Good morning, and welcome to Beasley Broadcast Group's Third Quarter 2020 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 the 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.

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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 the morning's news announcement and on the company's website. .

I would also remind listeners that following its completion, a replay of today's call can be accessed for 5 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 like to turn the conference over to your host, Beasley Broadcast Group's CEO, Caroline Beasley. Please go ahead. .

Thank you, and good morning, everyone, and thank you for joining us on election day to review our third quarter operating results. We hope, if you haven't already, that everyone gets out to vote. Marie Tedesco, our CFO, is with me this morning. .

So before diving into our third quarter results, I wanted to acknowledge the ongoing impact of the pandemic on our employees, customers in the communities we serve. The health and safety of our employees remain our top priority, and our company has implemented a variety of internal safety measures following federal state and local guidelines. .

As we'll discuss in a moment, we adapted quickly to the changing environment, and we are seeing promising trends in our various operations since the April lows. We continue to closely monitor the impact of the pandemic on our business in any potential closings. While cases are arising, we're highly focused on our back to work safely strategy.

I've been visiting our markets to let our team know that unless they are in a risk group or have pre-existing conditions, our best future will be realized if we can return to our offices and studios.

We believe that creative collaboration takes place in our offices and that our teams can more effectively work together in person rather than through Zoom and Slack, all while remaining safe. .

Our business is creative at its core, and our creativity extends from our on-air talent to our teams bringing innovation to areas such as sales or digital.

We have plans in place, which have been developed with the most up-to-date guidelines in line and hope that like other businesses across the U.S., we get more people back to their normal lives sooner rather than later.

It is through a return to our new normal that we can really overcome the impact of the pandemic, and we know that nothing compares to personal interaction, idea sharing and the social benefits of seeing colleagues and customers face-to-face or in our new normal, mask-to-mask. .

While our third quarter results continue to reflect the direct impact of the pandemic on local and national advertisers, we continue to see a vast improvement in weekly ads. And throughout the quarter, we started each month with more dollars on the book than where we ended the previous month.

The strong recovery in our business resulted in third quarter revenue, down 25% year-over-year marking a significant improvement compared to second quarter. .

During the third quarter, we again drove monthly sequential revenue improvements with July up 8% over June, August up 24% over July and September rising 22% over August. So visibility remains limited, political revenue exceeded expectations, and we booked more than 2x our projected annual political budget.

As a result, our recovery is on pace as evidenced by the positive SOI and EBITDA we recorded for the quarter. .

It's clear that the actions we took early on, the experience of our team through previous unseen economic challenges, our balance sheet focus, the quality of our content, our strong ratings, personalities and the role we play in communities we serve have all contributed to our ability to rebound from April low.

In addition, we continue to make progress with our digital growth initiatives with Q3 digital revenue increasing 1.8% year-over-year and accounting for 10.1% of total revenue. .

We also reduced our station operating expenses by approximately 16% for the quarter, including, as previously disclosed, continued wage cuts, permanent terminations, furloughs and negotiated temporary and permanent discounts. .

Overall, the company has reduced its operating expenses through year-end by more than $32 million from our 2020 operating budget. .

Finally, we amended our credit agreement to provide a bridge until revenues have normalized, and we can resume normal covenant reporting, which begins in September of '21. .

I'm going to hand it over to Marie now, who will provide you with deeper dive into the quarter. .

Thank you, Caroline. Let me start with a review of third quarter results, followed by an overview of our balance sheet. Third quarter net revenues decreased 24.9% or $16.5 million to $49.6 million, inclusive of $495,000 from our esport teams, the Outlaws and the Renegade.

We generated $3 million in net political revenue, and that compares to $300,000 in the prior year. .

Breaking down the revenue for the quarter, July was down 32% year-over-year; August was down 26%; and in September, we saw a 19% decrease year-over-year. Station operating expenses for the quarter decreased 15.9% to $41.6 million, resulting in third quarter SOI of $8.1 million. .

The 2020 third quarter station operating expenses include $1.3 million of expenses related to our esport teams that we did not have in 2019.

Also, a $236,000 in expenses year-over-year from the September 2019 WDMK acquisition and $1.1 million of added expenses related to our digital growth initiative, which was recorded under corporate expenses during third quarter 2019 but are now allocated to our stations. .

So as you can see in our continued pandemic response, we have been diligently reducing our operating expenses, including corporate initiative expense cuts of $23 million through the end of 2020, in addition to voluntary market cuts and savings in first and second quarter of $12 million to $10 million. .

Now looking at our revenue categories for third quarter on an actual basis during this as impacted period. Consumer services remained our largest revenue category at 27% of our revenue, and we had a 21.9% year-over-year decrease in this category for the quarter. .

Our second largest category in third quarter was retail, which represents around 16% of our revenue, and the retail category declined 25.5%. .

Auto moved into our third spot with revenues down almost 34%. Auto was around 12% of total revenue for the quarter. This category was hardest hit in Boston, Charlotte, Fayetteville and Las Vegas. .

Our fourth largest category for the quarter was political, which represented 9% of third quarter revenues and was, as I said, up meaningfully from last year, as well as when compared to the last substantial election cycle. .

Number five was telecom and utilities at 6.3% of total revenues, and this category was down 21%. .

And finally, consumer products, such as pharmaceuticals, food, beauty products and auto parts, accounting for close to 6% of total revenues, and this category declined nearly 46%.

On a same-station basis, consumer services decreased 23%, retail declined 26%, auto was down 34%, consumer products declined 46%, entertainment was down 56% and telecom was down 22%. .

Corporate G&A expenses for the quarter decreased $1.6 million compared to the same quarter prior year to $3.7 million. The decrease in corporate G&A is related to the previously discussed expense reduction initiatives and reallocation of certain digital expenses from corporate out to our market.

To quantify the digital investment, we spent approximately $1.3 million in the third quarter and $3.5 million year-to-date. We will continue to shift these digital expenses to our markets throughout the balance of 2020. .

Noncash stock-based compensation was down 62% to $229,000 in the quarter, and we had an income tax benefit for the quarter of $1 million. Our effective tax rate for the quarter was 27% of the loss, as certain expenses there are not deductible for tax purposes. .

Reported third quarter 2020 operating income was $835,000 compared to $9.4 million in the year ago quarter. The decline in third quarter operating income primarily reflects the year-over-year SOI decline of $8.6 million, and an increase in depreciation and amortization of $1 million, which was offset by lower corporate expenses. .

Total third quarter interest expense increased $138,000 year-over-year to $4.5 million. We did not have any scheduled debt payments on our credit facility during the quarter. However, we used our stocks to reduce the amount of debt by approximately $2.2 million. .

We ended the quarter with cash on hand of $16.5 million. Our total outstanding debt at the end of third quarter was $270.75 million, inclusive of $7.75 million of unsecured debt related to the Houston Outlaws acquisition. This compares to $273 million at June 30, 2020.

Based on the latest amendment of our current credit agreement, we currently have 5-week reporting requirement of a minimum liquidity of $8.5 million. And as of September 30, 2020, we were in compliance. And based on current ad leasing and revenue trends, expect to remain in compliance until we resume normal covenant reporting in September 2021. .

Finally, the company spent $1 million in CapEx for the quarter compared to $2.2 million in the prior year quarter and $7 million year-to-date compared to $6.2 million year-to-date 2019. This includes our Philadelphia build out in first quarter as well as our corporate build out and our cybersecurity initiative that's been ongoing throughout the year.

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And with that, I'll turn it back to Caroline. .

Okay. Thank you, Marie. So to provide further color on third quarter revenue. Spot revenue, including political, decreased 28%, with local down 34% and national down 11%.

We also continue to see our smaller markets being less impacted by COVID, and this is partly due to their focus on local direct business, and then, of course, slower reopenings in our larger markets. .

Digital, as I mentioned earlier, was a bright spot for the quarter, increasing by 1.8%, and it has increased 8.7% on a year-to-date basis.

Esports continues to be a growing and popular facet of our company, given the sports COVID-proof online play format, and our offerings have enormous appeal to the millennial and Gen Z demo who are obsessed with gaming. We'll have more to come about esports next quarter. .

Moving on to the fourth quarter, we ended up in the high single digits as far as October goes and despite minimal political, November has improved as well and is pacing down in the low double digits. As COVID cases increase, we remain cautiously optimistic about the remainder of fourth quarter and heading into 2021.

So to recap, our 24.9% decline in revenue is a significant improvement from the 54% decline in second quarter, and coupled with the operating expense reduction of plus to $8 million allowed us to positive SOI and EBITDA for the quarter. .

Looking ahead to fourth quarter and into 2021, our focus will include growing our cash flow and maintaining a strong balance sheet with liquidity at the current level or higher.

While we aren't under a leverage covenant until third quarter of '21, reducing our leverage is a priority, and we are working towards returning to our pre COVID levels when net leverage was in the mid 4x and eventually land at our goal of 4x or below. .

With our continued focus on the highest quality local content, our station's ratings performance remains the best in the industry. In fact, according to Nielsen, our Q3 PPM ratings cluster roll up tier was the highest of any other major broadcaster in the industry.

At the moment, we have one or more top 3 stations in 11 of our 13 rated markets, with the top advertising demographic of persons 25 to 54. .

So finally, I would like to acknowledge our team numbers across the company for the sacrifices that they have made and everything that they are doing to help us address and overcome the challenges of the last 7 months. And on behalf of all of our employees, we thank you very much for tuning in to our call. So Marie, I'm going to hand it over to you. .

Great. Thanks, Caroline. So we always ask for questions, and we did receive one question about our pacing. And because of that, we have updated our current pacings as of this morning.

And Caroline, would you like to review those?.

Yes. Just -- so as I said earlier, we did end October up in the high single digits, and November has improved as well and is pacing down in the low double digits. .

Great. Thank you. That was all the questions. .

Okay. Well, thank you very much. If you have any questions, please feel free to reach out to Marie or myself, and we appreciate your time this morning. .

Thank you very much. Ladies and gentlemen, this now concludes today's conference. You may disconnect your phone lines, and have a great rest of the week. Thank you..