Q1 2021 Beasley Broadcast Group Inc Earnings Call

Good morning, and welcome to the Beasley broadcast group's first quarter 2021 conference call for.

Before proceeding I would like to emphasize the today's conference call and webcast will contain forward looking statements about our future performance and results of operations and involve risks and uncertainties described and the risk factors section of our most recent annual report on form 10-K, and supplemented by our quarterly reports on form 10-Q.

Today's webcast will also contain the discussion of certain non-GAAP financial measures within the meaning of item 10 of regulation S. K.

Conciliation of these non-GAAP measures with their most direct comparable financial measures calculated and presented in accordance with GAAP can be found in this morning's news announcement and the company's website.

Also like to remind listeners that following its completion a replay of today's call can be accessed for five days and the company's website www Dot B B G. I Dot Com you can also find the copy of today's press release on the investors or pressroom sections of the site at this time I would like to turn the conference over to you.

Your host Beasley broadcast group CEO Caroline Beasley.

Go ahead.

Thank you Stephanie and good morning, Thank you for joining us to review, our first quarter operating the Dol Marie Tedesco, our CFO, who is on the call with me this morning.

With the industry trends and Jan and fast start and strong but slow significantly at the midpoint as we were again challenged by tightened and COVID-19 related restrictions and several of our markets as well as of the snow storms that affected the large portion of the northeast and February we ended Jan and staff, each down 21% and when.

Compared to 'twenty, and 'twenty and as a reminder, Jan and February of 'twenty, and 'twenty were up 7% of or the same period and when comparing the 2019 and that was in part due to political March revenue increased three 9% compared to March 2020 as we lap the initial impact of the pandemic.

Overall first quarter revenue declined $16 four per cent and all of that revenue increases and our Atlanta Augusta and Detroit markets.

And I noticed political spending also impacted the comps as net political revenue and first quarter of 'twenty with $1 7 million compared to 265000 in Q1 21. In addition, we're still waiting for the return of MTR and event revenue and disregard our hugely popular and wild splash and camera.

I'm sure that both of which took place and 2020 does not recur in Q1 of 'twenty, one impacting Q1 comparisons by about a million dollars normalizing for political and MTR of that revenue for Q1, 'twenty. One would have been down 8.8 per cent. The good news is that while we didn't have.

Revenue from Baas flash or of the Tampa home show and the first quarter. Both of these events have been rescheduled for later in the year.

Continuing the momentum of recent quarters, we continue to make meaningful progress with our digital growth initiatives as Q1 digital revenue rose, 10% year over year and accounted for 12% of of our total revenue.

Given the continued growth and it's the accounting for more than 10 per cent of total revenue. We have begun to report digital revenue on a segment basis of factor first quarter. We believe this milestone represents an important inflection point and our evolution revenue and cash flow of diversification remains a strategic priority and we are.

Making meaningful progress on the tranche and believe our results throughout 'twenty 'twenty. One will further highlight the complementary nature of our radio operations with our digital and esports offerings. The.

The first quarter results reflect some of the operating expense reductions implemented in 2020 offset in part by some increases in spending as we began reinvesting and research and marketing well also continued our investments and digital for Iraq, which is our internal of digital advertising agency, which is the <unk>.

The rest driver of the rise of our digital revenue.

And the face of the year plus long pandemic Beasley has managed its operations and in manner that prioritize the health and safety of our employees and the local communities, we serve while preserving our financial flexibility and advancing our prospects for long term growth I'm extremely proud of the way our team members rose to a draft and overcome the.

And many unprecedented headwinds to our business, while continuing to deliver exceptional local content and services to our listeners and advertisers online users and esports fans. During this difficult time for the country.

We are energized by the progress, we're making with our ongoing diversification initiatives and the strength of our content and market positions and are optimistic about the future as vaccination rates continue to ride the most markets across the country of expected to be more or less fully operational and the next few months are N P. R and of that revenue will come.

And with our recent 300 million dollar deal debt financing and receipt of $10 million and PPP loans, we ended the quarter with $56 2 million and cash and the balance sheet strength to continue to diversify our business revenue and cash flow for higher growth rate reflects.

And this optimism of our second quarter is pacing currently up 86 per cent breaking that down April was at 128% with May and June pacing up 100 per cent and 32%, respectively. We expect may and June pacing to improve even more as of May.

Get further into the quarter some of the hand, it over to Marie to give you more details on the corner.

Caroline and I will start with a review of the financial the salt and provide the balance sheet update for.

First quarter net revenue decreased $16 four per song or $9 for maryann to $48 two of Manhattan, which includes 720000 from our esports team, we generated 264000 and political revenue during the quarter compared to 1.7 out of them.

And the prior year breaking down the quarter January decreased 21, three percentage year over here and February was down 21 per se.

And if we comped against the strong start in 2020 in March revenue rose three 9% year over year, reflecting the comp against the beginning of the pandemic and make March 2020.

For the quarter revenue was up year over year at our Atlanta, Wilmington assay and our digital clusters.

Station operating expenses for the quarter decreased $7 9 million for $15 six for fast just for you for the amount yeah for Sofia, the first quarter Soi of 5.2 of Maryanne.

Quarterly expense decrease is the direct first of all of our 2020 permanent expense reduction, including a reduction of our allowance of count somewhat offset by the reinvestment and our digital agency, which will continue through 2020, one asheville, certain instead of that increase that and waste.

Search and marketing as we bring them back in our markets and clusters.

Now looking at our revenue categories for first quarter on the actual basis consumer services, including service oriented business that remains our largest revenue category at the 29 seven per cent of our total revenue and this category was flat year over year are set for.

And the largest first quarter category retail represented about $14 one per cent of our total revenue and was down 14% year over year Entertainment the land of indoor Spa, representing an 11.9% of first quarter of revenue. This category of declined just over two.

And two six per se.

Auto our fourth largest category saw revenues down 13% year, all of a year and although it was 11, 2% of total revenue base.

And this category showed year over year increase asking and several of our market, including the Philadelphia, Detroit and Las Vegas, and we see the potential for this category. The strength then in 2020, one as the industry supply chain issues E.

Our fifth largest category and was consumer product, which represents 7%. The first quarter of revenue that includes pharmaceutical suite view of the products and all the card this category of declined nearly 8%.

Telecom and utilities was $5 five per cent of total revenue and this category was down $9 four per se.

Corporate G&A expenses for the quarter decreased $13 five per cent or by 608000 compared for the same quarter a year ago. Two of three 9 million the year over year decrease and corporate DNA reflects the 2020 expense reduction initiatives as well of the allocation of.

Certain digital expenses from corporate to our market.

Noncash stock based compensation and increased $95 four per cent to 521000 in the quarter. We had no income tax expense for the quarter and our effective tax breaks for the quarter was 19, 6% for.

First quarter 2021 operating income was a negative $2 5 million compared to a negative 7.1, now and yet and the year ago quarter. The prior year operating income included non cash impairment losses of $6 8 million for softening from the impact of the COVID-19 pandemic on.

And revenue, while the first quarter 2021 operating and the economy, let's say one for like 1 million of non operating expenses.

Total first quarter interest expense increased $1 6 million and year over year, just $5 8 million, reflecting the capital the restructuring we do not have any scheduled loan payments and my first interest payments the schedule for August of 2021.

First quarter of 2021 free cash flow with the magazine for point of 2 million compared with the negative $4 6 million and the previous year of quarter.

During the first quarter, we completed the previously announced 300 million bond offering which allowed us the terminate our term loan b revolver and all of a subordinated note.

And the bonds were issued of five years with the non call too and the coupons of $8, 625% excess net proceeds of 25 now and then we're adding to our balance sheet and can be used for general corporate purposes and.

In addition, and due to the future economic uncertainty on February 2nd we applied for and were subsequently approved for tens of millions P. P alone as media companies became eligible to participate and the latest round of SBA COVID-19 related along the.

S P. A non cash of 1% interest and could qualify for forgiveness.

Together these transactions have greatly improved our liquidity profile and provides additional capital and we continue to diversify our best net revenue and cash flow is still higher growth area. We.

We ended the quarter with cash on hand of $66 2 million and how the total outstanding debt as of March 31, 2021, what's the 310 million, including the 10 million for PPP loans.

We spent 1 billion the capex for the quarter and that's something that's just the viewpoint for now and yes in the prior year first quarter and with that I will not turn it back the care I think of marine So let me add a bit more color on why we are optimistic about participating and the recovery after the vaccination and take hold and we were trying to a new.

Normal despite the COVID-19 and weather related challenges and lack of N T R and of that revenue in Q1, we continued to see a sequential increase and theft of Virginia March over February and now April over March revenue growth from our digital agency business exceeded our internal budget in the first quarter.

And this improvement combined with the $7 9 million of operating expense reductions resulted in positive S O Y and EBITDA for the quarter now moving onto esports. These businesses continue to be a growing and popular facet of our company with the mass appeal to younger consumers. So let me give.

A quick update on our recent initiatives and our Houston our off platform during the quarter, we completed an asset for <unk>.

All of that swap whereby we secured the remaining 10 per cent interest and the alcohol and exchange for our interest in the Detroit Renegades and after naming a new coaching and player of roster for 2020 one the out all season kicked off on Friday April 16th being selected to host the league season opener against the dollar.

Fuel not only did we win the match against our biggest rival but we then pulled in a historical win on that Sunday afternoon, beating the two time reigning world champion viewership for both of these not just the exceeded 113000 light viewers and we were ranked as the number one and number two most of <unk>.

Used matches for the weekend following that first weekend of play we've competed and three additional bad debt and we're currently for and one having box to the Dallas fuel this past.

Sunday and however, we are still one of the top ranked teams and belief. We believe these positive for early season results reinforced the popularity and fan favorite status of the alcohol and our position to monetize this platform.

So moving on with our focus on the desktop of live and local content of radio stations continue to gain audience share and the markets. We operate a P. P. M ratings share performance in Q1 was the best and over three years with adults 25 54 in fact, our P. P. M stations are up for per.

Sent from Q1, Q1 of 19 and up nearly 2% from Q1 of 'twenty like last quarter. Our P. P. M cluster and for a lot share of was once again the highest of any other major broadcast or in the industry and finally, our total on air audience of our Kim has been consistently growing since the pandemic.

And now more than 93% of where our audience was prior to COVID-19 and we will continue to see growth as our markets fully open.

Now looking ahead as we celebrate our 60 <unk> anniversary and 2021 and during the time of significant personal hardship for so many of our founding values have never been more important and therefore, we are a local media company that produces unique local content and our brands connect our audience and to their favorite.

Artist Sports teams and most important our local community and as much as the world has changed and the past year. So much of what makes Beasley exception all of a sense George founded the business of 1961 has remained true our commitment to local and our culture of innovation and entrepreneurship and B.

So in 2020, one of our strategic priority of art or street strategic priorities remain focused on serving our communities, while diversifying our revenue growing our cash flow and maintaining a solid and flexible balance sheet. We believe the experience of our team and strong competitive positions and our market.

Combined with the steps, we've taken to reduce costs and improve operating efficiency position us for near and long term success and the enhancement of shareholder value. So with that we did receive several questions. This morning, I'm going to hand, it over to Marie and she can reviews of his question.

Thanks, Caroline and yes, we did break even for your questions that were not addressed in the earnings release. So when the first question can you provide some color on the expanding on the expense savings and put in place last year compared to 2019 expenses.

Operating expenses for first quarter declined for 4 million for $9 four per se when comparing to the first quarter of 2019.

Full year operating expenses.

Well the will include the our investment of approximately 10 million of ours and they should all of direct agency and also includes the full year of operating expenses all of our esports team, which is equivalent to approximately 2.5 and now yeah and.

Including these added expenses and the fact that we are reinvesting and marketing and research of our assets, we expect flat for a small increase and full year expenses, there's all kinds of loose their share of some of the our digital expenses from corporate overhead two of the mark that and we expect corporate debt.

Overhead expenses also to be free.

Next question. Please explain the the first tax liabilities on the balance sheet.

And the first half of liability on the balance sheet to come primarily from the difference between book and tax and like the registration of our FCC license debt and this liabilities will only be a way of life, if our assets ourselves.

Next question can you provide some insight unexpected for Capex for this year and is this most of the spending on property and equipment of existing radio station.

So yes, we expect the span of approximately 7 million this year with approximately for the email and Yang of studio and office build outs and two of our markets with the remaining being normal cat and making them.

Next question can you provide guidance on free cash flow this year.

So.

And the past free cash flow is a high priority for us and after plenty of 'twenty, we do expect to produce positive free cash flow by next quarter.

Next question.

Can you give some additional color at the topline growth and second quarter, and how that fast compared to 2019 Caroline yeah. So the patients that we provided and the call our year over year to 2020, we do use 2019 for internal comparison purposes.

And as going forward, we believe that they are more relevant so April 19, compared with the April 'twenty, one was down 8%.

On May 19, compared to May 21, we are 75 per cent of May 19th of final number and then and June 19 compared to June 'twenty. One was <unk> 57 per cent of June 19th final number. So June appears to be at this point a little stronger.

And then May right now we are 75 per cent of Q2 19 in terms of booking and.

And in terms of pacings, and where are we potentially will and given the data we expect that our Q2 and.

The 21, compared with Q2 19 could be down in the mid single digit and.

And the caveat being and T R and events and that could swing that either way.

And as of now the bookings are coming very very light as we have seen over the last few months.

And thank you and we have all of our questions. How do you plan to use excess cash of retained cash from revenue going forward, yeah. So for now and where keeping the cash on our balance sheet, we are reinvesting and our company and research and marketing and also and dessert all and we.

And you are looking for potential strategic investments that are targeted towards digital.

And that's all the questions we have okay, great all right well. Thank you very much for your time. This morning, and should you have any questions. Please feel free to call.

Okay.

Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.

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