Beasley Broadcast Group, Inc. (BBGI) Q1 2013 Earnings Report, Transcript and Summary

Good day, and welcome to this Beasley Broadcast Group First Quarter Earnings Call. Today's call is being recorded. At this time, I'd like to turn the call over to Ms. Caroline Beasley. Please go ahead, ma'am.

Thank you, Melissa, and good morning. Welcome to the Beasley Broadcast Group First Quarter 2013 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 our 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. You can also find a copy of today's press release on the Investors or Press Room sections of the site. My remarks this morning will primarily focus on the first quarter, our balance sheet and our markets. So for the quarter, actual net revenue increased 6.5%. Now on a same-station basis, net revenue increased 3.4%, and this excludes revenue from KOAS in Las Vegas, which we acquired in the third quarter of 2012. Our first quarter revenue growth primarily reflects double-digit increases in 2 of our 3 largest market clusters, that's Philly and Vegas, as well as a double-digit increase in our Fort Myers operations. On a consolidated same-station basis, national and digital revenue increased approximately 20% and 43%, respectively, which more than offset a 2% decline in local revenue for the quarter. We have 5 markets that report to Miller Kaplan, and these markets account for approximately 77% of our total revenue. According to Miller Kaplan, total revenue in these 5 markets decreased 0.5% compared to our station clusters in these markets, which grew 8.7%. And I'm pleased to report that each of our clusters outperformed their respective market for the quarter. In addition to our Philly and Las Vegas clusters dramatically outperforming their markets, our Naples-Fort Myers cluster grew revenue by over 10%, while the market grew 6.4%. So now let's take a look at our 3 largest markets according to Miller Kaplan. Starting with Philly. Market revenue increased 2.3% for the quarter, with local rising 0.6% and national declining 1.2%. With the great performance from WXTU, our cluster outperformed the market, growing revenue almost 23% for the quarter as we generated increases in local, national and digital. Vegas was another shining star for our company in the first quarter and significantly, we outperformed the market. The market decreased 6.4% compared to our stations, which were up over 20%. In Miami, the market declined 2.3% for the quarter with national increasing 10% and local down 7.1%. Our cluster performed slightly better than the market, posting a revenue decrease of just under 2%. National and digital were gangbusters, increasing 25% and 152%, respectively. However, this was not enough to offset a 7% decline in local for our cluster. Looking now at Q1 category data. On a combined same-station basis, our 5 largest categories were flat for the quarter, and these 5 categories accounted for approximately 58% of our revenue. Specifically, we saw increases in our top 2 categories, retail and auto; while health, restaurants and other posted declines. Retail increased 10% for the quarter and auto, on a combined basis, rose 5%. Now outside the top 5 categories, we saw significant increases in telecom, banking and insurance categories. Looking now at ratings in our 3 largest markets. We are pleased to report the progress that our stations are making. In Philly, WRDW, our Rhythmic CHR station, launched its new Morning Show in mid-February, and we are hearing positive and seeing positive reviews there. At the same time, our country station, XTU, continues to perform well, and we expect to see ongoing success here. In Miami, 2013 has been good to Power 96 to date. It is seeing some of its best PPM top line shares that we are achieving further upward momentum at this station. In WKIS, our country station, continues to be consistent in the 25-54 demo. Our Las Vegas stations also continue to perform very well ratings-wise. We have 2 stations in the market, KKLZ and KOAS ranked in the top 5, 25-54. Our country station continues to be competitive, and BOB launched an extensive marketing campaign in the first quarter. So we're hopeful that we'll see ratings improvements there. So as a result, we believe that each of our 3 largest market clusters are well positioned in terms of ratings for 2013. So moving on, actual station operating expenses increased 7.7% through the quarter, while same-station operating expenses rose 5% for the quarter. Actual expenses represent the inclusion of KOAS, which accounted for about 1/3 of the total increase. And almost half of the same-station operating expense increase reflects an increase in sales expenses as we reinvest in our sales force. The other half reflects an increase in trade or noncash expense. So actual SOI for the quarter increased 4.1%, while same-station SOI was flat. And excluding the impact of trade revenue and expense, same-station SOI increased 2.8%. Corporate G&A, excluding stock-based comp, totaled $2 million for the quarter, and stock-based comp expense for the quarter was around $137,000. Interest expense for the quarter increased approximately $700,000 to $2 million from $1.3 million. The increase is a result of a refinancing of our credit facility in the third quarter of last year. So turning to the balance sheet. During the quarter, we made repayments totaling $1 million against our debt, and our debt was reduced to $115.7 million. The latest trailing 12-month consolidated operating cash flow was $31.3 million, resulting in a reduction in the leverage ratio to 3.7x at the end of the quarter, and this compares to our leverage ratio of 3.78x at the end of the year. Our credit agreements allow the company to receive the benefit of $7.5 million of total cash on hand. And calculating net leverage for 2013 that reflecting the cash, our net leverage is 3.46x as of March 31, and that compares to our covenant of 5.75x. On April 3, we amended our first lien credit agreement to permit us to prepay the $25 million second lien credit facility in full and to modify the interest rate margins on the term loan. We borrowed an additional $20 million on the term loan, we drew down $2 million on our revolver and we paid the remaining $3 million from cash on hand. Total debt outstanding on the credit facility after the amendment was $112.7 million. And reflecting the full repayment of the second lien credit facility, total pro forma leverage was 3.61x and pro forma leverage net of the $7.5 million in cash was 3.37x. Now the company expects to record a loss on extinguishment of debt of approximately $1.3 million in the second quarter in connection with the amendment. Cash on hand as of the end of the quarter was $14.2 million, and pro forma for the cash used to pay down the second lien credit facility was $11.2 million. We spent $287,000 in CapEx in the first quarter. So overall, our first quarter results highlight a continuation of the operating momentum we've achieved over the last several quarters. And looking forward, we remain focused on on-air and digital revenue growth, and we expect our station clusters to exceed their markets' performance. We plan to continue to strengthen our balance sheet and lower leverage by allocating cash flows from operations to further reduce our debt. And with further progress on this front, we intend to evaluate future opportunities to return capital to shareholders. So with that, I'd like to thank you very much for participating on our call today, and should you have any questions, please feel free to give me a call. Thank you very much.

That does conclude our conference for today.