Beasley Broadcast Group Inc (BBGI) 2010 Q4 法說會逐字稿

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

Thank you, Kevin. Good morning and welcome to the Beasley Broadcast Group fourth-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 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 the Company's website, BBGI.com. Investors can also find a copy of today's press release on the investors or pressroom sections of the site.

My remarks this morning will primarily focus on the fourth-quarter results and our markets. Afterwards, Bruce Beasley, our President and COO, and I will address questions that were e-mailed to our investor relations inbox.

Our fourth-quarter 2010 actual net revenue increased 3.1%, reflecting the improving industry environment and broad-based increases across our markets. With our focus on profitable revenue and the Company's streamlined operating and cost structure, we are generating significant flowthrough from this revenue growth. As a result, quarterly SOI increased 34.2%, while SOI margins rose to 39%, up from 30% in the fourth quarter of last year.

As noted before, and consistent with our focus on driving profitable same-station revenue growth, we did not renew the Miami Dolphins programming agreement, so we are reporting also same-station revenue, operating expense, and SOI for the quarter.

So on a same-station basis, fourth-quarter revenue increased 9.1%, while SOI rose 24.5%, and margins were 39% compared to 34% in Q4 2009.

Our fourth-quarter same-station revenue increase was driven by our Philly, Miami, Vegas, Wilmington, Augusta, and Fayetteville clusters. In the five of our 11 markets that report to Miller Kaplan, our clusters outperformed the market on a combined basis, as total revenue in the markets increased 9%, compared to our stations, which increased 9.5%. Again, this is on a same-station basis.

We're also pleased that as we moved throughout 2010, our clusters successfully closed the gap between their performance and the total market performance, ending the year on a strong note. These five clusters accounted for 74% of the Company's total revenue in Q4, and this is consistent with prior periods.

Local revenue in the five markets increased 1.9%, compared to our stations, which posted a 0.5% decline. However, for the third consecutive quarter, our station clusters outperformed these five markets in national revenue, increasing 50.4%, compared to national revenue in the markets, which rose 28.1%.

Looking at some of our key markets and the factors that drove the results, according to Miller Kaplan, overall Philly market revenue increased 8.3%, compared to our cluster's revenue, which increased 11.6% for the quarter. We attribute our cluster's outperformance to the strength of our stations and their ratings in the market. WRDW, our CHR rhythmic station, maintains a leading position in its 18-34 demo, while WXTU, our country station, continues to turn in solid ratings in its core demo.

In Miami, total market revenue increased 9.5%, while our total Miami cluster revenue increased 4.2%. Now this is on a same-station basis, excluding the revenue related to the Dolphins in 4Q 2009. We outperformed the market nationally in Miami, but underperformed on a local basis.

We continue to pursue ways to improve our share of local revenue, and recently strengthened our local sales efforts with the addition of several new salespeople. Overall, our Miami ratings are solid, and we have the appropriate management and sales structures in place.

Ratings at Power 96, our CHR station, remain strong, and the station holds a leading spot in its target demo. WKIS, our country station, and WQAM, our sports station, remain very competitive as well.

Moving on to Vegas, the market posted another quarter of revenue growth, increasing 10% compared with our station cluster, which again significantly outpaced the market with a 21.2% revenue increase. The strength of our Vegas cluster throughout 2010 has been a real bright spot, and reflects the effort we placed over the past two years on identifying and recruiting the right management for the cluster and building ratings.

Results in Vegas are now benefiting from the improved competitive position of our station, as well as our agreement last year to provide management services to two FM stations in the market and our sale of certain assets in 2009. Going forward, we believe we are well positioned to continue to benefit in Vegas from these actions.

We're also seeing continued improvement in the Fort Myers and Augusta markets.

Now, let me run through a quick overview of the Q4 ad category results. Beasley's fourth-quarter net revenue reflects year-over-year improvements in our top three categories, retail, auto, and health, and generated increases in three of our top five categories. The top five categories accounted for approximately 55% of our net revenue, and on a year-over-year basis, we grew revenue from these advertising sources by 9%.

Overall, the Company booked approximately $600,000 in political in the fourth quarter, with about 50% of this being generated in the Vegas cluster. Our stations generated approximately $1.3 million in political for the year, with again over half of this coming from Vegas, and this reflects the highly-contested senatorial race in Nevada.

Our actual station operating expenses decreased 10%, and this primarily reflects cost savings related to not renewing the Dolphins rights agreement. On a same-station basis, expenses rose 1%, reflecting higher sales commissions resulting from our revenue growth.

Our SOI increased 34.2%, or by $2.7 million, while same-station operating income increased 24.5%.

Corporate G&A, excluding stock-based comp, $1.9 million for the quarter, increasing almost $500,000 compared to last year. This largely reflects incentives in 2010 related to the Company's improved performance. Stock-based comp decreased 60% compared to fourth quarter of 2009, to $91,000. Interest expense for the quarter decreased 6.2%, and this reflects a reduction in borrowing costs due to repayments on our credit facility.

Now turning to the balance sheet, during the quarter we made repayments totaling $3.3 million against the credit facility and reduced our total bank debt to $142 million. Our latest trailing 12-month operating cash flow was $27.1 million, resulting in a reduction in the leverage ratio to 5.24 times at year end. This compares to our leverage covenant of 7.25 times at year end, and marks a reduction from the leverage ratio of 5.78 times at the end of the third quarter.

In 2010, we repaid a total of $9.8 million in bank debt, which, when combined with the growing operating results, allowed us to reduce leverage from 7.11 times at 12/31/09.

Looking at our capital allocation in 2011, debt reduction will remain one of our corporate priorities. Cash on hand at the end of the year was $10.7 million. We spent $469,000 in CapEx for the quarter and $1.2 million in CapEx for the year.

So to conclude, our fourth-quarter and 2010 full-year results reflect our success in driving profitable same-station revenue growth while maintaining strict expense discipline, which led to significantly stronger SOI and margins. We generated a 24.9% increase in 2010 actual SOI and a 17.1% increase in same-station SOI, while margins improved to 34% from 28% on an actual basis, and again, this is for the full year.

At the same time, we focused on our core products, which allowed us to enter 2011 with healthy clusters and ratings across our markets.

Our use of cash for debt reduction has significantly derisked the Company, and as noted a moment ago, we ended the year with significantly lower debt and leverage ratios and a higher cash position.

Over the last two years, we've noted our enthusiasm and optimism for the changes occurring in the industry and its forward potential. Radio remains highly relevant in the digital world, as reflected by the fact that audiences are at record levels of 240 million listeners. This represents an increase of 1% when compared to 2009 and, probably surprising to some, a 5% increase over 2005.

New technology remains a driver of new revenue opportunities for radio, and this is demonstrated by the fact that radio apps are among the top 10 iPad downloads, and 70% of all MP3 players now have FM tuners.

On a company side basis, we are quickly adapting to and developing strategies to benefit from changes in media and advertising, and look forward to continued core and digital revenue growth and participating in emerging revenue models for online, mobile, and HD radio.

Finally, we have operated through the best of times and the worst of times, and remain diligent in managing all aspects of our operations to bring value to our shareholders.

With that, Bruce and I will address some of the questions that were e-mailed earlier to us.

So Bruce, the first question came from Mike Kupinski, and he wanted to know if we are starting to see signs that local is starting to pick up.

Yes, when you take a look at Q3 2010, according to our Miller Kaplan markets, BBGI was down 6.5%, and then look at Q4 2010, we were down 0.5%. So it looks like local is firming up somewhat in our markets.

Okay, thank you. And the next question from Mike was in terms of our buildup in cash, and whether or not that is just cash flow management.

And yes, it is cash flow management, but also we will be paying cash flow recapture in 2011 from 2010.

And I think that all the other questions were addressed in our remarks. So, since there are no further questions, I would like to thank you all for joining us today, and feel free to call Bruce or myself with any questions. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect.