This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good morning and welcome to the Beasley Broadcast Group first quarter 2022 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 risk and uncertainties described in the risk factors 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 meaning of Item 10 of Regulation SK. 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 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 section of the site. At this time, I'd like to turn the conference over to your host, Beasley Broadcast Group CEO, Caroline Beasley. Please go ahead, ma'am.
spk03: Thank you, Cody, and good morning, everyone. Thank you for joining us to review our 2022 first quarter operating results. Marie Tedesco, our CFO, is with me this morning. I'm thrilled to share our first quarter 2022 results with you, as our digital growth initiatives, strong presence, and share in broadcast markets resulted in revenue, SOI, and EBITDA growth on a year-over-year basis. Overall, Q1 was another strong quarter for us, with total revenue growth of 15.6%, outpacing the 13% revenue guidance we provided on our last earnings call. New business initiatives, sports betting, and a $2 million year-over-year increase in digital revenue were the primary drivers to the strong quarter. These results are beginning to reflect the power of our platform and diversification efforts and are truly a testament to the hardworking team we have. As mentioned, 2022 first quarter revenue rose 15.6% over Q1 2021. Over the year, local spot revenue increased 20.6%, while national spot revenue declined 12.1%. Our gains were again broad-based with 11 of 14 markets delivering year-over-year revenue increases, including double-digit growth in Boston, Detroit, New Jersey, Philadelphia, Tampa, and Wilmington. Looking closer at the quarter, January was up 17%, February up 8% and March rose almost 13% year over year. We have now almost fully regained business at the levels achieved in Q1 19 and Q1 20. When comparing our revenue performance to Q1 19, our revenue was down $2 million or 3.4%, which the difference is primarily from the event and NTR revenue that have not fully recovered to pre-pandemic levels. We are exceeding our goals of growing our total audience, and that is coming from the accelerated growth on our digital platform, where we have doubled and tripled our increases in unique visitors and unique page views since 2019. These page views are directly related to our large increase in impressions, which in turn is driving the increase in digital revenue, making content creation on the digital side a priority. This initiative resulted in continued digital growth, where Q1 digital revenue rose 26% year-over-year and represented 14% or $7.8 million of total first quarter revenue. And that's up from 12% in the comparable year-ago quarter. A special note when comparing Q1 2022 digital with Q1 2019, our digital revenue has more than doubled from $3.4 million or 6% of total revenue. We continue moving closer to our near-term goal of digital representing 20% of total revenue, and we are laser focused on increasing our digital cash flow with a goal to achieve margins comparable to our over-the-air business. And as an aside, we do expect our digital agency to contribute to positive SOI in third quarter. Touching on sports betting, we recorded 3.6 million of revenue or 6.5% of total revenue in this category during the quarter, on par with first quarter of 2021, but slightly down from fourth quarter. Sports betting revenue was again driven by our Detroit, Philadelphia, and New Jersey clusters. In Massachusetts, sports betting legislation was recently approved by the Senate with some restrictions compared to the House's previously approved version. moving us closer to another meaningful source of new revenue once these differences are resolved. First quarter SOI increased $645,000 or 15.6% year-over-year as we were able to leverage the revenue growth in the quarter. First quarter operating expenses increased 16% year-over-year with higher cost of sales directly related to the revenue increase, and we also absorbed inflation-related increases in wages. and reinvestment in station marketing. We are hyper-focused on reducing our leverage and we were able to take advantage of our bonds trading below par and repurchase $5 million at a discounted rate of approximately 4%. This was completed in the first week of April and is a permanent reduction of our debt, which will reduce cash interest expense and hence have a positive benefit on our free cash flow. I'm now going to turn it over to Marie who will provide you more details into the quarter.
spk02: Thanks, Caroline, and good morning, everyone. Let me start with a review of the first quarter results, followed by a review of our balance sheet. First quarter net revenue increased 15.6%, or $7.5 million, to $55.7 million, which includes $550,000 from our two eSports teams, the Outlaws and Accelerates. We grew revenue year over year at all but three of our markets, including Atlanta, Boston, Charlotte, Detroit, Fort Myers, Las Vegas, New Jersey, Philadelphia, Tampa, and Wilmington. And for comparison, we generated approximately $50,000 in net political revenue in first quarter 22 compared to $265,000 last year first quarter. Digital revenue for the quarter grew 26% to 7.8 million and now represents 14% of total revenue. We are focused on continue to grow this revenue stream and diversifying our revenue sources. Station operating expenses for the quarter increased 6.9 million or 16% to 49.8 million, resulting in first quarter 2022, SOI of 5.9 million an increase year-over-year of approximately 600,000. Breaking down the increase in operating expenses, the main drivers were cost of sales directly related to the revenue increase of 2 million plus, inflation-related wage increases and increased talent fees, forced ride fees due to increased games played, investment in station marketing, and a bad debt variance of approximately 1 million stemming from the prior year credits taken. Reflected in the variance above is approximately $2.5 million, which is directly related to the build-up of our digital agency and the driver of the success and ongoing growth of our digital revenue. Now looking at our revenue categories for first quarter, consumer services remained our largest revenue category at 30% of our total revenue, and we drove a 15% year-over-year revenue increase in this category for the quarter. Our second largest category was entertainment, which flipped spots with retail. Entertainment grew 48% year-over-year and accounted for 16% of total revenues. This jump was partly driven by sports betting, which added 3.6 million more revenue in first quarter 22. Retail number three represents around 15% of first quarter total revenue, and retail increased 16% year over year. Auto, our fourth largest category, saw revenues down 1.2% year over year, and the category accounted for 10% of total revenue. We saw double-digit increases in auto at our Detroit and New Jersey clusters, and the year-over-year decline in this category was less than 65,000. We believe this revenue category can show improvement by the latter part of the year, provided that supply chain issues have normalized. Moving into the fifth spot is financial services, up 22.6%, and representing 6% of total revenues. Telecom runs out our top six categories and was up 3%. Looking now at our first quarter market performance according to Miller Kaplan, of our seven clusters that report to Miller Kaplan, Boston, Detroit, and Tampa outperformed their market. On a combined basis, Beasley market clusters increased 13.9% for the quarter compared to our combined market of 15.3%. Our clusters exceeded their market on a combined basis in local, digital, and TR. And of course, we continue to stay hyper-focused on local revenue and growing this with new business initiatives and growing our digital share while we expect national demand will continue to slowly decrease. National revenue in first quarter represented less than 16% of our total revenues. Corporate G&A expenses for the quarter increased 8.4% or by $328,000 compared to the same quarter a year ago to $4.2 million. The year-over-year increase in corporate G&A is related to increased wages, insurance expense, and T&E partially offset by a reduction of stock-based compensation. And stock-based compensation decreased $300,000 to $149,000 in the quarter, and we had an income tax benefit of the quarter of $5.8 million. First quarter 2022 operating income declined $200,000 to a negative $2.7 million compared to a negative $2.5 million in the year-ago quarter, largely due to an impairment charge of $1.9 million related to the sale of our bulk Everton AM station. Total first quarter interest expense increased $1.1 million year over year to $6.8 million and represents a full quarter of increased borrowing costs compared to a partial period in first quarter 21. We did not have any scheduled debt payments during the quarter, leaving us with a total debt of $300 million. However, as Caroline noted, we repurchased $5 million of our bond debt between April 1st and April 5th at an average discount of around 4%. Additionally, we made an interest payment of approximately $12.9 million on February 1st. First quarter 2022 free cash flow was a negative $6 million compared with a negative $4.2 million in the 2021 first quarter, which due to seasonality is typically a negative free cash flow quarter for us. We ended the quarter with cash on hand of $50.7 million. Our substantial cash balance It's allowing us the financial flexibility to reduce debt, just as we did earlier in the second quarter, and or pursue a potential acquisition or investment within the digital space should an opportunity arise that could accelerate our digital growth or provide significant synergies and free cash flow. Our capital expenditures for the quarter were $1.4 million compared to the prior year of $1 million. And with that, I'll turn it back to Caroline.
spk03: Thank you, Marie. Overall, Beasley radio stations continue to gain share and audience, driven by the highest quality multi-platform local content in the industry. In the winter Nielsen Audio TPM ratings period, our overall share increased by 3% year-over-year in the top and most valuable advertising demographic of adults 25-54. According to Nielsen, we have the highest average cluster share and the largest year-over-year share growth when compared to all the other major radio broadcasters in PPM. Our digital content strategy continues to show great success and Q1 impressions grew over 88% year over year and 36% quarter to quarter. This was once again the biggest quarter ever for digital impressions at Beasley as we continue to monetize our digital content. In addition to audience performance, we always put a high priority on serving the community And this is evident by our Philadelphia Classic Rock Station, WMGK, just being awarded the prestigious Crystal Award for Outstanding Community Service. Moving on to esports, we remain very focused on expanding our viewership, fan base, and revenue streams. The Overwatch League season number five kicked off on May 6th. This was a big deal with the Houston Outlaws hosting the first live and in-person event since pre-COVID. that features the Outlaws playing against the Dallas Fuel and where we won all three matches. This was the first time that fans saw two Overwatch League teams play the beta released version of the new game Overwatch 2. The match was broadcast live on YouTube in addition to in-person tickets being sold. Looking ahead to second quarter and into the back half of 2022, our focus remains on driving further revenue diversification and audience expansion, improving our margins, maintaining a strong and flexible balance sheet, reducing leverage, and growing free cash flow. Excluding any recession impact, we expect progress on each of these fronts as we continue to close the gap toward our pre-COVID revenue and SOI levels and grow from there. As of today, our second quarter revenue is pacing up about 7% and breaking that down April was up 7% with May and June pacing up 10% and 5% respectively. In terms of local and national, local is currently pacing up in second quarter 17% while national is pacing down 23%. We're proud of the strong results we are delivering even in the face of headwinds, including the war in Ukraine. unprecedented inflation, labor challenges, interest rate increases, and the continued recovery from the pandemic. It's too early from an economic perspective to see what impact high interest rates and inflation may have, but in the past, broadcasting groups have operated well in a high interest rate environment. Lastly, I'm absolutely thrilled to share with you two announcements. Number one, former U.S. Senator and former CEO of the NAD, Gordon Smith, has agreed to be included as a nominee for our board of directors to be voted on by the end of this month. And then number two, Tina Murley was promoted from VP of sales where she oversaw radio revenue to chief revenue officer overseeing all revenue for the company. So before going to Q&A, I'd like to acknowledge our team members across the company for everything they've done and are doing to help us move past the challenges presented by the pandemic and now even more economic headwinds. So with that, Marie, I'm going to turn it over. I know that we do have a few questions to address today.
spk02: That's correct, Caroline. We have a few questions that were not covered in our prepared remarks. And first, a request to touch on revenue categories for second quarter, and I will take that. So as of today, our top five categories look like this. Consumer services is up 8%. retail is up 28%, entertainment is up 23%, finance is up 28%, and auto is down, as of today, 6% or approximately 300,000. So as you can see, auto is still somewhat weak, still suffering from the supply chain issues, and we hope to see an improvement in that revenue category by the end of the year. The next question is, what are you compensating on the M&A front, Caroline?
spk03: So what we have been saying over the last several quarters is we are hyper-focused on digital and we're looking at various digital assets that would complement what we are currently doing, focusing either on content or on our digital agency business and acquisitions that would be accretive to the company. In addition, I think many of you may have read that we did sell off one of our smaller radio properties, which was an AM station located in Boca Raton, and we did that because it just wasn't strategic to our company any longer.
spk02: Thank you. And all other questions were covered in our prepared earnings remarks.
spk03: Okay. Well, with that, I thank you very much for listening today, and should you have any further questions, please feel free to reach out to either Marie or myself. Thank you, and I hope you all have a great week.
spk01: Thank you. That does conclude today's conference. We thank you all for your participation, and you may now disconnect.
Disclaimer