Beasley Broadcast Group Inc (BBGI) 2014 Q2 法說會逐字稿

Good day, everyone. Welcome to the Beasley Broadcast Group 2014 second quarter results conference. Today's call is being recorded. At this time I'd like to turn the call over to Caroline Beasley, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Kim and good morning. 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 mornings news announcement and on our new and improved 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 and you can also find a copy of today's release on the press section of the site.

My remarks this morning will primarily focus on the second quarter, our balance sheet, and our markets. So for the second quarter, actual net revenue decreased 3.6%. This is largely as a result of weaker overall add spending, as reflected by declines in seven of our 11 markets including Philly, Miami, Wilmington and coastal Carolina.

Now excluding the revenue from KBGF which we acquired in the third quarter of 2013, our same station revenue declined 5.6%. Companywide on a same station basis local revenue decreased 10% and national revenue decreased approximately 13%.

On a positive note both our Augusta and Fort Myers clusters generated revenue increases for the quarter and in addition our initiatives to expand our digital offerings resulted in an approximate 24% increase in digital revenue during the quarter.

Now we have five markets that report to Miller Kaplan, and these markets account for about 78% of our total revenue. And despite the overall decline in add spending, we outperformed our markets. In the second quarter, on a combined basis total revenue in these five measured markets was down 6%. And that compares to the revenue at our station clusters in these markets which was down 5.2%.

So let's take a look at the larger market clusters for the quarter starting with Philly. Market revenue was down 5% for the quarter with local down 5.8% and national decreasing 8.3%. Our Philly cluster underperformed the market as we posted a revenue decline of 9%. As in the first quarter, our stations also faced tough comps from second quarter 2013 as our revenue in the year ago period was up over 11% compared to the market being down 5%.

Moving to Miami total market revenue was down 10.4% for the quarter with local down 13.8% and national declining 5.9%. Our cluster outperformed the market posting a decline of approximately 4% with local down 7% and national increasing 0.2%. The fact that we outperformed this market speaks volumes about our sales team, particularly given the competitive landscape with Power 96 and WQAM which we'll talk about en a moment.

The Vegas market declined 1.3% in the second quarter with declines in both local and national, which compares with our cluster decreasing 9.6%. Our local and national revenue were each down 16% which were partially offset by increases in both digital and NTR of 116% and 56% respectively. As in Philly, our Las Vegas cluster faced very tough revenue comps in the second quarter as last year, our cluster revenue grew over 20% compared to the market being down 4.5%.

Let's quickly review Q2 category data in aggregate. The companies top five categories decreased 7% in each of these five categories posted declines. Moving on to our stations ratings, in Philly our country station XTU had a strong quarter and is top three, 25-54.

Wireds ratings slid in adults 18-34 as did other competitors in this format; however we're pleased to report recent trends look promising for wired. Moving to Miami as we indicated on the Q1 webcast, there have been several changes to the Miami radio market during the past nine months, including two new competitors targeting the 18-34 demo.

Despite these new competitors, Power 96 has improved and was Miami's number one station in its target demo, 18-34, during the second quarter, up from second place in the first quarter. Our country station KISS is slightly down among adults 25-54 but has shown tremendous growth with younger demos.

Recently a competitor launched a country formatted station on an FM translator in the fort Lauderdale market so we will be protecting our KISS franchise. Our sports station WQAM generated solid ratings growth this quarter and was up 25% from Q1 with adults 25-54 and we expect this will continue now that Lebron is no longer in Miami and more attention should go to other sports which should benefit QAM.

Moving to Vegas, urban oldies KOAS continues to be our biggest success story as it remains a top player with adults 25-54. Classic hits KKLV and our country station KCYE are just fine; however our biggest challenge is KBGF where programming adjustments are already being implemented and we expect to report better news in the next several quarters.

Now turning back to the financials. Actual station operating expenses declined 2.3% and same station operating expenses decreased 4.4%. As such the decline in revenue was partially offset by the lower station operating expenses, leading to actual station operating income declining 5.9% with same station SOI decreasing 7.5%.

Corporate G&A excluding stock based comp totaled $2 million for the quarter and this was in line with last years second quarter. And our stock based comp expense was approximately $371,000 for the quarter. Interest expense for the quarter decreased approximately 53% which reflects both the lower cost of borrowing and the payment in Q2 2013 of almost $1 million in prepayment fees to the second lien holders.

In Q2 our effective tax rate was 41% and as a reminder, during Q1, we recorded a significant rise in income tax expense primarily due to a change to the companies federal income tax rate from 34% to 35%. Now turning to the balance sheet during quarter we made repayments totaling $1.25 million against our debt and our debt was reduced to $102.25 million. The latest trailing 12 month consolidated operating cash flow as defined in the credit agreement was $28.8 million and our leverage ratio was 3.55 times.

Our credit agreement allows us to receive the benefit of up to $10 million in cash on hand and calculating net leverage. So reflecting the cash our net leverage at the end of June was 3.2 times and this compares to our covenant of 4.5 times. On June 17 we amended our credit facility. This amendment reduced the cost of borrowings by 25 basis points, extended the maturity from 2017 to 2019 and provides additional flexibility.

Cash on hand at the end of the quarter was $12.1 million and we spent about $600,000 in CapEx which was only slightly more than last years second quarter spend in CapEx. Now looking back at the first half and looking forward to the remainder of 2014, there are a few items I'd like to highlight.

First in our revenue measured markets, our overall revenue trends in the second quarter were ahead of our markets, even though we faced difficult comps related to our outperformance relative to our markets in the second quarter of 2013. Second cash flow and bottom line results have benefited from last years credit facility amendment and prepayments. Interest expense is down meaningfully and our leverage remains near its lowest level.

In addition the amendment negotiated last month affords us additional flexibility to manage the business for cash flow and the return of capital to shareholders. Third, ratings are generally solid and stable and we will continually-- to aggressively protect our formats against any new competitors. Next, our digital and NTR revenue plans are progressing and we are starting to see positive results as reflected by the 24% growth in digital revenue in Q2.

We're actively and aggressively managing this business as it represents a significant long term opportunity that we are capable of and working hard to further capitalize on. Fifth, the second half of 2014 predominantly late Q3 and then in Q4, we will see the cyclical return of political advertising.

And finally despite Q2 industry add spend trends in our largest markets, the radio add environment generally remains healthy and our long term experience has shown that our organization-wide focus on core programming and targeted localism continued to support our ratings strength.

So this concludes my comments for today. I thank you for your time and participating on the call today and should you have any questions, please feel free to call me. Thank you.

That does conclude our conference today. Thank you all for your participation.