Beasley Broadcast Group, Inc.

Good morning and welcome to Beasley Broadcast Group's second quarter 2020 conference call. Before proceeding, I would like to emphasize that today's conference and webcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties described in the risk factor 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 a discussion of certain non-GAAP financial measures within the meeting 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 I would like to remind listeners that following its completion, a replay of today's call can be accessed for five days on the company's website, www.bbgi.com. 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 CEO, Caroline Beasley. Please go ahead.

Thank you, Chantel, and good morning, everyone. Thank you for joining us to review our 2020 second quarter operating results. First of all, I'd like to say my apologies for any confusion on the conference call time this morning. And then moving on, Marie Tedesco, our CFO, is on the call with me today. As the world continues to confront the challenges brought on by the spread of COVID-19 and as our country continues to respond to the changes in our day-to-day lives, our priority, as it has always been, is to ensure the health and safety of our employees while they are returning to work and delivering premium local content and critical information that our listeners trust and rely on. As we get started, I want to acknowledge all of our team members for their efforts to provide listeners and users with continuous access to the local news, information, and the other critical services we provide as we are presented with the challenges of the pandemic and recent civil unrest. We take our commitment to the communities we serve very seriously. Throughout our nearly six decades as broadcasters, we've stressed targeted localism across our platforms, and actively supported our communities. With a greater than ever percentage of our audience working from home and practicing social distancing, now more than ever, people need a trusted companion, one that connects them to their communities. And I am proud of our teams for their perseverance in upholding this commitment despite the challenges now being faced. As expected, our second quarter results reflect the direct impact of the pandemic on national and local advertisers. Since the nationwide virus outbreak, we've been working diligently to preserve liquidity and best position the company, our stations, digital operations, and esports interests for renewed long-term success. In this regard, we've significantly reduced our overall expenses and daily cash burn through several key steps, including reduced operating expenses, permanent terminations, placing certain employees on unpaid furlough, and we negotiated temporary and permanent discounts with landlords, service providers and partners. I reduced my salary by 20% since April 1st through the end of this year and our staff, including our executive management team, have also taken a 10% salary reduction for the same time period. In addition, the board has suspended future quarterly dividends. Overall, the company has reduced its operating expenses through year-end by more than $26 million. On the balance sheet, between March and April, we drew down $9 million on our revolver to enhance our liquidity. And with the resulting loss of revenue, we amended our current credit agreement to bridge us through the worst of the pandemic until we can resume normal covenant reporting in September 2021. Until such time, we will be operating under a minimum liquidity test and later this year, a minimum EBITDA test. Looking back to the beginning of this year, we generated solid financial performance in the first two months, followed by March, which demonstrated the early impact of the significant economic changes created by COVID. The impact from the pandemic caused our revenues to decrease 53.7% in the quarter. During the second quarter, we drove monthly sequential dollar improvements in revenue from April, and we see the same pattern Thank you for joining us today. that we are entering the month of August with greater revenue numbers than we ended the month of July. So we are seeing this trend continue. While the pandemic has presented serious challenges and setbacks for the entire industry, we believe the actions we've taken early on, the experience of our team, our balance sheet focus, and the quality of our stations, content, personalities, and the role we play in the communities will be key factors in our ability to rebound on the other side. Finally, and despite the pandemic, we continue to make progress with our digital initiative, with Q2 digital revenue down 15% year over year, however, up 13% on a year-to-date basis. Digital now accounts for 13.9% of our total revenue for the quarter, and it accounts for 11% on a year-to-date basis. This compares to 7.4% last year second quarter and 6.7% on a year-to-date basis last year. So now I'm going to hand it over to Marie who's going to provide a thorough review of second quarter.

Thank you, Caroline. I will start with a review of the second quarter results followed by a review of our balance sheet. Second quarter net revenue decreased 53.7% or $35.3 million to $30.4 million, which includes $823,000 from our esports team, the Outlaws and the Renegades. We generated $228,000 in net political revenue compared to $110,000 in the prior year second quarter. Breaking down the quarter, April was down 60.4% year-over-year, May was down 60.6%, and in June we saw a 43.7% decrease year-over-year. The decreases were broad-based, with a few markets doing slightly better, including Augusta, Detroit, and CSL. Station operating expenses for the quarter decreased 13.4% to $41.4 million, and include a $1.9 million of expenses related to our eSports teams that we did not have in 2019 or as in the Renegades case, not included in our reporting in the comparable period. We added $613,000 in expenses from the September 2019 WDMK acquisition and we also incurred $1.3 million of expenses related to our digital growth initiative, which was recorded under corporate expenses during second quarter 19, but are being allocated to our stations in 2020. In response to the pandemic, we have diligently been reducing operating expenses, beginning with a company-initiated expense cut on April 1, 2020, of $13 million. After reopening of businesses were delayed, and especially so in our key markets, we initiated a second round of cuts beginning June 1, 2020, with an additional $8 million. These cuts are an addition of voluntary market cuts done in first quarter of close to $5 million. Now, looking at our revenue categories for second quarter on an actual basis during this pandemic period, Consumer Services remained our largest revenue category at 36% of our revenue, and we had a 36.7% year-over-year revenue decrease for the quarter. This includes service-oriented businesses, and this category had the least decline within the quarter. Our second largest category in second quarter was retail, which represents around 16% of our revenue. and the retail category declined 61.2%. Autos moved into our third spot with revenue down almost 69%. Auto was 8.6% of total revenue for the quarter. This category was hardest hit in Boston, Philadelphia, Charlotte and New Jersey. Our fourth largest category was consumer products such as pharmaceuticals, food, beauty products and auto parts. and this category declined nearly 69%. Telecom rose up the top five with a decrease of 46%. On the same station basis, consumer services decreased 37.6%, retail declined 61.4%, auto was down 69%, consumer products declined 77%, entertainment down 78% and telecom was down 47%. Corporate DNA expenses for the quarter decreased $1.7 million compared to the same quarter a year ago to $3.7 million. The year-over-year decrease in corporate DNA is related to the previously discussed expense reduction initiative as well as the mentioned allocation of certain digital expenses from corporate to our markets. And to quantify the digital investment, We spent approximately $1.3 million in the second quarter and $2.4 million here today. We will continue to shift these digital expenses to our market through the balance of 2020. Non-cash self-based compensation was down 60% to $199,000 in the quarter. We had an income tax benefit for the quarter of $6 million, and our effective tax rate for the quarter was 26.4%. Before the second quarter 2020 operating income was approximately a negative $17.6 million compared to a positive $10.7 million in the year before. The operating income reflects the SOI decline of $29 million as described earlier and an increase in depreciation and amortization of $1.1 million, which was offset by lower corporate expenses. Those second quarter interest expense decreased $695,000 year-over-year to $3.9 million. We did not have any scheduled first lien debt payments during the quarter, and we reduced the balance sheet of our seller notes by $500,000 during the quarter. No other voluntary payments were made during the period. We ended the quarter with cash on hand of $22.8 million. Our total outstanding debt as of June 30, 2020 was $273 million, which includes a previously announced $5 million cash infusion from George Beasley. This compares to $268.5 million at March 31, 2019. The current quarter debt includes $10 million of unsecured debt related to the Houston Outlaws Acquisition, and the additional drawdown of $9 million against our revolver done at the onset of COVID-19 impact became evident. Based on the latest amendments to our current credit agreement, there were no provenance measures as of 6-30-2020. We spent $2.5 million in CapEx in this quarter compared to $2.8 million in the prior year quarter and $6 million year-to-date compared to $4.9 million year-to-date 2019. We have reduced our projected tax expense through the end of the year as we have put scheduled projects on hold. And with that, I will turn it back to Caroline.