Beasley Broadcast Group, Inc.

Good morning and welcome to Beasley Broadcast Group's fourth quarter 2020 conference 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 factor section of our most recent annual report on Form 10-K as supplemented by our quarterly reports on Form 10-U. Today's webcast will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of Regulation S-K. 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 five days on the company's website, www.bbgi.com. You also can find a copy of today's press release on the investors or press room sections of this site. At this time, I would like to turn the conference over to your host, Beasley Broadcast Group CEO, Caroline Beasley. Please go ahead.

Caroline Beasley Thank you, Casey, and good morning, everyone. Thank you for joining us to review our 2020 fourth quarter and full year operating results. Marie Tedesco, our CFO, is with me this morning. First, let me provide a quick update on our recent capital market activity and the success we had as a first-time issuer in the high-yield market. On February 2nd, we closed on our oversubscribed $300 million bond offering, which allows us to terminate our term loan B Revolver, and all subordinated notes. The bonds were issued at five years with a two-year non-call at a coupon of 8.625%. In addition to allowing Beasley to repay in full all prior indebtedness, the remaining net proceeds of $25 million were added to our balance sheet and can be used for general corporate purposes. We believe this transaction improves our liquidity profile and provides capital as we continue to diversify our business, revenue and cash flows to higher growth areas. With respect to Q4, it proved to be a very strong quarter as we generated more than three times the expected political revenue, which helps offset some advertiser hesitation as well as the increased restrictions we experienced in some of our markets. Beginning in mid-November, which was more pronounced in December and we're seeing it as we go into 2021 as well. Overall, we recorded approximately 10.2 million of political revenue in the fourth quarter with approximately 6.9 million in October. Strong political markets for us were Charlotte, Detroit, Augusta, and Fayetteville with quarterly sequential revenue growth in the third and fourth quarters. We continued to see improvement in weekly ads with monthly sequential revenue increases in October and November when excluding political. December revenues were down slightly due to one less Patriots game and the just-mentioned tightening restrictions in several of our markets. Despite the pandemic and related restrictions, we generated year-over-year revenue increases in six of our markets, which resulted in overall 4Q revenues down 5%. which is a substantial improvement when comparing to second and third quarters. During the quarter, we continued to make meaningful progress with our digital growth initiatives as Q4 digital revenues rose 7.6% year-over-year and accounted for 10.6% of total fourth quarter revenue. And that's up from 9.2% in 4Q19. The trend was also evident in the 2024 year results as digital revenues represented 10.6% of total revenue compared to 7.6% in all of 2019. As noted earlier, diversifying our revenue and cash flow remains a strategic priority, and we believe our 2020 results demonstrate the complementary nature of our radio business with our digital and esports operations. Our fourth quarter performance also highlights the significant operating benefits from the actions we took in 2020 to address the pandemic, including reducing station operating expenses and negotiating discounts with our partners. Reflecting these efforts and initiatives, fourth quarter expenses decreased 14.4% year over year, which resulted in fourth quarter SOI increasing 28.8% to 20.1 million. The high end of the range we provided in our January 14th Q4 pre-announcement. And that compares with $15.6 million in last year's Q4. In addition, fourth quarter SOI plus corporate expenses increased by approximately 16.4% to $16.5 million compared to $10.1 million in Q4 2019. And again, this was at the high end in our January 14th Q4 pre-announcement. As we reflect on 2020, I couldn't be prouder of the resiliency and determination shown by our corporate, station, digital, and esports team members during what was a very challenging year for all of us from both a personal and professional standpoint. We successfully endured unprecedented changes to our business, created and implemented enhanced safety protocols, and continue to execute on our long-term strategy by reevaluating and reimagining our operations and content offerings while accelerating our digital transformation. So now I'm going to hand it over to Marie to give you a deeper dive into the quarter.

Thanks, Caroline. I will start with a review of the fourth quarter results, followed by a review of our balance sheet. Fourth quarter net revenue decreased just 5%, or $3.6 million, to $68.5 million, which includes $732,000 from our esports teams, the Outlaws and the Renegades. We generated $10.2 million in net political revenue compared to $500,000 in the prior year. Breaking down the quarter, October increased 9.1% year-over-year. with approximately 6.9 million of political. November was down 8.2% and in December we saw a 15.9% decrease year over year, primarily due to one less Patriots game played compared to 2019, as well as tightened restrictions in some of our markets due to COVID-19 surge and second wave in some of those markets. Despite the headwinds, we grew revenue year-over-year at our Atlanta, Augusta, Detroit, Fayetteville, Tampa, and Wilmington clusters. Full-year revenue decreased 21.2% or $55.4 million to $206.1 million, inclusive of approximately $15.2 million of political revenue. Station operating expenses for the quarter decreased 8.1 million, or 14.4%, to 48.3 million, resulting in fourth quarter 2020 SOI of 20.1 million. Our significant quarterly expense reduction is the direct result of our quick response to the pandemic, including company-initiated expense cuts and savings in excess of $32 million against our 2020 operating budget and in excess of $23 million against our station's operating expenses in 2019, excluding esports. Full-year expenses decreased 9.4% or $18.9 million to $182.2 million, including esports, with SOI for the full year decreasing 60.4% to approximately 24 million. Now, looking at our revenue categories for fourth quarter, consumer services, including service-oriented businesses, remained our largest revenue category at 25.5% of our total revenue, and we had a 5.3% year-over-year revenue decrease in this category for the quarter. and that compares to this category being down almost 22% in the previous quarter. Our second largest category in fourth quarter was political revenue which represented around 15% of fourth quarter total revenues. Retail came in the third spot and represented around 13.5% of our revenue and this category declined 24%. Otto, our fourth largest category, saw revenues down close to 31% year-over-year, but showed a modest increase from the previous quarter. Otto was around 9.5% of our total revenue for the quarter. This category was hardest hit in Boston, New Jersey, and Las Vegas, as these markets endured some of the largest COVID-driven restrictions during the period. Our fifth largest category was entertainment which represented 8.4% of fourth quarter revenues. Consumer products such as pharmaceuticals, food, beauty products and auto parts accounted for 5.5% of total revenues and this category declined nearly 38%. Telecom and utilities was 4.9% of total revenues and this category was down 10%. On a full year basis, consumer services decreased 15.6%, retail declined 31.6%, auto was down 36.5%, consumer products declined 44.5%, entertainment was down 47.1%, and telecoms was down 20%. Corporate G&A expenses for the quarter decreased almost 49%, or by 1.8 million, and many more. Non-cash stock-based compensation decreased 85% to $56,000 in the quarter and decreased 65%, or $1.4 million, to $751,000 for the full year. We had an income tax expense for the quarter of $4.3 million and an income tax benefit for the full year of $5.2 million. Our effective tax rate for the quarter was approximately 28%, and we will have no tax liability for 2020. Fourth quarter 2020 operating income was 19.6 million and reflecting the year-over-year increase in SOI, we significantly exceeded prior year operating income of 11.2 million, which in the prior year included 17.1 million gain on dispositions and a 13.7 million non-cash impairment loss. In addition, in the current quarter, we closed on the sale of a piece of land in Charlotte, North Carolina with net cash proceeds of $4.6 million on December 31st that was partially offset by a $2.2 million non-cash impairment charge for this divested asset. Full-year operating income declined from $38.1 million in 2019 to a loss of $4.3 million A direct reflection of the loss of revenue during the pandemic, particularly in the first half of 2020, partly offset by reduced operating expenses and lower corporate expenses. Total fourth quarter interest expense increased $175,000 year-over-year to $4.3 million, and for the full year 2020 interest expense increased approximately $1.1 million due to increased borrowing costs. We did not have any scheduled term loan debt payments during the quarter. However, we reduced the mortals note by 2.25 million at the end of December. Fourth quarter 2020 free cash flow was 16.8 million compared to 20.7 million in the 2019 fourth quarter, which included 21.8 million of proceeds from dispositions. Fourth quarter 2020 also reflects lower capital spending, the aforementioned expense reduction and the net proceeds from the land sale. We ended the quarter with cash on hand of 20.8 million. Our total outstanding debt as of December 31st, 2020 was 268.5 million, inclusive of 10.5 million of unsecured debt. Pro forma, for the completion of the 300 million bond offering completed in first quarter, and if it had occurred by December 31st, including the repayment of all prior existing indebtedness, our total outstanding debt was 300 million. And finally, the company spent 481,000 in the current quarter on CapEx, Thank you, Marie. To provide further color on fourth quarter revenue, spot revenue, including political, was down just 2.6%.