Beasley Broadcast Group Inc (BBGI) 2016 Q4 法說會逐字稿

Good morning and welcome to the Beasley Broadcast Group fourth quarter 2016 conference call. Before proceeding, I would like to emphasize that today's conference call and webcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties described in the Risk Factor's section of our most recent Annual Report on Form 10-K and supplemented by our Quarterly Reports on Form 10-Q.

Today's webcast will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of Regulation 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 the Company's website.

I'd also remind listeners that following its completion, a replay of today's call can be accessed for five days on the Company's website, www.BBGI.com. You can also find a copy of today's press release on the Investors or Press Room sections of the site.

At this time, I'd like to turn the conference over to your host, Beasley Broadcast Group CEO and Chief Financial Officer, Caroline Beasley. Please go ahead.

Thank you, Carrie. Good morning and thank you for joining us to review our 2016 fourth quarter and full year operating results. Actually Marie Tedesco, our CFO, is on the call with me today and she will provide more detail on the fourth quarter.

We are late in responding, or reporting, to the fourth quarter in regards to the fourth quarter and full year and that is due to the added requirements from the Greater Media transaction. Our goal is to be back on track with the first-quarter reporting. As a reminder, on November 1 we did complete the accretive acquisition of Greater Media, adding 17 stations net of divestitures and four attractive new markets to our operating footprint.

We are making continued progress with the integration of the new stations. And similar to the CBS swap transaction that we did in late 2014, we expect to complete the integration within 12 to 18 months. And I am pleased to report that we're generally on track with our integration plans, execution and synergy realizations. Today we will review the fourth-quarter results and our outlook, as well as the expected benefits from the Greater Media transaction and other ongoing initiatives to drive free cash flow growth and shareholder returns.

The results reported today reflect the Company's ownership and operation of 52 radio stations through October 31, and then the addition of 17 Greater Media stations effective November 1. As a reminder, the Charlotte Greater Media stations and WFND AM were divested on January 5, 2017. As a result, are reported as discontinued operations. However our sale of the six Greenville-New Bern-Jacksonville, North Carolina stations that were announced in early February, are reported in continuing operations for the fourth quarter.

The 89.1% rise in fourth quarter net revenue was a direct result of the acquisition, as well as a strong quarter from the Beasley legacy station and this is due to political ad spend. On a standalone basis, the Beasley legacy stations generated a fourth quarter revenue increase of approximately 7.6% or $2.1 million in contrast to some of the Greater Media stations that experienced transition-related issues.

Overall the 89.1% consolidated net revenue increase drove SOI growth of 80.3% which led to solid operating income, net income, diluted EPS and free cash flow growth. Our fourth-quarter results highlight the value of our long-term strategy, to focus on strong core programming and targeted localism while building scale through swaps and accretive acquisitions.

I'd emphasize that fourth quarter was a transitional period by all measures and we look forward to future reporting which will reflect our new platform, our integration initiative and the initiatives underway to drive SOI and cash flow improvement. In this regard, bottom-line results reflect an approximate $45.5 million gain on the acquisition of Greater Media Stations. And this is primarily resulting from the net difference in the valuation of the assets and the purchase price paid.

The Company also incurred about $5.2 million and $6.4 million of pretax merger expenses in the fourth quarter and the full year, respectively. Fourth quarter interest expense increased about $2.8 million. This is related to the Greater Media transaction.

Free cash flow for the period which is operating income plus depreciation, amortization, excluding merger expenses and other income, and then subtracting cash taxes, cash interest expense and maintenance CapEx for the quarter, was $11.1 million. That compares with $5.2 million in the fourth quarter of 2015. So now I'm going to turn the call over to Marie to report in detail Q4.

Thanks, Caroline. It's a pleasure to be joining you today. Now let's start with a review of the fourth-quarter results. Net revenue increased $25.3 million, or 89 1%, to $53.7 million. And station operating expenses for the quarter increased 93.1%, or $18.1 million, resulting in an 80.3% increase in station operating income to $16.2 million.

The revenue increase reflects strong results as the legacy station where the revenue was up 7.6% compared to Q4 2015, as well as including two months of operations of the Greater Media stations. The increase in SOI reflects the rise in revenue, partially offset by higher station sales costs and the operation of the recently acquired stations.

Beasley legacy clusters in Tampa-St. Petersburg, Charlotte and Las Vegas clusters generated double digit revenue growth quarter over quarter, primarily due to political. On a consolidated basis, fourth quarter 2016 SOI margins were 30.2% compared to 31.7% in the year-ago period, reflecting growth in the margin in the Beasley legacy stations that was partially offset by the two months of operations of the Greater Media properties. Which, as Caroline indicated, did not perform up to their potential in the quarter as a result of the change in ownership and transition.

To this point on a standalone basis, the Greater Media stations revenue decreased 6.1% or approximately $2.3 million, with $1.4 million of the decline coming from Philadelphia. On a consolidated basis, actual fourth quarter political revenue was strong, with approximately $3.5 million growth, of which approximately $3 million came from the Beasley legacy stations. Our Las Vegas, Tampa-St. Petersburg and Charlotte clusters accounted for approximately 77% of it.

On a pro forma basis for the quarter, as if we owned Greater Media Stations from October 1, 2016, net revenue rose 0.5% to $65.8 million, while SOI decreased 10.6%, or $2 million, to $16.7 million. Both quarter operating expenses on a pro forma basis include one time severance expenses of approximately $1.6 million. Excluding this charge, these pro forma expenses would have increased 1.6% quarter over quarter and pro forma SOI would have decreased approximately 2.4%.

In the fourth quarter, including the Greater Media stations, we again outperformed our markets in terms of revenue growth. And according to Miller Kaplan, our clusters rose approximately 2% compared with the overall market which increased 0.5%. Our out-performance was driven by our new Detroit cluster which generated an impressive year over year revenue increase of 6.9% compared with the Detroit market which was down 3.2%. In addition to Detroit, our Augusta, Boston, Charlotte, Fayetteville, Las Vegas, Greenville-New Bern and Tampa-St. Petersburg clusters all outperformed their respective markets.

With the inclusion of the Greater Media stations, we will report strong year-over-year revenue and SOI increases in the 2000 (sic - see press release "2017") first quarter on an actual basis. However, in Q1 today we are seeing a mid-single-digit decline in both pro forma and same-station revenue which is largely attributable to comparisons against the political revenue, lower national revenue and the formal change in Tampa, where WBRN and is now WPBB, featuring today's hits and yesterday's favorites.

Corporate G&A expenses rose 25.5%, or by $569,000 during the quarter, to $2.8 million, primarily due to an increase in corporate staff and other costs associated with the integration of the Greater Media acquisition. Our effective income tax rate after the gain on the merger was approximately 8.3% and 14.9% for the three and 12 months ended December 31, 2016. We paid $93,000 of taxes in the fourth quarter of this year.

With the financing of the Greater Media acquisition, our total outstanding debt as of November 1 was $270.3 million. We made voluntary repayments against our debt in Q4 of $2.3 million, so our outstanding debt was $268 million as of 12/31/16.

The LTM consolidated operating cash flow, as defined in our credit agreement, was $62.3 million, resulting in a leverage ratio of 4.28 times as of December 31, 2016. Our credit agreement allows the Company to receive the benefit of up to $20 million of our total cash on hand in calculating net leverage. So reflecting our balance sheet cash, net leverage at 12/31/16 was 3.96 times.

Per the new credit agreement completed on November 1, 2016, the Company does not have a covenant leverage test at 12/31/16. Our next measured leverage test will occur on March 31, 2017 with a maximum leverage covenant of 6.25 times at that time.

We end up 2016 with cash on hand of $20.3 million. The Company spent $868,000 in CapEx in the quarter compared with $321,000 in the fourth quarter of 2015. For the full-year 2016 we spent $2.9 million in CapEx compared to the full year of 2015 where we spent $2.1 million. And with that, I will now turn the call back over to Caroline.

Thank you, Marie. So to conclude, with our long term strategic focus on localism and expanding our scale and free cash flow, we are confident the addition of Greater Media represents transformational growth opportunity for our Company. The transaction has increased our portfolio by about 40% and more than doubled our audience reach, giving us market-leading stations with great, great brands that are complementary to our existing properties.

Financially, the acquisition more than doubled both our revenue and cash flow. And we are intent on bringing the cash flow growth to the free cash flow line.

Needless to say, it's been a very, very busy few months. We are in the midst of the integration and focus on completing the synergies. On January 5, as mentioned before, we closed on the previously announced divestiture of four stations in Charlotte for $24 million. And given the tax basis of the stations sold, we do not expect to incur any significant tax impact on the sale. So we applied the entire $24 million to debt reduction.

In February we entered into an agreement to do divest our Greenville-New Bern cluster for $11 million. Again, we intend to apply the majority of the net proceeds to further reduce debt and leverage. And we expect this transaction to close sometime in the second quarter of this year.

Throughout 2017 our strategic priorities will be realizing the synergy targets and integration goals for the newly acquired stations, reducing debt and leverage, returning capital to shareholders through our quarterly cash dividend program and further diversifying our revenue stream. In closing, we remain confident that our initiatives to drive sales, productivity and efficiency, combined with prudent management of our capital structure, is a proven formula for sustained long term financial growth and the appreciation of shareholder value.

And finally, I'd just like to say a few words about the industry. We continue to be very bullish on radio, as we are the number-one reach medium, with 93% of the US population tuning in weekly. And TSL is approximately two hours a day. And in spite of the increased audio competition, the number of radio listeners increased year over year by 3.1 million. And TSL increased by 13 minutes per week.

So with that, we did open it up for questions or asked for questions, and we did receive a few. So I'm going to hand it over to Marie to walk through a few of those questions.

Thanks, Caroline. The first question we got was to ask if we could please give them an update on the first-quarter pacings.

Okay, Marie mentioned this in her comments. We are looking at actual revenue to increase about 90%.

However, if you take a look at this on a pro forma basis, we are looking at pro forma revenue to be down mid- to high-single digits. This is due to the following. National is pacing down double digits, and that is, in part, due to political. We had about $1 million net in political in first quarter of last year.

And then in addition, as she mentioned before, we changed format up in Tampa at WPBB, which used to be WBRN, back in December. And so we are looking at tough comps with that format change as well. So, that is it.

Great, thank you. Another question we got was to put a little color on what revenue categories drove the revenue increase in fourth quarter, outside of political. And looking at that, outside political, we did see increases in both retail auto and also in fast food.

Another question that was asked was what percent of our revenue comes from national? With Beasley, national is about 17% of our total revenue based on for the full year of 2016. Greater Media is a bit higher at 26%. On the combined basis for 2016, national was around 21% of total revenue. We also received a few other questions that we feel have been addressed in this call.

Okay, thanks, Marie. Thank you to everyone who attended the call today. Should you have any questions, please feel free to call either Marie or myself. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.