Beasley Broadcast Group, Inc. (NASDAQ:BBGI)
Q4 2015 Earnings Conference Call
February 12, 2016 10:00 AM ET
Caroline Beasley - EVP, Secretary, Treasurer and CFO
Good day and welcome to the Beasley Broadcast Group 2015 Fourth Quarter Results Conference. As a reminder, today's conference is being recorded.
At this time, I'd like to turn the conference over to Ms. Caroline Beasley. Please go ahead ma'am.
Thank you, David and good morning. Welcome to the Beasley Broadcast Group's fourth quarter 2015 web cast. Before beginning, I'd like to emphasize that that web cast 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 Form 10-K. Today's web cast will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of Reg FK. 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 our Web site. I’d also remind listeners that following its completion, a replay of today's web cast can be accessed for five days on our web site.
As on our past three web casts, I'll remind everyone that on December 1, 2014, we swapped five radio stations, including two FMs in Philly and two FMs and one AM in Miami, for a total of 14 CBS stations, including seven in Charlotte, six in Tampa and one in Philly. As a result of the transaction, on a GAAP basis, we're required to report the five stations that CBS assumed ownership of, under discontinued operations on the income statement, Despite having operated them through November 30 of 2014. As such, we again provided supplementary disclosures in today's release.
Beginning in the first quarter of 2016, our reporting will become more simplified, as the results for the 2016 and 2015 period will solely reflect Beasley's current platform.
For the fourth quarter, on a continuing ops or as-reported basis, revenue increased 53% and SOI rose 42.9%. Now this reporting reflects revenue from the new Tampa and Charlotte clusters for the 2015 fourth quarter, which were only included for the months of December and 4Q 2014 results. And as noted a moment ago, it excludes the revenue from the stations we swapped to CBS for the month of October and November of 2014.
Now on a combined continuing and discontinued op basis for the quarter, revenue increased $1.7 million or 6.5%, while station operating expenses rose $1.6 million or 8.8%, which led to an SOI increase of $148,000 or 1.7%. The revenue increase is largely attributable to improvements in Fort Myers and Tampa, while the expense increase is primarily due to higher operating expenses in Charlotte and Tampa in 4Q 2015 compared with Philly and Miami in 4Q 2014, which is partially due to the fact that we operate a total of 14 stations in the new markets, versus five in the markets we gave up. The increase in SOI is primarily attributable to increases in Tampa, offset by declines in Vegas and Wilmington.
In 4Q 2014, the company generated about $100,000 in political revenue that did not recur in 4Q 2015, and given the political headwinds effect that we generated positive SOI for the quarter, reflects the beginning of the benefits of last year's swaps.
Now on a pro forma basis for the quarter, revenue decreased 2.1% or $600,000 and SOI decreased 3.9% or $366,000. The decline in revenue reflects overall softness in Charlotte, Vegas and Wilmington. However, on a pro forma basis, 4Q 2014 political revenue was approximately $1.7 million. So excluding political, pro forma revenue increased approximately 4% in 4Q 2015.
With respect to SOI, we partially offset the revenue decline through additional cost reductions. Specifically, we continue to bring down station operating expenses in Charlotte, which declined about $600,000 and we lowered total company station expenses by $200,000.
Notably, when comparing combined Charlotte and Tampa results on a pro forma basis for the quarter, revenue declined 1%, but we reduced expenses by over 6%, resulting in an SOI increase of almost $500,000 from these clusters. Again, this quarterly SOI growth highlights the beginning, that the benefits of last year's swap and marks the first quarterly increase in these markets, since we implemented our operating and expense management discipline. This is particularly meaningful, given these markets had almost $1 million of political revenue in 4Q 2014.
In 2016, we expect to complete our transition of our Charlotte and Tampa clusters, which should lead to better results in Charlotte, and the continued strength of our Tampa cluster, as shown in the 4Q 2015 combined SOI increases in these markets.
At present, we have seven markets that report to Miller Kaplan, and these markets account for about 92% of our total revenue. In 4Q, the seven markets increased almost 1.5% compared to our clusters declining approximately 1.1% and this is on a pro forma basis. So overall, radio advertising is fairly healthy, and while our fourth quarter comparisons may not reflect this, we are making progress toward our goal of outperforming our markets. With December 2015 being the first month that we achieved this, and we expect this trend to continue through 2016.
Our overall Q4 2015 underperformance relative to the markets was primarily due to revenue from Charlotte and Vegas. Overall, the Charlotte market declined 7.2% for the quarter, compared to our cluster being down 16%. Our clusters decline was driven by the impact of a direct competitor against our urban AC station, WBAV, which weighed on both local and national revenue for the quarter.
In Vegas, the market was down 3.5% compared to our cluster being down 7%, which was due to the change in format at KBGF earlier this year and softness in ratings at our country and urban LD station. Elsewhere, we generated revenue growth in Tampa and Fort Myers, and these clusters outperformed their overall market.
Moving on to the ratings, starting with Vegas, we are seeing the continued growth of our flagship stations, classic hits, KKLV, which was second in key demos again this quarter, and garnered a very strong 7/2 share with adults 25-54 and prime. These ratings mark a 3% quarterly sequential increase and a rise of over 111% year-over-year. However, on a combined basis, the Vegas cluster ratings were down, both on a quarterly and year-over-year basis. The decline largely reflects the impact at our Urban Oldies KOAS, which faced two new urban competitors in the market, beginning in September of 2015.
Moving on to Charlotte; Beasley once again had a number one rated cluster in the market, for a total share among adults 25-54 and prime. On a quarterly sequential basis, our share rose to 32.8 in Q4, compared to 32.2 in Q3. As such the Charlotte cluster ratings are up nearly 3% quarter-to-quarter, and up nearly 10% year-over-year. Beasley has three out of the top five stations in Charlotte, and we are in a strong position to start 2016.
In Tampa, our largest market, we had three of the top four stations, including the number one and number two station. Our Rhythmic CHR station was the number one station for most of 2015 and many key demos, including 25-54. Our country stations, QYK, was number two this quarter, with 40% higher shares than the direct country competitor.
Classic hits, Q105 is currently fourth with adult 25-54, and is Tampa Bay's number one choice for at-work listening. And we are delighted, that overall, the cluster saw gains in persons 25-54 and prime, quarter-over-quarter and year-over-year.
Overall, Beasley PPM market share in Q4 is 24.6 with adults 25-54 and prime. This compares with 23.9 share in Q3, and 22.8 share last year. We attribute the 3% quarterly sequential and 8% year-over-year growth to our organization-wide focus on localism, research, promotions, and marketing.
In our Diary markets, despite the fall 2015 books being softer than normal, we have the number one station in three of the five markets. In addition, we have the dominant clusters in every market, where we operate more than one station. Our country formatted stations accounted for much of the fall 2015 softness, which we attribute to a soft music cycle. We have numerous programming initiatives underway, including marketing and research, and we expect to see improvements in the spring 2016 book.
Now turning back to the financials, interest expense for the quarter was approximately $1 million, and this reflects an increase of 4.6% over last year's fourth quarter. The company refinanced its debt, and entered into a new credit agreement on November 30, and as a result, we quoted a loss on modification of long term debt of $600,000. The refinancing extended the maturity and provided added flexibility under the credit agreement. For the full year 2015, our effective tax rate for the combined continuing ops and discontinued ops was approximately 36%.
Now turning to the balance sheet, during the quarter, we made net repayments totaling $1.2 million against our debt, and our total debt was reduced to $89 million. The latest trailing 12 months consolidated operating cash flow is $23.7 million, and this resulted in a gross leverage ratio of 3.75 times at the end of the year. A credit agreement allows the company to receive a benefit of up to $12.5 million of cash on hand and calculating net leverage; so our net leverage at the end of the year was 3.23 times. Cash on hand at the end of the year was $14.3 million, and we spent about $320,000 in capital in fourth quarter, and a little over $2 million for the year.
In closing, I'd like to reiterate that we made progress throughout 2015 in right sizing the operations and practices of the stations received in a swap. We successfully implemented integration cost efficiency and operating plans, and maintain our organization-wide focus on targeted localism, delivering quality program, effective online marketing solutions, and dedicated service to the listeners and advertisers in these markets. This led to stronger clusters, and continued ratings leadership across our market.
We are about 14 months now, into our integration of the new stations, and we are beginning to see the financial benefits of our operating practices and ratings trends reflected in these markets.
At the time the swap transactions was announced, we indicated that we expected it to be accretive to BBGI's station operating income in the first 18 months of ownership. With the overall health of radio and the expectation of a return of political, combined with our rating strength, streamlined operations and solid financial positions, we entered 2016 on strong footing towards achieving this goal.
We believe our commitment to localism in all of our markets is the best means of improving revenue share across the platforms, and enhancing shareholder value. We are making continued strides towards achieving revenue performance ahead of our markets, and extracting the economic efficiencies we identified in our new markets.
Finally, our employees are our largest asset, and with the addition of Tampa and Charlotte, the number of full time employees increased significantly. It has been incredible to see the commitment and drive to win from our markets, and I am very proud of our team.
So on behalf of our corporate and station personnel, I'd like to thank you all for tuning in today, and should you have any questions, please feel free to call me. Thank you.
And that does conclude today's conference, and we thank you for participating.
[This presentation has no question-and-answer session.]
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