Beasley Broadcast Group Inc (BBGI) 2014 Q3 法說會逐字稿

Thank you and good morning. Welcome to the Beasley Broadcast Group 2014 third quarter results webcast. Today's call is being recorded. At this time I would like to turn the call over to Ms. Caroline Beasley, please go ahead ma'am.

Thank you, and good morning. Welcome to the Beasley Broadcast Group third quarter 2014 webcast. Before beginning, I would 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 SK. 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 would 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 press release on the Investors or Press Room sections of the site. So to say that we've been busy this quarter is an understatement.

Before getting into the details for the quarter, I would like to remind everyone that on October 1, the Company entered into an asset exchange agreement with CBS Radio, whereby we will swap five radio stations, our two FMs in Philly and our two FMs and one AM in Miami, for a total of 14 CBS stations, including seven in Charlotte, six in Tampa, and one in Philadelphia. As a result of the proposed transaction, we're required to report the stations that CBS will assume ownership of under discontinued operations on the income statement, and as assets held for sale on the balance sheet.

So in other words the results of the income statement other than income from discontinued operations, and that's net of taxes, and basic and diluted net income per share for discontinued operations represent the remaining stations in our portfolio, excluding the five stations in Philly and Miami that we're swapping to CBS. However, we are not including the benefit and financial results of the 14 stations to be added in Charlotte, Tampa and Philadelphia.

As noted at the time we made the announcement, the station exchange will substantially broaden and diversify our local radio platform and revenue base with 14 new stations that are geographically complementary to our continuing operations, while also presenting financial and operating synergies with the Company's ongoing station portfolio and digital operations. Notably, we expect the transaction to be accretive to our SOI in the first 18 months of ownership, so for the quarter taking into consideration both continuing operations and discontinued operations, net revenue decreased by 0.4%, while SOI declined 17.6%.

On a continuing operation basis, net revenue decreased 5%, reflecting revenue declines in our Wilmington and Greenville/New Bern/Jacksonville market clusters, and on a positive note, our initiative to expand our digital offerings resulted in an approximate 22% increase in digital revenue at our stations. In addition, we generated approximately $170,000 in political this quarter from the continuing ops stations, with the majority from our Fayetteville and Augusta clusters. SOI on a continuing ops basis declined $800,000, which largely reflects the revenue decline. And on a continuing ops basis, we have three markets that report to Miller Kaplan, and these markets accounted for about 55% of the revenue. The total revenue in these through markets increased 3% compared to our station clusters which were flat.

For the third quarter, net revenue from discontinued ops decreased 5.9%, reflecting declines in both Miami and Philly. SOI on a discontinued operations basis declined $800,000. So as you'll note from the press release, net revenues from discontinued operations accounted for about 47% of the total combined revenue when you combine both continued and discontinued operations of the Company. I would emphasize that the third quarter was a transitional period, and we look forward to completing the CBS station swap in the current quarter, so that reporting for 2015 will reflect our new platform and our integration initiative.

I would now like to review the performance in our Las Vegas cluster. The Las Vegas market increased 4.4% in the third quarter, compared to our cluster declining 2.9%. Our local and national revenue were down, which were partially offset by increases in digital and NTR. As far as ratings in Vegas, Rhythmic AC, KOAS continues to be our cluster leader, with a solid Top 5 position with adults 25 to 54, and country KCYE and classic hits KKLZ remain Top 10 players. Elsewhere, our [Dowry] cluster ratings remain strong at this time. Greenville, New Bern, Jacksonville, we have four out of the market's top six stations with adults 25-54, including WKIS which is No. 1. The Ft. Myers cluster has two out of the market's Top three stations with adults 25-54, including the number one station, WRXK. In Fayetteville we have the No. 1 and No. 2 stations in the market with adults 25-54, and they are WZFX and WKML. And the Augusta cluster has the No. 1 station 25-54 in the market with KICKS country. Finally at JBR in Wilmington, the station has two challenged ratings books recently, however, programming adjustments have been made with following a research study, and new promotions and marketing have begun.

Now turning back to the financials, corporate G&A excluding stock-based comp decreased $100,000 to $1.9 million. However when we report continuing and discontinued operations, all corporate G&A expenses allocated to continuing operations, which creates a bit of a mismatch with the temporarily lower levels of revenue. Stock-based comp expense for the quarter was $375,000, and interest expense for the quarter declined approximately 19%. The decrease reflects both the lower cost of borrowing, and reduction in principal. However this is the other situation where all of the interest expense is allocated to continuing operations, which here again creates a mismatch with the temporarily lower levels of revenue. In Q3, our effective tax rate for the combined continuing operations and discontinued operations was 40%.

Now turning to the balance sheet, during the quarter we may repayments totaling $3.3 million against our debt. The total debt at the end of the quarter was $99 million. The latest trailing 12-month consolidated operating cash flow as defined in the credit agreement and inclusive of continuing operations and discontinued operations was $27.7 million, with our leverage ratio at 3.57 times. Our credit agreement allows us to receive the benefit of up to $10 million of cash on hand, so in calculating net leverage for the third quarter, it was 3.21 times, and that compares to our covenant of 4.5 times. Cash on hand at the end of quarter was $13.2 million, and we spent $823,000 in CapEx, of which $713,000 was from continuing operations. Year-to-date we've spent $2.6 million in CapEx, of which $2.3 million is from continuing operations.

Looking forward, there are a few items I would like to highlight. First, the decision to enter into an asset exchange agreement with CBS was not made lightly, and in some ways, bittersweet. However, we believe this decision is in the best interest of our shareholders. Given today's competitive landscape, operating in markets where you're not fully clustered is challenging, and the proposed exchange provides us with leading clusters in both Tampa and Charlotte, with upside we believe in both markets. The announced transaction places us in the unique position of owning a full compliment of FM stations in seven of the 12 markets where we will operate, and upon closing the proposed transaction will increase our portfolio of owned and operated stations to 53, with approximately 7.7 million weekly listeners. Today we own and operate 44 stations in 11 markets, with approximately 7.1 million listeners.

With respect to the new markets, we'll be entering upon completion of the swap, Tampa, St. Pete is the 18th largest radio market when ranked by revenue, while Charlotte is the nation's 24th largest radio revenue market. We're actively developing post-closing integration, cost efficiency, and operating plans, and look forward to welcoming the new stations to Beasley. Our operating initiatives post-closing will focus on targeted localism, and delivering quality programming, effective online marketing solutions, and dedicated service to the listeners and advertisers in these markets. From a financial standpoint, the asset exchange will allow us to meaningfully expand our operating and revenue base, without incurring additional borrowings or using cash from operations. Based on our expectation that the transaction will lead to SOI accretion in the first 18 months after choosing, we plan to further reduce the Company's leverage ratio, which is presently near its lowest level in ten years.

Overall we believe this transaction represents a unique and innovative means for Beasley to enhance shareholder value. I would like to add that overall our digital and NTR revenue plans are progressing, and we're starting to see positive results as reflected by the 22% growth in continuing operations digital revenue in Q3. We are an actively and aggressively managing this business, as it represents a significant and near and long-term opportunity. Finally despite Q3 industry ad spending trends in our market, the radio advertising environment generally remains healthy, and our long-term experience has shown that our organization-wide focus on core programming and targeted localism continue to support our ratings strength. We believe this focus and the near-term completion of the asset exchange are the best means of improving revenue share across our platform, and enhancing shareholder value.

With that, I thank you for your time today. Should you have any questions, as I'm sure there are many, especially given the separation between continuing and discontinued ops, please feel free to give me a call. Thank you.

This concludes today's conference. Thank you for your participation.