Beasley Broadcast Group Inc (BBGI) 2010 Q3 法說會逐字稿

Good morning, and welcome to the Beasley Broadcast Group third quarter 2010 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 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 primarily focus on the third quarter results and our markets.

So for the third quarter 2010, actual net revenue decreased 0.9%, which reflects changes from last year with respect to Dolphin programming in Miami and our station holdings in Las Vegas.

The quarter was very successful for Beasley on an earnings and cash flow basis, as with our continued focus on managing costs, our SOI increased 22.5%, while margins rose to 35% for the quarter, up for 28% in the same period last year.

As a result of the sale of two Las Vegas stations in third quarter of '09 and the discontinuance earlier this year of the Miami Dolphins programming agreement, we are also reporting same-station revenue, operating expense and SOI for the quarter. The same-station results exclude the two Las Vegas stations and the results from the Miami Dolphins contract for the third quarter and year-to-date periods. On this basis, third quarter revenue increased 2.6%, while SOI rose 10.3%. And margins were 35%, compared to 32% on a same-station basis last year.

The rise in third quarter same-station revenue was driven by our Miami, Las Vegas, Wilmington and Augusta clusters. In the five of our 11 markets that report to Miller Kaplan, our clusters further closed the gap relative to their markets, as on a combined basis total revenue in these markets increased 6.3% compared to our stations, which increased 4.8%. And this is on a same-station basis. These five clusters account for 74% of the Company's total revenue. And this is consistent with prior periods.

Local revenue in these five markets increased 2.3% compared to our stations, which posted a 1.7% decline. In contrast, we're pleased to report that our station clusters out-performed these five markets in national revenue, increasing 31.5% compared to the markets, which increased 15.9%.

According to Miller Kaplan, overall market revenue in Philly increased 6.7% compared to our stations' revenue, which decreased 4.1%. Our Philly cluster revenue decline is partially due to a format change from early this August at WWDB AM from broker programming to ESPN Deportes Radio as well as underperformance on a local basis by our FM stations in the market.

Overall, our stations lag the market with a 23.9% local revenue decline compared with the local market revenues, which increased 0.5%. However, on a national basis, our stations significantly outperformed the markets, with a 34.5% increase in revenue compared with the markets where national was up 13.1% for the quarter.

In a moment, Bruce will review in more detail the local and national performance and how we are addressing the markets.

In Miami, total market revenue increased 6.3%, while our total Miami cluster revenue increased 2.8%. And this does exclude the revenue related to the Dolphins contract in third quarter of '09. We outperformed the market locally, but underperformed on a national basis. And with the Miami changes that have been made, we expect our cluster to perform in line with or outperform the Miami market going forward.

Our shining star now for the third consecutive quarter was our Las Vegas station cluster, as it outperformed the market both nationally and locally. The market itself posted another quarter of revenue growth, increasing 4.2% compared with our station cluster, which again significantly outpaced the market with a 28% revenue increase.

We're also seeing continued improvement in Fort Myers, as total market revenue increased 9.6% for the quarter. Unfortunately, our stations did not perform in line with the market, as revenue was down slightly at that cluster.

Our Augusta cluster continues to outperform its market, with revenue increasing 7.9% compared to the market revenue increasing 3.4%.

Now moving down the income statement, actual station operating expenses decreased 10%. And on a same-station basis, operating expenses decreased 1%. SOI for the quarter, as mentioned before, increased 22.5%. And same-station SOI income increased 10.3%.

Corporate G&A, excluding stock-based comp, was $1.7 million, or reflecting about a $100,000 increase for the quarter. Stock-based comp was down 48% to $122,000. And interest expense for the quarter decreased 7.8% to $2.5 million. And this reflects a reduction in borrowing costs due to repayments on our credit facility. There were no cash taxes for the quarter.

Now turning to the balance sheet, during the quarter we made repayments totaling $2.5 million. And as of 09/30, total bank debt was $145.3 million. And the latest trailing 12-month consolidated operating cash flow was $25.2 million for a leverage ratio of 5.78 times. Now this compares to our leverage covenant of 7.5 times at the end of September. And it marks a reduction from the leverage ratio of 6.2 times at the end of the second quarter. For the year, we've repaid $6.5 million in bank debt. And we have reduced our leverage from 7.11 times when you compare now from 12/31 of '09.

Cash on hand as of 09/30 was $9.6 million. And CapEx for the quarter was $259,000. Year to date we've spent $690,000.

So to conclude, we're pleased that we continue to see an upturn in same-station revenue and again generated double-digit quarterly SOI increases. Over the last two years, we've significantly improved our operating processes and business model. And looking forward, with these improved efficiencies, the Company is well positioned to drive continued improvement in our results based on modest increases in core local and national ad spending and further growth from our interactive initiatives. And we remain focused on deploying cash from operations to reducing leverage.

And with that, I thank you. And I'll now turn it over to Bruce.

Thank you, Caroline. And good morning, everyone. I'm going to spend a few minutes this morning drilling down on the Q3 results, our ratings and some great opportunities before us in our largest markets.

Overall, I'm pleased with our Q3 results, as they further demonstrate that we've taken right actions with respect to the management of our stations and our organization as a whole, with a focus on driving profitability, revenue growth from our large and mid-sized markets.

Beasley's improved third quarter operating results and reduced debt levels and leverage ratios reflect a broad range of corporate and station-level initiatives and cost reductions, which did not impair our programming and our station operations on an ongoing development of high revenue growth sources like Interactive.

We are far better off than we were 12 months ago. But we are not yet where we think we can be, as we are only beginning to tap unrealized upside from our clusters in Miami and Philadelphia, our two largest markets.

Now let me run through a quick overview of Q3 top line. And then we'll look at our three largest markets, which account for about 60% of the revenue.

Excuse me. Beasley's third quarter net sales reflect year-over-year improvements in six of our top ten industry categories and increases in key categories including retail, health care, other, auto, entertainment and banking and finance. The top five categories accounted for approximately 53% of our net ad sales in both Q3 '10 and Q3 '09. And on a year-over-year basis, we grew revenue from these advertising sources by 3.4%.

Excuse me. With exceptionally positive results being generated in our Las Vegas cluster, we did -- we indicated on the last two calls that we are focused on closing the gap in our Miami and Philadelphia's clusters' performance relative to the overall revenue performance.

In the third quarter, we continue to make progress toward that goal in Miami. In Q1, the Company under-indexed in Miami by 18.3%. And we improved that 10 13.1% in Q2, to adjust 3.5% on a same-station basis in Q3. Our September results indicate that we are making further positive growth. Our ratings are solid, and our expenses are in check as we are maximizing inventory in Miami.

In Philly, the Beasley Broadcast Group underperformed the market by 8.3% in Q1, which improved to 5.6% in Q2. However, in Q3, the Philly cluster slipped and missed the market performance by 10.8%.

While some of the quarter-to-quarter decline in comparison to the market at large is related to the change from broker programming in early August on WWDB AM to ESPN Deportes, the market's only Spanish-language sports station, the rest is attributable to the revolving realignment of sales management and responsibilities there, which took a toll on our Q3 local revenue in the market.

Now this is not a reflection of our station's ratings, because we're doing very well there. In third quarter, our national revenues increased 34.5%, giving a good indication that our national advertisers are happy with our ratings. WRDW is maintaining a solid position at number one in the market 18 to 34, while our country station continues to do very solid in the ratings.

On an additional note, our Philly cluster maintains its positive position as one of the top five revenue generators in the market. And we think Q4 will be a period of positive growth for us in Philadelphia.

In Las Vegas, our cluster again posted robust results. And the market has returned to overall revenue growth. The cluster revenue growth reflects the efforts we've placed on bringing in the right management. And our team there is energized towards achieving its long-term goal of becoming the number one cluster in revenue share in the market.

We recently began to provide management and sales services to two FM stations in the market. And combined with our existing cluster strength and having the right team in place, we expect to continue to capitalize on strengthening position in the market.

Now before I close out my remarks, I'll once again call out the excellent continued success of our digital and interactive initiatives, which have established an impressive track record of posting solid double-digit gains quarter after quarter. Matter of fact, in Q3 '10, we posted a 10% rise in year-over-year revenue.

We have operated through the best of times in the industry and the worst of times in the industry. And we remain vigilant in managing all aspects of our operations to bring value to our shareholders.

Now with that, if you have any questions, please feel free to give us a call. Thank you, and good day.