Beasley Broadcast Group, Inc.

Good morning and welcome to Beasley Broadcast Group's third 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 reports 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 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'd like to turn the conference over to your host, Beasley Broadcast Group CEO, Caroline Beasley. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us to review our third quarter results. Marie Tedesco, our CFO, is with me on the call this morning. So I'm happy to share that our third quarter results continue to show year-over-year improvements in both revenue and SOI. Overall, net revenue increased 1.5% year-over-year, exceeding the guidance we provided when we reported Q2 of a projected flat to slightly down quarter. Now, breaking that down, over-the-air local spot revenue increased 1% or by $275,000. while national revenues declined to 8.7% or by 1.2 million, and that includes the benefit of 1.9 million in political. Impressively, third quarter digital revenue grew 23.2% year-over-year, while audio revenues decreased 1.9%. Similar to previous quarters, new business initiatives, sports betting, political, and a 1.9 million year-over-year increase in digital revenue for the primary drivers that offset the continued national revenue decline. Now to dig into that a bit, national excluding political was down 20% or 2.7 million for the quarter. And it now accounts for about 15% of our total revenue. This trend is consistent with the past several quarters where we've been successful in offsetting declines in national with higher local and more notably digital revenue. As a matter of fact, in both the second and third quarters, digital was a larger part of our revenue mix than national. Third quarter digital revenue represented just over 16% of our total revenues, up from 13.2% in the year-ago third quarter. And our goal remains that digital revenues will be close to 20% of total revenue by fourth quarter, with continued growth thereafter. And as a reminder, we completed the acquisition of the White Label Digital Agency on June 23rd, and this will continue to accelerate our digital revenue growth and provide meaningful synergies with our growing digital platform. Now, historically, National has accounted for as much as 20 and sometimes 30% of our total revenue mix. And as I just mentioned, it now represents about 15%. We expect National to continue to decline, which is why we have emphasized the growth of our digital platform. while continuing to aggressively develop local direct new business. And we recorded 6.4 million in new business this quarter. Now, given the economic backdrop, we began reducing costs early in the quarter. We executed our first of two RIFs at the beginning of July, which eliminated approximately 1.5 million of permanent wages. Our second RIF, which was executed in early October, reduced annual wages by an additional approximate $3.5 million. These initiatives were executed as we remain watchful of all expenses as we near the end of 2022 with our eyes on 2023. Now touching on sports betting, we recorded $3.8 million in revenue or 6% of total revenue in this category during the quarter. which was driven by Detroit, Philly, and New Jersey clusters. We expect that sports betting will begin in Massachusetts sometime between the end of fourth quarter and first quarter of 2023. And we're well positioned in this market with our five SMs that have five distinct formats reaching five different demographics, including 98.5, the sports hub, home to the Patriots, Bruins, and the Celtics. Operating expenses increased 0.6% year over year or by 326,000 with our June acquisition accounting for 926,000 of new expenses. SOI grew by 595,000 compared to third quarter 21 with margins now at just over 19%. And of note, when comparing third quarter 22 to third quarter 21, Digital SOI increased to $2 million, and that was from $10,000, marking another indication of the great progress we are making in digital. Like previous quarters, we were able to take advantage of our bonds trading below par, and we repurchased an additional $3 million at 77% of par for a total of $5 million that was settled in the quarter, permanently reducing our debt to $290 million. So with that, I'm going to hand it over to Marie, and she's going to provide you deep insights into the quarter. Marie?

Thanks, Caroline. Good morning, and good morning, everyone. Let me start with a review of our third quarter results followed by a review of our balance sheet. Third quarter net revenue increased 1.5%, or $921,000 to $63.8 million, which includes $586,000 from our two esports teams, as well as 1.1 million from Guaranteed Digital, our second quarter agency acquisition. We grew revenue year over year in all but two of our markets, and we generated approximately 1.9 million in net political revenue in third quarter compared to 258,000 last year. We continue to see higher political spending than initially expected, which will also be evident in fourth quarter. As of today, we have exceeded the full year political revenue received in 2018 midterm election by approximately 40%. Excluding political, third quarter revenue declined 1.5% or $724,000 due to the decline in national. We saw a slowdown in July and August related to inflation, labor shortages, interest rates increases, and the overall slowdown in the economy. Looking closer at the quarter, July was down approximately 3% with local flat and national down 28%. August came in flat with local up 5% offsetting a 24% decline in national. September was up 2.8% with local up 3% and national up 5% thanks to political. Digital revenue for the quarter grew 23.2% to 10.2 million and represented approximately 16% of total third quarter revenue compared to a 13.2% in the prior year quarter. We grew our digital margin from 14.4% in second quarter 2022 and from 3.3% in prior year third quarter to an impressive 19.6% this quarter as we close in on margin levels closer to pre-pandemic over-the-air margins. Station operating expenses for the quarter increased 326,000 or 0.6% to 51.5 million, resulting in third quarter SOI of 12.3 million, a year-over-year increase of approximately 600,000. Breaking down the increase in operating expenses, the main drivers were the acquisition of a white-labeled agency, Guaranteed Digital, which added $926,000 of new expenses for the quarter, and severance costs from Part 1 of two RIFs completed first week of July of approximately $200,000. For FORMA, for the severance and the annual wage savings, our expenses would have declined 2.4%, and our SOI would have increased 18.4%. Now looking at our revenue categories for third quarter, consumer services remained our largest revenue category at 28.5% of total revenue, with an increase of 1.1% year over year for the quarter. Our second largest category was entertainment, which switched place with retail, Entertainment was flat year over year and accounted for 15.8% of total revenues. We saw entertainment spend increases in all but four of our markets, and sports betting added $3.8 million compared to $4.3 million in the prior year quarter. Retail grew 9.6% year over year and accounted for 15.7% of total revenues. and we saw double-digit growth in Philadelphia, Tampa, Detroit, Charlotte, and Las Vegas. Auto, our fourth-largest category, saw revenues down 5.5% year-over-year, and the category accounted for 8.3% of total revenue. We saw double-digit increases in auto at our Detroit and Seattle clusters, and low single-digit increases in Boston, New Jersey, and Las Vegas. The year-over-year decline in this category in third quarter was again less than 300,000. We believe this revenue category can show improvement as supply chain issues normalize and stabilize and as inventory levels continue to build at the dealership level. Consumer products were in fifth place, down 24% and 5.4% of total revenue. and telecom was in sixth spot, down 5.5%, representing 4.9% of total revenues. Corporate G&A expenses for the quarter increased 29%, or by 1.2 million, compared to the same quarter a year ago, to 5.1 million. The year-over-year increase in corporate G&A is mostly related to an increase in corporate digital expenses of approximately $900,000, as well as severance expense from a reduction in headcount. Non-cash stock based compensation increased 19,000 or seven and a half percent to 270,000 in the quarter. And we had an income tax benefits for the quarter of 1.3 million. Third quarter 2022 operating income declined 170,000 to a negative 4.7 million. compared to a negative 4.9 million in the year-ago quarter, driven by the increase in corporate expense, mostly offset by an increase in station operating income. Third quarter interest expense decreased 400,000 year-over-year to 6.6 million, related to the repurchase of our bonds over the past two quarters. We did not have any scheduled debt payments during the quarter, leaving us with a total debt of 290 million. Our next semiannual interest payment is scheduled for February 1st, 2023. EBITDA for the third quarter was $7.2 million, and our adjusted net leverage, including add-backs such as certain taxes, non-cash compensation, a PPO grant from fourth quarter 2021, and pro forma for the agency acquisition and our July risk was 5.87 times. We ended the quarter with cash on hand of $32.8 million. That's net of the cash used for the bond repurchases. Our cash balance continues to allow us flexibility to reduce debt and or pursue additional investments in the digital space should an opportunity arise that could further accelerate our digital growth and provide significant synergies and free cash flow. However, given the uncertainty economic environment, we are inclined to keep our cash on the balance sheet for time being. Our capital expenditures for the quarter were 4.7 million, which was almost entirely related to the relocation and build-out of our Boston studios and offices, which were completed on August 30th. We have received 2.6 million in a build-out allowance from the landlord, with an additional 1.5 million on the way. This compares to prior third quarter of $1.2 million, and year-to-date cap expense was $11.2 million, or $8.6 million net of the build-up reimbursement received so far, compared to prior year-to-date of $3.7 million. And with that, I'll turn it back to Caroline.