Beasley Broadcast Group Inc (BBGI) 2011 Q3 法說會逐字稿

Good day and welcome to the Beasley Broadcast Group third quarter webcast. At this time, for opening remarks and introductions, I'd like to turn the call over to Ms. Caroline Beasley. Please go ahead.

Thank you and good morning. Welcome to the Beasley Broadcast Group's third quarter webcast. Before preceding, I'd like to emphasize that the webcast will contain forward-looking statements about our future performance and results of operations, that involve risks and uncertainties described in the Risk Factors section of our 10-K.

Today's webcast will also contain a discussion of certain non-GAAP financial measures. 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 our website.

I'd also remind listeners that following its completion, a replay of today's webcast can be accessed for five days on our website, bbgi.com.

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

So, for the quarter, actual net revenue decreased 1% and the $232,000 revenue decline reflects the negative impact of almost $300,000 in political advertising in the third quarter 2010. So excluding the impact of political, revenue will be flat to slightly up for the quarter and this reflects local Interactive growth and a decline in national.

Our clusters reported mixed results on a month-by-month basis, with revenue the lowest in July, but improving sequentially throughout the quarter. And we ended the quarter on a positive note in September.

In terms of BBGI performance by cluster for the quarter, Philly, Fayetteville and Coastal Carolina, all generated good revenue growth, while Miami, Vegas, Fort Myers, Wilmington, and Augusta reported revenue declines.

And as those of you who closely follow our Company know, we benchmark our cluster performance to that of our markets according to Miller Kaplan. And I'm disappointed to report today that we slightly underperformed in our markets.

We have six markets that report to Miller Kaplan, and these stations and these markets account for about 82% of our total revenue. So on a combined market revenue basis, these markets were down 0.4% compared to our stations, which were down 1.4%.

Local in these markets were down 2% compared to our stations locally which were flat. And national market revenue was down 3% compared to our stations, which were down 13%. So the overall theme for the third quarter was that local outperformed in our markets.

Drilling down to the market levels starting with Philly, the Philly market increased 4.1% compared to our stations, which were up 4.8%. Locally, the market was up 8.5% compared to our stations, which were up 18.9%; and nationally, the market was down 5% compared to our stations, which were down 16%.

Moving on to Miami, the market was down 4.2% compared to our stations, which were down 5.7%. Locally, the market was down 10% compared to our stations, which were down 7%; and nationally, the market was down 2% compared to our stations, which were down 13.7%.

Moving on to Vegas, the market was down 3.9% compared to our stations, which were down 6.1%. And the revenue decline in the Vegas market can be traced to political, as well over $1 million was placed last year in third quarter. Locally, Vegas was down 6.8% compared to our stations, which were down 3.2%; and nationally, the markets were up 1% compared to our stations, which were down 25%.

Now, moving on to Fort Myers, the market was down almost 5% compared to our stations, which were down 2%. In Augusta, the market increased 0.7% compared to our stations, which were down about 4%; and our cluster decline in this market is due to a change in format at one of our FMs to simulcast with our AM news/talk station.

And finally, we started reporting to Miller Kaplan in our Fayetteville and North Carolina market in third quarter. And Fayetteville is the home of Fort Bragg and Pope Army bases. And as you know, the troops are returning to their home bases and this is stimulating growth in the marketplace. So the Fayetteville market itself was up 13% compared to our stations, which were up 7%.

Now, let me run through a quick overview of the Q3 ad category results. Four of our top-five categories posted increases for the quarter. Retail, our top revenue category, posted a decline of 1%. Auto advertising, which is the second largest category for us, increased 11% for the quarter and that was driven by domestic spending, which was up 31%, while import spending was down 4%.

The top-five categories accounted for about 58% of our total ad spend in the quarter and we grew revenue from these top-five categories by 5.7%.

Our station operating expenses were flat for the quarter and SOI for the quarter was down 2.3% or about $200,000, which was driven by the decline in revenue.

Corporate G&A, excluding stock-based comp, was $1.8 million for the quarter and this is increasing $120,000 compared to last year, that's consistent with our levels in prior quarters for this year. Stock-based comp was $175,000 for the quarter.

Interest expense decreased 30% to $1.8 million. 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. We had two other swaps that rolled off in September, so we presently have no swaps outstanding.

Our effective tax rate is approximately 40% and current taxes were $270,000 for the quarter.

Now, turning to the balance sheet, we made repayments totaling $3.2 million for the quarter and this has reduced our bank debt to $132.6 million. The latest trailing 12-month operating cash flow was $28.6 million and this results in a leverage of 4.64 times at the end of the quarter, down from 4.71 times at the end of second quarter.

Cash on hand at the end of the quarter was $15.1 million and we spent about $0.5 million in CapEx for the third quarter. And on a year-to-date basis, we've spent over $1 million in CapEx.

So despite the slowdown in the US economy and revenue volatility in our markets, and the cyclical impact of political advertising, on a year-to-date basis, our revenue has increased 2.2% combined with a 1% expense decline. So we have reported SOI increase of 8.6% for the year and we've been able to grow our margins from 32% to 34%.

In the third quarter, we began the conversion to a new traffic system, which will enable us to more closely track all of our digital assets and improve inventory management. The electronic system puts us another step closer to becoming paperless throughout the entire revenue cycle. And it has the ability to integrate with many of our third-party products.

So our station personnel, they've invested hundreds and hundreds of hours of time in this conversion. And we plan to have completed the initial phase by the end of the year.

This December, we will celebrate our 50th anniversary, and Bruce and I have reflected quite a bit on those factors that have contributed to our success over this last half-century where we experienced both the best and the worst of economic times. And we both agree that George's consistent direction to focus on content, to build local relationships, and to adopt relevant new technology have been the cornerstone of our growth and this is aside from our employees, which is the most important factor.

To this note, earlier this year, we announced an alliance and a minority investment with Quu, which is expanding our digital capabilities and offerings. And they recently launched technology called the Advertiser Experience and that enables radio advertisers to show their images to users of RDF and HD-equipped radio. So we intend to be one of the first in the industry to integrate this new technology.

And earlier this month, we launched our iRadio NOW app for Android devices and that enables listeners to interact with our radio stations. Those listening will be able to both hear and see radio with visuals.

And we continue to be supportive of NAB's efforts to get the FM chip in mobile devices. And simple fact is that radio is a mobile medium and should be in all mobile devices. So we believe that with our [dual] focus on our core content and new media, we're addressing both our current and prospective radio users. This along with prudently managing our business is the best approach to our next 50 years in delivering value to our shareholders.

Finally, I think that Bruce and I will be remiss if we did mention our concerns about the volatile economic and political environment. This uncertainty along with the tough political comps from last year will provide for some challenging month ahead.

And with that, we were e-mailed a couple of questions this morning that I'm going to direct to Bruce.

One, Bruce, do you see the markets slowly getting better even though housing remains a problem in regards to Vegas and Fort Myers?

Yes, in regards to both of those markets, we do see it getting better because the service industries are improving and that's due to the positive impact of increased tourism.

And do you think that the negative impact on advertising is beginning to fade?

I do. Our markets are improving both in Las Vegas and Fort Myers on a year-to-date basis, and Beasley, quite frankly, and we're proud of this, is outperforming in those two markets revenue wise.

Okay. All right, well, that is it for today. And as always, if you guys have any questions, please feel free to call Bruce or myself. Thank you very much for your time.