Good morning and welcome to Beasley Broadcast Group's Third Quarter 2017 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 section of our most recent annual report on Form 10-K as supplemented by our quarterly reports 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 website.

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 company's website, 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's Chief Executive Officer, Caroline Beasley. Please go ahead..

Thank you Kim, and good morning. Thank you for joining us to review our 2017 third quarter results. Marie Tedesco, our CFO is on the call with me this today. So let's just jump right in. as we look at third quarter, I'm pleased to report that we had another solid quarter of pro forma SOI growth.

Overall, pro forma revenue was flat in third quarter and this is primarily due to softness in local and national spot revenue and the non-recurrence of last year's political revenue, which amounted to about $620,000. Excluding the impact from political, revenue increased 1%.

Pro forma expenses for the quarter declined 5.2%, resulting in a 16.9% increase in SOI. In addition, our pro forma margins rose 16.7% year over year and we reduced our debt by $6 million during the quarter. We’ve reduced it by $49 million year to date and a total of $51.3 million since the closing of Greater Media last November 1.

On our call in July, we indicated that third quarter pro forma revenue would be flat and we were right in line with those projections. And I'm pleased to report that several of our clusters reported year over year revenue increases. And they include Detroit, Philly and Boston.

In fact, our Detroit cluster delivered double digit revenue increases, and our Philly cluster rebounded from a revenue decline of 13% and a decline of 7.6% in first and second quarters respectably, to an increase of 1% in the third quarter. So now I’m going to turn it over to Marie and she's going to provide you some more detail on the numbers..

Thanks, Caroline. We’ll start with a review of the third quarter operating results, and then we’ll review some balance sheet items. Reflecting the addition of the Greater Media station, actual net revenue increased $31.2 million 112.4% to $58.9 million.

And station operating expenses for the quarter increased 117.6% or $23 million, resulting in a 100% increase in station operating income to $16.4 million. The rise in operating expenses is a direct result of our operations of the Greater Media station. On a pro forma basis, our third quarter revenue remained flat at a plus 0.1% increase.

Pro forma operating expenses were approximately 5.2% or $2.3 million. Pro forma SOI rose 16.9% or $2.4 million year over year, reflecting the flat revenue and the reduced expenses from the ongoing realization of synergies.

As expected, when we entered into the Greater Media transaction, with the operating synergies we are extracting from our expanded scale, Q3 pro forma SOI margins increased 400 basis point to 27.9% from 23.9% in the year ago period.

According to Miller Kaplan, we outperformed the markets as our combined clusters rose 0.13% compared with the overall market, which declined 0.82%. This was mainly driven by NTR and network revenues, and a slight outperformance in traditional spot revenue in some markets.

We significantly outperformed our markets in terms of revenue growth in Detroit, with a revenue increase of 29.4% compared to the overall market, which was up 4.1%.

Corporate G&A expenses rose to 68.1%, or by $1.6 six million during the quarter to $4 million, reflecting our expanded scale and an increase in corporate staff and new employment agreement. In addition, stock based compensation increased $0.3 million for the quarter to $0.5 million.

Our effective income tax rate after the change in the fair value of the working capital adjustments was approximately 26% for the nine months ended September 30, 2017. And we paid $2 million in cash taxes in the first nine months of this. Year.

Total third quarter interest expense increased approximately $3.9 million year over year to $4.7 million, reflecting the year over year increase in borrowings related to the Greater Media transaction, as well as higher borrowing costs.

With the financing of the Greater Media acquisition, our total outstanding debt as of September 30, 2017 was $225 million compared to $240 million at June 30, 2017. During the third quarter, we made voluntary repayments against our debt totaling $6 million.

our LTM consolidated operating cash flow as defined in the credit agreement, was $52.6 million, resulting in a leverage ratio of 4.17 times as of September 30, 2017, compared to 4.28 times as of June 30, 2017. Our credit agreement allows the company to receive the benefit of up to $20 million of our total cash on hand in calculating net leverage.

And reflecting our balance sheet cash, net leverage at September number 30, 2017 was 3.87 times, with a maximum leverage covenant of 6.25 times at that time. We ended third quarter ’17 with cash on hand of $15.5 million. And the company spent $1.36 million in CapEx during third quarter, compared to $704,000 in third quarter a year ago.

Year to date, the company spent $2.96 million in CapEx, and it compares to year to date a year ago of $2.07 million. We anticipate CapEx spend to be approximately $5 million for the year. And with that, I'll turn this back to Caroline..

Thank you, Marie. The third quarter again confirmed the benefits we expected to achieve through the Greater Media transaction. It increased our portfolio by approximately 40%, more than doubled our revenue and audience reach, with both market leading stations and great brands and it is accretive to our operating results.

Looking at Q4, we generated about $4 million in political pro forma revenue last year. So we are looking at pacings and projections to be down in the high single digits for fourth quarter. Our focus will continue to be on protecting and growing our brands, and we will continue to prudently invest in them.

throughout 2017 and looking into ’18, we will continue our strategic priorities of further diversifying our revenue streams, achieving or exceeding the synergy targets and integration goals for Greater Media acquired stations. We do think that leverage and our cost of capital and returning capital to our shareholders.

And as a special note, the non-call period for the repricing of our debt expires on November the 1st and we are exploring our options, including repricing and refinancing our existing credit facilities. We're excited about our company’s future.

We’re becoming more and more agnostic to the content distribution platform, with the emphasis on delivering entertaining local content, which is the core focus of our company and incorporating our Beasley best philosophy in all that we do.

In this regard, during the third quarter, we completed the rollout of our stations on to the Alexa platform, giving listeners access to our great local content on all Amazon echo devices.

We also completed phase one of our mobile app update, by converting all of our stations to one platform, and plans are underway to add new and exciting features to our apps and this is expected to be rolled out early next year.

In addition, we are refocusing on our podcast strategy and are very excited about the long term opportunities regarding this effort. Our goal with each of these initiatives is to create a better listener experience, while providing our company with enhanced opportunities to monetize our strong core programming and local brands.

In closing, we are very proud to be in the radio business. In addition to being a great entertainment medium, we are the lifeline to our communities in times of crisis. Each of us has heard story after story on how the broadcast community helped provide critical information during the latest devastating hurricanes.

We’re honored to serve our local communities, our listeners and our advertisers with critical, reliable news, weather and safety information. And this all would not be possible without our dedicated employees who give their Beasley best each and every day. So I thank you for your time this morning.

I'm going to lob it back to Marie because I think we received a few questions to review..

We did. We have gotten a few questions and I’ll start off with the first question, which is asking about the driver of Detroit’s strong growth rate..

So we refer to the Detroit market being strong in the third quarter, the market is growing and we’re excited to be able to participate in that growth in Detroit. But we are fortunately outpacing the Detroit market and that is in part due to the format changes that we made last year..

Great. We were also asked if we could quantify our synergy expectations, and I will take that, that to date we have realized proximately $9.8 million of synergies, and that posed against a $9.6 million of expected synergies. We have approximately $1 million left of the original synergies identified and that will be achieved in fourth quarter.

Another question was we were asked about the priorities that include further diversifying revenue streams..

So what does that mean? So what we're doing here internally is - and what I referred to earlier in the release is that we are reviewing our content opportunities in order to open doors to other revenue streams. And in addition, we're looking at digital and NTR, which both outperformed in third quarter as drivers in our revenue going forward..

Thank you. Another question is that to please provide some color on fourth quarter revenue trending for auto and retail. And auto in fourth quarter is pacing down in the low single digits. Retail is pacing down in the double digits. We were also asked about our target leverage, what our comfort zone is.

And our comfort zone is to stay at below four times. And the final question we have is any thoughts on regulatory changes that are being discussed in Washington and how they might impact Beasley..

Right. So I guess the big announcement last week was the proposed ownership dereg and that’s across ownership between radio, TV and newspaper. But specifically for radio, any mention of a release for sub caps or even release in the markets to even own more radio stations was not addressed.

My personal opinion on this is in order to be competitive with many of the audio companies out there, ownership release would be something that we would welcome. But I do realize that radio is different than other platforms that have coding and algorithms and we have actually real people in our communities.

But we would be definitely welcoming any further deregulation for radio..

Great. That concludes the questions..

Thank you for your time today, and please feel free to call Marie or myself with any further questions..

And this does conclude our conference today. Thank you for your participation. You may now disconnect..