Chipotle Mexican Grill Q3 2024 Earnings Call Transcript

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November 5, 2024

There are 2 speakers on the call.

Operator

Good morning, and welcome to Beasley Broadcast Group Third Quarter 2024 Earnings 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 of our most recent annual report on Form 10 ks 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. 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 would also remind listeners that following its completion, a replay of today's call can be accessed for 5 days on the company's website, www.bbgi.com.

Operator

You can also find a copy of today's press release on the Investor Relations section of the site. At this time, I would like to turn the conference over to your host, Busy Broadcast Group's CEO, Caroline Beasley. Please go ahead.

Speaker 1

Thank you, Ryan, and good morning, everyone, and thank you for joining us to review our Q3 results. Before we dive into the Q3 and other recent developments, I want to thank Marie Tedesco, who retired last week from Beasley after 33 years, including serving as our CFO for the last 7 years. On behalf of the Board and the entire Beasley team, we wish her the very best in the next phase of her journey. I'm pleased to announce that Lauren Burrows Coleman, our newly appointed CFO is on the call with me this morning. Lauren joined us from Wayfair, where she served as Global Head of Strategic, Corporate and Commercial Finance, leading the team of 50 across Financial Planning and Analysis, Commercial Finance, Capital Markets, corporate development and global tax functions.

Speaker 1

We're delighted to have her on the team and she has hit the ground running. The last few months have been both active and productive for Beasley as we've reached an inflection point with respect to successfully addressing several of the strategic priorities that we've discussed on recent calls related to debt reduction, maturities and our NASDAQ listing. To start, subsequent to the quarter end, we successfully completed our exchange offer, new notes offering and tender offer, resulting in an immediate debt reduction of $47,000,000 in a meaningful extension of our maturities to August of 2028. This transaction was supported by 98.4 percent of the company's existing 8.625% senior secured note due in 2026, reflecting our note holders' confidence in the future of our business. As we've noticed previously, improving our capital structure is a strategic priority for the business and this transaction squarely addresses our goals and creates value for all of our stakeholders.

Speaker 1

Also in September, the company affected a reverse split of our Class A and Class B common stock at a ratio of 1 for 20. This enables us to maintain our NASDAQ listing, while making BBGI shares more investable for certain institutions. Now diving into Q3. Same station revenue was up 0.5%, adjusting for WJBR divestiture, closure of the Outlaws and Guaranteed Digital. Total net revenue comping with JBR, the Outlaws and Guaranteed Digital from last year declined 3.2%, representing a quarterly sequential improvement from Q2.

Speaker 1

In the 9 months ended September 30, 2024, revenue was down 1.6% on a same station basis and total net revenue was down 4.6%. Given the well documented challenges of the ad environment and economy at large, we believe the positive 3rd quarter same station results reflect the strength of our local content and franchises and the ongoing success of our digital revenue diversification and also our focus on developing local direct business. During the quarter, we generated $2,700,000 in net political across both traditional and digital, bringing year to date net political revenue to 3,700,000 that's up 23% relative to $3,000,000 in the same period in 2020. On the day of the general election, we're pleased with the net political revenue we generated, exceeding our budget for the year and of course, there will be another significant level of political to report in Q4 as we booked $8,200,000 to date in Q4 $12,000,000 on a year to date basis. Following a strong Q2, 3rd quarter digital segment revenue grew 1.1%.

Speaker 1

This reflects some of the disruption we experienced as we closed our white label agency, Guaranty Digital effective July 15. However, on a same station basis, digital grew 11.7% for the quarter and 13.6% on a year to date basis. Nevertheless, our revenue mix shift toward digital continues with digital revenue accounting for 19.4 percent of Q3 total revenue. That's up from 18.6% of total revenue in Q3 2023 and 16% in Q3 20 22. For the 9 months ended September 30, digital accounted for 20.4% of total revenue.

Speaker 1

National saw the benefit of political in Q3 with same station national up 10.7%. Overall, National remains constrained across our industry and other ad reliant businesses. And in Q3, it was down 16% ex political. Including results from divestitures and discontinued ops, National increased $1,200,000 or 11.2 percent year over year for the quarter and dropped 15.3% ex political. In total, National accounted for 12.7% of total revenue and this is ex political compared to 14.8% in Q2 2024 and 14.6% in Q3 2023.

Speaker 1

Now breaking down our Q3 revenue performance further. Same station over the air local was down 8.9 percent or $3,000,000 and declined 9.9% or $3,400,000 overall. This was driven by a 6.9% decline in local agency business that was partially offset by a 2.7% increase in local direct. Local direct sales currently account for about 57% of our total local business as we continue to shift from agency to direct sales. Given the margin and cash flow upside, we remain highly focused on developing our new local direct business.

Speaker 1

In our Q3 'twenty four new business increased 1.9% year over year and on a same station basis, it grew 4.2%. And on a year to date basis, it increased 18.8% year over year and 21.2% on a same station basis. Now this reinforces our focus towards business that we have more control over and that is local direct and digital. So with that, I'm going to hand it over to Lauren and she's going to give you a deeper dive into Q3. Thanks, Caroline, and good morning, everyone.

Speaker 1

I'm excited to be here because as Caroline noted, Beasley has some fantastic franchises in local markets with great teams. Further, the business is making demonstrable progress on several key strategic priorities and has set a foundation for growth and the creation of shareholder value. As Caroline mentioned, 3rd quarter total net revenue was 58,200,000 The divestiture of the Wilmington Station and elimination of the Outlaws and Guaranteed Digital plus the decline of local spot was partially offset by political revenue and continued growth in digital. On a same station basis, excluding the divested Wilmington Station Guaranteed Digital and Esports, July was up 2.5%, August declined 0.8% and September dropped 0.2% year over year, resulting in a 0.5% same station revenue increase for the quarter. In Q3, we drove further efficiency in our operations.

Speaker 1

For the quarter, our operating expenses declined 0.3 percent or $171,000 inclusive of $747,000 in severance costs and station operating income or SOI declined $1,800,000 year over year to $8,200,000 Excluding non recurring severance costs, expenses were down $639,000 and SOI would have decreased by $1,300,000 to $9,000,000 year over year. On a same station basis, excluding WJBR, Guaranteed Digital, Esports and one time severance costs, operating expenses increased by $1,800,000 which resulted in a $1,500,000 reduction in same station SOI to $9,800,000 Again, that number is also excluding one time severance costs. In addition to the $800,000 in severance expenses, this quarter was also impacted by $1,000,000 in incremental expenses from a combination of non cash trade expense, bad debt and the timing of a home show this year versus last year. Digging into our revenue categories for the quarter. Consumer Services remained our largest revenue category at 28.6% of total revenue with a 1% year over year decline.

Speaker 1

Tampa and Detroit were bright spots delivering a combined $800,000 in incremental revenue in the consumer services category. Retail and entertainment tied for 2nd place, each representing 15.6% in the quarter as retail fell 5.2% year over year and entertainment rose 1.2% year over year. Declines in the retail category were primarily driven by national accounts responding to the challenging economic environment, partially offset by strength in local retail. In entertainment, Charlotte delivered a year over year gain of 726,000 more than offsetting declines in other markets. In the sports betting category, which benefited Charlotte as North Carolina went live with sports betting, early in 2024, we recorded $3,400,000 in the quarter and that accounted for 5.8 percent of total revenue in the quarter.

Speaker 1

Reflecting the continued challenges in domestic auto as profits have been squeezed by rising inventory levels and high interest rates, the auto category was down 11% year over year and represented 7.9% of our total Q3 revenue. Consumer products came in 5th place at 5.4% of total revenue for the quarter, up an impressive 18% year over year driven by Boston and Philadelphia with strong results in Charlotte and Augusta as well. Turning to expenses. Corporate G and A expenses decreased 4.4% or $197,000 compared to the same quarter a year ago to $4,300,000 Excluding non recurring severance costs, corporate G and A expenses increased 15 point I'm sorry, decreased 15.5% or $696,000 to $3,800,000 The Q3 decrease in corporate G and A is mostly related to a reduction in corporate compensation and an allocation of digital expenses to our markets. Non cash stock based compensation increased $180,000 to $358,000 in the quarter and increased $240,000 to $773,000 year to date.

Speaker 1

Q3 2024 operating income increased 101.4 percent year over year or $86,700,000 from a negative $85,500,000 to a positive $1,200,000 and operating income for the 9 months ending September 30 increased $95,100,000 from a negative $89,600,000 to a positive 5,500,000 dollars The prior year Q3 and prior year 9 months results included an impairment loss of $89,000,000 $99,000,000 respectively compared to $922,000 in the current year quarter and current year to date. Interest expense decreased $353,000 year over year to $6,100,000 and decreased $2,000,000 year to date compared to the same period a year ago, reflecting the benefit of debt reductions throughout 2023. We ended the Q3 with total debt of $267,000,000 down from the original $300,000,000 of debt issued at the beginning of 2021. And as Caroline noted at the start of the call, we completed our exchange new notes and tender offer on October 8, 2024 and pro form a for the transaction, our quarter end debt was 220,000,000 dollars Adjusted EBITDA with the add back of one time severance expense of $1,200,000 and non cash stock based compensation of $358,000 was $5,600,000 for the quarter $15,200,000 year to date, down 6.9 percent or $414,000 for the quarter and 9.2 percent or $1,500,000 year to date.

Speaker 1

We had additional non recurring expenses of $760,000 this quarter from the shutdown of Guaranty Digital and Outlaws and the LMA of WBOS. When adjusting for these further one time items, adjusted EBITDA grew by $344,000 year over year more than offsetting the $1,900,000 reduction in revenue. We ended the quarter with cash on hand of $27,800,000 down from $33,300,000 at the end of Q2 2024. Our capital expenses for the quarter were $642,000 compared to the prior year Q3 of $847,000 Year to date CapEx spend was $2,600,000 compared to the prior year of $3,100,000 And looking at the full year of 2024, we continue to expect our annual CapEx spend in the range of $4,000,000 to $5,000,000 And with that, let me turn it back to Caroline. Thank you, Lauren.

Speaker 1

The digital revenue growth remains a strategic priority for us and Q3 represented a further optimization of our strategy. As noted on our Q2 call, we closed our white label agency Guaranty Digital effective July 15. And in doing so, we eliminated a large portion of the operating expenses. So for the Q3, our digital segment reported SOI of $871,000 In August, we hired Dave Snyder as our Head of Digital Content Marketing. He's responsible for overseeing digital marketing and building revenue opportunities on behalf of the company.

Speaker 1

In Dave's short time with the company, he successfully rolled out content rich newsletters, websites, go to market O and O sales strategy and affiliate marketing products. He's also been integral in leading our development team to optimize all of our digital offerings. We've mentioned a few times on the call the strength of our local franchises and Beasley remains the Nielsen ratings powerhouse in most of the markets we operate. In our markets such as Boston, Charlotte, Vegas, Tampa and Philly, we sustained our dominant ratings positions in the key adults 2554 demographics. Since the last earnings release, the spring ratings period was released for our medium sized market, where we saw growth of 3% from the previous ratings period.

Speaker 1

Augusta and Travel saw the most share growth increasing 25% 19%, respectively. As more of our audience continues to migrate to our digital platform, same station streaming audience grew 2% from the same period in 2023. Now during the final days of Q3, Hurricane Helene impacted several of our markets, especially Augusta, Fort Myers and Tampa. During the storm, our station served as a lifeline to concern local residents looking for information and guidance. Our programming team provided amazing live wall to wall coverage and listener engagement before and after the storm.

Speaker 1

And our technical team worked day and night to keep us on the air. In the days following the storm, our stations were leading the recovery efforts by hosting supply drives, producing benefit efforts by hosting supply drives, producing benefit concerts and providing ongoing Red Cross support on all stations. And then just a few days later, we did it all over again when Hurricane Milton made landfall just south of Tampa. These are the moments when radio is needed the most and the Beasley team serve their communities in the best possible ways. Now moving on to Q4 2024 revenue pacings on a same station basis as of today, they're up in the mid single digits with October up 24% and November pacing down mid single digits and December pacing down roughly 10%.

Speaker 1

As we look at the pacing through November December, we are hearing from our advertisers that they are hesitant to book prior to the election results. We continue to execute on our strategic plan to drive improved profitability and free cash flow and in parallel improve our capital structure. Our recent exchange new notes and tender offer represented a material improvement in our capital structure. And in addition, since July, we've continued to evaluate our operations and we've executed expense reductions, which are projected to amount to in excess of $5,000,000 on an annualized basis. These reductions have been achieved through a voluntary early retirement, strategic headcount reductions and the implementation of new systems streamlining G and A.

Speaker 1

In aggregate, these actions have reduced our full time employee count from the start of the year by 15% through September 30. Now this is in addition to the nearly $15,000,000 previously disclosed in the financial supplement for our exchange, new notes and tender offer. As such, we are looking at total annualized savings of approximately $20,000,000 So with the meaningful improvement in our operational efficiency and capital structure and a strong political season behind us, we're focused on growing and nurturing our traditional business and expanding our digital revenues. So in closing, I'd like to thank our team members across the company for everything they've done and are doing to execute on our strategic plan. So with that, Lauren, I know that we have a few questions that were sent in.

Speaker 1

So yes, take them. So the first question we received, that wasn't covered in our prepared remarks was, are you seeing any resumption in national advertising in Philadelphia and Boston? So I would answer that as not yet. As we indicated, our advertisers are hesitant to book anything until after the election. And that is primarily because of the shortage of inventory.

Speaker 1

We are hopeful that once the election is over today and maybe once the noise is passed, then the advertisers will be coming back. Next question is post the exchange, how do you think about liquidity and the potential for more bond buybacks? So I'll take this one. 1st and foremost, we are focused on maintaining a minimum cash position as a business. But of course, anything above that, we will absolutely seek opportunities to opportunistically buy back bonds.

Speaker 1

Moving on to the next question. When do you foresee year over year comps going positive again? Right. So in the Q3 on a same station basis, our revenue was up 0.5 percent. And as we indicated earlier, 4th quarter is pacing up in the mid single digits.

Speaker 1

So we do expect revenue to be up in 4th quarter as well. That's great. So those were all the incremental questions we had beyond what we already addressed in prepared remarks. Okay. Thank you, Lauren.

Speaker 1

Thank you, everyone, for listening in today. And should you have any follow-up questions, please feel free to contact Lauren or myself. Thank you.

Operator

Thank you. The conference of Beasley Broadcast Group has now concluded. Thank you for your participation. You may now disconnect your lines.

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