Beasley Broadcast Group, Inc.

Good morning and welcome to Beasley Broadcast Group's Second Quarter 2024 earnings 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 S-K. 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 at .bbgi.com. You can also find a copy of today's press release on the Investors or Press Room section to 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, Rob. Good morning, everyone, and thank you for joining us to review our Second Quarter results. Maria Tedesco, our CFO, is with me this morning. So consistent with the pacing we provided at the time we reported Q1, and reflecting continued softness across agri-billiant businesses, our Second Quarter Sankstation revenue was down just 2%, adjusting for the WJBR divestiture and the outlaws. And on an actual basis, total revenue was down 4.8%. Now reflecting our continued focus on leveraging and monetizing our local content and reach, Second Quarter Sankstation digital revenue grew by an impressive 10.2%. Our revenue makes shift toward digital continues with it now accounting for .5% of Second Quarter total revenue. And that's up from .4% in Second Quarter 23, and up from .5% in Second Quarter 22. For the full year of 2024, we expect digital to account for between 20 and 25% of our total revenue. And this is driven by our content creation capability and the continued success and growth of our digital service offering. As such, we intend to continue to expand our digital sales force to leverage our strong local brands, content, and relationships by offering a broad range of advertising solutions to clients. Another bright spot for the quarter was political, as during Q2, we generated 586,000 in net political revenue. And this includes both traditional and digital, exceeding our Second Quarter political revenue budget by 72%. This compares to 228,000 in political revenue in Second Quarter of 2020. So we're off to a strong start with political, and we expect a robust second half of 2024, as several of our markets are well positioned in swing states. Now, national showed signs of stabilizing in Q2 with same station national up .3% and up .5% ex political. And on an actual basis, national increased .4% year over year for the quarter and .6% ex political. In total, national now accounts for .4% of our total revenue, and this is ex political. Now, breaking down our Second Quarter revenue performance even further, over the year, local spot was down .9% or 4.1 million, and same station local was down 10% or 3.7 million. This was driven by a 3% decline in local agency business and a .9% decline in local direct. Local direct currently accounts for .3% of our total local business as we continue to shift from agency to direct. I think the declines that we've seen in local business further supports the softness on Main Street that many of us and our peers have discussed for the last quarter. Our operating expenses in the quarter declined .9% or 2 million, and this includes an added 1.3 million in severance costs. Excluding the severance costs, expenses were down 3.3 million, and SOI would have increased by 250,000 to 12.4 million. And on a same station basis, X, WJBR, eSports, and the one-time severance costs, operating expenses were down 1.3 million, which resulted in a 60,000 increase in same station SOI to 12.6 million. And to highlight, our adjusted EBIDA increased .4% to 8.8 million in the Second Quarter. Now I'm gonna turn it over to Marie, and she's gonna give you further detail in Second Quarter.

Thanks, Caroline, and good morning, everyone. As Caroline mentioned, Second Quarter total net revenue was 60.4 million, and six of our markets, including Augusta, Charlotte, Fayetteville, Fort Myers, New Jersey, and Tampa, exceeded prior year Second Quarter revenues as did our in-house agency, Digital Direct. The main drivers of the overall revenue decline was related to the divested Wilmington station, the elimination of the outlaws, and the decline in local stock business, which was somewhat offset by continued growth in digital and political revenue. Looking closer at the quarter, on a same station basis, excluding the divested Wilmington station and eSports, April was up 2.3%, May declined 5.2%, and June dropped .7% year over year, resulting in a 2% same station revenue decline for the quarter. Operating expenses for the quarter decreased .9% year over year, or two million, and SOI declined one million year over year to 11.1 million. The expense decline was primarily due to the divestiture of our Wilmington station and the elimination of our e-sport team, along with a May 2024 headcount reduction, somewhat offset by a 1.3 million non-recurring severance costs. Excluding the one-time severance costs, SOI increased 2% or 250,000 for the quarter. Same station expenses dropped by 28,000, driven by the headcount reduction, offset by increased third-party costs and severance expenses. Consequently, same station SOI declined 1.2 million for the quarter to 11.3 million, and excluding the one-time severance costs, same station SOI increased 60,000 for the quarter. Now looking at our revenue categories for the quarter, consumer services remained our largest revenue category at .1% of total revenue, with a decline of 1% year over year. Retail ended in second place, representing .2% in the quarter, falling .4% year over year, mostly from Detroit and New Jersey. Entertainment number three was at .5% in the quarter, accounting for .1% of total revenue. The largest entertainment increase came from Boston and Charlotte, related to increased sports betting revenue, partially offset by a decline in sports betting revenue from Philadelphia. In the sports betting category, we recorded 3.1 million in the quarter, and that accounted for .6% of total revenue. The audit category was down .5% year over year, and represented .6% of our total second quarter revenue. This drop was primarily due to a decline in domestic auto spend, which accounted for 60% of the drop. Consumer products came in fifth place, at 6% of total revenue for the quarter, up 19.8%. Corporate GNA expenses decreased 11.9%, or 525,000, compared to the same quarter a year ago, to 3.9 million. And year to date, corporate expenses declined 6.8%, or 600,000. The second quarter year over year decrease in corporate GNA is mostly related to a reduction in corporate compensation and an allocation of digital expenses to our markets. Non-cash stock-based compensation increased 80,000 to 262,000 in the quarter, and increased 59,000 to 415,000 year to date. And we paid 117,000 in income taxes year to date for 2024. Second quarter 2024 operating income increased 219%, or 9.9 million, from a negative 4.5 million to a positive 5.4 million. And operating income for the six months increased 8.4 million from a negative 4.1 million to a positive 4.3 million. Both prior year, second quarter, and prior year, six months, included an impairment loss of 10 million. Interest expense decreased 632,000 year over year to 6.1 million, and decreased 1.6 million year to date, compared to the same period a year ago, reflecting our debt reductions throughout 2023. We ended the quarter with total debt of 267 million, down from our original 300 million debt at the beginning of 2021, and we made our latest semi-annual interest payments on August 1st, 2024. Adjusted EBITDA, meaning adding back one-time severance expense of 1.3 million, and non-cash stock-based compensation of 262,000 was 8.8 million for the quarter, and 9.6 million year to date. We ended the quarter with cash on hand of 33.3 million, and that's up from 27.8 million at the end of first quarter 2024. Our capital expense for the quarter was 1 million, compared to prior year, second quarter of 847,000. Year to date cap expense remained the same in both years at 2 million. Looking at the full year 2024, we expect our annual cap expense in the range of four to five million. And with that, I'll turn it back to Caroline.

Thank you, Marie. Digital revenue growth remains a strategic priority for us, and I'm happy to report that our digital segment reported SOI of 3.1 million, and a margin of 24% for the quarter. As we evolve this business and look to drive efficiency and reduce digital expenses, we decided to close our white label agency Guaranteed Digital effective July 15th. In doing so, we eliminated a large portion of their operating expenses, and I'm pleased to announce that we've already successfully transferred 75% of the GD revenue to our in-house agency, Digital Direct. This reorganization is expected to increase our bottom line by about $1 million. Additionally, we decided to exit our e-sports content initiative. It's monthly past profitability contradicts our hyper focus on reducing leverage. Our multi-platform content strategy is consistently delivering dominant market share results and strong digital impressions. On the digital side, our focus has been growing and monetizing our social media audiences and leading platforms, including Facebook, Instagram, X, and YouTube. In addition, connecting our show pages to our social media management platform, maximize our revenue opportunities, and increase our monetizable social media followers by nearly 1 million over the past six months. And while our strategy has predominantly revolved around stationed social accounts, we believe these partnerships will open more doors for engagement and reach of new audiences. We expect this growth to continue with revenue to follow. And finally, I'm really pleased to announce that we hired a head of digital content marketing with extensive marketing expertise to help us as we continue to build our new digital revenue streams on behalf of the company. And on the traditional side, in Nilson audio PPM ratings, we remain the dominant player in most of our large markets. We currently have the top rated station in Boston, Charlotte, Detroit, Las Vegas, and Philadelphia, and have the number one rated cluster in Boston, Charlotte, Las Vegas, and Philadelphia, with key adults 2554. Now moving on to third quarter, pacings as of today, they're down low to mid single digits, with July ending up slightly and August and September pacing down. Now considering the current economic environment, we've developed a strategic plan focused on revenue, leverage, free cashflow, and addressing our capital structure ahead of the first quarter 2026 maturity. This includes streamlining our traditional business with emphasis on local growth, expanding our digital revenue via a combination of new and old digital revenue streams, and most imperative remaining laser focused on corporate expense management. As we mentioned on our last call, we executed a $6.7 million expense reduction initiative in May, which is projected to amount to nearly 10 million on an annualized basis. These reductions have been achieved through strategic headcount reductions, totaling .5% of full time employees, which includes a combination of streamlining production and traffic services, and the consolidation of GNA operations, among other reductions. Also, earlier this month, we rolled out another voluntary early retirement offer. As employees accept this offer, we will not be backfilling most of these positions as part of our greater effort to streamline our processes. However, we have not been reducing headcount in our sales departments. Instead, we are adding technical sales specialists on both the traditional and digital side. Additionally, last week, we introduced a new regional VP structure. These managers already active in existing markets will now oversee multiple markets across the organization to realize operational efficiencies across regions, thus further streamlining our processes. So looking forward, we remain optimistic about the growth prospects in the second half of 24. And this is driven by anticipated strong political spin and continued expansion in the digital sector. So with that, I'd like to thank our team members across the company for everything that they have done and are doing to focus forward. So with that, Marie, I think we do have a few questions that were submitted. Yeah, thanks, Caroline.

While most questions we received were addressed in our remarks, we do have a couple of them that we will address at this point. So the first one, are you in any discussions with creditors about the February 2026 bonds maturity?

So what I can say about that is that we are laser focused on addressing our first quarter of 26 maturity, and we will have more details that come on this near term.

Great, the next question we received is, are there more assets that could be sold?

We are open to selling assets at an attractive and de-leveraging price.

Great, and the last question, I will take that. Do you realize two million of cost improvements in the quarter, how far into the 10 million cost savings program are you? So as for using our prepaid remarks, same station expenses, excluding the divestiture of WJDR and outlaws, we were flattish. Adding back the one-time severance of 1.3 million and increased digital expenses from the increased digital revenue, our expenses would have dropped approximately 2.2 million. Now our second quarter expense reductions occurred in the month of May. So we did not see the full quarter benefit of the savings in second quarter. And that concludes the additional question.

All right, thank you all. We really appreciate you attending the call and your interest in our company. All right, and should you have any questions, please feel free to reach out to Marie or myself.

Thank you. This will conclude today's conference. We disconnect your lines at this time and we thank you for your participation and have a wonderful day.