Beasley Broadcast Group Inc (BBGI) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Beasley Broadcast Group 2010 first quarter earnings conference call. I would now like to introduce your host for today's conference, Ms. Caroline Beasley. You may begin, ma'am.

Thank you, Kevin. Good morning, and welcome to the Beasley Broadcast Group first quarter 2010 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 Risks Factors section of our most recent Form 10-K. Today's webcast will contain a discussion of certain non-GAAP financial measures within the meaning 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 mornings news announcement and on the Company's website.

I would also remind listener's that following its completion, a replay of today's webcast can be accessed for five days on the Company's website. Investors can find a copy of today's press release on the site on the Investors or Press Room section of the website. Bruce Beasley, our President and COO, is with me this morning. Our remarks will primarily focus on the first quarter results and our markets. And so for the first quarter actual revenue 3%, we saw monthly sequential improvements in revenue, with March representing the first month in over year two years that BBGI recorded revenue growth and this trend has extended through April. And reflecting our strict expense discipline over the last two years, the Company generated year-over-year SOI growth of 13% with margins increasing to 28% for the quarter, up from 24% in the first quarter of 2009. Please note that a result of the sale of the two Las Vegas stations in the third quarter of 2009 we're reporting both actual and same-station revenue operating expense and SOI for the quarter.

The same-station results do exclude those two Las Vegas stations. Again, actual revenues decreased 3% and same station decreased 1.7%. I'm pleased to report that our Philly, Las Vegas, Augusta, and coastal Carolina clusters grew revenue in the quarter. However, the decline in revenue is primarily attributable to our station clusters in Miami, Fort myers, and Fayetteville. In the five of our 11 markets that report to Miller Kaplan our clusters under performed their markets on a combined basis, as total revenue increased 9% compared to our stations which increased 1% on a same-station basis. These five clusters account for 74% of our revenue. Local revenue in these markets increased 6% compared to our stations which were up 2%. National in the markets increased 16% compared to our stations which were down 11%. According to Miller Kaplan listen, our Philly market increase revenue 12% compared to our stations which were up 4%. While we're pleased to see quarterly revenue growth, we're disappointed that our stations did not perform in line with the markets.

In Miami, total market revenue increased 10% while our stations were down 7%. This under performance is primarily attributable to our CHR station, WPOW, and this is in part due to the compression of the stations with PPM and the fact that Power is competing with more stations in this primary demo. However, on a positive note, our country station is benefit ting from PPM, and is generating spot-revenue increases better in line with the market. Our shining star for any quarter was our Las Vegas cluster. As it outperformed the market both locally and nationally. The market itself continues to remain our most economically challenged with total revenue declining 2%, compared to our stations, which increased 24%. And that's on a same-station basis. We're also seeing continued improvement in the Fort myers market, as total market revenue was flat in first quarter, and this represents the first quarter in three years that this market did not decline in terms of revenue. However, we're disappointed that our cluster revenue did decline 5%. Fort myers has been another market that faced extreme challenges related to the recession, and we're hopeful that this market will continue to improvement.

Bruce will address our over all revenue performance and specific issues in Philly and Miami in a moment. But it's clear that with our current cost structure, operating on par with our markets can meaningfully improve our SOI. Finally, our digital initiatives continue to grow with revenue from these sources increasing 22% for the quarter. Actual station operating expenses declined 8% and same-station operating expenses declined 5%. SOI for the quarter as mentioned before increased 13%, and same-station SOI increased 9%. Corporate G&A, excluding stock-based compensation, was down 3.2%, and stock-based comp expense was down 5.5%. However, first quarter interest expense increased almost 26%, as this reflects our increased borrowing costs, and there were no current cash taxes for the quarter. Turning to the balance sheet, during the quarter we made repayments totaling $1.8 million against our credit facility, and as of the end of the quarter, total bank debt was $150 million, and the latest trailing 12-month consolidated operating cash flow was $22.2 million for a leverage ratio of 6.77 times, and this compares to our leverage covenant 7.5 times at the end of the quarter.

We did successfully amend the credit agreement in early March to address the leverage-covenant step-down in June 2010. And I would ask you to please see your 10-K filing for December 31st, 2009, for a discussion of the amendment and financial covenants. Cash on hand at the end of the quarter was $6.9 million, and we spent $236,000 in CapX. This compares to $212,000 that we spent last year in first quarter. So to conclude my remarks, we're pleased that the first quarter and second quarter to date are reflecting further improvements and advertiser activities, and for the first time since third quarter of 2008, BBGI generated a quarterly SOI increase. Over the last two years, we have made significant progress toward our goal of emerging from the recession with a stronger competitive position and an improved business model.

With our streamlined cost and operating structure, our operating results are poised to benefit from healthier levels of local and national ad spend, as well as political revenue, and further growth from our interactive initiatives. With that, I thank you very much, and I'll now turn it over to Bruce.

Thank you Caroline and good morning, everyone. My comments will focus on Beasley's ratings and relative performance in key markets. The further indications we are seeing an overall rebound in ad spending, and how our continued focus on expense management has positioned the Company for further improvements and margins, SOI, and overall operating results. The radio industry and BBGI are benefiting from the momentum and the advertising spending rebound. Based on what we are seeing in many of our markets, research on advertiser's intentions, the crowding-out factor, the return of cyclical political advertising, and other inputs, we are optimistic this trend can continue as we move through 2010.

On the top line, Beasley's first quarter net sales reflect year-over-year improvement in 7 of our top 10 categories. Including increases in healthcare and auto, however, these were offset by a decline in the topped a category of retail, as well as restaurants and telecom. Notwithstanding the continued quarterly sequential progress we are reporting, we are disappointed that the group revenue performance did not match that of our reported markets, primarily based on the results generated at our Miami, Philadelphia, and Fort Myers clusters. In each case we are addressing the specific issues that impacted the ability of the clusters to take full advantage of ad spending improvements in the market, and expect to see revenue performance in the future periods more closely reflect the strength of our ratings and station operations in these markets.

Now let's take a look at Miami. The good news is our ratings are solid, expenses are in check, and we are maximizing inventory. The bad news is that with PPM, the currency since last June, we have seen a compression in the 18 to 34 demographic, and we have not yet been able to get rates where we need them to be. The March ratings came out last week and Power 96 remains number one in its target demo. However, with the market and buyers still adapting to PPM, we have seen competing stations present buys to advertisers our rates below ours. Our inventory was sold out in February and March, yet with lower priced inventory being brought to market by these other players who really don't have the ratings the way we have. And we have not yet been able to maximize yields on rates. We see this situation stabilizing and then normalizing as PPM mature. The other issues that skewed our Miami performance were that Power had been somewhat resilient through 2008 and 2009 and it wasn't as reliant on auto and financial services advertising. So it did not suffer as much as the market at large during these periods.

The offset to that of course is that the market turned up, Power had fewer prospects for growth, and is still not a station where we see a lot of auto or banking buys. During Q1, we also continue today miss out on national revenue in Miami as we weren't as aggressive as other stations in offering short-form spots which turned out to be prerequisites for certain national buys. Our rationale was predicated on our ratings strength and lacking of inventory. But we are making changes on this front and boosting national revenue is a priority at BBGI. Beyond Power, Kiss Our Country station has been very solid as PPM has shown there to be more country listening than was evident in the diary. However, WQAM, our Miami sports talk station continues to face format challenges as there are now four stations in the market vying for this demo. Comparisons later this year at WQAM will reflect the absence of Dolphin's broadcast, which will impact the top line but should benefit the stations cash flows. The team at WQAM is doing a great job given the competitive changes, and our expenses are very, very tight there.

Let's move on to Philadelphia, where we have been doing a nice job of outperforming the market our -- our cluster flat out missed several points of upside as our 4.4% revenue increase paled relative to the low double-digit growth of the market. Overall our cluster remains a top 5 biller in the market, our revenue share hasn't declined, and Wired, our rhythmic CHR station is now for the first time in its target demo 18 to 34. WXTU achieved a ratings rebound early this year after some sloppiness late in 2009. So the lingering effect of the weak book at the end of 2009 weighed on its revenue. I am confident these situations have been addressed, as, again, the rating strengths should carry the day and since buyers in PPM markets have shown that they buy three-month average, and with our March results showing improvements, I think we're on the right track. As a market, Fort myers still challenged, but overall ad spending improvements have been impressive, and we are slowly closing the gap on our performance relative to the market.

In Las Vegas, our clusters really benefited from the focus we placed on identifying the right leadership, and cluster manager Tom Hahn, continues to do an excellent job across our stations. Finally, would be remiss if we didn't spend a minute talking about the continued success of our digital and interactive initiatives lead by Kathleen Bricketto. Overall Beasley stations with doing a great job on this front, and we're having huge success with the iRadioNow app which was launched last falls which enables mobile listening as well as with video, which is a priority and highly popular among our users. With the worst of the recession behind us we are looking forward to making further progress in 2010.

Now with that, we'll address some of the questions that have been emailed to us from the investment community. So Caroline if you would, would you please read the first question.

These questions are from Jim Boyle. Thank you Jim for sending them.

The first question that he has is in regard to Q1 and of course and Q2, and he just made the statement that Q1 -- his indications seem or indicate that everyone saw sequential revenue improvement in Q1 and that is in fact, the case for BBGI. In terms of Q2, we can speak to April, and say that April bookings are better than March bookings, and we will not go any further out than April. (Inaudible) also asked about rate card integrity and pushing rates up. And wants to know that -- if you expect to see rate increases in Q2?

We do. We saw that happen in some of our markets in Q1, but we're seeing more of that across the Company in Q2.

Okay. And then Jim wanted to know about our ad categories in terms of Q1 and Q2. Bruce you addressed the Q1 top five categories, and how they performed. We can talk a little bit about Q2. Retail is pacing up in Q2 compared to it declining in Q1 for us health is pacing up, compared it to also being up in Q1. Auto continues to pace up as well. Restaurants and telecom are both pacing down, but not as much as in first quarter. So I think that's -- addresses Jim -- most of Jim's questions. And then we have just one other question regarding political and the Florida Senate race.

Yeah, there's a couple of aspects. The Company really didn't see that much political advertising in Q1 in the state of Florida. Now with the announcement of Governor Chris going to be an independent, we don't believe we're going to see a lot of advertising for the primary, but we do feel pretty confident that we're going to see a good amount of advertising as the general -- general election rolls around.

And one thing -- one point to follow up on that, in terms of the whole Company and political, we did not see a great amount of revenue in first quarter for political. It was actually less than $100,000. So it wasn't a significant part of our revenue base for first quarter.

That does it for the questions. And we would like to thank you again for participating in the call. And feel free to give us a call if you have any questions. Thank you.