Beasley Broadcast Group, Inc. (BBGI) Q4 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the 2012 Fourth Quarter Results for Beasley Broadcast Group Conference Call. This call is being recorded. At this time, I would like to turn the call over to Caroline Beasley. Please go ahead.

Thank you, Nicole. And good morning. Welcome to the Beasley Broadcast Group Fourth 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. I'd also remind listeners that, following its completion, a replay of today's webcast can be accessed for 5 days on our website. My remarks this morning will primarily focus on the fourth quarter, the full year, our balance sheet and our markets. However, before getting into the numbers, I am very pleased to announce that we have entered into an agreement with Big Machine Label Group. This agreement will align our business interests in both over-the-air and digital radio. I want to thank Scott Borchetta of Big Machine and Bob Pittman in Clear Channel and David Field of Entercom for paving the way for record companies and broadcasters to work together in this manner. I'm confident and encouraged that we will continue to forge new relationships by focusing on the future and not dwelling on the past. So moving on into the numbers. Actual net revenue for the quarter increased 9.1% and same-station net revenue increased 5.7%. Fourth quarter same-station numbers excludes net revenue, station operating expense and SOI from KOAS in Las Vegas, which we acquired in August of 2012. So for the quarter, the revenue increase was primarily due to strength in; Philly, Vegas, Fort Myers and Augusta. And of the $1.4 million year-over-year same-station revenue increase, political amounted to about $1 million, with almost half of that coming from Las Vegas. On a consolidated same-station basis, our local revenue for the company increased 2%, while national revenue rose approximately 37%. The national increase was primarily driven by political in Vegas, Miami and Wilmington. Actual political revenue for the quarter was about $1.2 million, and the Obama campaign was our largest advertiser in the quarter. We were able to realize significant operating leverage from our revenue growth, as SOI rose 14.3% and same-station SOI increased 9.5%. Now we have 6 markets that report to Miller Kaplan and these markets account for approximately 84% of our total revenue. So according to Miller Kaplan, these 6 markets increased almost 4%, and that's for the quarter, compared to our stations in these markets, which grew 9%. Our out-performance in the quarter was primarily due to strength in our Philly and Vegas clusters. So now let me give you some insight on net revenue pacing data for the quarter, and this is for our Miller Kaplan markets. October was the strongest month, with revenue in our markets growing 14% compared to our stations which increased almost 17%. And of course, this is in large part due to political. We received approximately 800,000 in total political on our stations in October and almost 400,000 in November. And for the month of November, revenue in our markets increased approximately 2% while our stations rose approximately 7%. And in December, our markets were not immune to the negative impact related to the fiscal cliff negotiations and uncertainty surrounding the economy. Revenue in our markets declined 4.5%, yet we were able to outperform our markets and we generated growth of 4.5%. So now I want to review cluster performance in our large markets, and I'm just going to focus on Philly, Miami and Vegas. These 3 markets account for approximately 58% of our revenue and SOI. So let's start with Philly. The market was down almost 4% for the quarter. Fortunately, with the great performance from XTU, our cluster outperformed the market, growing 6% for the quarter. Vegas was another shining star for us in the fourth quarter. The market increased almost 10% compared to our stations, which were up 30%. And as noted earlier, political was a big contributor to this. Moving on to Miami. The market grew 9.6% for the quarter. However, our cluster did not perform in line with the market, as we posted a revenue increase of 3%. Now let's look at Q4 category data. Our 5 largest categories, on a combined same-station basis, increased 2% for the quarter. And these 5 categories accounted for about 55% of our total revenue. Specifically, we saw increases in our top 2 categories, retail and auto, while health, restaurants and other posted declines. Now drilling down further into auto. On a combined basis, it rose 19% as we generated double-digit increases in both import and domestic auto spending. Just to note, political was our seventh largest category in the quarter. Looking out at full year. Actual net revenue increased 2.6% and same-station net revenue increased 1.3%, with these results inclusive of about $2 million in total political revenue. The 6 markets that report to Miller Kaplan grew 2.2% for the year compared to our clusters, which slightly outperformed our markets, growing 2.5%. Now let's take a look at ratings in our larger markets. Starting with Philly, WRDW, our Rhythmic CHR station, had seen its 18-34 listenership decline. However, recent ratings point to stabilization. And with the 4Q promotional campaign combined with the new Morning Show we feel that the station is poised for improved ratings. At the same time, our country station, XTU, continues to perform very well, ending the December monthly in the top 5, 25-54. Moving on to Miami. WPOW, our Rhythmic CHR station, is now ranked #3 18-34. We named a new program director in the fourth quarter. He is a native to Miami. So we're delighted that he has chosen to return back to Miami and we look forward to his contributions in 2013. KISS, our country station in that market, continues to be consistent in the 25-54 demo. And QAM, our AM sports talk station, has a very strong lineup and is set to compete with other sports talk stations. Our Vegas stations continue to perform very well in their ratings. KKLZ, our classic hits station, is in the top 4 25-54, and our recently acquired KOAS was ranked #2 25-54 for the month. Our country and BOB stations continue to show ratings improvements, too, so our Vegas cluster is positioned well for 2013. So moving on, actual station operating expenses increased 5.9%, while same-station operating expenses increased 3.4%. Same-station operating expense increases reflect higher revenue levels leading to increased commissions. We also saw an increase in quarter-over-quarter Arbitron fees, promotions and bonuses. Actual SOI for the quarter increased $1.3 million or 14.3%, while same-station SOI increased 9.5%. And continuing our trend, margins improved to 39% for the quarter compared to last year's fourth quarter at 37.5%. And for the full year, our SOI margins improved to 37.6% from 35.2% in 2011. Corporate G&A, excluding stock-based comp, totaled $2.1 million. This reflects an increase of almost $300,000 and this is primarily a result of higher bonuses. Stock-based comp expense for the quarter was approximately $96,000 and this compares to fourth quarter 2011 stock-based comp expense of $148,000. Interest expense for the quarter increased approximately $700,000, and this is a result of the refinancing of our credit facility on August 9. And our effective tax rate for the quarter was approximately 40% and Q4 current cash taxes were $1.7 million. Now turning to the balance sheet. During the quarter, we made repayments totaling $2.1 million on our debt and our total debt was reduced to $116.8 million. The latest trailing 12-month consolidated operating cash flow was $30.9 million, and this resulted in a reduction in our leverage ratio to 3.78x at the end of the year. This compares to 4.6x at the end of 2011. And our new credit agreements allow the company to receive the benefit of $5 million cash-on-hand in calculating net leverage. So in taking that into consideration, our net leverage at the end of the year is 3.61x. The company declared and paid a special one-time dividend of $0.085 per share in the fourth quarter, and this amounted to a return of capital to shareholders of about $1.9 million. As stated in prior earnings calls, one of our goals has been to return capital to our shareholders. And with the anticipated tax changes, we were able to do so before year end. At the end of the year, we had cash-on-hand of $11.7 million. We spent $414,000 in CapEx for the quarter and $1.7 million for the year. So to recap: BBGI delivered solid revenue and SOI results in the fourth quarter and for the full year 2012. During the year, we refinanced our debt, which provided additional financial flexibility and certainty. We used cash from operations to purchase KOAS-FM in Las Vegas. And we've made prepayments against our debt. And for the first time since the recession we returned capital to our shareholders. Looking at the balance sheet. Total leverage was reduced to 3.78x, marking our lowest leverage ratio in over 10 years. Reducing leverage and returning value to our shareholders remains a corporate priority and our operating results continue to highlight the value of this focus. Also, we are very excited about the Big Machine agreement. And on the industry front, we see the Spring FM chip announcement made during the CES last month as a huge advancement and look forward to 30 million mobile devices being activated with FM radio capabilities. The industry is grateful to Jeff Smulyan for his tireless effort on this front over the last several years. And we remain hopeful that other telecoms will adopt similar plans. So with that, I want to thank you very much for your time today. And should you have any questions, please feel free to give me a call. Thank you.

Once again, ladies and gentlemen, that concludes today's conference. We appreciate your participation today.