Beasley Broadcast Group, Inc.

Good morning and welcome to Beasley Broadcast Group's first quarter 2023 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 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 the Item 10 of Regulation SK. A reconciliation of these non-GAAP measures with their most direct comparable financial measures calculated and presented in accordance with GAAP can be found in this morning's news announcement 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 section 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, Doug, and good morning. Good morning, everyone, and thank you for joining us to review our 2023 first quarter operating results. Marie Tedesco, our CFO, is with me this morning. And as for our earnings release, we did post an earnings presentation on our website, and we hope that you will find it helpful. I'm thrilled to share our first quarter results, which, again, highlights the significant success and growth we are achieving based on our strategy to leverage our local talent to build a growing digital platform. In Q1, we generated strong year-over-year results across the board, driven by growth from our digital initiatives, new business initiatives, increased network revenue, and revenue growth in the sports betting category. Our strong first quarter revenue performance drove solid FY and EBITDA growth on a year-over-year basis. Total revenue grew 3.7%, outpacing the guidance we provided on our last earnings call. With over-the-air local spot revenue increasing 4%, Network up 69%, which was strategically planned to offset the decline in political from 2022, and digital was up almost 27%. As expected, national spot revenue remained challenged and declined 15%, while overall audio revenue increased slightly. New initiative brought $5.7 million to the quarter. That's up 14% year-over-year, and sports betting added $4.3 million year-over-year. Our overall gains were broad-based with eight of 14 markets delivering year-over-year revenue increases. including a 16% year-over-year growth in Boston driven by sports betting. As noted on previous calls, sports betting commenced in Massachusetts on January 31st, and Q1 saw the benefit of the Super Bowl and March Madness. We're well-positioned in the Boston market with five FMs, including 98.5, the Sports Hub, home to the New England Patriots, Boston Bruins, and Boston Celtics. Now moving on to the ongoing success for our digital transformation, Q1 digital revenue grew 26.7% year-over-year and represented 17.3% of total revenue. That's up from 14.1% in the year-ago first quarter. Our digital initiatives continue to drive great results and we are well on our way to achieving our goal of digital accounting for 20 to 30% of total revenue. Digital growth in Q1, as in the past recent quarters, was driven by our content creation initiative and web services rollout, as well as from last month's acquisition of the white label agency, Guaranteed Digital. With our consistent digital revenue growth, we continue to make headway in increasing our margins with the goal of digital margins ultimately matching or exceeding our traditional over-the-air margins. Now, breaking down the quarter trends, January was flat, February was up 4%, and March was up 9.5% year-over-year. Now, March did include the Tampa Home Show this year, and last year it was included in April. Importantly, with Q1 solid growth, we have retained business at levels achieved in Q1-19. These great results are directly related to our efforts to diversify our revenue streams as well as a reflection of our brand's strong local presence, and the results are truly a testament to the hardworking team we have. Now, touching on sports betting, we recorded $4.3 million of revenue, or 7.4% of total revenue in this category. That's up $553,000, or 20% from the prior year. Sports betting revenue is driven by our Boston cluster with $2.2 million. Detroit is fully recorded sports betting revenue combined of $2.1 million for the quarter. Now, that's slightly lower year over year as was expected in the established sports betting markets. First quarter operating expenses increased 1.7% year over year, including new expenses from the acquisition of our digital agency and cost of sales directly related to revenue increase, which more than offset a reduction in expenses stemming from the headcount reductions and other 2022 expense costs. First quarter FY increased 1.2 million or 21% year over year to 7.1 million, as we were able to leverage the year-over-year revenue growth in the quarter. Same station revenue increased 2.6%, same station expenses were down 0.6%, and same station SY increased 28.4%. With our strong results and positive outlook, we remain hyper-focused on reducing our leverage by organically growing EBITDA. We're also actively monitoring market conditions to determine when we should take advantage of our bonds trading below par. And with that, I'm going to turn it over to Marie, and she's going to give you more details on the quarter.

Marie? Thanks, Caroline, and good morning, everyone. I will review first quarter results, followed by an update of our balance sheet. First quarter net revenue increased 3.7%, or $2.1 million, to $57.8 million, which includes $385,000 from our eSports team. We grew revenue year-over-year in eight markets, and most notably in Boston, where revenues increased $2.1 million year-over-year. Digital revenue for the quarter grew double digits to $10 million, and now represents 17.3% of total revenues as we continue to grow this revenue stream and diversify our revenue sources. Station operating expenses for the quarter increased 823,000, or 1.7%, to 50.7 million, resulting in first quarter 2023 SOI of 7.1 million, an increase year-over-year of approximately 1.2 million, or up 21%. Breaking down the increase in operating expenses, the main drivers were the addition of Guaranty Digital, our white label agency, which added new expenses of 1.3 million, plus cost of sales directly related to the revenue increase, and a year-over-year variance from a bad debt credit adjustment that occurred in first quarter of 2022. 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 3% year-over-year revenue increase in this category during the quarter. Our second largest category was entertainment, which grew 8.3% year-over-year and accounted for 16% of total revenues. This jump was partly driven by sports betting with 4.3 million for the quarter. Retail, number three, represents around 15% of first quarter total revenues, and retail increased 8.8% year over year. Auto, our fourth largest category, saw revenues up 1.7% year over year, and the category accounted for 9.6% of total revenue. We saw increases in auto in half of our market, including Boston. We believe this revenue category will continue to improve as we move throughout the year. In fifth spot was telecom, up 13%, representing 5.2% of total revenues. And financial services rounded out our top six categories and was down 5%. Corporate GNA expenses for the quarter increased 5.9% or by $250,000 compared to the same quarter a year ago to $4.5 million. The year-over-year increase in corporate GNA is related to increased cybersecurity expenses and some corporate digital expenses. Non-cash stock-based compensation decreased $53,000 to $174,000 for the quarter. And we had an income tax benefit for the quarter of 2.2 million. First quarter 2023 operating income increased 3.1 million to a positive 413,000 compared to a negative 2.7 million in the year-ago quarter largely due to the increase in EBITDA as well as the 1.9 million impairment charge in the prior year quarter. Total first quarter interest expense decreased $255,000 year-over-year to $6.6 million, and our outstanding debt at the end of first quarter was $290 million. Additionally, we made an interest payment of approximately $12.5 million on February 1st. EBITDA for our first quarter 2023 was up 59.5%, or $986,000, from the previous year quarter to 2.6 million. LCM adjusted net leverage, including add-backs such as certain taxes, non-cash compensation, losses from our digital agency build-out, pro forma of our 2022 agency acquisition, and 2022 risk decreased to 6.67 times. I'm happy to point out that while we ended fourth quarter 2022 with cash on hand of $39.5 million and with an interest payment made in February of $12.5 million, we still ended first quarter with $35.9 million of cash on hand as we are generating cash from operations and continuing to build up our cash. same as our operations, are seasonal, with first quarter always low. Now we expect second quarter, third quarter, fourth quarter, and the full year of 2023 to provide positive free cash flow. Our current cash balance will allow us the flexibility to reduce our debt and therefore also reduce our leverage, which we are hyper-focused on. Our capital expenditures for the quarter were $1.2 million, which was mostly related to upgrades and replacements of transmitters. That compares the first quarter 2022 CapEx spend of $1.4 million. We expect our CapEx spend to normalize in 2023 at around $4 to $5 million. And with that, I'll turn it back to Caroline. Thank you, Marie.