Beasley Broadcast Group Inc (BBGI) 2013 Q4 法說會逐字稿

Good day, and welcome to the 2013 fourth-quarter results conference call. Today's conference is being recorded.

At this time, I would like to turn the call over to your host, Ms. Caroline Beasley. Ms. Beasley, you may begin.

Thank you, and good morning. Welcome to the Beasley Broadcast Group fourth-quarter 2013 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 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 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.

My remarks this morning will primarily focus on the fourth-quarter and full-year results, our balance sheet, and our markets. As noted in our third-quarter webcast, we knew that fourth-quarter revenue would be challenging, given the $1.2 million in political advertising received in 4Q 2012. While we were not able to fully offset these political dollars, we saw improved advertising in December after cycling off the political comps in October and November.

So, for the quarter, actual (technical difficulty) net revenue decreased 0.5%, and same-station net revenue decreased 2.6%. Excluding the benefit of approximately $1.2 million in political advertising in 4Q 2012, 4Q 2013 same-station net revenue rose approximately 2%. And for the full year of 2013, actual full-year revenue rose 4.7%, while same-station revenue increased 1.9%.

4Q 2013 same-station revenue results reflect declines in our Vegas and Miami clusters, primarily due to the political comps. On a consolidated same-station basis, local and national decreased 1.7% and 21%, respectively, with the decline in national primarily attributable to approximately $1.1 million in national political advertising booked in 4Q 2012. And I'm very pleased to report that digital revenue rose approximately 40% during the quarter.

Now, we have five markets that report to Miller Kaplan, and these markets account for about 76% of our total revenue. In the fourth quarter, on a combined basis, our clusters outperformed in the markets, as total revenue in these five markets decreased 4.1%, while revenue at our station clusters declined by 2.6%; which, again, was primarily attributable to the cyclical nature of political advertising.

So, let's take a look at our three largest markets in terms of revenue, starting with Philly. Market revenue increased 4% for the quarter, with local down 0.7%, and national increasing 5.5%. Our Philly cluster again outperformed the market, with revenue growth of approximately 10%, reflecting increases in local, national, and digital, as we saw another quarter of great performance at XTU.

In Miami, total market revenue was down 9% for the quarter, with national being down almost 21%, and local down almost 9%. Our cluster also outperformed the market, posting a decline of approximately 4.7%, driven by outperformance in local and digital revenue. As noted in prior quarters' webcasts, in April we hired a DOS in Miami who is overseeing sales for the entire market. She has responsibility for the sales managers at each of our stations. As expected, this has driven improvements in our local sales results in the second half of 2013.

Moving on to Vegas, we saw the brunt of the impact of political comps, as almost half of our 4Q 2012 political revenue was generated from Vegas. In 4Q 2013, the market was down 16.4% compared to our stations, which were down 18.4%. And for the full year, each of our clusters that report to Miller Kaplan outperformed the revenue in their market, as total combined market revenue was down 2.2%, compared to our stations that increased 5.5%. And these are the stations that report to Miller Kaplan.

Looking now at Q4 category data, on a combined same-station basis, our five largest categories increased 2% for the quarter, and these five categories accounted for about 59% of our revenue. Specifically, we generated revenue increases in three of our top five categories -- auto, health, and other -- while retail and restaurants were down for the quarter.

Outside the top five, we saw notable increases in the insurance, travel, and telecom categories. The increase in the insurance category is in part due to the increased spend from Geico and Progressive. Telecom increased due to higher spend from AT&T, Verizon, and MetroPCS.

Moving now to our stations' ratings in our larger markets. In Philly, XTU capped a banner year, with improvements in the fourth quarter. While XTU remained top five in the core adults 25-54 demo, we've seen tremendous growth with the younger demos of 18-34 and 18-49, where the station is now top three in both.

And a special congratulations go out to XTU's morning show, Doc & Andie, who won the prestigious CMA Award for major market personality of the year. Elsewhere in Philly, our CHR rhythmic station, Wired 96.5, finished the year again ranking top 10 among adults 18-34 and 18-49. And over the last six months, Wired has also performed well in the 25-44 demo.

Moving on to Miami, Power 96 delivered its best ratings quarter of the year, despite a new format competitor which launched in November. Power ranked number one or two among adults 18-34 in all of the survey periods of the quarter, and top five in the 18-49 demo. In the last several weeks, a second station in the Miami market changed format, so now Power 96 is facing two new competitors. But let me assure you, we intend to aggressively protect our heritage station in the market, and Power has won format challenges in the past.

Moving on, KISS Country has now generated four consecutive survey periods of positive growth, growing ratings results. And let me just comment on KISS for a moment. This past Sunday, they held their 29th Annual Chili Cookoff, where over 20,000 of their closest friends attended. It was a very successful event, and it really showed the power of local radio. So, kudos goes to everyone over at KISS.

Moving on to Vegas, our urban oldies station, KOAS, is delivering tremendous growth with increases in four consecutive survey periods, making it one of the top rated stations in the market. Elsewhere, BOB-FM remains competitive in the adults 25-54 demo, and consistently a top 10 station in the market. Our country station, KCYE, has a 2-to-1 ratings lead over its direct competitors. And our flagship station, KKLZ, continues to be one of the top adults 25-54 stations in the market.

But moving back to the financials, Q4 2013 actual station operating expenses increased 2.5% for the quarter, and same-station expenses rose 0.6%, reflecting the fourth-quarter decline in revenue due to the political comps and station operating expenses. Actual SOI for the quarter decreased 5.2%, while same-station SOI decreased 7.4%.

Corporate G&A, excluding stock-based comp, totaled $2.1 million for the quarter, and this is in line with last year's fourth quarter. Stock-based comp for the quarter was approximately $187,000 compared to $88,000 in fourth quarter of 2012.

Interest expense for the quarter decreased approximately 34%. And most of this reflects the lower cost of borrowing resulting from the repayment of the second lien holders on April 3.

As a reminder, in Q2 2013, the Company incurred a $1 million prepayment fee when the second lien debt was refinanced. In addition to the prepayment fee recorded in interest expense, we recorded a charge in Q2 for loss on extinguishment of long-term debt of $1.3 million. And both of these items impacted net income and earnings per share for the full-year 2013 results.

Turning to the balance sheet, during the quarter we made repayments totaling $3.375 million, and that reduced our debt to $106.875 million. The latest trailing 12 month consolidated operating cash flow was $30.5 million, resulting in a reduction in the leverage ratio to 3.5 times. And this compares to a leverage ratio of 3.78 times at the end of the 2012.

Our credit agreement allows that Company to receive the benefit of $7.5 million of cash on hand in calculating net leverage. So, reflecting the cash, our net leverage at the end of 2013 was 3.26 times, compared to a covenant of 5 times, and compared to the net leverage ratio of 3.61 times at the end of 2012.

Cash on hand at the end of 2013 was $14.3 million. We spent about $700,000 in CapEx for the quarter, and about $2.8 million in the year.

Looking ahead at operating results for first quarter, there are a few items I'd like to highlight. We're beginning to expand our digital offerings to nontraditional radio advertisers. To support this initiative, we hired our new digital sales team, which went to work effective January 1. With these new products and focus on sales, we expect digital revenue to increase going forward. However, and reiterating our expectation from prior webcasts, initial margins from this initiative are expected to be lower.

In addition to this, we continue to focus on strengthening and monetizing our core digital assets, streaming, and display; and are in the process of re-launching all of our websites to be more content-focused, with higher levels of user interactivity. And as of today, we are about halfway through this project, and believe the updated look and expanded functionality are resonating well with our listeners and advertisers.

So to conclude, overall revenue trends this quarter were consistent with the health we saw throughout 2013; although comps were, as expected, strained by the benefit of the political advertising in the fourth quarter of 2012. In 2014, we remain focused on ensuring that our station clusters match or exceed their market's revenue performance while further strengthening our balance sheet. We have strong station clusters and ratings in key markets, and excellent leadership and personnel across our Company.

We are reinvesting in a return-focused manner in programming, personnel, and expanding our digital offering. And we believe our focus on our core content and new media opportunities position Beasley well.

Looking at our capital structure, we are realizing the benefits of the Q2 refi, which has lowered our cost of borrowing and our leverage to the lowest level in over 10 years. As such, we continue to strengthen our balance sheet and lower leverage by allocating cash flow from operations to further reduce our borrowings.

With progress on this front, we intend to evaluate future opportunities to return capital to shareholders. And as announced in December, we re-initiated a quarterly dividend of $0.045 per share, with the first dividend paid on January 10.

So with that, that concludes my comments. I thank you very much for your time today. And should you have any questions, please feel free to give me a call. Thank you.