Beasley Broadcast Group, Inc. (BBGI) Q3 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Beasley Broadcast Group 2012 Third Quarter Results. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Caroline Beasley. Please go ahead.

Thank you, and good morning, and welcome to the Beasley Broadcast Group Third Quarter 2012 Webcast. 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 morning’s news announcement and on the company's website. I’d also remind listeners that following its completion, a replay of today’s webcast can be accessed for 5 days on our website, bbgi.com. Investors can also find a copy of today's press release on the investors or preference sections of the site. My remarks this morning will primarily focus on the third quarter results, our balance sheet, and our markets. Q3 was a very busy quarter for our company. Operationally, it was another quarter where our focus on profitable revenue and expense management drove growth in SOI, which resulted in another period of leverage reduction. Additionally, in 3Q, we refinanced our senior secured credit facility and closed on the acquisition of KOAS-FM in Las Vegas. Actual net revenue for the quarter increased 3.1%. We are reporting same station numbers for the quarter given the August 10 closing of KOAS. Same station numbers will exclude net revenue, station operating expense and SOI from the station in the third quarter. So on a same-station basis, revenue increased to 1.4%. The revenue increase was primarily due to strength in our Vegas, Coastal Carolina and Augusta clusters. On a consolidated same-station basis, local revenue was basically flat for the quarter, while national revenue rose approximately 10%. The national increase was primarily driven by political in our Vegas and Miami markets. Of the $740,000 year-over-year revenue increase, political revenue in the quarter amounted to approximately $400,000, with almost half of that coming from our Vegas cluster. Third quarter station operating income rose 9.1% and same-station SOI increased 7.1%, which highlights the operating leverage realized from our revenue growth and expense discipline. We have 6 markets that report to Miller Kaplan, and these markets account for approximately 82% of our total revenue. Revenue in these 6 markets, according to Miller Kaplan, increased 2% for the quarter compared to our stations, which also grew 2%. Now let me give you some insight on net revenue pacing data for the quarter from our Miller Kaplan markets. July was the strongest month, with market revenue growing 7% compared to our stations increasing almost 8%. August was still strong with combined market revenue increasing approximately 5.5%, which was in line with our stations. However, in September, the Philly market was down 10%, primarily due to national, while the Miami market was down 5%, primarily due to local, which contributed to our combined station clusters revenue decreasing 5.5%, which was in line with our Miller Kaplan markets. Now let's look at Q3 category data. Our 5 largest categories on a combined same-station basis increased 2% for the quarter, and these 5 categories accounted for 59% of our revenue. Specifically, we saw increases in auto, health and restaurant, which were offset by declines in retail and other. Drilling down further into auto revenue. On a combined basis, it rose 21% as we generated double-digit increases in import auto spend and mid-single digit increases in domestic auto spend. Looking now at ratings in our larger markets. We are making progress and have identified areas for improvement and, where needed, we are making changes. In Philly, Wired, our Rhythmic CHR station, has seen its 18-34 listenership decline over the last quarter. And in the latest monthly ratings, the station ranked fifth in this demo. In response to this, we have implemented a promotional campaign. Conversely, our country station, WXTU, ended the September monthly with one of its strongest books to date, ranking second, 25-54. Country remains a very popular format and we are seeing improved ratings at most of our country stations across our markets. Moving onto Miami. WPOW, our Rhythmic CHR station, is now ranked #3, 18-34. Launched earlier this year, our new morning show continues to build ratings across most demos in the latest monthly PPM. Similarly, WKIS, our country station, generated a 4 share 25-54 and has posted steady gains since January of this year. QAM, our a.m. sports talk station, has a very strong lineup and is set to compete with other sports talk stations in the markets. Our Vegas market ratings have shown significant improvement this year. KKLV, our Classic Hits station, is in the top 5, 25-54. And our recently acquired KOAS, was ranked #6, 25-54 for the month. Our country and Bob stations continue to show ratings improvements as well. So our Vegas market is positioned well in terms of ratings at this time. Moving on, Q3. Actual station operating expenses were flat while same-station operating expenses decreased 1.5%. And actual station operating income increased $750,000 or 9.1% to $9 million, while same-station SOI increased 7.1%. Corporate G&A for the quarter, excluding stock-based comp, totaled $1.8 million, which reflects a slight decline compared with Q3 '11. And stock-based comp during the quarter was $108,000, which compares to $175,000 last year third quarter. Third quarter interest expense increased $39,000 to $1.79 million from $1.75 million. On August 9, we closed on 2 new credit facilities, refinancing the remaining $120 million of debt outstanding under the prior credit facility. And as a result, we recorded a loss of extinguishment of long-term debt of $2.6 million. Overall, our new credit facilities extend the company's maturities to 2017 or 2018, improve financial flexibility, and allow for share repurchases or dividends, should they be authorized by our board. While borrowing costs are higher with an average interest rate for both facilities slightly less than 7%, we intend to remain active in using cash from operations to lower overall debt levels, and believe the extended maturities, certainty and the option to again return capital to shareholders offset the higher costs of capital. Our effective tax rate for the quarter was approximately 40% and Q3 current cash taxes were approximately $300,000. Now turning to the balance sheet, during the quarter we made repayments totaling $1.3 million against our debt, which was reduced to $118.9 million. The latest trailing 12-month consolidated operating cash flow, as defined in our credit agreement, was $29.9 million, resulting in a reduction in the total leverage ratio to 3.97x at September 30. And this compares to our leverage ratio of 4.64x at September 30, 2011. Our new credit agreements allow the company to receive the benefit of $5 million cash on hand and calculating net leverage for 2012. Though reflecting the cash, our net leverage is 3.8x at the end of September. As mentioned earlier in the call, we closed the acquisition of KOAS-FM on August 10. The purchase price of this station was $4.5 million. We paid $2 million cash at closing and issued a note for $2.5 million, payable over 5 quarters. However, we paid this note off by the end of September so the entire acquisition was funded from cash from operations in third quarter. Cash on hand at the end of the quarter was $11.4 million, and we spent approximately $600,000 in CapEx in the quarter and, year-to-date, we've spent approximately $1.3 million in CapEx. So to recap, BBGI delivered impressive revenue and SOI result in Q3. We refinanced our debt, providing more financial flexibility and certainty, and we used cash from operations to purchase KOAS-FM and made payments against our debt. Looking at the balance sheet, total leverage was reduced to 3.97x, marking our lowest leverage ratio in over 10 years and reducing leverage remains a corporate priority. And our operating results continue to highlight the value of this focus. So with that, I appreciate your time today, and I ask that if any of you have questions to please feel free to call me anytime. And thank you very much.

Thank you for your participation. That concludes today's webcast.