Beasley Broadcast Group Inc (BBGI) 2015 Q4 法說會逐字稿

Good day, and welcome to the Beasley Broadcast Group 2015 fourth-quarter results conference. As a reminder, today's conference is being recorded. At the time, I would like to turn the conference over to Ms. Caroline Beasley. Please go ahead, ma'am.

Thank you, David, and good morning. Welcome to the Beasley Broadcast Group's fourth-quarter 2015 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 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 would also remind listeners that following its completion, a replay of today's webcast can be accessed for five days on our website. As on our past several webcasts, I will remind everyone that on December 1, 2014, we swapped five radio stations, including two FMs in Philly and two FMs and one AM in Miami for a total of 14 CBS stations, including seven in Charlotte, six in Tampa, and one in Philly.

As a result of the transaction, on a GAAP basis, we are required to report the five stations that CBS assumed ownership of, under discontinued operations on the income statement. Despite having operated them through November 30, 2014. As such, we again provided supplementary disclosures in today's release. Beginning in the first quarter of 2016, our reporting will become more simplified, as the results for the 2016 and 2015 periods will solely reflect Beasley's current platforms.

So for the fourth quarter on a continuing ops, or as-reported basis, revenue increased 53% and SOI rose 42.9%. Now, this reporting reflects revenue from the new Tampa and Charlotte clusters for the 2015 fourth quarter, which were only included for the month of December in Q4 2014 results, and as noted a moment ago, it excludes the revenue from the stations we swapped to CBS for the months of October and November of 2014.

Now, on a combined continuing and discontinued ops basis for the quarter, revenue increased $1.7 million or 6.5%, while station operating expenses rose $1.6 million or 8.8%, which led to an SOI increase of $148,000, or 1.7%. The revenue increase is largely attributable to improvements in Fort Myers and Tampa, while the expense increase is primarily due to higher operating expenses in Charlotte and Tampa in Q4 2015 compared with Philly and Miami in Q4 2014, which is partially due to the fact that we operate a total of 14 stations in the new markets versus five in the markets we gave up.

The increase in SOI is primarily attributable to increases in Tampa, offset by declines in Vegas and Wilmington. In Q4 2014, the Company generated about $800,000 in political revenue that did not recur in Q4 2015, and given these political headwinds, the fact that we generated positive SOI for the quarter reflects the beginning of the benefits of last year's swap.

Now, on a pro forma basis for the quarter, revenue decreased 2.1% or $600,000 and SOI decreased 3.9% or $366,000. The decline in revenue reflects overall softness in Charlotte, Vegas and Wilmington, however, on a pro forma basis, Q4 2014 political revenue was approximately $1.7 million. So excluding political, pro forma revenue increased approximately 4% in Q4 2015.

With respect to SOI, we partially offset the revenue decline through additional cost reductions. Specifically, we continue to bring down station operating expenses in Charlotte, which declined about $600,000, and we lowered total Company station expenses by $200,000. Notably, when comparing combined Charlotte and Tampa results on a pro forma basis for the quarter, revenue declined 1%, but we reduced expenses by over 6%, resulting in an SOI increase of almost $500,000 from these clusters.

Again, this quarterly SOI growth highlights the beginning of the benefits of last year's swap, and marks the first quarterly increase in these markets since we implemented our operating and expense management discipline. This is particularly meaningful, given these markets had almost $1 million of political revenue in Q4 2014. In 2016, we expect come complete our transition of the Charlotte and Tampa clusters, which should lead to better results in Charlotte, and the continued strength of our Tampa cluster, as shown in the Q4 2015 combined SOI increases in these markets.

At present, we have seven markets that report to Miller Kaplan, and these markets account for about 92% of our total revenue. In Q4, the seven markets increased almost 1.5% compared to our clusters declining approximately 1.1%, and this is on a pro forma basis. So overall radio advertising is fairly healthy, and while our fourth-quarter comparisons may not reflect this, we are making progress towards our goal of outperforming our markets, with December 2015 being the first month that we achieved this, and we expect this trend to continue through 2016.

Our overall Q4 2015 under-performance relative to the markets was primarily due to revenue from Charlotte and Vegas. Overall, the Charlotte market declined 7.2% for the quarter, compared to our cluster being down 16%. Our cluster's decline was driven by the impact of a direct competitor against our urban AC station, WBAV, which weighed on both local and national revenue for the quarter.

In Vegas, the market was down 3.5% compared to our cluster being down 7%, which was due to the change in format at KVGS earlier this year, and softness in ratings at our country and urban-oldies stations. Elsewhere, we generated revenue growth in Tampa and Fort Myers, and these clusters outperformed their overall markets.

Moving on to the ratings, starting with Vegas, we're seeing the continued growth of our flagship station, Classic Hit KKLZ, which was second in key demos again this quarter and garnered a very strong 7.2 share with adults 25, 54, and prime. These ratings mark a 3% quarterly sequential increase and a rise of over 111% year over year. However, on a combined basis, the Vegas cluster ratings were down, both on a quarterly and year-over-year basis. The decline largely reflects the impact at our urban oldies KOAS, which faced two new urban competitors in the market, beginning in September of 2015.

Moving on to Charlotte, Beasley once again had the number-one rated cluster in the market, for a total share among adults 25, 54, and prime. On a quarterly, sequential basis, our share rose to 32.8 in Q4, compared to 32.2 in Q3. As such, the Charlotte cluster ratings are up nearly 3% quarter to quarter, and up nearly 10% year over year. Beasley has three out of the top five stations in Charlotte, and we are in a strong position to start 2016.

In Tampa, our largest market, we had three at the top four stations, including the number-one and number-two stations. Our Rhythmic CHR station was the number-one station for most of 2015 in many key demos including 25, 54. Our country station, QYK, was number two this quarter with 40% higher shares than the direct country competitor. Classic Hits, Q105 is currently fourth with adults 25, 54, and is Tampa Bay's number-one choice for at-work listening. So we are delighted that overall the cluster saw gains in persons 25, 54 and prime, quarter over quarter, and year over year.

Overall, Beasley's PPM market share in Q4 is 24.6 with adults 25, 54 and prime. This compares with 23.9 share in Q3, and 22.8 share last year. We attribute the 3% quarterly sequential and 8% year-over-year growth to our organization-wide focus on localism, research, promotions, and marketing.

In our [diaries] markets, despite the fall 2015 books being softer than normal, we have the number-one station in three of our five markets. In addition, we had the dominant clusters in every market where we operate more than one station. Our country-formatted stations accounted for much of the fall 2015 softness, which we attribute to a soft music cycle. We had numerous programming improvement initiatives underway, including marketing and research, and we expect to see improvements in the spring 2016 books.

Now turning back to the financials, interest expense for the quarter was approximately $1 million, and this reflects an increase of 4.6% over last year's fourth quarter. The Company refinanced its debt and entered into a new credit agreement on November 30, and as a result, recorded a loss on modification of long-term debt of $600,000. The refinancing extended the maturity and provided added flexibility under the credit agreement. For the full-year 2015, our effective tax rate for the combined continuing ops and discontinued ops was approximately 36%.

Now turning to the balance sheet, during the quarter, we made net repayments totalling $1.2 million against our debt, and our total debt was reduced to $89 million. The latest trailing 12-month consolidated operating cash flow was $23.7 million, and this resulted in a growth leverage ratio of 3.75 times at the end of the year. Our credit agreement allows the Company to receive the benefit of up to $12.5 million of cash on hand, and calculating net leverage, so our net leverage at the end of the year was 3.23 times. Cash on hand at the end of the year was $14.3 million, and we spent about $320,000 in capital in fourth quarter, and a little over $2 million for the year.

In closing, I would like to reiterate that we made progress throughout 2015 in right-sizing the operations and practices of the stations received in the swap. We successfully implemented integration cost efficiency and operating plans, and maintain our organization-wide focus on targeted localism, delivering quality programming, effective online marketing solutions, and dedicated service to the listeners and advertisers in these markets. This led to stronger clusters and continued ratings leadership across our markets.

We are about 14 months now into our integration of the new stations, and we are beginning to see the financial benefits of our operating practices and rating strengths reflected in these markets. At the time the swap transactions was announced, we indicated that we expected it to be accretive to BBGI's station operating income in the first 18 months of ownership. With the overall health of radio, and the expectation of the return of political, combined with our ratings strength, streamlined operations and solid financial position, we entered 2016 on strong footing toward achieving this goal.

We believe our commitment to localism in all of our markets is the best means of improving revenue share across the platform, and enhancing shareholder value. We're making continued strides toward achieving revenue performance ahead of our markets, and extracting the economic efficiencies we identified in our new markets.

Finally, our employees are our largest asset, and with the addition of Tampa and Charlotte, the number of full-time employees increased significantly. It's been incredible to see the commitment and drive to win from our markets, and I am very proud of our team.

So on behalf of our corporate and station personnel, I would like to thank you all for tuning in today, and should you have any questions, please feel free to call me. Thank you.

And that does conclude today's conference, and we thank you for participating.