Beasley Broadcast Group, Inc. (BBGI) Q4 2022 Earnings Call Transcript

Beasley Broadcast Group, Inc. (NASDAQ:BBGI) Q4 2022 Earnings Conference Call February 16, 2023 11:00 AM ET

Company Participants

Caroline Beasley - CEO

Marie Tedesco - CFO

Conference Call Participants

Operator

Greetings, and invited to Beasley Broadcast Group Fourth Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this convention is being recorded.

It is now my pleasance to present your host, Caroline Beasley, Chief Executive Officer. Please proceed.

Caroline Beasley

Thank you, Latanya. Good morning, everyone, and convey you for joining america to reappraisal our 4th fourth and afloat twelvemonth results. Marie Tedesco, our CFO, is pinch maine this morning.

We're happy to stock that our 4th fourth results showed year-over-year improvements successful revenue, SOI and nan continued maturation we are achieving connected our integer side. Our integer revenue, governmental gross and caller business initiatives were nan superior drivers to nan quarter. Overall nett gross accrued to 1.8%, successful statement pinch nan guidance we provided erstwhile we reported Q3 of a projected level to somewhat up quarter. Breaking down nan gross increase, over-the-air section spot accrued 1.9% and nationalist accrued 6.1%, and this is inclusive of $5.1 cardinal of governmental revenue.

The maturation successful our Q4 governmental revenue, offset nan headlines aliases nan headwinds everyone is seeing successful nationalist arsenic our nationalist business, ex political, was down 25%. Notably, same-station gross for nan 4th accrued 0.7%, pinch same-station SOI expanding 2.8%. Full twelvemonth gross accrued 6.2%.

Similar to 4th quarter, over-the-air section spot accrued 7.7%, while nationalist was down 7.5%, including nett governmental gross of astir $7.5 million. Same-station afloat twelvemonth gross accrued 5.6% and same-station SOI accrued 3.2% for nan afloat year.

Excluding governmental for nan afloat year, nationalist declined 19.2%. In addition, nationalist revenue, ex political, declined to 12.2% of our full gross successful 4th quarter. Looking astatine erstwhile quarters arsenic good arsenic nan last fewer years, nationalist has been trending down and has decreased from almost 21% of full gross successful 2019 to 12.2% successful 4th fourth and to 14.2% for nan afloat twelvemonth of '22, and this is ex political. We've been successful successful offsetting these nationalist declines pinch higher section and digital gross arsenic evidenced by our results of nan past respective quarters, wherever integer gross has consistently outbuilt national. And we expect nationalist to proceed to decline, which is why we are prioritizing nan maturation of our integer level while continuing to aggressively create section nonstop caller business.

Q4 integer gross grew 12.2% year-over-year and now represents almost 17% of our full revenue, and that's up from 15% successful nan year-ago 4th quarter. Full twelvemonth integer gross accrued 25% to $40.8 cardinal and accounted for astir 16% of our full revenue.

We're intelligibly connected nan way to achieving our extremity of integer accounting for 20% of full revenue, and we expect to onshore location betwixt 20% and 30% integer to full gross successful 2023. And that's going to beryllium driven by our contented creation, our web services rollout and our acquisition of nan achromatic explanation agency, Guarantee Digital, past year.

Now audio gross for nan quarter. And audio gross is spot, network, talent revenue, barter and artifact programming, was somewhat down by 0.4%. Our summation successful caller business and governmental were offset by declines successful national, web and barter.

Moving connected to sports betting. We recorded $3.3 cardinal successful Q4 revenue, amounting to 4.6% of full gross successful this category, which was again driven by Detroit, Philly and New Jersey. And connected a affirmative note, sports betting authorities was approved and started connected January 31 successful Massachusetts. And we are seeing nan use of such, conscionable this period pinch nan Super Bowl, arsenic good arsenic heading into March pinch March Madness. We're good positioned successful Boston pinch our 5 FM power stations, including nan number 1 sports position successful nan country, 98.5 The Sports Hub, location to nan New England Patriots, nan Boston Bruins and nan Boston Celtics.

Now arsenic acold arsenic our operating expenses go, we implemented a costs simplification programme successful 3rd quarter, pinch astir of these cuts completed successful October. Our monthly disbursal reductions were imperishable headcount reductions, which will use 2023 by astir $5 million.

And I'm going to move it complete to Marie. She's going to bring you much item connected nan disbursal broadside of wherever we ended up past year. So Marie, I'm going to move it complete to you correct now.

Marie Tedesco

Great. Thanks, Caroline, and bully morning, everyone.

I will commencement pinch a reappraisal of our 4th fourth results, followed by a reappraisal of our equilibrium sheet. As Caroline mentioned, 4th fourth nett gross accrued 1.8% aliases $1.3 cardinal to $72 million, which includes $784,000 from our 2 esports teams arsenic good arsenic $900,000 from Guarantee Digital, which is our 2nd 4th agency acquisition.

Excluding political, 4th fourth gross declined 4.8% aliases $3.4 cardinal owed to nan diminution successful national. Full twelvemonth full gross accrued 6.2% aliases $15 million. And excluding political, gross accrued 3.5% aliases $8.4 million, reflecting our outperformance successful section and integer revenue.

Given nan beardown governmental request during nan period, we had a shortage of inventory for local. And while nan governmental gross masked immoderate benignant of slowdown successful October and partially November, we saw a slowdown successful nan 2nd half related to inflation, labour shortages and liking complaint increases.

Looking person astatine nan quarter, October was up 8% pinch section up 2% and nationalist up 41%, including political. November was down 2%, pinch section down 3% and nationalist down 7.3%, including political. December besides declined 2%, pinch section up 1% and nationalist down 15.1%. Station operating expenses for nan 4th accrued $1.3 cardinal aliases 2.2% to $58.1 million, resulting successful 4th fourth SOI of $13.9 million, marking a flimsy year-over-year increase.

Breaking down nan summation successful operating expenses, nan main driver were nan acquisition of our achromatic explanation agency, Guarantee Digital, which added $1.1 cardinal of caller expenses for nan 4th arsenic good arsenic severance costs from our October consequence of astir $600,000.

Full twelvemonth operating expenses roseate 6.9% aliases $13.8 million, driven by an accrued costs of income of astir $4.3 million, a $2.6 cardinal variance from a bad indebtedness simplification taken successful 2021 and nan summation of Guarantee Digital of $2 cardinal of caller expenses. Notably, pro forma for nan severance and nan 4th fourth headcount savings, operating expenses would person declined 1% and SOI would person accrued 13.5%.

Now looking astatine our gross categories for 4th quarter, user services remained our largest gross class astatine 28.6% of our full revenue, pinch a alteration of 0.5% year-over-year for nan quarter. Our 2nd largest class was retail, switching spot pinch entertainment, and unit was down 1.4% for nan 4th astatine 15.3% of our full revenue.

Entertainment was 13.2% of full revenue, and this category, which includes sports betting, was down 11%. We saw intermezo walk increases successful Charlotte, Las Vegas, Augusta and Wilmington. However, sports betting was nan driver for nan alteration successful this class successful Detroit and Philadelphia.

Auto, our 4th largest category, saw revenues down 3% aliases $190,000 year-over-year, and nan class accounted for 8.8% of our full revenue. We saw double-digit increases successful car astatine our Detroit, Augusta, Fayetteville and Wilmington clusters and debased single-digit increases successful Charlotte and New Jersey. Political came successful 5th spot astatine 7.5% of full 4th fourth revenue, and user products and telecom landed successful sixth and seventh spot pinch 4.8% and 4.4% of full revenue.

Looking astatine nan afloat year, user services accounted for 29.5% of full gross and was up 5.7% for nan year. Retail was up 11% and accounted for 15.9% of full revenue. Entertainment besides accrued 11% and accounted for 14.5% of total, and car declined 4% to 8.8% of full revenue.

Comparing our cardinal categories successful fiscal twelvemonth 2022 to 2019, user services accrued 14.6%, unit was down 5.5%, intermezo accrued 4.8% and car was down 31.6% aliases conscionable nether $10 cardinal compared to 2019. Corporate G&A for nan 4th decreased 14.1% aliases by $666,000 compared to nan aforesaid 4th a twelvemonth agone to $4.1 million.

The year-over-year alteration successful firm G&A is mostly related to expenses successful anterior twelvemonth 4th fourth related to a CapEx task that was terminated arsenic good arsenic reduced compensation.

Full twelvemonth firm G&A accrued 8.6% aliases $1.4 cardinal to $18 million, chiefly related to firm integer expenses. This includes noncash expenses of astir $1 million. We expect to onshore location astir $18 cardinal successful 2023 aliases somewhat beneath $17 million, excluding noncash expenses.

Noncash stock-based compensation decreased $26,000 to 12.6% aliases 12.6% to $183,000 successful nan 4th and decreased 23.5% aliases $325,000 to $1.1 cardinal for nan afloat twelvemonth 2022. And we had an income taxation benefit, some for nan 4th and for nan afloat year.

Fourth 4th 2022 operating income declined $40 cardinal to a antagonistic $33.5 cardinal compared to $6.5 cardinal successful nan year-ago quarter, driven by a noncash impairment complaint of $44.2 cardinal related to FCC licenses, goodwill and franchise rights. Full twelvemonth operating income declined $50.8 cardinal year-over-year to a antagonistic $36.1 million, again related to a noncash impairment complaint of $54.7 cardinal for nan year.

Fourth 4th liking disbursal decreased $170,000 year-over-year to $6.6 million, reflecting our enslaved repurchase activity during 2022. And afloat twelvemonth liking disbursal was $26.9 million, somewhat up from $26.5 cardinal successful 2021. We ended nan twelvemonth pinch a full indebtedness of $290 million, and we made our semiannual liking costs connected February 1, 2023.

EBITDA for nan 4th was $9.9 million, up 7.5% aliases $690,000 from nan anterior twelvemonth quarter. And afloat twelvemonth EBITDA decreased 0.9% aliases $234,000 compared to 2021. Adjusted nett leverage was 6.71x and includes add-backs of astir $12 million, pinch half of that coming from our consequence connected a pro forma basis, 25% coming from our integer build-out and nan remaining 25% from taxation and noncash items that are added back. And successful this calculation, nan indebtedness is nett of rate connected hand.

We ended nan 4th pinch rate connected manus of $39.5 million. Our existent rate equilibrium continues to let america nan elasticity to trim indebtedness and/or prosecute further investments successful nan integer abstraction should an opportunity arise. However, fixed nan uncertain economical environment, we are inclined to support rate connected nan equilibrium expanse for nan clip being.

Our superior expenditures for nan 4th were $2.4 million, of which $1.6 cardinal was straight related to nan now completed Boston build-out of studios and offices. We received $830,000 successful nan 4th from nan build-out allowance, pinch an further $590,000 equilibrium connected nan way. This superior disbursal compares to anterior 4th fourth of $800,000.

Year-to-date CapEx walk was $13.4 cardinal aliases $9.3 cardinal nett of nan build-out reimbursement compared to anterior year-to-date aliases afloat twelvemonth of $4.5 million. Moving into 2023, we expect our CapEx walk will normalize successful nan scope of $4 cardinal to $5 million.

And pinch that, I'll move it backmost to Caroline.

Caroline Beasley

Thank you, Marie.

As reflected successful our results and successful ray of nan economical headwinds that we saw successful 4th quarter, we're pleased pinch our 4th fourth and afloat twelvemonth performance, peculiarly nan continued maturation and diversification afforded by our integer business. Specifically, nan strategy that was put successful spot midyear helped to thrust 25% maturation successful our integer gross for nan afloat year. We're very excited astir this opportunity arsenic we spell into 2023.

For example, our multi-platform section contented strategy continued to thrust tremendous assemblage maturation successful nan 4th quarter. Our owned and operated assemblage scope grew by 18% compared to 4th fourth of '21. And our power brands stay ascendant successful Nielsen, wherever we presently person nan highest mean cluster stock erstwhile compared to nan different awesome power broadcasters successful PPM.

However, nan largest assemblage maturation was seen connected our integer O&O asset, pinch unsocial users expanding from 16.6 cardinal successful Q4 '21 to 22.3 cardinal successful Q4 '22, marking an summation of 34%. This assemblage maturation led to a 69% summation of sellable integer impressions from Q1 - from Q4 '21 to Q4 '22. And arsenic noted connected anterior calls, nan maturation successful integer impressions is simply a basal driver of our integer gross growth.

And erstwhile looking astatine nan afloat twelvemonth '22 versus '21, our full owned and operated assemblage is up 30%. And conscionable for illustration successful Q4, integer is fueling nan maturation pinch our unsocial users up 38%, increasing from 54.9 cardinal successful '21 to 75.5 cardinal successful '22. And our sellable integer impressions were up 95% year-over-year, and we expect akin maturation successful 2023.

So moving connected to 2023 and looking astatine first 4th revenue. As of today, pacings are somewhat up to anterior year. And breaking that down, January was flat, February and March are pacing up successful nan debased to mid-single digits. And arsenic antecedently noted, we are very mindful of nan existent economical environment, and we will beryllium monitoring our gross pacings and managing our expenses based connected such.

We're hyper-focused connected improving wide margins for nan institution and generating free rate travel for nan year. And we'll show our rate connected manus and find nan champion usage of free rate travel successful nan early arsenic we move done nan year.

So lastly, I'd for illustration to admit our squad crossed nan institution for everything they've done and are doing to thief america proceed our integer modulation pinch our contented and income strategies successful place.

So convey you very much. And Marie, I'm going to manus it complete to you to inquire a number of questions that we received this morning.

Question-and-Answer Session

A - Marie Tedesco

Great. Thanks, Caroline.

So astir of nan questions that we received were addressed successful our pre-prepared remarks, however, we do person a fewer further questions that I will now review. And for nan first question, Caroline, this will beryllium for you. Could you touch connected our pacing for first 4th for section versus nationalist versus digital?

Caroline Beasley

Sure. And this is nan aforesaid communicative that we've seen complete nan past respective quarters and really respective years. Local's pacing up correct now, 6%, national's pacing down 12% and digital's pacing up 15%. So this reinforces what our goals are, and that is really focused connected section nonstop business, generating caller level of nonstop business and increasing our integer broadside of nan location because nationalist continues to decline.

Marie Tedesco

Great. Next question. Digital maturation was up 12.3%. Can you touch connected nan trends successful integer margins?

Caroline Beasley

Sure. So we're going to spell backmost to '21, erstwhile you saw our integer margins astatine level to somewhat up, truthful we were hardly generating rate travel pinch integer successful '21. In '22, those margins accrued to astir 11%. And successful '23, we're looking astatine those margins coming successful person to 20%.

Marie Tedesco

Great. In position of your integer businesses, are location immoderate existent restraints successful its growth, specified arsenic expertise to prosecute knowledgeable staff? And besides immoderate heightened title retired there?

Caroline Beasley

So connected nan integer broadside of nan house, we are seeing, successful position of hiring knowledgeable personnel, that this is really easing up. However, what we are seeing coming is that it's harder to find entry-level positions. So that is wherever we are connected nan employment side.

On nan business side, successful position of competition, we are seeing heightened title successful immoderate of our markets. But successful immoderate of nan markets, we are not. We are seeing much of our peers really focused connected integer and past besides smaller agencies coming connected starting a integer broadside of nan house. And truthful we're competing against them.

Marie Tedesco

Great. Another question. Under a mild recession - a recessionary situation for 2023, really should nan numbers look? And really should we position nan $10 cardinal costs savings? And what is nan incremental operating disbursal for nan acquisition of Guarantee Digital? Can you beryllium free rate travel affirmative successful 2023 nether this benignant of an environment?

Caroline Beasley

So I'll commencement pinch nan past question. And yes, we do expect to beryllium free rate travel affirmative successful 2023. The reasons are arsenic follows. In a mild recession, we still expect to spot gross growth. We expect national, of course, to beryllium down.

Local will beryllium flat, possibly moreover somewhat down. But pinch our accent connected integer and increasing integer revenue, we expect that to beryllium capable to offset immoderate declines successful nan accepted broadside of nan house. Also pinch nan acquisition of Guarantee Digital, they're going to bring gross into nan company.

In position of expenses from Guarantee, we are projecting astir $7 cardinal successful additive expenses this year. However, that's based connected definite gross projections for Guarantee, and we are expecting them to rate travel affirmative this year. So if nan revenues are not coming successful nan measurement that we expect, past we will evidently set those expenses. And what else? Did I miss thing there?

Marie Tedesco

I deliberation - I cognize that was a agelong question, and I deliberation you sewage it all. There was a question, is location - is immoderate much rate costs tied to nan costs savings actions that were implemented successful October? And nan reply is really no. So we accrued and paid retired each nan related severance expenses successful 4th quarter, and nary of that is carrying complete to first 4th of 2023.

And then, Caroline, nan past mobility that we'll reappraisal is, pinch rate now almost up to $40 cardinal and nan bonds trading successful nan mid-60s, does it make consciousness to support buying backmost some?

Caroline Beasley

Yes. So 1 of nan goals of nan institution is to trim our indebtedness and to trim our leverage. So that aligns very good pinch nan extremity - 1 of nan goals of nan company. So yes, it would make consciousness to bargain nan bonds backmost astatine 60%, if you will.

We are being very disciplined. We want to spot really nan opening of 2023 shapes retired and to spot if location are immoderate recessionary risks retired successful nan marketplace. And erstwhile we consciousness comfortable pinch nan economy, past we will really attraction connected nan goals of nan company.

Marie Tedesco

Perfect. And that concludes nan questions.

Caroline Beasley

All right. Well, convey you very much. We really admit your questions and you each participating today. Hope you person a awesome day.

Operator

Thank you. This concludes today's teleconference. You whitethorn disconnect your lines astatine this time. And convey you for your participation, and person a awesome day.