Beasley Broadcast Group Inc (BBGI) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Beasley Broadcast Group 2011 second quarter earnings call. As a reminder, this conference is being recorded.

I'd now like to introduce your host for today's conference, Caroline Beasley. Ms. Beasley, you may begin.

Thank you, Mickey. Good morning and welcome to the Beasley Broadcast Group second quarter 2011 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 Press Room sections of this site.

And my remarks this morning will primarily focus on the second quarter results and our markets. Afterwards, Bruce Beasley, our President and COO; and I will address any questions that were e-mailed earlier.

So I'm pleased to report that we extended our record of revenue growth, as second quarter revenue increased 2.3%. And during the quarter, we were able to hold station operating expenses flat, resulting in an SOI increase of 7.2%, while our margins improved to almost 36% from 34% last year and second quarter 2010.

Our second quarter revenue increase primarily reflects further growth in our Philly and Miami markets. And as those of who closely follow BBGI know, we benchmark our cluster revenue performance to that of our market and I'm pleased to report that in Philly and in Miami, our two largest markets, we outindexed the market revenue performance.

The Philly market total revenue declined 2.7% and that compares with our station cluster revenue, which increased around 6%. Our cluster increase was driven by local as national was down in our cluster.

In terms of the Philadelphia market, local revenue was down 4.1% and national revenue was down 6.9%. In Philly, WRDW maintained the strong position among 18-34 listeners and XTU continues to turn in solid ratings with its target demo 25-54.

Now, moving on to Miami, the market saw a 5.2% decline and that compares to our cluster, which increased 4.8% for the quarter. Our clusters revenue increase was driven by national, as local was only slightly up. And as I just mentioned, the Miami market declined 5%; local in Miami was down 7.6%, and national was down 3.8%.

Our outperformance in the market reflects the strength of our stations. And I'd like to add that we are very excited to welcome Jill Strada as Program Director for Power 96. And for those of you who may not recognize her name, Jill joins Power from New York's Urban AC WRKS and Rhythmic CHR Hot 97.

Now, reflecting our performance in Philly and Miami, our five clusters that report to Miller Kaplan outperformed our market on a combined basis as total revenue for our clusters increased 1.5% compared to our markets, which were down 3.5%. And these five clusters accounted for 73% of our total revenue in Q2, and this is consistent with prior periods.

The Vegas market posted a small revenue decline for the quarter, as it was down 0.5%, compared with our stations, which recorded flat revenue. And locally, the market was down 3.8% and nationally, the market increased 10.9%.

The Fort Myers market declined 4.1% and our cluster declined around 4% as well, and this reflects weakness in both local and national. And finally, in Augusta, the total market revenue grew 1%, while our station revenue decreased almost 2%.

Now, let me run through a quick overview of the second quarter ad category results. And the first comment that I want to make is that we saw a deceleration throughout the quarter and that was driven by auto and telecom categories. Nevertheless, the auto category rose 16% for the quarter. We also saw an increase of 9% during the quarter in health-related advertising, which is another top five category for us.

Now, it's impossible to quantify the impact on revenue from the disruption of the Japanese earthquake, but I will tell you that auto pacing slowed significantly from the beginning of the quarter, where we were up 57% compared to the end, where we ended up 16%, as mentioned earlier. Auto is our second largest category and it accounts for approximately 13% of our revenue.

Retail is our top category, accounting for about 19% of our revenue. That category declined 2% in second quarter, and restaurants and other top five categories declined 1%. Our top five categories account for about 57% of total net ad sales revenue and we grew advertising from these sources 2.5% and obviously this is driven by auto.

As mentioned before, station operating expenses were basically flat and SOI increased 7.2%. Corporate G&A, excluding stock-based comp, increased just under $100,000 and this is consistent with prior periods. And stock-based comp decreased 31% for the quarter. Interest expense decreased 26.6% for the quarter and this reflects the roll off of a swap on March 31, and continued reductions in borrowing cost due to repayments on our credit facility and lower leverage.

Now, turning to the balance sheet, during the quarter, we made repayments totaling $3.1 million against the credit facility. So our total bank debt at the end of the quarter was $135.7 million and the latest trailing 12-month consolidated operating cash flow was $28.8 million, resulting in a leverage of 4.71 times at the end of the quarter. This compares to our leverage covenant of 7 times. And as we've mentioned in prior conference calls, we do have a leverage step-down that's going to be measured on March 31, 2012 to 4.75 times. So we're pleased to be below this covenant well ahead of time.

Cash on hand at the end of the quarter was $11.9 million and we spent $321,000 in CapEx for the quarter and year-to-date, we've spent $566,000.

So our second quarter results mark our fifth consecutive quarter of same-station revenue growth, and our sixth consecutive quarter of solid SOI and margin gains. And despite the slowdown in the US economy and revenue volatility in our markets, during the first half of 2011, we generated 4.1% increase in same-station revenue and a 14.5% increase in same-station SOI.

Now, as radio broadcasters for nearly 50 years, we've operated through both good and bad times, and we remain diligent in managing all aspects of our operations to bring value to our shareholders. Today, more than 90% of consumers listen to radio each week and radio account for 25% of consumers' time spent with media.

Our programming and content have become significantly more interactive and throughout our organization, we felt digital extensions for core content, resulting in higher listener engagement. Advertisers are benefiting from our 360 marketing solutions, reaching targeted consumers anytime, anywhere.

Our use of cash for debt reduction has significantly derisked the Company and absent a significant deterioration in the economy, we've reached an inflection point with respect to our covenant levels and this will improve our forward flexibility to deploy our cash flow from operations to other shareholder value initiatives, which could include select acquisitions, a resumption of a dividend payment or share repurchases.

In summary, we have strong station clusters and ratings in our key markets and we are highly focused on generating profitable revenue growth. Our streamlined cost and operating structure is resulting in significant operating leverage and strong cash flow, but even when we post modest revenue increases as we did in Q2.

We are confident we can further develop our platform as a high-value media buy for advertisers and a primary source of on-air and online entertainment for consumers, which in turn will generate new value for shareholders.

Notwithstanding, our optimism for radio's future, near-term results are being impacted by uncertainty related to the domestic and world economies, particularly our debt filling issue as well as comparisons with the year-ago period, which included political spending.

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

So to start that out, Bruce, I'm going to -- [Jim Boyle] had sent several questions. And I'm going to start with some directed for you. How do you feel Beasley stations and sales teams are dealing with some of the commercial loads and he is hearing that some of our peers are adding additional commercials?

Well, Jim, it comes down to the relationships that our sellers have with the client and the value that our client sees in our product. It's not easy, but as you've seen, for the most part, we do outperform our markets revenue wise. And as a matter of fact, our Company is currently reducing inventory in a few of our markets.

Jim also asked, if you weren't radio right now, what other media looks intriguing to you as of that trend in radio?

Well, Jim, our Company has been in radio for 50 years and I certainly hope we'll be in for another 50 years to come. I think I'd pick radio. Radio is a great medium; radio reaches over 90% of the US population each week and with the combined 360 marketing solutions, it really positions radio well for the future.

Okay. Let's say, to follow up on another question that Jim asked, he was asking about, what do we expect the industry to do in third and fourth quarter given political comp?

And as everyone on this call knows, we do not give specific guidance, but as I just mentioned in our comments, we do feel that near-term results are being impacted by the domestic and world economies, particularly the debt filling issue and of course, the political comp. So, that is that.

And then, finally, I guess Jim asked, I guess between 1960 and 1999, radio on average grew about 9%; beginning in 2000 through 2010, radio was down 2%. So where does he think that -- or where do we think that the industry will be going forward?

And I think our response to that is even though radio is considered a mature industry, as Bruce mentioned, we do have interesting prospects for our future growth. So we would expect to see radio industry growth to be around GDP going forward.

Moving on to [Mike Kupinski], he had asked several questions. He wanted to know how much political advertising we had in third and fourth quarters.

Third quarter, we had $300,000, this was last year. And in fourth quarter, we had $600,000 last year.

He wanted to know if we are seeing any political advertising going forward in the second half of this year.

And I would say that we're seeing de minimis political ad spend at this point.

And he wanted us to break out the performance for our Company in the second quarter between local and national.

And what I can do is, based on the markets that report to Miller Kaplan, when you look at local including digital, we were up 3.5% and national was down 2.2%.

And then, he wanted us to outline the maturities on our debt.

And 2015 is when our revolver and term loans mature. We do have significant paydowns being scheduled on our revolver beginning in 2014.

So that concludes the question section and our comment section. We thank you, all, very much for tuning in today and if you have any questions, as always, feel free to call Bruce or myself. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the conference and you may now disconnect. Everyone, have a wonderful day.