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spk01: Good morning, ladies and gentlemen, and welcome to the Beasley Broadcast Group's second 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 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 meaning of Item 10 of Regulation SK. A reconciliation of these non-GAAP measures with their most direct comparable financial measures calculated 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 to the following. In 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 this site. At this time, I'd like to turn the conference over to your host, Beasley Broadcast Group CEO, Caroline Beasley. Please go ahead.
spk03: Thank you very much, and good morning, everyone. Thank you for joining us to review our second quarter results. Marie Tedesco, our CFO, is with me this morning. I'm pleased to report that our growth momentum continued through second quarter. Net revenue increased 8.8% year over year, exceeding the guidance we provided when we reported 2.1% of a projected 7% increase in revenue. On a pro forma basis, That excludes our divested Boca Raton station, which closed on April 1st. Our revenues grew 9.2% for the quarter. Second quarter digital revenue grew impressive, 34.3%, while audio revenue increased 4.3% year over year. Similar to previous quarters, new business initiatives, sports betting, political, and and year-over-year increase in digital revenue were the primary drivers to our quarter. Our new business performance was robust this quarter as we recorded $7.8 million in revenue, up 60% from Q1 and up 16% from second quarter of 21. Given the declining economic backdrop, we remain watchful of every market, every expense, and all of our content creation initiatives as we move into the back half of the year. Now, breaking down second quarter, as I mentioned before, revenue increased 8.8%, 5.2 million. Over-the-air local revenue increased 10.5% or by 3.5 million, while national declined 21.2% or by 3.3 million. This is consistent with the trends of the past several quarters where declines in national offset by increased local also given the growth that we have had in digital digital now accounts for a larger share of revenue than national and we expect this gap to increase going forward net of political our overall gains were again based with 11 of our 13 markets delivering year-over-year revenue increases now looking closer at the quarter april was up 7.4 percent may was 11.1% and then June rose 5% year over year as we started to see the economy swelling. Finally, we are in close range to second quarter 19 revenue levels with the current quarter being less than $500,000 off second quarter 19 on a pro forma basis. We continue to exceed our internal goals of growing our total audience and reflecting our strategy of talent-created content. we generated a 24% per year increase in unique visitors, which directly converts to impressions. In addition, on June 23rd, we completed a small acquisition of a white label digital agency that will accelerate our digital revenue growth and provide meaningful synergies within our digital platform. Overall, our digital revenue accounted for 16.5% of our total Q2 revenue, That's up from 14% in the prior quarter and 13.4% in the year-ago comparable quarter. Our goal remains for digital revenues to account for 20% of total revenue by the end of 2022. Now, touching on sports betting, we recorded 3.1 million in revenue, or 5% of total revenue in this category during the quarter. This was driven by Detroit, Philly, and New Jersey. And I do have breaking news, and that is sports betting legislation was tentatively approved in the hours of this morning in Massachusetts. That's moving closer to generating additional revenue in this category from our Boston cluster. Second quarter SOI increased slightly compared to last year to $11.2 million. Rating expenses increased 10.6% year-over-year, or $5.1 million, with increased cost of sales directly related to revenue. Also, we saw increased event costs associated with NTR revenue. We had a reinvestment in station marketing and non-cash expense related to the new Boston studios, which we will be moving in within the next month or so. Of note, digital SOI grew by $1.5 million in the second quarter of 2021, margins now at 14%. And when comparing second quarter 22 to first quarter 22, digital SOI increased 2.1 million to negative 593,000. This further highlights the progress we are making with our digital business. Similar to Q1, we were able to take advantage of our bonds trading below par, and we repurchased an additional 2 million at 75% of par, and that settled in third quarter. I'm going to hand it over to Marie now, and she's going to give you a deep dive into the quarter. Marie?
spk02: Thanks, Caroline. And good morning, everyone. I will start with our review of the second quarter results and follow up with a review of our balance sheet. Second quarter net revenue increased 8.8%, or $5.2 million, to $64.8 million, which includes $673,000 from our two esports teams, the Outlaws and X-Ray. We grew revenue over the year in 11 of our markets, including our Boston, Charlotte, Detroit, New Jersey, Philadelphia, and Tampa clusters. And for comparison, we generated approximately $600,000 in net political revenue in the second quarter, compared to $85,000 last year, as we are seeing a higher fiscal spend than initially expected, including more spend on PAC-related campaigns. Digital revenue for the quarter 34% to 10.7 million and now represents 16.5% of total revenue. Also up 14% from the previous quarter. As we continue to manage our digital expenses, expect to grow our digital margin from 14.4% this quarter to a margin closer to pre-pandemic over the air margin. Largely reflecting the revenue growth, station operating expenses for the quarter increased 5.1 or 10.6% to 58.6 million, resulting in quarter SOI of 11.2 million, a year-over-year increase of approximately 100,000. Breaking down the operating expenses, the main drivers of the increase were cost of sales, of approximately 1.5 million year-over-year, including third-party hard costs related to the revenue increase. Also, concert and event expenses of 1.6 million, inflation-related wage increases, investment in station marketing, and the bad debt variance of approximately 1 million stemming from the prior year. Reflected in these variances is approximately 2.5 million which is directly related to the investments in our digital age, which has been the driver of the success, ongoing growth of our digital revenue. Now looking at our revenue categories for second quarter, consumer service remained our largest revenue category at 30.5% of our total revenue, and we drove at 7.4% year-over-year revenue increase in this category for the quarter. Our second largest category, retail, switching place with entertainment, and retailed 28.5% year-over-year, and accounted for 17.7% of total revenues. We saw double-digit growth in all but two markets. Entertainment moved down a notch to third spot, and represented about 20% of second quarter total revenues, and entertainment, 27% year-over-year. This increase was partly driven by sports betting, which added $3.1 million, or $100,000 more in the quarter year-over-year. Auto, our fourth-largest category, saw revenues down 5.8% year-over-year, and the category accounted for 8.3% of total revenue. We saw double-digit increases in auto, Detroit, and New Jersey clusters, and low single-digit increase in PSL. The year-over-year decline in this category was less than 320,000. Believe this revenue category can show improvement by the latter part of the year, provided the supply chain issues have normalized. Consumer services, I'm sorry, consumer products down 20% and 5.6% of total revenue. And financial services were in the sixth spot and rose 17%, representing 5.3% of revenue. Moving to second quarter market performance, according to Miller Kaplan, of our seven clusters that report to Miller Kaplan, Boston, Detroit, and still outperform their markets. On a combined basis, Beasley market clusters increased 8.3% for the quarter compared to our combined market of 10%. However, while the national bucket decreased and now represents less than 15%, we grew our local revenue 12.3% compared to our combined markets at 7.2%. Our clusters outperform their markets in local revenue in all but one of our markets, with Boston, Charlotte, Detroit, Fayetteville, Philadelphia, and Tampa all beating their markets. Our clusters also exceeded the markets on a combined basis in digital and NTR, as we continue to stay hyper-focused on digital revenue and growing this, digital revenue grew 51%. 8% year-over-year compared to the combined markets up 38.6%. With the ongoing success of our new business initiative and the growth of our digital businesses, we expect this to offer a continued national revenue decline. Corporate G&A expenses for the quarter increased 15.4% by $610,000 compared to quarter a year ago to 4.6 million. The year-over-year increase in corporate G&A is related to increased wages, non-cash stock-based compensation, corporate and employee insurance expense, and T&E expenses. Non-cash stock-based compensation decreased 25,000 to around 380,000 in the quarter, and we had income tax expense for the quarter of 3.6 million, offsetting previous quarter tax benefits of $5.8 million, resulting in a year-to-date tax benefit of $2.6 million. Second quarter, 2022 operating income declined $10.2 million to a negative $2.5 million, compared to $5.8 million in the year-ago quarter, solely due to an impairment of $8.6 million related to the increase in interest rates. and a $1.5 million insurance proceeds received in the prior year quarter. Total second quarter interest expense decreased $42,000 year-over-year to $6.8 million related to our previous $5 million of our bonds completed early April. We don't have any scheduled debt payments during the quarter, leaving us with a debt of $290 million. As previously mentioned, we repurchased an additional $2 million of our bonds, which settles on July 1st. Our second annual interest payment of approximately $12.6 million is going to be made this morning, August 1st. We took the quarter with a strong hand of $45.9 million net of cash used in the bond tax. Our strong tax funds allows us the continued flexibility to reduce debt and or pursue additional acquisitions or investments in the digital space with an opportunity to rise that could further accelerate our growth and provide significant synergies and free cash flow. Our capital expenditures for the quarter were $5.1 million, mostly related to a relocation and buildup of our Boston studios and office. We have received $2.6 million in a build-out allowance from the landlord, which nets our second quarter cash spend to $2.5 million prior year of $1.5 million. And with that, I'll turn it back to Caroline.
spk03: Okay, thank you, Marie. Beasley brands continue to grow driven by the highest quality multi-platform content in the industry. In the second quarter, Mentioned before, our digital owned and operated audience grew 24% compared to second quarter of 21, with unique users now at 20.3 million. But even more important, this expanded audience spent more time and consumed more content on our digital platforms, which is a higher sellable digital impression. Our O&O impressions were up over 95% from Q2 21 to Q2 22. And we are in the very early innings of capitalizing on our ability to leverage growing impressions. And we're laser focused on this aspect of our business. And to the incredible growth on the digital platform, our radio stations continue to maintain dominant positions in NILSA ratings. We currently have the highest cluster share when compared to every other major broadcaster in PPM. In fact, we have the number one station in most of our largest markets. including Detroit and Charlotte, of adults 25-54 during the spring rating period. Moving on to eSports, the Overwatch season is well underway, and we're presently ranked sixth in the world. We are expanding our overall presence with the introduction of an academy team, and that's in partnership with the University of St. Thomas in Houston. And we'll have more to report on this in the coming years. Now, looking ahead to third quarter and the back half of 22, as we stay focused on driving further revenue diversification and growing our audience, especially on the digital platform with our new strategic initiatives, we have a slowdown in July and August related to inflation, labor shortages, interest rate increases, and the continuing chip and auto inventory issues, and just an overall slowdown in the economy. Third quarter revenue as of today is flat to prior year and breaking that down, July was down 4%. August is now pacing down 2% and September is pacing up 8%. Breaking that down further, national is pacing down 16% and local is pacing up. We are mindful of our expenses and we initiated cost reductions in second quarter through the end of the year. And so lastly, before going to Q&A, I'd like to once again acknowledge our team members across the company for everything they have done and are doing to help us move past these economic challenges. And also, we thank you very much for being on the call today. And should you have any further questions after we address the questions you sent in, please feel free to reach out to us. So, Marie, I'm going to hand it over to you at this point.
spk02: Thanks, Caroline. So there's a couple of questions in addition to our prepared script that wasn't covered. The first question was to please provide details on the small acquisition of this digital agency, if we could touch both on the price and the revenue impact of such.
spk03: Yes, so we paid $2 million for the agency. and the incremental revenue on a pro forma basis for the full year should be about four million. As mentioned in the script, we are expecting synergies as a result of this acquisition, and we're expecting those to be probably between one, one and a half million in synergies.
spk02: Thank you. And the second question is, can you break down the increase in operating expenses and how much is related to digital as well as the agency build-out? So, in addition to what we reviewed in our script, digital expenses for the quarter total was approximately $9.2 million, or 17% of total expenses. Our digital agency accounted for approximately $2.5 million of that. And also for some additional color, our total third party expenses for the quarter was $5.7 million. And that concludes our question.
spk03: All right. Again, thank you so much for attending the call today. And should you have any follow-up questions, please feel free to reach out. All right. Have a good week.
spk01: Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.
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