Caroline Beasley - CEO Marie Tedesco - CFO.

Analysts:.

Good morning and welcome to the Beasley Broadcast Group Fourth Quarter 2016 Conference 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 Factors sections of our most recent annual report on Form 10-K and supplemented by our quarterly report 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 Web site.

I’d also like to remind listeners that following its completion, a replay of today's call can be accessed for five days on the Web site www.bbgi.com. You can also find a copy of today's press release on the Investors or Press Room sections of the site.

At this time, I'd like to turn the conference over to your host Beasley Broadcast Group CEO and Chief Financial Officer, Caroline Beasley. Please go ahead..

Thank you, Kerry. So, good morning and thank you for joining for joining us to review our 2016 fourth quarter and full year operating results. Actually, Marie Tedesco, our CFO is on the call with me today and she will provide more detail on the fourth quarter.

We are like in responding or reporting to the fourth quarter -- in regards to the fourth quarter and full year and that's due to the added requirements from the Greater Media transactions. Our goal is to be back on track with the first quarter reporting.

As a reminder on November 1, we did complete the accretive acquisition of Greater Media adding 17 stations net of divestitures and 4 attractive new markets to our operating footprint.

We're making continued progress with the integration of the new stations and similar to the CBS Swap transaction that we did in late 2014, we expect to complete the integration within 12 to 18 months, and I'm pleased to report that we're generally on track with our integration plans, execution and synergy realizations.

Today we'll review the fourth quarter results and our outlook as well as the expected benefits from the Greater Media transactions and other ongoing initiatives to drive free cash flow growth and shareholder returns.

The results reported today reflect the company's ownership and operation of 52 radio stations through October 31, and then the addition of 17 Greater Media stations effective November 1. And as a result, the Charlotte Greater Media stations and WFNGAM [ph] were divested in January 5, 2017 and as a result are reported as discontinued operations.

However, our sale of the 6 Greenville New Bern Jacksonville, North Carolina stations that were announced in early February are reported in continuing operations for the fourth quarter.

The 89.1% rise in fourth quarter net revenue was a direct result of the acquisition as well as a strong quarter from the Beasley legacy stations and this is due to political ad spend.

On a standalone basis, the Beasley legacy stations generation a fourth quarter revenue increase of approximately 7.6% or $2.1 million in contrast to some of the Greater Media Stations that experienced transition related issues.

Overall the 89.1% consolidated net revenue increase drove SOI growth of 80.3% which led to solid operating income, net income, diluted EPS and free cash flow growth.

Our fourth quarter results highlight the value of our long-term strategy to focus on strong core programming and targeted localism while building scale through swaps and accretive acquisitions.

I'd emphasize that fourth quarter was a transitional period by all measures and we look forward to reporting -- to future reporting which will reflect our new platform, our integration initiatives and the initiative underway to drive SOI and cash flow improvement.

In this regard bottom line results reflect an approximate $45.5 million gain on the acquisition of Greater Media Stations and this is primarily resulting from the net difference in the valuation of the assets and the purchase price paid.

The company also incurred about $5.2 million and $6.4 million of pretax merger expenses in the fourth quarter and the full year respective, and fourth quarter interest expense increased about $2.8 million and this is related to the Greater Media transaction.

Free cash flow for the period which is operating income plus depreciation, amortization excluding merger expenses and other income and then subtracting cash taxes, cash interest expense and maintenance CapEx for the quarter was $11.1 million and that compares with 5.2 million in the fourth quarter of '15.

So, now I'm going to turn the call over to Marie to report in details of Q4..

Thanks, Caroline. It’s a pleasure to be joining you today. So, now let's start with the review of the fourth quarter results. Net revenue increased 25.3 million or 89.1% to 53.7 million and station operating expenses for the quarter increased 93.1% or 18.1 million resulting in an 80.3 increase in station operating income to 16.2 million.

The revenue increase has left strong result at the legacy station where the revenue was up 7.6% from Q4, 2015 as well as including two months of operations of the Greater Media station. The increase in SOI reflects the rise in revenue partially offset by higher station sales costs and the operations of the recently acquired station.

These legacy clusters in Tampa-St. Petersburg, Charlotte and Las Vegas clusters generated double-digit revenue growth quarter-by-quarter, primarily due to the political.

On the consolidated basis, fourth quarter 2016 SOI margins were 30.2% compared to 31.7% in the year ago period reflecting growth in the margin in the Beasley legacy station that was partially offset by the two months or operations of the Greater Media properties which as Caroline indicated did not performed up to their potential in the quarter as a result of a change in ownership and transition.

To this point, on a standalone basis, the Greater Media station's revenue decreased 6.1% or approximately 2.3 million with 1.4 million of the decline coming from Philadelphia.

On a consolidated basis, actual fourth quarter political revenue was strong with approximately 3.5 million growth, of which approximately 3 million came from the Beasley legacy station. Our Las Vegas, Tampa-St. Petersburg and Charlotte cluster accounted for approximately 77% of it.

On the pro forma basis for the quarter, as we own the Greater Media stations from October 1, 2016, net revenue rose 0.5% to 65.8 million while SOI decreased 10.6% or 2 million to 16.7%.

Fourth quarter operating expenses on the pro forma basis include onetime severance expenses of approximately 1.6 million, excluding this charge this pro forma expenses would have increased 1.6% quarter-over-quarter and pro forma SOI would have decreased approximately 2.4%.

In the fourth quarter including the Greater Media station, we again outperformed our market in term of revenue growth and according to [indiscernible] our cluster rose approximately 2% compared with the overall market which increase 0.5%.

Our outperformance was driven by our new Detroit cluster which generated an impressive year-over-year revenue increase of 6.9% compared with a Detroit market which was down 3.2%. In addition to Detroit our Augusta, Boston, Charlotte, Fayetteville, Las Vegas, Greenville-New Bern-Jacksonville and Tampa-St.

Petersburg clusters all out performed their respective market. With the inclusion of the Greater Media station, we will report strong year-over-year revenue and SOI increases in the Q -- first quarter on an actual basis.

However, in Q1 today we are seeing a mid-single digit decline in both proforma and same-station revenue which is largely attributable to comparisons against the political revenue, lower national revenue and the format change in Tampa where WBR is now WPDB featuring today's hits and yesterday's favorite.

Corporate G&A expenses rose 25.5% or by $569,000 during the quarter to $2.8 million primarily due to an increase in corporate staff and other costs associated with the integration of the Greater Media acquisition.

Our effective income tax rate after the gain on the merger was approximately 8.3% and 14.9% for the 3 and 12 months ended December 31, 2016. We paid $93,000 of taxes in the fourth quarter of this year. With the financing of the Greater Media acquisition, our total outstanding debt as if November 1 was $270.3 million.

We made voluntary repayments against our debt in Q4 of $2.3 million, so our outstanding debt was $268 million as if 12-31-16. The LTM consolidated operating cash flow as defined in our credit agreements was $62.3 million resulting in a leverage ratio at 4.28 times as if December 31, 2016.

Our credit agreement allows the company to receive the benefits of up to $20 million of our total cash on hand in calculating net leverage. So reflecting our balance sheet cash net leverage at 12-31-16 was 3.96 times.

Revenue credit agreements completed on November 1, '16 the company does not have a covenant leverage test at 12-31-16 our net measured leverage test will occur on March 31, '17 with the maximum leverage covenants of 6.25 times at that time.

We end up '16 with cash on hand of $20.3 million and the company spends $868,000 in CapEx in the quarter compared with $321,000 in the fourth quarter of 2015. For the full year 2016, we spent $2.9 million in CapEx compared to the full year of 2015 where we spent $2.1 million. And with that I will now turn the call back over to Caroline..

Thank you, Marie. So to conclude with our long-term strategic focus on local and expanding our scale and free cash flow, we are confident the addition of Greater Media represents transformational growth opportunity for our company.

The transaction has increased our portfolio by about 40% and more than doubled our audience reach giving us market leading stations with great, great brands that are complementary to our existing properties.

Financially, the acquisition more than doubled both our revenue and cash flow and we're intend on bringing the cash flow growth to the free cash flow line. Needless to say, it's been a very, very busy few months, we're in the midst of the integration and focused on completing the synergy.

On January 5, as mentioned before, we closed on the previously announced divestiture of four stations in Charlotte for $24 million and given the tax basis of the stations sold, we do not expect to incur any significant tax and tax on this sale, so we apply the entire 24 million to dent reduction.

In February, we entered into an agreement to develop our Greenville-New Bern clusters for 11 million and again we intend to apply the majority of the net pricing to further reduce debt and leverage. And we expect this transaction to close sometime in the second quarter of this year.

Throughout 2017, our strategic priorities will be realizing the synergy target and integration goals for the newly acquired stations, reducing debt and leverage, returning capital to shareholders through our quarterly cash dividend program and further diversifying our revenue stream.

In closing, we remain confident that our initiatives to drive sales, productivity and efficiency combined with prudent management of our capital structure is a proven formula for sustaining long-term financial growth and the appreciation of shareholder value. And finally, I just like to say few words about the industry.

We continue to be very bullish on radio as we are the number one reach meeting medium with 93% of the U.S. population tuning in weekly and TSL is approximately two hours a day. And in spite of the increased audio competition the number of radio listeners increased year-over-year by 3.1 million and TSL increased by 13 minutes per week.

So with that we did open it up for questions or ask your questions and we did receive a few. So, I'm going to hand it over to Marie to walk through a few of their questions.

Thanks, Caroline.

The first question we got was to ask if we could please give them and update on the first quarter pacing?.

Okay. So, Marie mentioned this in her comment we are looking at actual revenue to increase about 90%. However, if you take a look at this on pro forma basis, we are looking at pro forma revenue to be down mid to high single-digit. And this is due to the following. National is pacing down double-digits and that is impart due to political.

We had about 1 million net in political in the first quarter of last year. And then in addition, as she mentioned before, we changed format up in Tampa at WPDB which use to be WBR and back in December. And so we are looking at tough comps with that format change as well. So, that was it..

Great. Thank you. Another question we got was to put a little color on what revenue categories drove the revenue increased in fourth quarter outside of political. And looking at that, outside political we did see increases in both retail, auto and also in fast food. Another question that was asked was what percent of our revenue comes from national.

And so with Beasley national is about 17% of our total revenue, these are for full year of 2016. Greater Media is a bit higher at 26%, on the combine basis for 2016 national was around 21% of total revenue. We also received a few other questions that we feel have been addressed in this call..

Okay. Thanks, Marie. Thank you to everyone who attended the call today. And should you have any questions please free to call either Marie or myself. Thank you..

This concludes today's call. Thank you for your participation. You may now disconnect..