Good morning, and welcome to the Beasley Broadcast Group’s Third 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 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 the Item 10 of Regulation S-K.

A reconciliation of these non-GAAP measures with their most direct comparable financial measures calculated and presented in accordance with GAAP can be found in the morning’s news announcements and on the Company’s website.I would also remind listeners that following the 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 would now like to turn the conference over to your host of Beasley’s Broadcast Group’s CEO, Caroline Beasley. Please go ahead..

Thank you, and good morning, everyone. Thank you for joining us for our third quarter operating results.

I’ll first review several quarterly highlights and then hand it over to our CFO, Marie Tedesco, who will provide some more color on the quarter.So, let me begin by reviewing the accretive and deleveraging acquisition of DMK in Detroit, which we completed on August 31st.

The total purchase price was $13.5 million and was funded by a combination of debt and cash on hand. The addition of DMK and the three translators to our broadcast portfolio is complementary to our three existing radio stations and digital operations in the Detroit market.

Consistent with Beasley’s disciplined approach to growing our platform, the acquisition of DMK is immediately accretive to free cash flow and will contribute approximately $2.6 million in pro forma station operating income and this includes synergies, while moving us closer to our goal of achieving 30% revenue share in the market.

The integration over the last 8 weeks has been as expected. And as such, we look forward to realizing the full financial and strategic benefits of this transaction in 2020.Now, looking at the quarter.

Revenue increased by 1.5% on a year-over-year basis to $66.1 million, driven by our Boston, Charlotte, Detroit, Fayetteville, Philly and Wilmington clusters.Looking closer at the year-over-year revenue comparison, in last year’s third quarter, we recorded approximately 240,000 of non-recurring USTN traffic revenue and 300,000 of non-recurring revenue related to a cancelled spectrum license.

In addition Q3 ‘19 revenue levels were impacted by a $375,000 decline in political revenue from $700,000 in prior year.

As such, excluding the combined $915,000 of revenue related to these items, our 3Q ‘19 net revenue would have grown 2.9%.Now, on a same station basis and not adjusting for the non-recurring revenue items and higher levels of political.

Revenue for the quarter was essentially flat or minus 43,000, with third quarter same station spot advertising flat, while excluding political.In addition, we continued to make progress with our digital growth initiative, as digital revenue grew almost 37% year-over-year in third quarter and accounted for 7.4% of our total third quarter revenue, and this is up from 5.4% into comparable year ago quarter.

This trend is also evident on a year-to-date basis as digital revenues represented 7% of revenue in the nine months ended September 30, compared to 5.9% in the same period a year ago.Now, looking past the revenue line, our strategic accretive acquisitions combined with our focus on margins and synergy realizations drove a 12.7% increase in reported third quarter SOI to $16.7 million.

Third quarter SOI was also strong on a pro forma and same station basis, rising by 4.6% and 6%, respectively.Moving on, we’re pleased with our results from XTU as the station generated a 16% year-over-year revenue increase on a pro forma basis with a return of a heritage country station to our Philly cluster, we drove pro forma third quarter revenue increases in the market of 5.4% or 800,000.

And we have a revenue share of just over 28% in the third quarter and 29% year-to-date. And one of the reasons we targeted this acquisition last year was the prior experience and successes that we had with this format in Philly.

And I would like to congratulate our teams in Philly and at WXTU for a job well done.As we previewed our expectations on the call earlier this year, third quarter 2019 free cash flow was $4.6 million compared with $5.9 million in the third quarter of last year.

And this is due to the fact that the growth in year-over-year quarterly SOI was more than offset by increased corporate overhead related to our investment in digital platforms, higher CapEx related to the now near-completed build out of our Philadelphia studios and increased costs related to our additional borrowings and increased taxes.

And as noted on calls earlier this year, we expect full year ‘19 free cash flow to reflect a year-over-year decline related to the lack of political, the higher interest expense related to the addition of XTU, increased CapEx and the investments we’re making to expand and diversify our platform.We continue to allocate our free cash flow to pay down debt, return value to our shareholders through quarterly cash dividend, to complete strategic transactions including investments in digital and eSports and other businesses that leverage our brand’s content and strong market decisions.And with that, I’m going to turn it over to Marie, who’s going to take a deeper dive into the quarter..

Thanks, Caroline.

Let me start with the review of the third quarter results, and then I will review our balance sheet.Third quarter net revenue increased 1.5% or $968,000 to $66.1 million, and we saw year-over-year net increases in our Boston, Charlotte, Detroit, Fayetteville, Philadelphia and Wilmington clusters with net revenue at our remaining clusters comparable to the levels in third quarter ‘18.As Caroline mentioned, the year-over-year comparison was impacted by approximately $240,000 of USTN revenue in third quarter ‘18, $300,000 of non-recurring spectrum revenue and approximately $375,000 of non-recurring political revenue, which combined would be equivalent to an additional 1.4% growth in net revenue for the quarter.Station operating expenses for the quarter decreased 1.8% to $49.4 million, mostly related to the non-recurring $1.7 million write-off of USTN that occurred in third quarter ‘18, which was partially offset by operating expenses from the Philadelphia and -- WXTU Philadelphia and WDMK Detroit acquisitions.As a result, the 1.5 increase in net revenue led to a 12.7% increase in station operating income to $16.7 million on an actual basis.Looking at our revenue categories for third quarter on an actual basis.

Consumer services remained our largest revenue category representing around 26% of our revenue. And we generated a 12% year-over-year revenue increase in this category during the quarter.Our consumer services category includes advertisers such as medical, dental, construction, insurance, and other service oriented businesses.

Our second largest category in third quarter was retail, which represents almost 16% of our revenue, and the retail category was up 1.5%. Entertainment was a third largest category for the quarter, and we were flat year-over-year.

Auto, our fourth largest revenue category, representing about 13% of our revenue was down around 5%.The top four categories accounted for approximately 69% of our total third quarter net revenue. On the same station basis, consumer services increased 10%, retail declined 1.5%, entertainment was down 3% and auto was down 6.5%.

Another category that had strong performance in the quarter was telecom, which rose 5% on the same station basis.Corporate G&A expenses for the quarter increased $1.7 million, compared to the same quarter a year ago to $5.3 million.

Breaking it down, the year-over-year increase in corporate G&A is primarily related to timing differences compared to prior year and a continued investment in our digital initiatives as we build out our platform. To quantify this investment, we spent approximately $750,000 in the third quarter and $1.7 million year-to-date.

This increase reflects our ongoing transformation from a pure play radio Company to a diversified audio focused media and digital entity. As indicated on prior calls.

These investments will continue throughout the year and will result in an expanded digital platform, digital content portfolio, digital sales team and corporate staff.We expect our corporate expenses to stabilize once this digital build-out is complete, and we should then see a decrease, and some of these expenses at that point will be move into the markets.Non-cash stock-based compensation was up 31.7% at $603,000 in third quarter.

Our income tax expense for the quarter was $1.7 million.

And our effective tax rate for the quarter was 37%, as a result of certain expenses that are not deductible for tax purposes.Reported third quarter 2019 operating income was approximately $9.4 million, compared to $9.3 million in the year ago quarter, while third quarter net income increased 15.6% or $410,000 to $3 million primarily as a result of higher station cash flow.Total third quarter interest expense increased approximately $300,000 year-over-year to $4.4 million, reflecting an overall increase in borrowing costs from additional borrowing related to our recent acquisition.

We made $2.5 million in voluntary debt repayments for the quarter and repaid $9 million in the year-to-date period. We ended the quarter with cash on hand of $11.8 million.Inclusive of the WDMK transaction, total outstanding debt at September 30th was $253 million compared to $245.5 million at June 30th.

Our LTM consolidated operating cash flow, as defined in the credit agreement was $54.3 million, resulting in a leverage ratio or 4.66 times as of September 30, 2019, compared to 4.66 times as of June 30th.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 4.44 times, compared to a maximum leverage covenant of 5.75 times and that’s compares with 4.43 times on the same basis at June 30, 2019.

We spent $2.2 million in CapEx during the quarter, compared to $1.2 million in the prior year third quarter and $6.9 million year-to-date, which compares to $3.3 million year-to-date 2018.For the third quarter, Beasley Broadcast growth free cash flow decreased from $5.9 million in the prior year third quarter to $4.6 million in the current quarter.

The $1.3 million variant reflects a $1 million increase in capital expenses, which includes the build out of our Philadelphia studio. A $1 million increase in corporate G&A -- $1.7 million increase in corporate G&A expenses, primarily related to digital investments, which I reviewed a moment ago.

A 320,000 increase in current income tax expense and the 330,000 increase in interest expense related to higher end borrowing costs due to the acquisition.These increases were partially offset by $1.9 million increase in station SOI. As noted by Caroline earlier, we expect another quarter of positive free cash flow in the fourth quarter.

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 dividend payments to complete the less strategic accretive transactions, and to reinvest in our stations for research, promotions, and other initiatives that build revenue share, leverage our brand and content and strong market position.And with that, I will turn it back to Caroline..

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

After an extensive search we identified and hired Todd Handy to fill the newly created position of Chief Digital Officer.

Handy has been at the forefront of the digital media space for more than a decade, having spent six years in local media, responsible for sales, advertising strategy and products ad operations and analytics, programmatic sales and native advertising.

He also led publisher development, implementation and customer success for an ad tech studio startup and worked with blue chip digital pure plays and display, audio, video, mobile, performance marketing and retargeting and affiliate sales.

And with Todd’s background and digital expertise, our digital team will be that much stronger and we expect to see the benefit going into 2020.The development of our digital support teams continue to be in progress.

This team will help in developing custom marketing, solutions as turnkey and efficient as possible including lead generation, custom presentations, proposal development, campaign activation, optimization, recording and final campaign recap reports. These themes have been very well received by both advertisers and by our internal teams.

And we're seeing increased renewal rates, due to highly performing campaigns and increased digital revenue.

So, to reiterate, I'm happy to report that we saw an almost 37% increase in digital revenue year-over-year in the third quarter, and a 22.5% increase in digital revenue on a year-to-date basis.Our commitment to growing content and audiences within our digital space continues in full force as well.

Specific content editors are now in place and are continuously creating new, relevant and exciting content.

We're also in the process of rolling out our first series of BMG produced syndicated music videos, to continue to work with our own IR team to expand their own their brand to the digital pod and as a result, our digital expansion efforts are showing record growth, including an increase in users year-over-year of 68% and page views are up 31%.

And these are just a few examples of early successes that we're seeing.Finally, let me review our current portfolio of eSports businesses as we are very excited about this space and its potential opportunity. In 2018, we invested in content via Checkpoint XP.

We entered into a partnership with Sun Radio Group for the syndication of this content, and this show can now be heard on approximately 70 stations in North America. And the team is live on Twitch for approximately five to seven hours a day, Monday through Friday, and it is offering podcast as well.

Earlier this year, we invested in team Renegades, which includes players from five different teams competing in different games such as Fortnite, smite and Rocket League.

In September, we entered into a partnership with UNLV where we created Checkpoint XP On Campus, a new college-based endeavor with a Hank Greenspun School of Journalism and Media Studies. Checkpoint XP On Campus is positioned as the voice of collegiate eSports produced for students by students with a show that airs weekly.

And it's a great tie in with one of eSports primary demographic, while creating further catalyst for social media integration regarding our eSports interest. And we continue to work on other eSports investments and look forward to sharing these with you as appropriate.And moving on and looking into the balance of ‘19.

Due to the October and November comparisons with last year's political cycle, actual Q4 revenue is currently facing down by single digits. However, December is more representative of what we’ve seen throughout the year and it's pacing up in the low single digits.

And as a reminder, in Q4 ‘18, we recorded approximately $3.3 million in net political revenues. So, to recap, our third quarter performance inclusive of the investments we've made to-date, we saw revenue and SOI increases on actual basis. We're focused on investments that diversify the Company on a long-term basis, particularly in digital and eSports.

And we're managing our capital structure and leverage and we continue to return capital to shareholders.So, with that, I thank you for your time today.

And, Marie, do we have any questions that have come in?.

Yes. Thanks, Caroline. So, we received a few -- or handful of questions. Now, most of them have already been addressed except for a few. And so, I'm going to dive right into them.

First question is, can you, Caroline, provide some color on our digital segment’s EBITDA and whether that is cash flow positive?.

Sure, yes. I mean, definitely, the digital segment EBITDA, and we're not reporting in segments but the digital EBITDA is cash flow positive. And we’re looking at margin in the 30 plus percent range. We're very excited about this area. And as I just mentioned earlier, we just hired Todd Handy to come on board.

And we're looking for even higher increases next year in our digital revenues than what we reported in third quarter..

Second question is, please, can you please provide some color on our M&A strategy going forward?.

Yes. So for M&A, I mean, we are -- I would like to break it into three buckets. We have our core business of radio, and we will look at any potential strategic acquisitions that make sense for our Company. In addition to that, we're looking at growing our digital and eSports area.

And because we see these two areas as providing significant increase and long-term value for our Company and also near-term revenue growth for our Company..

And the final question is, does our leverage target remain at 4 times by year-end? And the answer is, yes, 4 times is our target and has been our target, and we expect to get closer to that by the year-end, from both organic growth and from additional debt repayments. And that concludes our questions..

Okay, great. So, again, thank you all for participating on the call. And should you have any questions, please feel free to reach out to Marie or myself. Hope you all have a great day..

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect..