Beasley Broadcast Group, Inc. (BBGI) Q1 2012 Earnings Report, Transcript and Summary

Welcome to the Beasley Broadcast Group 2012 First Quarter Results Webinar. Today’s call is being recorded. At this time I’d like to turn the conference over to Ms. Caroline Beasley, Chief Financial Officer of Beasley Broadcast Group. Please go ahead.

Thank you, Lara, and good morning. Before beginning I’d like to emphasis 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 5 days on the company’s website. Investors can also find the copy of today’s press release on the Investors section of this site. My remarks this morning will primarily focus on the first quarter results and our markets, and Bruce Beasley, our President and COO, is with me today. So for the quarter, I am pleased to report that revenue increased 1.1% primarily reflecting strong growth in our Fayetteville, North Carolina cluster. Overall, we achieved revenue increases in 6 of our 11 market clusters as we saw improved local and digital advertising which offset the impact of a mid single digit decline in national. Political revenue in their quarter amounted to about $400 million or $140,000 with a majority coming from Augusta, Vegas and Miami. First quarter station operating income increased 2.3% as the net revenue increased more than offset 0.5% increase in station operating expenses. Before I get to specific market data, let’s talk about national a bit more. Overall, national revenue in the markets that we operate according to Miller Kaplan declined by approximately 7%. And our stations in those markets also declined around 7% on a national basis, and we expect that the industry will perform better nationally than our market, although it’s still down as the Phili market was the key driver in the national decline. As far as pacings during their quarter, Jan and Feb were pretty good, March got weak as the impact of higher gas prices and the uncertainty over the election begin to weigh on consumers and advertisers. As far as, Q2 goes, April was weaker than March and as we believe the disappointing unemployment figures are now also weighing on consumer confidence. And while visibility is limited May and June are pacing better than March and April, but we hope we’ve reached an inflection point as we also started hearing reports last weekend that gas prices are starting to ease out off a bit. So let’s stretch to category information, our 5 logics categories on a combined basis increased 2.7% for the quarter and the size categories accounted for 60% of revenue. Individually, we saw increases in retail and restaurant, retail being our larger category. Auto, our second largest category on a combined basis was flat as we saw increases in auto import offset by the clients in domestic auto. The decline in domestic spending was primarily due to a pullback from Jeep, Chrysler. Moving out to market data. We do have 6 markets that report to Miller Kaplan and we outperformed our markets by about 100 basis points, and these stations accounted for approximately 83% of our revenue. So for the quarter combined Miller Kaplan market revenue was down 0.75% compared to our stations which were up 0.29%. Going into specific markets, starting with Phile. The Phili market was down 4.8%, compared to our stations which were down 3.2%. After underperforming the market in the fourth quarter, we indicated on the last call that ratings were moving in the right direction acquired and remain solid at XTU. So we expected our stations to outperform the market going forward and we were able to do so in the first quarter. The Phili market is more impacted than others by National, as they represent over 30% of the market’s total revenue. And National for the market declined 16.6%, compared to our stations which posted a 12.8% decline. And the National decline reflects lower levels of ad spends on Comcast, Chrysler and USAA just to name a few. Local and digital combined increased 2% for the market, compared to our stations which generated a 3% increase for the quarter. Moving on to Miami for the quarter. The market increased slightly by 0.4%, compared to our stations which increased slightly by 0.1%. In our performance -- our performance was basically flat with the market and we continue to see progress at our Rhythmic CHR and country station. Now heading out with to Las Vegas. The market increased 4.4%, compared to our stations which were up 0.4%. Our revenue underperformance in Vegas is tied to National at our Classic Hit station, where we are seeing our ratings bounce back from a dip in 2011 and as such we expect to see revenue in this cluster to perform in line with the market in the coming quarters. As noted on the last call, we did change format at one of the stations that we manage in Las Vegas, we have two that we manage out there. So we do expect a short-term drop in management fees that we receive for managing those stations. Moving on Fort Myers. The market increased 2.8%, compared to our stations which were down 2.1%. We did change format at WRXK in the first quarter and as expected revenue did drop. We believe that this will be short-term in nature and it should reverse itself over the next quarter or so. Such that market revenue rose 4.6%, well our station cluster grew 3.4%. Here again we change format at one of our FM stations to simulcast with our AM new station and we switched frequencies with our alternative rock station and this station is not yet performing in line with the market. Finally, in Fayetteville, North Carolina the market increased 10.9%, compared to our stations increasing 8.3%. Moving on to station operating expenses, they increased 0.5% or $73,000 and station operating income increased $173,000 or 2.3%. Corporate G&A excluding stock-based comp was $1.9 million for the quarter and this is flat with last year. Stock-based comp expense, we recorded approximately 130,000 and this reflects the $24,000 decrease compared with first quarter of last year. Interest expense for the quarter was down 43% or $1 million and this reflects the roll off of swaps in March and September of 2011 and continued reductions and borrowing costs due to repayments on our credit facility. And our effective tax rate for the quarter was approximately 39.3% and our Q1 current cash taxes were a $125,000. Now turning to the balance sheet. During the quarter, we made repayments totaling $3.4 million against the credit facility and that reducing debt to $123.4 million. Our latest trailing 12-month consolidated operating cash flow as defined in our credit agreement was $27.6 million, resulting in a reduction in the leverage ratio to 4.46x at the end of the quarter. And as mentioned in prior conference calls last year, our leverage covenant at March 31 stepped down to 4.75x. Cash on hand at the end of the quarter was $15.3 million and we spent $369,000 in CapEx. So to recap, we’re pleased with our station cross stores performance in the first quarter and we’re delighted to deliver a return to revenue and SOI growth. Looking at the balance sheet, leverage was reduced to 4.46x compared to 4.6x at the end of last year. This marks our lowest leverage ratio in almost 6 years. Before we conclude the call, I want to quickly review the progress. The industry is making and ensuring that radio remains a highly relevant medium. The reason I attended the NABs Las Vegas Conference last week, where HD radio, particularly and mobile devices was highlighted. This technology will provide listeners the capability to have an interacted experience with our stations, while enabling us to provide advertisers with 360 marketing solutions. In addition the NAB continues to advance the industry efforts to have FM chips embedded in mobile devices and to advocate for our ownership dereg. Overall, based on what we’re seeing in our market and our takeaways from NAB and other group heads, the industry is doing the right things to ensure its bright future. With that, I thank you for your time this morning and feel free to give Bruce or myself a call with any question. Thank you very much.

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