Good morning and welcome to the Beasley Broadcast Group Second Quarter 2019 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 risk 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 the Item 10 in 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 the morning's news announcement on the company's website.I would also like to remind listeners that the following its completion, a replay of today's call will be accessible for five days on the company's website www.bbgi.com.You can also find a copy of the press release on the Investors or Press Room sections of the site.At this time, I would now like to turn today’s conference to your host of Beasley’s Broadcast Group's CEO, Caroline Beasley.

Please go ahead..

Thank you, and good morning everyone, and thank you for joining us to review our second quarter operating results.

I’m going to review several quarterly highlights and then hand it over to our CFO, Marie Tedesco, who will take a deeper dive into our financial performance.So, for the quarter, we generated record second quarter revenue of $65.7 million, which is a 6.5% increase over last year, primarily driven by our Boston, New Jersey, and Philadelphia clusters, including the September 2018 acquisition of XTU.Now looking closer at the year-over-year revenue comparison, in last year's second quarter, we realized approximately 675,000 of non-recurring USTN traffic revenue, as well as 340,000 of non-recurring revenue related to cancelled spectrum license and approximately 230,000 more in political revenue.

As such, excluding these items, our second quarter revenue would have increased 8.7%.Now digging deeper, on a pro forma basis, revenue for the quarter increased 2.4% and same station revenue increased 2.7%.

Overall, second quarter same station spot advertising increased 2% and our solid same station growth was again led by our national team with national spot revenue increasing almost 10% for the quarter.

As such, we outperformed revenue guidance provided at the time we reported during the first quarter call on both an actual and same station date basis.In addition, we continued to make progress with our digital growth initiative as digital revenues accounted for 7.4% of total revenue, and this is up from 6.5% in the year ago second quarter.

Our strategic accretive acquisitions and margin focus enabled us to increase reported second quarter SOI by 7.5%. We also increased pro forma SOI by 0.9% and same station SOI increased 1.9%.

So, just to recap here, actual, pro forma, same station, revenue and SOI increased across the board.While the integration of XTU has been seamless, we continued to see a slight year-over-year revenue decline in second quarter as we did in first quarter, and this is primarily related to corporate pushdown revenues under the prior ownership.

This revenue will correct itself as we enter the third quarter when the comps will reflect Beasley’s ownership for both periods.With the return of the heritage country station to our Philly cluster, I am happy to report that we are now garnering 30% revenue share of the market as our cluster grew second quarter revenue 2.5% on a pro forma basis.The second quarter also continued to be a busy period for our Boston cluster with both the Celtics and the Bruins competing in playoff games, and the Bruins ultimately going on to play in the Stanley Cup.

Unfortunately, they didn’t win, and that contributed to the cluster’s quarterly revenue increase.Second quarter free cash flow declined to 5.5 million from 8.4 million, and this is primarily related to an increase in higher CapEx related to a build-out of our Philadelphia studios, increased taxes and increased corporate overhead related to our investment in our digital platforms.

We’re going to talk a little bit more about this later on in the call.Finally, we are thrilled with the pending accretive acquisition of WDMK-FM and three translators in Detroit. In June, we announced the agreement with Urban One to acquire this Urban AC station, which is highly complementary to our existing Urban station in the market about.

The HD2 and its three translators’ format is gospel. The total purchase price is 13.5 million and will be funded by a combination of debt and cash on hand.Importantly, the transaction is expected to be deleveraging.

DMK and the translators will contribute approximately $2.4 million in pro forma SOI and that includes synergies, and we expect this transaction to close in the third quarter.We entered the Detroit market in 2016 and have consistently improved the operating results of the three stations we acquired and we believe the proposed transaction is a strategically and financially compelling growth opportunity for our shareholders.

This acquisition will add a fourth FM to our Detroit cluster and will move us that much closer to our goal of 30% revenue share in this market.Detroit is undergoing an exciting renaissance as a result of billions of dollars in new investment in the city's residential, commercial, entertainment and cultural centres, all of which are driving new resident businesses towards employment and economic activity, and we look forward to realizing the financial and strategic benefit of this transaction in 2020.And now, I'm going to turn it over to Marie to get some further Q2 highlights..

Thanks Caroline. I'll start with a review of the second quarter, and then, I will review our balance sheet.

Second quarter net revenue increased 6.5% or $4 million to $65.7 million and we saw year-over-year net revenue increases in our Boston, New Jersey and Philadelphia clusters, while net revenue at our remaining clusters was comparable to the levels in second quarter of 2018.As Caroline mentioned, the year-over-year comparison was impacted by approximately $1.2 million of non-recurring revenue, including USTN, which would have been equivalent to an additional 2% growth in net revenue for the quarter.Station operating expenses for the quarter rose 6.2% to 47.8 million, mostly related to the addition of WXTU, the Celtics and Bruins playoff games in Boston and other strategic growth initiatives.

As a result, the 6.5% increase in net revenue generated a 7.5% increase in station operating income to 17.9 million.Looking at our revenue categories for second quarter on an actual basis, consumer services remained our largest revenue category, representing just over 25% of our revenue and we generated almost a 17% year-over-year increase in this category during the quarter.

Our consumer services category includes advertisers such as medical, dental, construction, insurance, real estate, education and other service-oriented businesses.Our second largest category in the quarter was retail, which represents 18% of our revenue and the retail category was up 5%.

Entertainment was our third largest category for the quarter, and here we generated a 6% year-over-year revenue increase.

Auto, our fourth largest revenue category, representing about 12% of our revenue was down 1%.The Top 4 categories accounted for approximately 69% of our total second quarter net revenue and the combined net revenue from the Top 4 categories increased 3% in second quarter 2019 over second quarter 2018 on a same station basis.

Also, on a same station basis, consumer services increased 12%, retail declined 1%, entertainment was up 2%, and auto was down 5%.Corporate G&A expenses for the quarter increased by $1 million, compared to the same quarter a year ago to $5.4 million.

Breaking it down, the year-over-year rise in second quarter corporate G&A is primarily related to our investment in our digital initiative as we continue to build a platform that can support our near and long-term growth.To quantify this digital investment, we spent approximate 600,000 in the quarter, 1 million year-to-date and 1.2 million on a 12 months basis.

This increase reflects our ongoing transformation from a pure play radio company to a diversified audio focused media and digital entity, and Caroline will provide an update on our progress on those fronts in a moment.These investments will be ongoing throughout this year and will result in an expanded digital platform, digital content portfolio, digital sales team, and corporate staff.

We except our corporate expenses to stabilize once this digital build-out is complete.Non-cash stock-based compensation was down 22% at $548,000 in the quarter and our income tax expense for the quarter was 1.3 million.

Our effective tax rate for the quarter was 31.1% as a result of certain expenses that are not deductible for tax purposes.Reported second quarter 2019 operating income was approximately 10.7 million, compared to 10.7 million in the year ago quarter, while second quarter 2019 net income decreased 13% or 650,000 to 4.3 million, primarily as a result of higher interest expense as second quarter interest expense increased approximately 700,000 year-over-year to 4.5 million, reflecting an overall increase in borrowing costs.We made about 4 million in voluntary debt repayments for the quarter and 6.5 million year-to-date.

We ended the quarter with cash on hand of 12.2 million.

Reflecting the late Q3 2018 XTU transaction, total outstanding debt at June 30, 2019 was 245.5 million, compared to 249.5 million at the end of the previous quarter.In addition to the 4 million in voluntary debt repayments in the quarter, we made an additional 1 million voluntary repayment in July.

We intend to use our free cash flow and continue to make voluntary prepayments throughout the remainder of third quarter and the balance of 2019.Our LTM consolidated operating cash flow, as defined in the credit agreement, was $52.7 million, resulting in a leverage ratio of 4.66 times as of June 30, 2019, compared to 4.68 times as of March 30, 2019.

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 was 4.43 times, compared to a maximum leverage covenant of 5.75 times, and that also compares with 4.38 times on the same date that in March of 2019.The company spent 2.8 million in CapEx in the quarter, compared to 1 million in the second quarter of 2018 and 4.7 million year-to-date compared to 2.1 million year-to-date 2018.

As Caroline noted, for the second quarter, Beasley Broadcast Group’s free cash flow decreased from 8.4 million in the prior year second quarter to 5.5 million in the current quarter.The 2.8 million variance reflects a 1.2 million increase in SOI, offset by a 1.2 million increase in capital expenses, which includes the build-out of our Philadelphia studio; a [1 million] increase in corporate G&A expense, primarily related to digital investments; also a 1 million increase in current income tax expense; and 740,000 increase in interest expense.With respect to the build-out of the Philadelphia studio, in July, we did receive approximately 800,000 back as part of our build-out allowance.

As has been our practice, we will continue to allocate our free cash flow to pay down debt, return value to our shareholders through quarterly cash dividend payment, to complete select strategic accretive transactions, and to reinvest in our stations for research, promotion, sales and other initiatives that leverage our station’s brand, content, and strong market positions.And with that, I will now turn it back to Caroline..

Okay. Thank you, Marie. As we’ve discussed, we are in the midst of aggressively rolling out a digital expansion and transformation across the company. And during the second quarter, we continued our investment in the development and diversification of our digital platform.

I’m going to break it out in several different areas.In terms of technology, in the second quarter, we launched 62 new websites for our brands that are designed to deepen audience engagement with our brand and our advertisers.

Our new website technology is integrated with the Beasley experience engine joining our mobile apps and giving Beasley much deeper visibility into our audience, while giving our audience a greatly enhanced user experience.Development has also been completed on our next generation of Amazon and Google Smart speaker skills, bringing our brands to the Google platform.

The new skills began to roll-out in late July and will continue through third quarter.In terms of sales, during the first half of the year, we developed and deployed digital support teams strategically throughout the organization to help our local markets with all aspects of digital sales execution, including lead generation, custom presentation, proposal development, campaign activation, optimization reporting, and final campaign recap report.

These teams have been very well received by both advertisers and by our internal teams.We've made developing custom digital marketing solutions as turnkey and efficient as possible and we are seeing the results to prove it both in terms of better campaign renewal rates, as well as increased revenue across the market where we have coverage today.

And I'm happy to report that we saw a 16% increase in digital revenue year-over-year, and digital revenue has grown from, as I mentioned earlier, 6.5% of total revenue a year ago to 7.4% of total revenue in the current quarter, and this of course, is on a larger overall base.In terms of content, our commitment to growing content in audiences within our digital space has continued in full force.

During the first half of the year, our focus was on building and integrating a national content team that focused solely on creating the most viable and current content on all of our digital platforms.

Specific format editors are now in place and are continuously creating new, relevant, and exciting content.With the digital content initiative, we are working with our on-air team to expand their on-air brand over to the digital side, while aligning their interest and passion with their audience allowing us to continue developing this local relationship with listeners, and as a result, our digital expansion efforts are showing record growth, including an increase in users year-over-year of 45% and page views are also up 28%, and these are just a few examples of the early successes we’re seeing.Let’s switch to podcasts.

Our podcasting initiative, we focused on growing our biggest franchises in download, which presently include a target of 40 podcast, delivering over 3 million downloads per month. We saw more than 15% increase in total podcast downloads totalling over 10 million downloads in the quarter.

This is an increase of 1.3 million downloads from the first quarter.

Our goal is to continue working to better understand the want and needs that can propel downloads, listens and loyalty match with the talent that aligns with national advertiser demands.Esports, finally, in this space we launched [checkpoint XP’s] website and have begun to significantly grow our audience.

Since March, we’ve doubled the number of users and more than doubled sessions in page views.

It’s our intention to grow – to continue to grow checkpoint XP’s content and audience in tandem with our new syndication partner, [Sun] Radio Group.The syndicated weekly checkpoint show has expanded to 84 stations in North America and the team is now live on twitch for approximately 5 hours to 7 hours per day, Monday through Friday.

We also produced five different podcasts on a weekly basis with both original and portions of time-shifted content.

Finally, we have several new Esports shows in various development stages and we will be debuting them later this year.Moving on and looking into 2019, actual third quarter revenue is currently pacing flat, July rose low-single digits, August and September are flat.

In Q3, as a reminder, we recorded about 590,000 in net political revenue, and this will have some impact on our quarterly comps. We will focus on reducing our leverage ratios both through growth in our latest trailing 12-month consolidated operating cash flow and voluntary prepayment.

We expect the acquisition of DMK to be deleveraging and we expect further deleveraging progress through the balance of the year.Now, to recap our second quarter performance, inclusive of the investment that we’ve made today, we saw revenue and SOI increases on an actual same station and pro forma basis across the board.

The investments we've made in expanding and diversifying our platform are bringing results and are expected to lead to future growth and we are managing our capital structure and leverage and we continue to return capital to shareholders.So, with that, that concludes the comments that we have. We do have some questions that we would review.

So, I’m going to hand it over to Marie..

Thanks, Caroline. We’ve got a few questions.

The first question is – we’ve got a question about our revenue share in our Top 5 market, can you speak a little bit about that?.

Sure. As a reminder to everyone, 30% revenue share is our goal. Outside the Top 5 markets that we have, we do you have several smaller markets that are well in excess of 30% market revenue share.

Boston, in Charlotte, and Philly are around the 30% revenue share mark, and then, we have Detroit, Tampa and Vegas, and they are currently in the 20 – in the 20s in terms of revenue share. Detroit, we’re very excited about.

We do have the ability to add one more station in that market and we’re actually excited about Tampa and Vegas as we see potential upside in all three of these markets in order to achieve the 30% market revenue share that we believe we’ll be able to achieve..

Thanks, Caroline.

Another question was if you could give an update on ownership rules?.

Okay. So, really not much to say here other than because of litigation we are not expecting a decision until the first half of next year, and that's when we should take in [both]..

Great, thanks. We also got a question on CapEx and when we expect CapEx to normalize and also can we break out the CapEx between investment and maintenance?So, our maintenance CapEx is typically around $4 million to $5 million per year.

The investment CapEx this year will likely be somewhere between $3 million and $4 million, and that is due a lot to the Philadelphia studio build-out and also several other projects that we are working on.

At this point, we expect our CapEx to normalize back to maintenance level towards sometime in 2021.The next question was if we could mention the political revenue growth in second half of 2019?So, for the political revenue, net revenue in the second half of 2018 was approximately 4 million and we don't really expect to see much political in the second half of 2019 until we move closer into 2020.Another question is, if we could remind or state to where we expect our leverage to be at the end of the year?And as we have been vocal about in the past, we always try to get to around four times, that is our goal.And then, I think that was it.

Okay, that was it, alright..

Great. Well, thank you all for joining us today and should you have any further questions please feel free to reach out to Marie or myself. Have a great day..