under performed. We're guardedly optimistic about 2010 given the extremely high unemployment levels and very depressed real estate and economies in several of our markets including Miami, Las Vegas and Fort Myers-Naples. We're approaching the year with well developed top line strategies as we strive to participate in expected up trends in overall ad spending, further expanding our digital revenue, improve our national advertising share, and take advantage of political spending that we expect to occur in our markets.

Moving first to digital, since the formal launch of our interactive initiatives in late 2006, we've benefited from cross-selling synergies and cross-promotion between on air and online. We are leveraging the strength of our on air product, personalities and rich media to elevate usage. For advertisers, we've been successful in creating customized integrated platforms that touch the specific audiences or demos where they can generate the best results and in doing so, have proven the effectiveness of our interactive model. Our goal is to grow both online and on air listening and we do so by addressing listeners preferences, needs, and trends and in doing so, we deliver the most effective platform for our advertising client. This approach has lead to consistent growth with digital revenue accounting for over 7% of Q4 revenue and approximately 6.6% of our total revenue in 2009.

The second topic I'd like to spend some time on today is national. As Caroline noted on a local basis for markets that report to Miller Kaplan, we again out performed the markets while our national revenue continued to lag. However inconsistent with the expectations I laid out in our last call, we've begun to see the transition to Katz as our national sales are now paying dividends in both Philadelphia and Los Angeles and we see Miami following in this trend in 2010. Across the industry, national spot sales declined for the past two years. So our transition to a new rep firm was just another factor in our under performance on this front. I'll talk about ratings in a moment, but with recent reports of a broad based recovery in national, including a positive comparison in December, we're seeing early signs that national advertisers are returning to radio. We have a lot of ground to make up in national, but the reemergence of national along with political could prove to be drivers of upside in 2010 if they serve to tighten inventory across the industry.

Speaking of political advertising, given the economy and heightened levels of partisanship, 2010 promises to be very interesting with key races in several of our markets. The positive implications of the Supreme Court's recent campaign finance ruling and the census all expected to be factors in local radio advertising. We'll see Senate and Gubernatorial elections in some of our key markets in the states of Georgia, Florida, Delaware, Nevada, North Carolina and Pennsylvania as well as elections for House members. We believe the strength of our stations and their markets aligns us well with anticipated high level of political spending.

Finally on ratings, in our five [dowry] markets, BBGI garnered some of its best fall ratings in many years and with PPM now currency in Miami and Las Vegas, we're seeing solid ratings for Power 96 and Kiss, our country station in Miami, which will help our national revenue in that market, although WQAM, our Miami sports talk station continues to face format challenges. While in Las Vegas our classic hits station is top two, 22 to 54. Our situation in terms of national sales in Philadelphia, also a PPM market, was a bright spot in Q4 and with the strength of WRDW which is top three station in its demo and with strong trends in January at WXTU, we expect continued national improvements in this market. And as a side note, we're very grateful to Stu Olds and his team at Katz for their proactive work in representing BBGI and the entire radio industry.

So while momentum of the overall ad recovery is uncertain, we are confident in the long term prospects for the industry and BBGI, and in our stations and our corporate level managers, our salespeople, our on air talent, our programmers, promotion staffs, and everyone throughout the organization who helped us navigate the incredible challenges brought forth in 2009. With that well address some of the questions e-mailed to us from the investment community. Caroline, will you read the first question and identify who it came from?

Okay, Bruce. Thanks. We received a couple questions from Jim Boyle, and Bruce these are for you. Did you notice in the last few quarters any difference in rate card discipline between your top 25 markets and your smaller markets?

I think we've seen some consistent tightening or upward movement in rates in both our medium sized markets and our large markets.

How has the inventory sell out ratio changed in the last three to four months?

Particularly in January, we started to see tightening in a few of our -- well in both large markets and our medium sized markets. So we're seeing that happening across all market sizes.

And the spot rate?

Spot rate is inching up. It's not going through the roof, but we are seeing some increase in spot rate.

And has business been placed more in advance rather than last minute?

Yes. We are seeing a little more forward placing of business.

Okay, well that is -- those are the questions that we received, and we thank you very much for attending the call today and should you have any questions, please feel free to call Bruce or myself. Thank you.