Beasley Broadcast Group Q2 2024 Earnings Call Transcript

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August 12, 2024

There are 3 speakers on the call.

Operator

morning, and welcome to Beasley Broadcast Group's 2nd 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 and 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 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 at www dotbbgi.com.

Operator

You can also find a copy of today's press release on 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

Good morning, everyone, and thank you for joining us to review our Q2 results. Marie Tedesco, our CFO, is with me this morning. So consistent with the pacings we provided at the time we reported Q1 and reflecting continued softness across ad reliant businesses, our 2nd quarter same station revenue was down just 2%, adjusting for the WJVR divestiture and the out laws. And on an actual basis, total revenue was down 4.8%. Now reflecting our continued focus on leveraging and monetizing our local content and reach, 2nd quarter same station digital revenue grew by an impressive 10.2%.

Speaker 1

Our revenue mix shift toward digital continues with it now accounting for 21.5 percent of 2nd quarter total revenue, and that's up from 19.4% in Q2 2023 and up from 16.5% in Q2 2022. For the full year of 2024, we expect digital to account for between 20% 25% of our total revenue. And this is driven by our content creation capability and the continued success and growth of our digital service offerings. As such, we intend to continue to expand our digital sales force to leverage our strong local brands, content and relationships by offering a broad range of advertising solutions to clients. Another bright spot for the quarter was political.

Speaker 1

As during Q2, we generated $586,000 in net political revenue, and this includes both traditional and digital, exceeding our 2nd quarter political revenue budget by 72%. This compares to $228,000 in political revenue in Q2 of 2020. So we're off to a strong start with political and we expect a robust second half of 2024 as several of our markets are well positioned in swing states. Now national showed signs of stabilizing in Q2 with same station national up 7.3% and up 3.5% ex political. And on an actual basis, national increased 6.4% year over year for the quarter and 2.6% ex political.

Speaker 1

In total, National now accounts for 14.4 percent of our total revenue and this is ex political. Now breaking down our 2nd quarter revenue performance even further. Over the year, local spot was down 10.9% or 4,100,000 dollars and same station local was down 10% or $3,700,000 This was driven by a 3% decline in local agency business and a 4.9% decline in local direct. Local direct currently accounts for 57.3% of our total local business as we continue to shift from agency to direct. I think the declines that we've seen in local business further supports the softness on Main Street that many of us and our peers have discussed over for the last quarter.

Speaker 1

Our operating expenses in the quarter declined 3.9 percent or $2,000,000 and this includes an added $1,300,000 in severance costs. Excluding the severance costs, expenses were down $3,300,000 and SOI would have increased by $250,000 to $12,400,000 And on a same station basis, ex WJBR, Esports and the one time severance costs, operating expenses were down $1,300,000 which resulted in a $60,000 increase in same station SRI to $12,600,000 And to highlight, our adjusted EBITDA increased 11.4% to $8,800,000 in the 2nd quarter. Now I'm going to turn it over to Marie and she's going

Speaker 2

to give you further detail in 2nd quarter. Thanks, Caroline, and good morning, everyone. As Caroline mentioned, 2nd quarter total net revenue was 60,400,000 and 6 of our markets including Augusta, Charlotte, Fayetteville, Fort Myers, New Jersey and Tampa exceeded prior year 2nd quarter revenues, as did our in house agency digital direct. The main drivers of the overall revenue decline was divested Wilmington Station, the elimination of the out loss and the decline in local spot business, which was somewhat offset by continued growth in digital and political revenue. Looking closer at the quarter, on a same station basis, excluding the divested Wilmington Station and eSport, April was up 2.3%, May declined 5.2% and June dropped 2.7% year over year, resulting in a 2% same station revenue decline for the quarter.

Speaker 2

Operating expenses for the quarter decreased 3.9 percent year over year or $2,000,000 and SOI declined $1,000,000 year over year to $11,100,000 The expense decline was primarily due to the divestiture of our Wilmington station and the elimination of our E-four team, along with a May 2024 headcount reduction, somewhat offset by a $1,300,000 non recurring severance costs. Excluding the one time severance costs, SOI increased 2% or $250,000 for the quarter. Same station expenses dropped by $28,000 driven by the headcount reduction, offset by increased third party costs and severance expenses. Consequently, same station SOI declined $1,200,000 for the quarter to $11,300,000 and excluding the one time severance costs, same station SOI increased $60,000 for the quarter. Now looking at our revenue categories for the quarter.

Speaker 2

Consumer Services remained our largest revenue category at 31.1 percent of total revenue with a decline of 1% year over year. Retail ended in 2nd place, representing 16.2% in the quarter, falling 5.4% year over year, mostly from Detroit and New Jersey. Entertainment number 3 was up 4.5% in the quarter, accounting for 15.1% of total revenue. The largest entertainment increase came from Boston and Charlotte related to increased sports betting revenue, partially offset by a decline in sports betting revenue from Philadelphia. In the sports betting category, we recorded $3,100,000 in the quarter and that accounted for 5.6 percent of total revenue.

Speaker 2

The audit category was down 18.5% year over year and represented 7.6% of our total second quarter revenue. This drop was primarily due to a decline in domestic auto spend, which accounted for 60% of the drop. Consumer products came in 5th place at 6% of total revenue for the quarter, up 19.8%. Corporate G and A expenses decreased 11.9 percent or $525,000 compared to the same quarter a year ago to 3,900,000 dollars and year to date corporate expenses declined 6.8 percent or 600,000 dollars The 2nd quarter year over year 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 $80,000 to $262,000 in the quarter and increased $59,000 to 4 100 and $15,000 year to date.

Speaker 2

And we paid $117,000 in income taxes year to date for 2024. 2nd quarter 2024 operating income increased 2 19 percent or $9,900,000 from a negative $4,500,000 to a positive $5,400,000 and operating income for the 6 months increased $8,400,000 from a negative $4,100,000 to a positive $4,300,000 Both prior year Q2 and prior year 6 months included an impairment loss of $10,000,000 dollars Interest expense decreased $632,000 year over year to $6,100,000 and decreased $1,600,000 year to date compared to the same period a year ago, reflecting our debt reductions throughout 2023. We ended the quarter with total debt of $267,000,000 down from our original $300,000,000 debt at the beginning of 2021, and we made our latest semiannual interest payments on August 1, 2024. Adjusted EBITDA, meaning adding back one time severance expense of $1,300,000 and non cash stock based compensation of $262,000 was $8,800,000 for the quarter $9,600,000 year to date. We ended the quarter with cash on hand of $33,300,000 and that's up from $27,800,000 at the end of Q1 2024.

Speaker 2

Our capital expense for the quarter was $1,000,000 compared to prior year's Q2 of 847,000 dollars Year to date CapEx spend remained the same in both years at $2,000,000 Looking at the full year 2024, we expect our annual CapEx spend in the range of $4,000,000 to $5,000,000 And with that, I'll turn it back to Caroline.

Speaker 1

Thank you, Marie. Digital revenue growth remains a strategic priority for us. And I'm happy to report that our Digital segment reported SOI of $3,100,000 and a margin of 24% for the quarter. As we evolve this business and look to drive efficiencies and reduce digital expenses, we decided to close our white label agency Guaranteed Digital effective July 15. In doing so, we eliminated a large portion of their operating expenses and I'm pleased to announce that we've already successfully transferred 75% of the GD revenue to our in house agency Digital Direct.

Speaker 1

This reorganization is expected to increase our bottom line by about $1,000,000 Additionally, we decided to exit our e sports content initiative. It's once in past profitability contradicts our focus on reducing leverage. Our multi platform content strategy is consistently delivering dominant market share results and strong digital impressions. On the digital side, our focus has been growing and monetizing our social media audiences on leading platforms, including Facebook, Instagram, X and YouTube. In addition, connecting our show pages to our social media management platform, maximize our revenue opportunities and increase our monetizable social media followers by nearly 1,000,000 over the past 6 months.

Speaker 1

And while our strategy has predominantly revolved around station social accounts, we believe these partnerships will open more doors for engagement and reach of new audiences. We expect this growth to continue with revenue to follow. And finally, I'm really pleased to announce that we hired a Head of Digital Content Marketing with extensive marketing expertise to help us as we continue to build our new out new digital revenue streams on behalf of the company. And on the traditional side in Nielsen audio PPM ratings, we remain the dominant player in most of our large markets. We currently have the top rated station in Boston, Charlotte, Detroit, Las Vegas and Philadelphia and have the number 1 rated cluster in Boston, Charlotte, Las Vegas and Philadelphia with key adults 2,554.

Speaker 1

Now moving on to Q3, pacings as of today, they are down low to mid single digits with July ending up slightly and August September pacing down. Now considering the current economic environment, we've developed a strategic plan focused on revenue, leverage, free cash flow and addressing our capital structure ahead of the Q1 of 2026 maturity. This includes streamlining our traditional business with emphasis on local growth, expanding our digital revenue via a combination of new and old digital revenue streams and most imperative remaining laser focused on corporate expense management. As we mentioned on our last call, we executed a $6,700,000 expense reduction initiative in May, which is projected to amount to nearly $10,000,000 on an annualized basis. These reductions have been achieved through strategic headcount reductions totaling 8.5 percent of full time employees, which includes a combination of streamlining production and traffic services and the consolidation of G and A operations among other reductions.

Speaker 1

Also, earlier this month, we rolled out another voluntary early retirement offer. As employees accept this offer, we will not be backfilling most of these positions as part of our greater effort to streamline our processes. However, we have not been reducing headcount in our sales department. Instead, we are adding technical sales specialists on both the traditional and digital side. Additionally, last week, we introduced a new regional VP structure.

Speaker 1

These managers already active in existing markets will now oversee multiple markets across the organization to realize operational efficiencies across regions, thus further streamlining our processes. So looking forward, we remain optimistic about the growth prospects in the second half of twenty twenty four and this is driven by anticipated strong political spend and continued expansion in the digital sector. So with that, I'd like to thank our team members across the company for everything that they have done and are doing to focus forward. So with that, Marie, I think we do have a few questions that were submitted. Yes.

Speaker 1

Thanks, Caroline. While most questions we received were addressed in our remarks,

Speaker 2

we do have a couple of them that we will address at this point. So the first one, are you in any discussions with creditors about the February 2026 bonds maturity?

Speaker 1

So what I can say about that is that we are laser focused on addressing our Q1 of 'twenty six maturity and we will have more details to come on this near term.

Speaker 2

Great. The next question we received is, are there more assets that could be sold?

Speaker 1

We are open to selling assets at an attractive and deleveraging price.

Speaker 2

Great. And the last question, I will take that. Do you realize you realize $2,000,000 of cost improvements in the quarter, how far into the $10,000,000 cost savings program are you? So as per usual in our prepared remarks, same station expenses excluding the divestiture of WJDR and Outlaw, we were flattish. Adding back the one time severance of $1,300,000 and increased digital expenses from the increased digital revenue, our expenses would have dropped approximately $2,200,000 Now our 2nd quarter expense reductions occurred in the month of May, So we did not see the full quarter benefit of the savings in 2nd quarter.

Speaker 2

And that concludes the additional question.

Speaker 1

All right. Thank you all. We really appreciate you attending the call and your interest in our company. All right. And should you have any questions, please feel free to reach out to Marie or myself.

Operator

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

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Beasley Broadcast Group Q2 2024
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