Beasley Broadcast Group Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 12, 2024

There are 2 speakers on the call.

Operator

Good morning. Welcome to Beasley Broadcast Group 4th Quarter 2023 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 on the company's website.

Operator

I would also like to 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. You can also find a copy of today's press release in the Investors or Press Room sections of the site. At this time, I would like to turn the conference over to your host, Beasley Broadcast Group's CEO, Caroline Beasley. Please go ahead.

Speaker 1

Thank you, Sherry, and good morning, everyone. Thank you for joining us to review our 4th quarter and full year results. Marie Tedesco, our CFO is with me this morning. The combination of Cyclical non recurring political revenue and overall ad softness led to a 4th quarter revenue decline of 8.7%, slightly better than the expectation we provided when we reported 3rd quarter of minus 9%. However, excluding Q4 'twenty two political of approximately $5,100,000 4th quarter revenue would have declined just 2.4 Similarly, full year revenue dropped 3.6%, but excluding political, full year revenue would have declined just 0.9%.

Speaker 1

Same station ex political would have been down just 0.3% and down 0.6% for the full year. And as a point of reference, total net political for Q4 'twenty two and full year 'twenty two was $5,100,000 $7,500,000 respectively. With our focus on expense control, we managed to reduce our expenses primarily from headcount reductions in 2023 and brought our total expenses down 3.3% year over year for 4th quarter and 2.3% for the full year. And as a result, 4th quarter SOI declined by $4,300,000 However, when excluding political, SOI would have been down 1.2% or just $113,000 And on a full year basis, excluding political, SOI increased 5.4%. And on a same station basis ex political For the Q4 and full year, FOI increased 9% 16.9%, respectively.

Speaker 1

Now breaking down our 4th quarter revenue performance. Over the air local spot was down 6.1% or 2,500,000 And on a same station basis, excluding political, local was down 2.5% or 986,000. We remain focused on developing new local direct business and our efforts paid off as our new business increased 52% year over year for the Q4 and we saw a 20% increase for the full year compared to 2022. In addition, we saw a shift between local direct and local agency, where local direct as a percentage of total local increased 7% for the quarter. National remained challenged, decreasing 36.8 percent or net $5,000,000 and that is primarily due to political revenue.

Speaker 1

Excluding political, net national declined $1,200,000 or 12.4 percent for the quarter. Furthermore, National for the Q4 represented 12.7 percent of total revenue and 13.2% for the full year. This compares to digital revenue, which was 18.2 percent of 4th quarter revenue and 18.4% of total revenue for the full year of 2023, clearly outbilling national as we have been successful in offsetting the national declines with growing digital revenue for the full year. We expect National to continue to decline ex political, which is why we are prioritizing the growth of our digital platform and continuing to aggressively develop global direct new business. Q4digitalrevenuewasessentiallyflat@ $12,000,000 and now represents 18.2 percent of total revenue, that's up from 16.6% in the year ago 4th quarter.

Speaker 1

Full year digital increased 11.4 percent or $4,700,000 to $45,400,000 and accounted for 18.4% of total 23 revenue, just shy of our goal of digital accounting for 20% of total revenue. And we expect digital to account for between 20% 25% of total revenue in 2024, driven by content creation and the continued success and growth of our digital services. Now moving to Sports Betting. We recorded $5,200,000 in Q4, amounting to an increase of 58% or 7.9% of total revenue in this category, which was driven by our Boston cluster. Full year sports betting revenue increased 33% to $16,500,000 with more than 50% coming from Boston, where we require multi year commitments for sports betting contracts.

Speaker 1

Now I'd like to update you on a couple of transactions we closed on in 4th quarter. Number 1, in October, we closed on our Wilmington single station sale. And since this station was sold to a non con buyer, We kept the majority of the digital cash flow by moving it to our digital agency. And then number 2, with Activision Blizzard sale to Microsoft, The Overwatch franchise league was discontinued and our Houston Outlaws team was dissolved. As a result, we received compensation for the franchise license.

Speaker 1

And while we will no longer be competing in the gaming space, given our learnings and experience of the past 4 years, We're continuing to create gaming content and we have pivoted this business towards the Gen Z entertainment space with heavy emphasis on content oriented video, live streams and social media under our new brand, Outlaws Entertainment. We used the proceeds from both transactions along with a small portion of our cash on hand to buy back $20,000,000 face value of our debt at a discount of approximately 34%, reducing our bond debt to $267,000,000 as of the end of the year. And with the return of political in 2024 and our growth expectations for digital this year, we intend to continue to opportunistically address our debt. And as a point to note, we've reduced our debt by $33,000,000 since we closed on our bond deal. So now I'm going to turn it over to Marie, who's going to give you a deeper dive into the quarter.

Speaker 1

Thanks, Caroline, and good morning, everyone. As Caroline mentioned, 4th quarter net revenue decreased 8.7 percent or $6,300,000 to $65,700,000 Boston, Fort Myers and Tampa recorded positive revenue growth year over year when comparing to prior year, which included $5,100,000 of political revenue. Excluding 2022 Q4 political, Revenue declined 2.4 percent or $1,600,000 driven by a decline in Agency Business. Full year total revenue decreased 3.6 percent or $9,300,000 to 240 $7,100,000 And excluding 2022 political, full year revenue decreased 0.9% or $2,300,000 again driven by a decline in agency revenue. Looking closer at the quarter, October was down 16.3% driven by prior year political.

Speaker 1

November was down 9.7 percent also driven by 2022 political and December increased 1.7% year over year. Operating expenses for the quarter decreased 3.3% year over year or by $1,900,000 and SOI declined $4,300,000 compared to Q4 2022. Excluding political, SOI would have dropped just 1.2% or 113,000 The main driver of the 4th quarter expense savings came from previous headcount reductions. Full year operating expenses declined $5,000,000 also from wage reductions, somewhat offset by increased third party digital expenses, bad debt expense and our continued investment in cybersecurity. Our full year SOI ex political would have increased $2,000,000 or 5.4 percent.

Speaker 1

Same station revenue for the quarter, which excludes the divested Boca, Atlanta and our Wilmington station as well as our Las Vegas asset exchange And the dissolution of our Esports team declined 6.3 percent to $65,100,000 and same station SOI declined $2,900,000 or 21.5 percent. Looking at the full year same station revenue, It declined 3.1% and full year same station SOI increased 1.6% or $700,000 When comparing same station SOI ex political for the quarter and full year, SOI increased 840 or 9% and $6,300,000 or 16.9 percent, respectively. Now looking at our revenue categories for 4th quarter, consumer services remained our largest revenue category at 27.6% of total revenue with a drop of 10 point 0.6% of total revenue with a drop of 10.1% year over year. Our 2nd largest category was entertainment, Switching place with retail and entertainment was up 17.1% for the quarter at 16.5% of total revenue. We saw entertainment spend increase in Boston by more than $2,600,000 due to sports betting, which was partially offset by and retail fell 2.2% year over year.

Speaker 1

The auto category saw revenues down 4.9% or 290,000 year over year and the category accounted for 9% of our total revenue. We saw increases in auto at our Boston, Philadelphia, Augusta and FASO clusters as well as a 70% increase in the other category from our digital agency. Consumer Products came in 5th place at 5.5 percent of total revenue, up 8.3% and Telecom landed in 6th place with 4.1% of total revenue. Now looking at the full year, consumer services accounted for 29.4% of total revenue and was down 2.6% Retail down 1.6% and accounted for 16% of total revenue. Entertainment increased 3.9% and accounted for 15.5 percent and auto increased 1.1 percent to 9.1 percent of total revenue for the full year.

Speaker 1

Corporate G and A expenses for the quarter increased 19.6 percent or $800,000 compared to the same quarter a year ago to $4,900,000 The year over year increase in corporate G and A is mostly related to a catch up of non cash stock based compensation and increased corporate digital expenses. Full year corporate G and A increased 1.4 percent or $245,000 primarily related to corporate digital expenses and cybersecurity costs, partially offset by a reduction of wages. Non cash stock based compensation increased $130,000 to $313,000 in the quarter and decreased $213,000 to $846,000 for the full year 2023 and we paid $1,400,000 in income taxes for the full year. 4th quarter 2023 operating income increased $39,300,000 to $7,600,000 compared to a loss of $31,700,000 In the year ago quarter, which was impacted by prior year non cash impairment charges of $42,400,000 related to FCC licenses, goodwill and franchise rights, which was somewhat offset by current year 4th quarter Non operating income of $6,000,000 related to the dissolution of the Overwatch League. Full year operating income declined 40 $7,700,000 year over year to a negative $82,000,000 again related to a non cash impairment charge of $99,800,000 in the 2023 compared to impairment charges of $52,800,000 in 2022.

Speaker 1

4th quarter interest expense increased $224,000 year over year to $6,800,000 related to amortized interest expense from our divested Wilmington station. Full year interest expense was $26,600,000 down from $26,900,000 in 2022. We ended the year with total debt of $267,000,000 reflecting $20,000,000 of bond buyback within the 4th quarter and we made our semiannual interest payment on February 1, 2024. EBITDA for the 4th quarter was 4 point 7 $1,000,000 from the prior year quarter and full year EBITDA decreased 18% or $4,500,000 compared to 2022. Now excluding political, EBITDA for the quarter and full year would have been a decline of 17.3% or $910,000 for the quarter and an increase of 9.4 percent or $1,700,000 for the full year.

Speaker 1

Adjusted net leverage, including FX such as certain taxes, non cash compensation, pro form a of our agency build off, our July End October risk and pro form a of our Outlaws and Atlanta divestitures were 7.96 times where debt is reflecting net of cash on hand. And we ended the quarter with cash on hand of 26,700,000 Our capital expenditures for the quarter were $1,100,000 compared to prior year Q4 of $2,400,000 And full year CapEx spend was $4,200,000 compared to 2022 full year CapEx spend of $13,400,000 which included the Boston office and studio build out. Looking into 2024, we expect our CapEx spend in the range of $4,000,000 to $5,000,000 And with that, I'll turn it back to Caroline. Thank you, Marie. While we're looking forward to 2024 political revenue were laser focused on digital revenue and specifically the strategy that was put in place mid year 2022, which helped drive an 11.4% growth in our digital revenue for the full year.

Speaker 1

Digital has greatly surpassed national and we continue our focus on driving revenue and growing this segment. In addition, our multi platform local content strategy again drove audience growth In the Q4, year over year, our owned and operated audience monthly reach is over $31,000,000 in 2023 And that compares to $27,500,000 in 'twenty two. This is a 13% overall average monthly audience increase year over year. Now I would like to note that the digital content industry has experienced a decline in digital audience page views and digital display impressions due to Google's core updates that happened in both 3rd and 4th quarters. As we navigate these updates that have limited search engine traffic to digital publishers like ourselves, we're laser focused on the quality of our impressions and our content in leading to a more loyal audience and this focus has started to pay off.

Speaker 1

As a result of the Google updates in Q4, Digital revenue remained relatively flat with higher than expected revenue from our digital audio category because of the initiatives in place to optimize our digital audio impressions, and this is despite lower monthly page views. We've seen increases in CPMs this year. In fact, across our programmatic categories, CPMs have increased 58% since Q1. So while we expect a decline in digital display impressions through the first half of twenty twenty four, we do expect to continue to grow total digital revenue And we're optimistic that these strategic updates will help our audience to rebound by the second half of the year. Now our radio brands continue to maintain dominant positions in Nielsen, where our PPM market share grew by 2% year over year with a key demographic of adults 2,554.

Speaker 1

And we maintain the highest average PPM cluster share when compared to the other major broadcasters. It's also important to highlight the success of our company wide community of caring commitment From creating ongoing public service initiatives focused on a variety of important topics such as mental health awareness to making a direct impact in the lives of our listeners and their families. We remain committed to making a difference in the local communities we serve. As an example, this past November, WMMR FM, Preston and Steve's 26th Annual Camp Out hunger raised over £1,700,000 of food and nearly $1,000,000 in cash The benefit individuals and families in need in the Delaware Valley. It is the single largest food drive of its kind in the entire country.

Speaker 1

Now let's take a look at Q1 2024. As of today, we're pacing down 4.2% compared to prior year. And on a same station basis, we're pacing down 2.3%. As of this writing, we have not received any significant political dollars in the Q1. As always, we're very mindful of the current environment and we will be monitoring our revenue pacings and managing expenses based on such.

Speaker 1

Our goal remains to improve margins, reduce leverage and generate free cash flow. So with that, I thank you very much for being on the call today. I do want to acknowledge our team members across the company for everything that they've done and are doing. And Marie, I do think that we do have some questions. So if we could open it up, that would be great.

Speaker 1

Absolutely. Most of the questions that we received were addressed in our prepared notes, but we have 2 additional questions that I will address at this point. The first one, Caroline, is can you update us on political expectations for 2024? Sure. Even though Q1 is light, particularly in Pennsylvania where we thought that we would be receiving more political dollars in Q1 than we actually are going to be.

Speaker 1

We do still seem to think that we will generate $11,000,000 for the full year. That will be primarily in 3rd and 4th quarters. Thank you. And the last Jen then, does the company own any BMI shares? Yes, we did own BMI shares and we will receive approximately $6,000,000 as a result of the sale.

Speaker 1

Great. Thank you. All right. Thank you very much. And as always, should you have any questions, Please feel free to contact either Marie or myself.

Speaker 1

Hope you all have a great day.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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