Q2 2023 Beasley Broadcast Group Inc Earnings Call

Thank you operator, and good morning, everyone 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 of our most recent annual report on Form 10-K as supplemented by our quarterly reports on Form 10-Q, today's webcast will also contain it.

<unk> of certain non-GAAP financial measures within the meaning of item 10 of regulation 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 the company's website.

I'd 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 P. B G I dot com.

You can also find a copy of today's press release on the investors or pressroom sections of our website.

At this time, it's my pleasure to turn the conference over to your host Beasley broadcast group's CEO Caroline Beasley. Please go ahead Caroline.

Yeah. Good morning, everyone and thank you for joining us.

And you're right.

Three second quarter operating me I'll not.

Sorry to ask that.

With me this morning, I'm pleased to present, yet another successful quarter with significant improvement and that's S. O Y and EBITDA and continued double digit growth in digital revenue, reflecting our proactive initiatives to reduce expenses and permanently reduce head count in 'twenty two.

Two we delivered a quarter, where expenses were down four 3% year over year, resulting in quarterly soi growth at eight 5% and EBITDA growth of 16, 8%.

Overall revenue decreased two 1% and while we saw double digit increases in both digital which was up 14, 8% and network, which was up 32%. These were offset by softness in both national and local spot advertising.

As in recent quarters National remains challenged and for the quarter was down 11%. There was also softness on the local side local spot down 3% and this was a result of a soft local agency market with the local direct market being relatively flat.

More closely at the year over year comp second quarter 'twenty two had two event in our Tampa market, which did not return in second quarter 'twenty three as well as company wide political revenue of approximately 513000 net of agency Commission, excluding those events and political rather.

The new from the previous year, our revenue would have been flat year over year now moving to the sports betting category, we recorded $3 4 million in the quarter, that's up nine 7% from the prior year and sports betting represented five 4% of total revenue for the quarter.

Our growth in sports betting came from a surge in spending in Boston, which generated $1 5 million this quarter versus 170000 in the prior year second quarter, we expect sports betting in Boston to remain strong in both third and fourth quarters as we begin a new Patriots Celtics and.

Peru and season elsewhere, Detroit in Philly reported combined sports betting revenue of $1 5 million during the quarter.

Now the ongoing success of our digital transformation was again high market in second quarter Digital revenue grew 14, 8% and this represented 19, 4% of total revenue that's up from 16, 5% in the year ago second quarter and up from $17 three.

Per cent in first quarter of this year, our digital revenue comes primarily from the following number one.

Our owned and operated assets, which can with content creation driving the larger increase and this has a higher profit margin for US third party digital is number two which is primarily F. B M. S E O Facebook and Google and of course comes with a higher court and number three.

Web services, which we began selling late last year, our talented sales team has been able to combine our over the air and digital platform offerings to deliver marketing campaigns and brand solutions that work for our clients our.

Our continued strong digital revenue growth has moved us to within a few basis points, reaching the bottom end of our goal of digital accounting for 20% to 30% of total revenue this year.

Now breaking down the quarters revenue trend April was flat may was down one 6% in June which was a bit more challenging declined four 4% year over year.

And as a point to note same station revenue was down 3% same station expenses were down almost 7% and same station Soi increased 14%.

With strong results in a somewhat cautious outlook, we remain hyper focused on reducing our leverage by continuing to grow EBITDA and Bruce and reducing our debt. We took advantage of our bonds trading below par and reduced our debt 3 million at the end of second quarter, and we're going to continue to monitor the market conditions.

To determine when we should repurchase our bonds going forward with that I'm going to hand, it over to Maria who has additional comments on the quarter.

Thanks, Caroline and good morning, everyone I will review, our second quarter results and provide an update of our balance sheet.

Second quarter net revenue decreased two 1% or one point 40 million to $63 5 million, which includes 700000 from our esports teams. Excluding a political revenue decrease of 490002 nonrecurring fee back up 840000.

Our revenue would have been flat year over year.

We generated positive revenue growth in five of our markets, including double digit growth in Wilmington, and mid to high single digits growth in Boston, Charlotte Las Vegas, and Fort Myers did.

Digital revenue for the quarter grew 14, 8% to $12 3 million and now represent 19, 4% of total revenue for the quarter as we continue to grow this revenue stream and diversify our revenue sources.

Moving to our revenue categories for second quarter consumer services remained our largest revenue category at 31% of our total revenue this category declined calling 5% year over year during the quarter.

We're the largest increase coming from legal and the largest decrease coming from medical our second largest category was retail which fell eight 3% year over year and accounted for 17% of total revenue.

Entertainment number three represent around 14% of <unk> total revenue and decreased 1% year over year. The entertainment category include sports betting, which generated $3 4 million for the quarter auto our fourth largest category saw revenues up 7% year over year.

Here and the category accounted for 91% of total revenue.

We saw increases in auto and more than half of our markets, including double digit growth in Boston and in almost 10% growth in Philadelphia we.

We have seen improvements in this revenue category and expect that will continue to improve throughout the year as there have been reports on inventory levels of the millions of vehicles.

And fifth Farquhar telecom down, 7.5%, whereas representing four 4% of total revenue.

Corporate G&A expenses for the quarter decreased three 6% or 162000 compared to the same quarter a year ago to 4.4 million the year over year decrease in corporate G&A is related to a decrease in wage expense.

Noncash stock based compensation decreased 52% or 197000 to 181000 in the quarter and we had an income tax benefit for the quarter of 822000.

Second quarter 2023, operating income decreased 54000 to a negative $4 5 million more or less in line with a year ago. The negative operating income was driven by a non cash impairment loss of 10 million into few twenty-three and a noncash.

Impairment loss in <unk>, 2022 of $8 6 million.

So excluding the noncash impairment losses, we were positive on an operating basis in both periods.

Second quarter interest expense decreased 100000 year over year to $6 7 million and our outstanding debt at the end of Q1 287 million, reflecting a $3 million bond repurchase at a discount of approximately 34%.

We also made another interest payments of approximately $12 3 million on August 1st.

Second quarter 2023, EBITDA was up 16, 8%, a 1.1 million from the previous year quarter to $7 7 million L.

LTM adjusted net leverage including AD that such a certain taxes noncash compensation losses from a digital agency build up.

Pro forma for our 2022 agency acquisition and pro forma 2022 red decreased to $6 six four times we.

We ended 2023 with cash on hand of $35 5 million as we are generating cash from operations and continuing to build up our cash we expect to generate positive free cash flow for the full year of 2023.

Current cash balance will allow us the flexibility to continue to opportunistically reduce our debt our leverage and interest expense, which we are hyper focused on as it increases free cash flow and deal with our equity.

Our capital expenditures for the quarter was 847000, which was mostly related to replacement and upgrades of transmitters that compares to <unk> 2022, Capex expense of $5 1 million, which was related to our Boston build out.

Year to date Capex spend is 2 million and that compares to a year to date 2022 of $6 5 million again, reflecting the Boston buildup.

We expect our capex spending for 2023 to be around four to 5 million for the full year and with that I'll turn it back to Caroline. Thank you Murray So I'm pleased with our second quarter performance in an environment, where we've had some headwinds we continue to show growth in our digital business, partially offsetting the decline in <unk>.

Our content strategy initiated midyear 2022 helped drive 14, 8% growth in our digital revenue for the quarter. So we're very excited about this opportunity as we continue through the balance of 'twenty three and into next year, notably our multi platform local content strategy continued.

To drive tremendous audience growth in the second quarter and our owned and operated audience monthly reach is now almost 29 million that compares to 25 million. During the same period in 2022 again. This is a 14% overall monthly audience increase from last year, our radio brands can.

Tenure to maintain dominant positions in Nielsen, where our market share grew by 3% and our large P. P. M market with the key demographic of adults 25, 54, and we maintained the highest average P. T M cluster share when compared to the other major broadcasters and overall, including both P. P M and diary markets.

Our average share grew by 6% year over year with adults 25, 54. However.

Like other recent quarters, the largest audience growth was seen on our digital our window asset with unique users increasing by 62% from Q2 'twenty to Q2 'twenty three is audience growth led to a 59% increase at Sellable digital impressions for the same period.

Digital now accounts for 44% of our total monthly audience, that's up two points from last quarter and we expect this trend to contango now.

Now moving onto esports, we now have moved into the second half of the 2023 Overwatch League season with the team presently ranked number two in the world. We now have our eyes set on the October playoff and grandson notes, which will be played October the fourth week six in Toronto, our focus remains on <unk>.

Standing our audience on our social platform.

And competing for prize money now.

Now looking into third quarter and into the back half of 'twenty three our goals remain on maximizing revenue and driving further revenue diversification audience likes that expansion, improving our margins, maintaining a strong and flexible balance sheet, reducing our debt net leverage and growing free cash flow.

As of today, our third quarter revenue is pacing down 3% and breaking that down July was down approximately 5% that's pretty similar to where we saw June and August is pacing down approximately 3% in September it's pacing up 1% now last year, we recorded approximately.

2 million net of political revenue with half of that book as of this date last year. So excluding political we're currently pacing down 1% for the quarter with July down three August down two in September pacing up 4%, we continue to be super focused on developing new blah blah blah.

Rack business and digital to offset the softness and the political comps.

Finally, we're proud of the strong results, we have delivered over the last several quarters, even against headwinds and before going into Q&A I'd like to acknowledge our team members across the company for everything they've done and are doing I'm, absolutely thrilled with them as we clearly accomplished a lot as we pursue additional opportunities to strengthen that.

A company and build shareholder value, so with that I'm going to turn it over to Marie we do have some questions that were submitted to US summary, I'd want to go through those questions, Yes, I I won't do and ask them as Carolyn said, where we've seen a few questions that we would like to address and the first question is.

Could you give an update on your esports investment.

Sure. So esports, we continue to make progress in this area and built into our overall audience and also with a focus on winning price dollars as I mentioned earlier in the script. However, some of you may have read there are some questions with al al.

And we are currently looking at all of our options with the Overwatch League.

And we should have enough gates sometime in fourth quarter on that.

Great also the next question could you talk about your refinancing process of your bonds that are coming due in February of 2026, and I will take that and yet we are we certainly have our eye on this day and we are hyper focused on continuing to reduce our debt.

And reduce our leverage we will be exploring all options regarding our refinance well in advance of our bonds in two days and the last question is would you consider divesting noncore assets.

Yes, we discussed this last quarter and that is something that we will consider doing.

Great.

Alright. Thank you very much for your time today and should you have any questions feel free to reach out to either Marie or myself hope you all have a great day. Thank you bye.