Caroline Beasley
Management
Good morning, and welcome to the Beasley Broadcast Group Third 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 this site. My remarks this morning will primarily focus on the third quarter, our balance sheet and our markets. So to begin, this was a solid quarter of actual and same-station revenue and SOI growth for the company, particularly considering that we generated approximately $400,000 in total political revenue in Q3 last year. And I'm also pleased to report that during the quarter, we closed on the acquisition of KVGS in Las Vegas, a station that we've been operating under a management agreement since June of 2010. So for the quarter, actual net revenue increased 5%. Same-station net revenue increased 2.7%. And excluding the benefit of approximately $400,000 in political advertising in third quarter of 2012, our same-station net revenue rose approximately 4%. Our third quarter same-station revenue growth primarily reflects increases at our Philly, Miami and Augusta clusters. On a consolidated same-station basis, local and digital revenue increased approximately 1.5% and 46%, respectively. These increases more than offset a 2% same-station decline in national, which is primarily due to approximately $255,000 in national political advertising booked in last year's third quarter. So we have 5 markets that report to Miller Kaplan. These markets are Philly, Miami, Vegas, Fort Myers and Augusta, and they account for approximately 76% of our total revenue. In the third quarter, our clusters outperformed in each market, as total revenue in these 5 markets decreased 1.4% for the quarter, while revenue at our station clusters in these markets grew by 6.8%. So let's take a look at the performance of our large market clusters. Starting with Philly, market revenue increased 2.5% for the quarter, with local and national increasing 1.6% and 2.5%, respectively. Our Philadelphia clusters significantly outperformed the market with revenue growth of approximately 16%, reflecting increases in local, national and digital, as we saw another quarter of great performance at both of our FM stations, WRDW and WXTU. In Miami, total market revenue was down 1.5% for the quarter, with national declining 9.4% and local basically flat. Our cluster outperformed the market, posting an increase of approximately 6%, as we exceeded the market in all categories just as in Philadelphia, including local, national and digital revenue. Now, as mentioned on last quarter's webcast, we hired a DOF in Miami who was overseeing sales for the entire market and she has responsibility for the sales managers at each of our stations. As expected, this has driven improvement in our local sales processes and results, and is extending the positive momentum that we've generated with national and digital throughout 2013. Moving on to Vegas, we are seeing the negative impact of political comps in this market, as almost half of our political revenue in third quarter '12 was generated from Vegas. Nevertheless, in third quarter of '13, we outperformed the market. However, the market was down 13.8% compared to our cluster which was down 5.5%. We expect the tough political comps from last year will again be reflected both in the market and our results in fourth quarter. Now let's take a look at Q3 category data. On a combined same-station basis, our 5 largest categories were down 1% for the quarter, and these 5 categories accounted for approximately 57% of our revenue. Specifically, we generated increases in our top 2 categories, auto and retail, while health, other and restaurants, particularly restaurants, were down for the quarter. Notably, auto was our largest category in the quarter, which generally we'd not seen since the recession. Outside the Top 5, we continue to see significant increases in categories such as beverage, insurance and telecom. Moving on to our station ratings, we are pleased again to report continued momentum on this front. Moving to Philly, WXTU's ratings trends continues as it has been a consistent Top 5 station in nearly all of the time -- 9 rating periods this year. WRDW has also seen tremendous growth in all demos, reflecting both creative promotions and a further development of its new morning show. With both stations in top ratings positions in their respective target demos, the Philly cluster is positioned to perform well near-term. In Miami, Power 96 just delivered one of its best ratings books of the year and continues to be a Top 3 performer, 18-34, and Top 5 performer, 18-49, which can be partially attributable to the positive response to the station's new morning show there as well. KISS Country also remains steady and is delivering number 1 ratings among the non-ethnic population in Miami. Their sport station, WQAM, continues to compete well with other sports-formatted stations in the market and is expected to benefit from high listener interest in professional and college football in Miami. In Vegas, KVGS- BOB-FM and Classic Hits KKLZ both remain top players in the market, as both are top 10 and adults 25-54 and Top 5 with women 25-54. While the most recent ratings period have been lower than normal for our Rhythmic AC station KOAS, latest trends have shown progress, and we expect Oasis to back in the top 10 in the fourth quarter. Our country station KCYE has consistently been the #1 country station in the market, 25-54 for over 2 years. Moving on to station operating expenses. Actual station operating expenses increased 4.9%, and same-station station operating expenses increased 3.2%. As outlined in our 2Q earnings webcast, during the third quarter, we appointed Justin Chase to the newly created position of VP of Programming, and this is for all of our markets, and we also disclosed our intention to further expand our digital offerings. In August, we named Stacey Sadbrooke as our VP of Digital, again, for all of our markets, which reflects the company's strategic priority to build upon our existing digital revenue and develop a range of new revenue streams. In addition to these newly created positions, same-station expense increases include self-management restructuring in the Miami market and increased bonus compensation due to certain markets exceeding their revenue goals. Now our actual station operating income for the quarter increased 5.2%, while same-station SOI increased to 1.9%. And corporate G&A, excluding stock-based comp, was $2 million, and this is in line with the first and second quarters of this year. Stock-based compensation expense for the quarter increased $77,000 to $185,000. Now, interest expense for the quarter decreased approximately 25%, and most of the decline reflects the lower cost of borrowings resulting from the repayment of the second lien holders on April 3. And as a reminder, the company paid a $1 million prepayment fee when the second lien debt was refinanced in Q2 of this year. In addition to the prepayment fees that was recorded and interest expense, we recorded a charge in Q2 for loss on extinguishment of long-term debt of $1.3 million, and that was in connection with the amendment in the second quarter as well. Both of these items impacted net income in per-share earnings on a year-to-date basis ending September 30. Now turning to the balance sheet. During the quarter, we made repayments totaling $2 million against our debt, so our total debt at the end of the quarter was $110.2 million. The latest trailing 12-month consolidated operating cash flow was $30.9 million, resulting in a reduction in the leverage ratio to 3.57x. Now our credit agreement allows us to receive the benefit of up to $7.5 million of our cash on hand in calculating net leverage. So reflecting the cash, our net leverage at the end of the quarter was 3.32x, and this compares to our covenant of 5x. Cash on hand at the end of the quarter was $12.5 million. And we spent $1.2 million in CapEx for the quarter, with most of this related to the buildout of our new studio facility in Las Vegas. Year-to-date, we have spent $2.1 million in CapEx. Looking ahead at operating results for the fourth quarter, there are few items that I would like to highlight. First, from a revenue perspective, 4Q '12 political revenue was approximately $1.2 million, with almost half of this amount being generated from the Vegas market. Second, while we expect our existing digital revenue to generate a healthy margin as we begin to expand our digital offerings to nontraditional radio advertisers, initial margins from this initiative are expected to be lower. And as part of the digital interactive initiative, we are developing a team of digital-focused sales personnel. So to conclude, overall, this quarter was another period of good revenue and SOI growth on an actual and same-station basis. Looking forward, we are excited about the strength of our ratings in key markets, and we expect our station clusters to continue to exceed their markets' revenue performance. At the same time, we are reinvesting in programming, personnel and expanding our digital offerings. Looking at our capital structure, we are now realizing the benefit of the Q2 refinancing, which has lowered our cost of borrowing and quarterly interest expense, and our leverage is at its lowest level in over 10 years. As such, we intend to continue to strengthen our balance sheet and lower leverage by allocating cash flow from operations to further reduce our borrowings. And with further progress on that front, we intend to evaluate future opportunities to return capital to shareholders. So with that, that concludes my remarks. I thank you for your time today, and welcome any of you to give me a call if you have further questions. Thank you very much.