Beasley Broadcast Group Inc (BBGI) 2010 Q2 法說會逐字稿

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

Thank you, good morning and welcome to the Beasley Broadcast second 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 operation that involve risks and uncertainties better 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 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 would also remind listeners that following its completion a replay of today's webcast can be accessed for five days on the company's web site at www.bbgi.com. Investors can also find a copy of today's press release on the investors press room section of the site. Bruce Beasley, our President and CEO is with me this morning. Our remarks will primarly focus on second quarter results and our market.

The 2010 second quarter market and selection point for BBGI as actual net revenue increased 5.6% and with our continued focus on managing cost which has resulted insignificant operating leverage our SOI increased 26.5% while margins rose to 34%. Up from 28% in the same period last year. And please note that as a result of the sale of the two Las Vegas stations in third quarter of 2009 we are still reporting actual and same station revenue operating expense and SOI. So, again, actual net revenue for the quarter increased 5.6% and same station net revenue increased 6.6%.

The rise in second quarter revenue was driven by our Philly, Las Vegas, Fort Myers, Wilmington, August, and coastal Carolina clusters and in the five of our 11 markets that report to Miller Kaplan or cluster tightened the gap combined basis total revenue in these markets increased 11.6% compared to our clusters which increased 9.7% and this is on a same station basis. These five clusters account for 73% of the company's total revenue. Local revenue in the five markets increased 7.2% compared to our stations which increased 5.6%. And we're very pleased to report that our station outperformed these markets in national revenue increasing 37% compared to our markets which increased 27%.

According to Miller our Philadelphia market revenue increased 13.6% compared to our station cluster which increased 8% for the quarter. Nationally our stations out performed the market increasing 37.7% compared with the market which was up 19.5%. However, locally our stations decreased 1% compared with the market which increased 11%. And while we're pleased to see quarterly revenue growth we're disappointed that our stations did not perform in line with the market on a local basis and Bruce will review the factors that caused this and how we are addressing them.

In Miami total market revenue increased 11.9% while our total Miami revenue cluster declined 1.2%. And we under performed both locally and nationally. Here again Bruce will also address this market in his comments in a few minutes.

Our shining star for the second consecutive quarter was our Las Vegas stations. As they outperformed the market both nationally and locally. The market itself bounced back this quarter for the first time since Q2 2007 posting a revenue increase of 6.4% while our station clusters significantly outpaced the market with a 39% revenue increase and this is on a same station basis.

We're also seeing continued improvements in the Fort Myers market as total market revenue increased 11.3% for the quarter and we're very pleased that our cluster revenue reversed its trend from earlier in the year and out performed the market with an increase of 13.6%. Fort Myers, like Vegas and Miami, had faced extreme challenges related to the recession and we're hopeful that this market bottomed in late 2009 type.

I haven't mentioned our Augusta cluster in several quarter but I wanted to note that it continues to outperform the market posting a 13.1% revenue increase for the quarter compared with the market which increased 4.3%.

Finally, our digital initiative continue to generate revenue growth with revenue from these sources increasing 19% and marking a continued acceleration of the levels achieved throughout last year. Now moving down the income statement our actual station operating expenses decreased 2.7% and on a same station basis our expenses were flat. Now, this is on top of the 22% reduction that we recorded in second quarter of 2009 for station operating expenses. So our organization has done a stellar job on the expense side throughout the downturn. Reflecting our revenue and expenses are SOI for the quarter increased 26.5%. In same station SOI increased 21.2%.

Corporate G&A excluding stock based comp was $1.8 million or flat and stock based comp expense increased 2.5% to $249,000. Our interest expense for the quarter decreased 9.5% and this reflects a reduction in borrowing cost due to the repayments on our credit facility and there were no current cash taxes for the quarter.

Now turning to the balance sheet during the quarter we made repayments totaling $2.3 million and our total bank debt at the end of the quarter was $147.8 million and the latest trailing 12 month consolidatd operating cash flow was $23.8 million for a leverage ratio of 6.2 times and this compares to our leverage covenant of 7.5 times at the end of the quarter. I would also like to note that this marks a reduction from the leverage ratio of 6.77 times at the end of Q1 of this year.

Cash on hand at the end of the quarter was $7.9 million. We spent $194,000 in CapEx for the quarter and $430,000 on a year-to-date basis.

So to conclude we're pleased that we're participating more fully in the improvements in the advertiser activity and that we again generated quarterly SOI increases. Over the last two years we've made significant progress toward our goal of improving our business models and looking forward with our streamline costs and operating structure the company is well positioned to drive continued improvements in operating results. And this is based on even modest increase in both local and national ad aspend as well as political revenue and further growth from our interactive initiatives. Thank you very much and I will now turn it over to Bruce.

Thank you, Caroline and good morning, everyone. My comments this morning will provide some further perspective originals Q2 our ratings and the company's relative performance in key marked as well as some of the initiatives under way which we believe will enable the company to benefit further on the top and bottom line from even modest increases in advertising activity in our markets. As you have heard from other broadcasters throughout this earnings season and as reflected in ad spending trends improved in the second quarter of 2010.

Overall our second quarter results continue balance sheet improvements demonstrate that we appropriately navigated the enormous challenges of the last few years based on prudent cost reductions which did not impair our programming and station operations. However, there remains considerable upside for the company in Miami and Philadelphia, our two largest markets, and the industry at large has a lot of grounds to make up following these three years of declining revenue. So while we've turned the corner on several fronts including returning to revenue growth, improved national revenues, strengthening ratings, growing margins and reducing debt we're looking forward at the opportunities before us based on our reengineered business model and the excellent operating leverage it affords us.

On the top line Beasley's second quarter net revenue sales reflect revenue growth in seven of our top ten industry categories including increases in key categories including retail, health care, other, auto and bank and financing. The top five categories accounting for approximately 55% of our net ad sale revenue in both Q2 2010 and Q2 2009. We had earlier signaled this year on you are Q4 call that we expected our national to improve and turn positive and we are delighted with the progress on this front in nearly all of our markets. I credit our rep firm and our national sales manager for their work in turning this around for us. We see continued strength in national in the back half of 2010 and recently reported that national spot radio momentum is carrying into third quarter led by retail, auto, telecom and consumer products while demands in pricing vary by market the increase in demands is having a positive effect on our pricing.

Our clusters were well positioned for the renewed national demands a he worked very hard to strengthen ratings and have very solid PPM results in Miami, Philadelphia and Las Vegas. We recorded on our last call that we expect to close the gap on our clusters performance relative to the overall market performance in Miami and Philadelphia and we made progress toward that goal in Q2. While we have improved, in our eyes ,these rules remain unacceptable. They don't reflect the strength of our ratings and station operations in these markets and highlight substance upside available to us as we move forward.

In Miami our ratings are solid, expenses are in check, and we're maximizing inventory. We are we've also closed the gap in PPMas it relates to power 96 which is No. 1 in its target demo. However, this station has some continued improvement particularly in the national revenue front. In contrast our country station in Miami which is also doing very well on PPM is garnering great national revenue but came out short on the local side. Beyond Power and Kiss, our Miami sports station continues to face format challenges. There are now four stations in the market vying for the demo, we're doing a pretty got job with WQAM and we're keeping a close eye on our expenses.

Moving on to Philadelipha, we've done a nice job about outperforming in the market but we have under performed on a local basis and have outperformed on an overall national basis. In Las Vegas our clusters continue to do very well , as Caroline mentioned earlier, and we are looking forward to continued growth as we move forward throughout the next few periods with our revenue in that particular market. Before I close out on our remarks I would like to call out the excellent continued success Fort fourth Myers as well as in our interactive initiatives. With that I would like to turn the call over to Caroline to identify who has sent in questions and we'll answer those for you.

Okay, thanks, Bruce. We had a couple folks to send questions in and we'll start with Jim Boyle first.

He had asked about certain of our markets, the most real estate challenged such as Florida and Nevada and if there are any signs that the economy in these markets could be getting worse or going backwards and on that same note talked about some of peers who have recently said that booking fizzled in June and July and wanted to know what we were seeing in regards it to that. So I'm going to take those two questions together.

And our response is basically that the economic recovery is not going to be straight up. We expect to see starts and stops throughout the cycles and believe that this is what has happened and we will probably continue to go on as we continue through this cycle. In terms of Florida and Nevada, while these markets continue to experience high unemployment the radio revenues have grown this year and just as the general economic cycle we do expect that we will probably see starts and stops in these markets as well. That being said, we do expect to see political dollars coming from Florida and Nevada in the third quarter and fourth quarter.

Jim also wanted to know, Bruce, about the rate card; If there's been any change in that.

Yes. We have seen some pricing movement on the upper end. That's not in all of our markets but the good news is we're seeing that in our top three largest markets and it's due to obviously increased activity. We would hope to see that going forward because of what Caroline just mentioned the increases in political spending in the back half of Q3 and certainly the first of half of Q4.

Okay and then Mike Kupinski sent in a few questions. We'll address the ones about political and he wanted to know if we received any political ad spend in second quarter and we did about $300,000 and two thirds of the $300,000 came from Las Vegas. He wanted to know if political is being booked for the fall now and we have only about $40,000 on the books for third quarter in political with most of that being booked in Las Vegas.

So with that there were a few other questions that I think that we addressed those in the comments that we made this morning so I thank you for attending the call today and please feel free to call Bruce or myself with any questions. Thank you.