Caroline Beasley - EVP and CFO.

Good day ladies and gentlemen and welcome to today's Beasley Broadcast Group Third Quarter 2015 Results Call. At this time I would like to turn the call over to Caroline Beasley. Please go ahead..

Thank you, Greg and good morning. Welcome to the Beasley Broadcast Group's third quarter 2015 webcast.

Before beginning, I would like to emphasize that that webcast will contain forward-looking statements about our future performance and results of operations that involve risk and uncertainties described in the risk factors 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 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 webcast can be accessed for five days on our website.

As on our past three webcasts, I'll remind everyone that on December 1, 2014, we swapped five stations, including two in Philly and three in Miami, for a total of 14 CBS stations, including 7 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 despite having operated them for the full quarter of '14 and as such we again provide supplementary disclosures in today's release.

So for the third quarter on a continuing operations basis, revenue increased 101.3% and SOI increased 82.4% and this reflects revenues from Tampa and Charlotte clusters for the third quarter, which were not included in the third quarter of 2014 results.

Now on a combined continuing and discontinued ops basis for the quarter, revenue increased 7%, station operating expenses increased 17.2%, resulting in a SOI decline of 15%.

The revenue increase reflects improvements in Fort Myers and Tampa, while the expense increase is primarily due to the higher operating expenses in Charlotte and Tampa in 3Q '15 compared with Philly, Miami in 3Q '14 and this is partly due to the fact that we operate a total of 14 stations in the new market versus five in the markets we gave up.

The lower SOI is primarily attributable to declines in Charlotte, Wilmington, and Fayetteville and of the $1.2 million decline approximately $650,000 came from the differential of comparing Q3 '14 Miami/Philly with Q3 '15 Charlotte/Tampa.

Now on a pro forma basis and this is if we owned Charlotte/Tampa all of last years, revenue would have decreased 4.5% and SOI decreased 12.2%. The decline in revenue reflects overall softness in Charlotte, Vegas, Fayetteville, and Wilmington.

With respect to SOI, we partially offset the revenue decline through additional cost reductions, specifically, we continued to bring down station operating expenses in Tampa and Charlotte which on a combined basis declined approximately $700,000 and we lowered total company station expenses by $300,000.

Overall when comparing Charlotte and Tampa on a pro forma basis for the quarter, revenue was down 9%, we reduced expenses by almost 7%, and there was a SOI decline of almost $600,000 from these clusters. On a year-to-date basis, SOI has declined approximately $1.4 million in these two markets combined.

In 2016, we expect to complete our transition of a Charlotte and Tampa clusters which should lead to better results in Charlotte and the continued strength in our Tampa cluster. At present, we have seven markets that report to Miller Kaplan and these markets account for about 92% of our total revenue.

In the third quarter, the seven markets increased almost 1% compared to our clusters declining approximately 5.5% on a pro forma basis. Now this underperformance was partially due to our revenue results in both Charlotte and Vegas. Overall, the Charlotte market declined 5.3% for the quarter, compared to our cluster being down 17.1%.

Our cluster's 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 13.3%. And this is in part due to a format change at KBGF earlier this year.

Elsewhere, across our portfolio, we generated revenue increases in Tampa, Fort Myers, Augusta and Greenville-New Bern, and we outperformed the overall market in Fort Myers. Now moving onto the ratings, we're placed to report ratings growth in all three of our PPM market, which we expect to be evident in our market revenue results next year.

Starting in Vegas, our cluster has an 18.2 share of the persons 25-54 audience compared to a 16.8 share last quarter and a 16.1 share a year ago. Our strong ratings growth in Vegas is largely attributable to our flagship classic hit station KKLZ.

We're also very excited about the ratings strength of our hot AC station in the market, KBGL which has logged steady increases since its launch earlier this year and saw another 22% market share gain this quarter compared to last.

We expect to improve on our market underperformance in terms of revenue, as we convert this ratings strength into advertising buys. In Charlotte, we once again captured the number 1 position for total cluster share with adults 25-54 with a 32.2 share in Q3 compared to a 30.5 share in Q2.

Our mainstream AC station WKQC had the largest gains this quarter, shooting to the top in many demos with a 41% increase from last quarter and a 23% increase from last year. After a format challenge, our urban AC station is back in the game and raised 27% between Q2 and Q3.

The only station that saw a noticeable decrease in share was urban WPEG which was also defending against a format challenge. Notwithstanding this, like Vegas, we expect to improve on our market underperformance as we convert our Charlotte cluster's overall rating strength into revenue.

Moving to Tampa, our cluster increased total share by 15% year-over-year with persons 25-54 and prime. This occurred despite the fact that one much our independent contractors, Bubba the Love Sponge, the morning show talent on WBRN, was the subject of a Nielson audio investigation, which resulted in WBRN being delisted.

This negatively impacted the Q3 share for the station and the cluster. At this time, the morning show on BRN has returned with the same personalities and continues to be very popular in Tampa.

Overall, we expect to report even more upcoming growth as the latest Tampa trends and these are just trends show that we have the top four stations with adults 25-54. The company-wide, for our PPM markets, our average market share in Q3 is 23.9 with adults 25-54 and prime. This compares with the 23.3 share in Q2 and the 21.8 share last year.

We attribute this growth to research, promotions and marketing that we executed in all three of our PPM markets. Now turning back to the financials, the company recorded a goodwill impairment charge of $3.5 million, and this is pretax, related to our Wilmington cluster. Our interest expense for the quarter was flat at approximately $1.1 million.

We did have an increase in our interest spread of 50 basis points and that was given the slight tick-up in our net leverage. However this increase was offset by a decrease from the reduction in principal compared to Q3 '14.

Our effective tax rate for the 2015 is 39% and turning to the balance sheet, we made repayments against our debt totaling $3 million. And our total debt was reduced to $90.2 million at the end of the quarter.

The latest trailing 12-month operating cash flow is $23.7 million and our total debt -- our leverage ratio at the end of the quarter was 3.81 times. Our credit agreement does allow us to add up to $10 million of cash on hand so our net leverage was 3.39 times and this compares to our covenant of 4 times.

We had $11.1 million in cash on hand at the end of the quarter. We spent about $1 million dollars in capital and year-to-date we've spent about $1.8 million. So in closing, I would like to review our progress thus far in '15. First, the station exchange completed in late '14 substantially broadened and diversified our revenue.

And at the same time the transaction was announced, we indicated that we expected it to be accretive to our SOI in the first 18 months of operation or ownership. Since closing, we've been implementing strategies to extract operating and financial synergies from the exchange.

We're now approximately 11 months into our integration and transition plan and despite is being much more difficult than expected, we expect to see benefits from the swap in mid to later 2016.

And from a financial standpoint, the exchange meaningfully expanded our operating and revenue base without us occurring any additional borrowings or using cash from operations. And based on our projections, the transaction will lead to SOI accretion by the end of next year and the fact that we undertook no new borrowings.

We remain confident that this exchange represented a highly unique and innovative means for us to enhance shareholder value. In addition, our digital and event marketing plans are progressing. We will soon announce two new positions for the company, Director of Strategic Sales; his focus will be on event marketing and NTR and a Digital Sales Director.

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

While generally at present our revenue is not reflecting the strength of our ratings, we expect this disparity to close in the near future. We believe our commitment to localism in our new markets is the best means of improving revenue share across our platform and enhancing shareholder value.

We're making continued strides toward achieving revenue parity with our markets and extracting the economic efficiencies we identified in our new markets. And so with that, I thank you for your time today and please feel free to call me should you have any questions. Thank you..

Ladies and gentlemen, that does conclude today's conference. Thanks for your participation..

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