Caroline Beasley - EVP & CFO.

Analysts:.

Good day and welcome to this Beasley Broadcast Group 2015 Second Quarter Results. Today's call is being recorded. At this time, I’d like to turn the call over to Ms. Caroline Beasley. Please go ahead ma'am..

Thank you and good morning and welcome to Beasley Broadcast Group second quarter 2015 webcast.

Before beginning, I’d like to emphasize that this broadcast 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 form 10-K.

Today's webcast will also contain a discussion of certain non-GAAP financial measures, within the meaning of item 10 of Reg 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 our Web site.

I would also remind listeners that following its completion, a replay of today's webcast can be accessed for five days on our Web site.

As on our past three webcasts, I’ll remind everyone that on December 1, 2014 we swapped five radio stations, including two FM’s in Philly and two FM’s 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 are required to report the five stations that CBS assumed ownership of under discontinued operations. Despite having operated them in the second quarter and first half of 2014. And as such, we again have provided supplementary disclosures in today’s release.

So moving on a continuing operations basis, net revenue increased 91% and SOI increased 63%. This reflects revenues from the new Tampa and Charlotte clusters for the second quarter, which were not included in the second quarter of ’14 results, and it excludes the stations we swapped to CBS.

Now on a combined continuing and discontinued ops basis for the quarter, revenue increased $1.1 million or 4.4%. Station operating expenses increased $2.4 million or 14.3% and SOI declined 1.2 million or 12.7%.

The expense increase is primarily due to the higher operating expenses in Charlotte and Tampa in 2Q ’15, compared with Philly and Miami in 2Q ’14, 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.

So lower SOI is primarily attributable to the revenue declines in Charlotte, Las Vegas and Wilmington, which were partially offset by revenue increases in Tampa and Ft. Myers.

Of the 1.2 million SOI decline, approximately 300,000 came from the negative differential when comparing Q2 ’14 Miami, Philly with Q2 ’15 Charlotte, Tampa and this amounted to about $1 million on a year-to-date basis.

On a pro forma basis for the quarter, which assumes the asset exchange occurred on January 1, 2014 revenue decreased 6% and SOI decreased 8.4%. The decline in revenue reflects overall softness in the add markets and our clusters in Charlotte, Las Vegas and Wilmington.

With respect to SOI, we partially offset the revenue decline through several significant cost reductions, specifically in second quarter station operating expenses in Tampa and Charlotte on a combined basis declined approximately 1.2 million and by a total of 4.9% or 1 million for the entire Company.

So peeling back the onion even further, overall when comparing Charlotte and Tampa on a pro forma basis for the quarter, revenue declined approximately 7% or $1 million, but we reduced expenses by 11% or 1.2 million which led to an SOI increase of 4% or 200,000 from these clusters.

While we’re not yet where we expect to be, we’re making progress given that in first quarter SOI declined almost 700,000 in these two markets combined when compared to Q1 of ’14. At present we’ve seven markets that report to Miller Kaplan, and these markets account for about 92% of our total revenue.

In the second quarter, the seven markets were basically flat compared to our clusters declining approximately 5%, and this is on a pro forma basis. Our clusters made progress closing the gap between the market performance and theirs starting in April when there was a 7% gap followed by May at 5% and June it narrowed to 2%.

One of our strategic priorities is to outperform our markets and the recent trends indicate we’re heading in the right direction as we further integrate the new Charlotte and Tampa station and implement our operating disciplines and focus on localism.

Moving on to the specific markets, the Charlotte market declined 3.6% for the quarter compared to our cluster being down 14%. And this reflects both local and national declines for the quarter. In Las Vegas, the market was down 2.9% compared to our cluster declining 16%. And this is largely due to ratings, which I will discuss in a moment.

Elsewhere across our portfolio we generated revenue increases in Tampa, Ft. Myers, Fayetteville, and Greenville-New Bern. And we outperformed the overall markets in both Tampa and Greenville-New Bern. Given the swap category comps are difficult.

However, on an actual over actual basis consumer services, although [ph] entertainment in retail were all up, while beverage, fast food and telecom posted declines. Now moving on to the ratings, second quarter brought ratings growth to nearly all of our markets.

In our largest market, Tampa, our Rhythm Mix CHR station WILD 94.1 remains the shining star. Ranked number one with persons 18 to 34. Every station in this cluster saw a quarter-to-quarter and year-over-year share increase with the exception of Spanish WYUU.

In Charlotte, Beasley has two out of the top three stations with adjusted 25-54 including the number one station urban WPEG. The station with the largest growth this quarter was country WSOC which was up 32% from the first quarter. And currently the Charlotte cluster overall has a 31 share of the market.

Moving our West in Las Vegas, our largest station is now Classic Hits, KKLZ which is fifth with adults 25-54 and fourth among English speaking stations. Our second largest station old school KOAS also saw growth this quarter up 6% from last quarter and is fifth among English speaking stations sixth overall.

As a cluster Las Vegas was up over 5% from the first quarter. Spring brought ratings growth in our diary markets, and we have the number one 25-54 station in all diary markets with the exception of Wilmington. In Fort Myers our rock station WRXK is now number one 25-54 and the cluster has a 19.2 share of the 25-54 demo.

In the Greenville-New Bern-Jacksonville market, urban WIKS remains the number one station in all major demos and the cluster has the largest share of radio listening in the market. In Augusta, our country outlet Kicks 99 was once again the number one station with adults 25-54 despite a direct competitor.

And in Fayetteville, urban FOXY 99 remains number one in all demos and the cluster saw a 10% year-over-year share increase. And finally in Wilmington, WJBR saw a 19% year-over-year share increase and is closing the GAAP with its competitor.

Now turning back to the financials, interest expense for the second quarter decreased 14% and this reflects both the lower cost of borrowing and the reduction in principal compared to Q2, ’14. And our effective tax rate at the end of the quarter was approximately 39%.

Turning to the balance sheet, during the quarter we make repayment scheduling $3 million against our debt, and our total debt was reduced to $93.2 million. The latest trailing 12 months operating cash flow as defined according to our credit agreements was $25.4 million with a total leverage ratio of 3.67 times at the end of the quarter.

Now our credit agreement allows the company to receive the benefit of up to $10 million of cash on hand. So in calculating net leverage for the quarter reflecting the cash our net leverage at the end of the quarter was 3.27 times.

Cash on hand at the end of the quarter was $11.6 million and we spent $383,000 in capital for the quarter and $145,000 on a year-to-date basis. In closing, I’d like to review our progress in ’15 and how we expect that to benefit future periods.

First the station exchange completed in late ’14 substantially broadened and diversified our local radio and marketing solutions platform. From a financial standpoint, the asset exchange meaningfully expanded our revenue base without the company incurring additional borrowings or using cash from operations.

Based on our projections that the transaction will lead to station operating income accretion in the next year and the fact that we undertook no new borrowings to complete the transaction. We remain confident that the station exchange represented a highly unique and innovated means for our company to enhance shareholder value.

It will allow for delivering while positioning us with four clusters in seven of the twelve markets in which we operate. In addition our digital plans are progressing and we continue to see positive results as reflected by the 12% growth in continuing operations digital revenue in Q2 and this is according to Miller Kaplan.

We continue to aggressively manage this business and its opportunities for growth. As always, our long-term performance demonstrates their focus on core programming, and targeted localism are supporting the tremendous rating strength, which is clearly evident from the ratings results I shared with you a moment ago.

While generally at present our revenue is not reflecting the strength of our ratings. We fully expect this disparity to be close in the near future. So behalf on our corporate and station personal, thank you very much for participating today, and should you have any questions, please feel free to call. Thank you very much..

That does conclude today's conference. Thank you for your participation..