Q3 2022 Beasley Broadcast Group Inc Earnings Call

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Good morning, and welcome to Beasley broadcast group's third quarter 'twenty to 'twenty two conference call before proceeding I would like to emphasize that today's conference call and 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.

Our most recent annual reports on Form 10-K as supplemented by our quarterly reports on Form 10-Q.

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

So we use 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 would also remind listeners that following its completion a replay of today's call can be accessed for five days on the Companys website, Www Dot B B G I dotcom.

Could also find a copy of today's press release on the investors or pressroom sections of the site.

At this time I'd like to turn the conference over to your host Beasley broadcast group's CEO Caroline Beasley. Please go ahead.

Thank you and good morning, everyone. Thank you for joining us to review our third quarter result, Marie Tedesco. Our CFO is with me on the call. This morning, but I'm happy to share that our third quarter results continued to show year over year improvement in both revenue and Soi overall net revenue increased to one.

5% year over year exceeding the guidance, we provided when we reported Q2 ever projected flat to slightly down quarter.

Now breaking that down over the air local spot revenue increased 1% or by 275000, while national revenue declined eight 7% or by $1 2 million and that includes the benefit of $1 9 million in political and preferably third quarter digital revenue.

Grew 23, 2% year over year, while audio revenues decreased one 9% similar to previous quarters, new business I'm not sure that sports betting political and a $1 9 billion year over year increase in digital revenue were the primary drivers that offset the continued Nash.

<unk> revenue decline.

Now to dig into that a bit national excluding political was down 20% or $2 7 million for the quarter and now account for about 15% of our total revenue. This trend is consistent with the past several quarters, where we've been successful in offsetting declines in Nash.

<unk> with higher local and more notably digital revenue.

As a matter of fact in both the second and third quarters digital was a larger part of our revenue that's been national third quarter digital revenue represented just over 16% of our total revenue up from 13, 2% in the year ago third quarter and our goal remains that digital revenues will be close to 20% of total revenue.

By fourth quarter with continued growth thereafter, and as a reminder, we completed the acquisition of the White label Digital agency on June 23rd and this will continue to accelerate our digital revenue growth and provides meaningful synergies with our growing digital platform.

Now historically and national has accounted for as much as 20, and sometimes 30% of our total revenue mix and as I. Just mentioned it now represents about 15% we expect national to continue to decline, which is why we have emphasized the growth of our digital platform.

While continuing to aggressively develop local direct new business and we recorded $6 4 million in new business. This quarter now given the economic backdrop, we began reducing costs early in the quarter. We executed our first of two reps at the beginning of July which eliminated approximately.

$1 5 million of permanent ranges, our second rig which was executed in early October reduced annual wages by an additional approximate $3 5 million. These initiatives were executed as we remain watchful of all expenses as we near the end of 2022 with.

Our eyes on 2023 now touching on sports betting we recorded $3 8 million in revenue or 6% of total revenue in this category during the quarter, which was driven by Detroit, Philly and New Jersey clusters, we expect that sports betting will begin in Massachusetts sometime between the.

And the fourth quarter and first quarter of 2023, and we're well positioned in this market with our five F. L that have five distinct format, reaching five different demographics, including 98, five the sports hub home to the Patriots Bruins and disrupted.

Operating expenses increased 6% year over year by 326000 with our June acquisition accounting for 926000 of new expenses Soi grew by 595000 compared to third quarter 'twenty, one with <unk>.

Margins now at just over 19% and of note when comparing third quarter 'twenty two to third quarter 'twenty, one digital soi increased to $2 million and that was from $10000 Mark and another indication of the great progress we are making in digital like previous quarters, we were able to take it.

<unk> of our bonds trading below par and we repurchased an additional $3 million at 77% of par for a total of $5 million that was settled in the quarter permanently reducing our debt to 290 million so with that I'm going to hand, it over to Marie and she's going to provide you a deep insight into.

The quarter Murray, Thanks, Caroline Good morning, and good morning, everyone. Let me start with a review of our third quarter results followed by a review of our balance sheet.

Third quarter net revenue increased one 5% or 921000 to $63 8 million, which includes 586000 from our two esport teams as well as $1 1 million from guaranteed the edge at all our second quarter Agency acquisition, we grew revenue.

Year over year, and all but two of our markets and we generated approximately $1 9 million in net political revenue in third quarter compared to 258000 last year, we continue to see higher political spending doesn't necessarily expect that which will also be evident in fourth quarter.

As of today, we have exceeded the full year political revenue received in 2018 midterm election by approximately 40% ex.

Excluding political third quarter revenue declined one 5% or 724000 due to the decline in national.

We saw a slowdown in July and August related to inflation labor shortage as interest rates increase that and the overall slowdown in the economy.

Looking closer at the quarter July was down approximately 3% with local flat and national down 28%.

August came in flat with local up 5% offsetting a 24% decline in National September was up two 8% with local up 3% and national up 5% thanks to political.

Digital revenue for the quarter grew 23, 2% to $10 2 million and represented approximately 16% of total third quarter revenue compared to a 13, 2% in the prior year quarter. We grew our digital margin from 14, 4%.

In second quarter of 2022 and from three 3% in prior year third quarter, two unimpressive 19, 6% this quarter as we close in on margin levels closer to pre pandemic over the air margins.

Station operating expenses for the quarter increased 326000, or 6% to $51 5 million, resulting a third quarter soi of $12 3 million a year over year increase of approximately 600000.

Breaking down the increase in operating expenses. The main drivers were the acquisition of a white labeled agency guaranteed digital which added 926000 of new expenses for the quarter and severance costs from part one of two risks completed its first week of July of approximately 200000.

Pro forma for the severance and the annual wage savings our expenses would have declined two 4% and our Soi would have increased 18, 4%.

Now looking at our revenue categories for third quarter consumer services remained our largest revenue category at 28, 5% of total revenue with an increase of one 1% year over year for the quarter. Our second largest category was entertainment, which switched play with.

Retail entertainment was flat year over year and accounted for 15, 8% of total revenues, we saw entertainment spend increases in all but four of our markets and sports betting added $3 8 million compared to $4 3 million in the prior year quarter.

Retail grew nine 6% year over year and accounted for 15, 7% of total revenues and we saw double digit growth in Philadelphia, Tampa, Detroit, Charlotte and Las Vegas.

Although our fourth largest category saw revenues down five 5% year over year and the category accounted for eight 3% of total revenue.

We saw double digit increase that is auto as our Detroit and Fayetteville clusters, and low single digit increases in Boston, New Jersey, and Las Vegas.

The year over year decline in this category in third quarter. Once again less than 300000. We believe this revenue category can show improvement as the supply chain issues normalize and stabilize and inventory levels continued to build at the dealership level.

Consumer products from fifth place down, 24% and five 4% of total revenue and telecom weapon six box down five 5% representing four 9% of total revenues.

Corporate G&A expenses for the quarter increased 29% or by $1 2 million compared to the same quarter a year ago to $5 1 million a year over year increase in corporate G&A is mostly related to an increase in corporate <unk> expenses of approximately 900000.

Well several severance expense from a reduction in head count.

Noncash stock based compensation increased 19000, or 75% to 270000 in the quarter and we had an income tax benefit for the quarter of $1 3 million.

Third quarter 2022, operating income declined 170000 to a negative $4 7 million compared to a negative $4 9 million in the year ago quarter, driven by the increase in corporate expense, mostly offset by an increase in station operating income.

Third quarter interest expense decreased 400000 year over year to $6 6 million related to the repurchase of our bonds over the past two quarters. We did not have any scheduled debt payments during the quarter, leaving us with a total debt of $290 million. Our next semiannual interest payment is scheduled.

For February one 2023.

EBITDA for.

For the third quarter was $7 2 million and our adjusted net leverage including add back such as certain taxes noncash compensation, our PPO brand from fourth quarter 2021, and pro forma for the agency acquisition and our July Red was 5.87.

Hi.

We ended the quarter with cash on hand of $32 8 million. That's net of the cash used for the bond repurchases.

Our cash balance continues to allow us flexibility to reduce debt and or pursue additional investments in the digital space should an opportunity arise that could further accelerate our digital growth and provide significant synergies and free cash flow. However, given the uncertain economic.

Environment, we are inclined to keep our cash on the balance sheet for time being.

Our capital expenditures for the quarter were $4 7 million, which was almost entirely related to the relocation and build out of our Boston Studios and offices, which were completed on August 30.

We have received $2 6 million and our buildup allowance from the landlord with an additional $1 5 million on the way. This compares to prior third quarter of $1 2 million and year to date Capex spend was $11 2 million or $8 6 million net of the buildup reimbursements received.

So far compared to prior year to date of $3 7 million and with that I'll turn it back to Caroline. Thank you Murray.

Our multi platform local content strategy continues to drive more audience and our market in the third quarter, our owned and operated audience grew by 22% compared to Q3 'twenty. One this growth was particularly evident in our digital O&M assets with unique users increasing.

From $16 3 million in Q3 dollars 21 to $23 6 million in Q3, 'twenty two that's an increase of 45%, but more important this expanded audience spent more time and consume more content on our digital platform, which led to higher sellable digital impression.

<unk>, which has been our focus in dot and driving digital growth. Our O&M impressions were up over 128% from Q3 21, and we expect to reach 1 billion impressions by the end of this year. In addition to this incredible growth on our digital platforms. Our radio stations continue to May.

Entail dominant positions in Nielsen, where we currently have the highest average cluster share when compared to all other major broadcasters in ppm overall, our ppm market share increased 1% year over year with adults 25, 54 and crime. In fact, we have the number one station in most of our largest market.

Including Boston, Philly, Detroit, and Charlotte amongst adult 25 54 now.

Now according to E marketer Global Media Intelligence report total audio listening in the first half of 'twenty two grew 10% year over year to a total of four hours and five minutes per day broadcast radio increased from an hour and seven minutes to an hour and 11 minutes and this is likely.

Due to an increase in at work listening with a return to work between broadcast radio and podcast. The average daily time spent increase 10 minute with podcast listening moving from 52 to 58 minutes daily and digital audio listening is up across the board movie for 72% penetration.

During the first half of 'twenty, 1% to 79% in the first half of 'twenty two.

Growth is especially notable in the 16% to 24 demographic, where those reporting havent been listening to content in the past month went from 84% to 91%. So I hope that you can see from our comments. This morning that we are well positioned to take advantage of these trends now.

Now moving onto esports, the Overwatch League had its best season today and we just ended the season and we were ranked three.

Three in the world. So I have to say that I'm really proud of our team and the accomplishments that they were able to achieve this year. We're now planning for the 23 hour season, which should be very exciting given the fact that the Overwatch. Two game was released on October four and they had more than 25 million players registered to play in its first.

10 days.

Our rocket League team team axle has a new and upgraded roster, including one former World champion and we're currently ranked number 11 in North America and that's out of 200 teams. So last month, we were pleased to announce that we entered into an asset exchange agreement.

With Odyssey, whereby we will exchange Kate on AAM and our translator for their alternative 175, K S. T E FM in Vegas, and as part of this agreement longtime Las Vegas base syndicated morning personality, David Mahoney will continue to be heard weekdays from six 8%.

Under the Beasley Media group banner, the planned asset exchange highlights our focus on premium local content and it's very complementary to our other four stations in the market and the transaction is expected to be completed sometime this quarter.

Now looking at fourth quarter as we stay focused on driving further revenue diversification and growing our audience, especially on our digital platform with our new strategic initiatives, we have seen some political crowd out leading to declines in certain categories offset by stronger than expected political.

However, we have prepared for an overall slowdown in the economy given the overall declining environment that we're seeing today fourth quarter revenue as of today is pacing flat to slightly up to prior year and breaking that down October was up eight 5% in November and December are.

<unk>, just north of down 3% and as noted earlier, we are ever mindful of the current economic environment and initiated a second web and other permanent cut cost reductions effective October <unk> of approximately $10 million on a combined basis.

So before going to Q&A I'd like to thank our teams important meyers and the corporate office here in Naples.

Outstanding job of getting us back on air and for their incredible commitment and dedication during hurricane and in <unk>.

In September of this year, our own an off air teams were a direct lifeline to the local communities that were impacted by the storm stay in only air around the clock to provide important lifesaving news and information, they're southwest spread and unwavering acts of Euro zone.

This time, we're all inspiring and I'd also like to knowledge our team.

Members once again across the company for everything that they're doing to help us move past. These economic challenges that we're currently facing and we are expecting to face going forward into 2023.

Thank you for your time this morning, and please feel free to call with any question. We do have some questions that were submitted so we will take some time to review that.

Okay, great. Thanks, Caroline So we did receive a request to disclose our quarterly EBITDA numbers.

So I asked you efficacy in RF prepared comments, we have included both EBITDA and our net adjusted leverage and we will continue to do so on a go forward basis.

So going to the first question.

Caroline what is the minimum cash balance, which what you are comfortable with and also to follow up with that are you interested in buying back any more bonds yeah.

So the minimum cash balance that we feel comfortable with its about $25 million.

And as far as buying back more bonds. Our goal is to be opportunistic in buying back bonds. However, as I said, our minimum cash balance was $25 million and we're very conscious now given the uncertain economic environment.

So that's that's where we are great.

And another question was what products or services are driving the digital route and could you give us an update on expectations for digital revenue as a percent of total revenue for about 22% in 2023, yeah. So I think that hopefully you heard from the comments that I made earlier today.

As you know our focus has been growing our audience on the digital platform. So we have rolled out an editorial content initiative.

Has really driven our page views and therefore impression so our own our products as a result of this were really the driver of revenue growth and we saw a 23% increase in revenue. So what are these products that we're able to sell we've got programmatic audio and display and then of course.

Worse.

Sales from our podcast and display sell our TPP products for the quarter were flat. So again. This is all driven by <unk> product this year.

Great and then we have one more question here.

And this is about the timing of the cost reduction plan and what are the cash costs of implementing those cuts. So I will take that so of the 10 million annualized cost cut half of those are permanent reduction in head count, which cost us just under 600000 in sabra.

The head count reduction was effective in October so we will see some benefit of that in fourth quarter Lastly, add that severance expense and that is we had a few more questions, but they were all covered in our prepared comments.

Alright, well. Thank you very much for your time today and feel free to.

Reach out with any additional questions that we may not have covered alright bye.

This concludes today's call. Thank you for your participation you may now disconnect.

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