Good morning, and welcome to Beasley Broadcast Group's Third Quarter 2021 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 on this 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, David, and good morning, everybody. Thank you for joining us to review our third quarter results. Marie Tedesco, our CFO, is with me this morning. So I'm pleased to report strong third quarter results where we again generated revenue increases both quarter-over-quarter and year-over-year.

We delivered overall third quarter revenue growth of 26.7% with over-the-year local spot revenue increasing 31% and national spot revenue increasing 23%.

While the Delta variant impacted some markets mid-quarter, we continue to see an overall rebound from the pandemic, including improvements in core radio advertising as well as from our digital platform.

Looking at digital revenue and our steady upward trend of recent quarters, this revenue stream grew 67% year-over-year and accounted for 13.2% of total third quarter revenue and 12.9% on a year-to-date basis. This compares with digital revenue accounting for 10% of 2020 and 6% of 2019, 3rd quarter revenue.

It's important to note that ex-political, total third quarter revenue would have grown 34%. We drove total revenue increases across all, but 1 of our markets, with Detroit, Las Vegas and Wilmington delivering year-over-year increases above 40%.

Furthermore, when comparing third quarter 2021 with third quarter 2019, our total revenue declined approximately 4.8%. So we're closing that gap even further as we go through the year. Also to note, we returned back to the office over a year ago.

We've seen the benefits of this, especially when looking at our performance compared with the local markets. With respect to our markets and emerging ad categories, we have broad-based strength, so let me touch quickly on sports betting, as this revenue stream has and continues to grow into a very meaningful category.

It was our second largest category in Q3, growing 228% year-over-year, and it represented $4.3 million or 7.2% of our total revenue for the quarter. This growth was driven by our Philadelphia, Detroit and New Jersey market clusters.

Notably, Massachusetts and Florida are in the process of legalizing sports betting, which, if passed, will have a positive impact on our revenue next year. Our monthly revenue in the third quarter reflects increased consumer spending and demand as customers are visiting local and national retailers and dining out more.

July revenue rose 39% year-over-year, while August and September increased 29% and 16%, respectively.

Our third quarter operating expense reflects permanent cost reductions implemented in 2020, offset by the increased cost of sales related to the significantly higher levels of local and national spot advertising in the period, which accounted for about 2/3 of the quarterly expense increase.

Q3 operating expenses also include our reinvestment in events and marketing, and the continued investment in our internal digital agency that is a significant driver of our digital revenue growth. Given these factors, our third quarter SOI was $11.7 million, and we generated positive free cash flow of just over $1.7 million.

With our third quarter free cash flow, we ended the quarter with over $48 million on our balance sheet. Overall, our fourth quarter is now pacing up 2% with October down 12%, and this is solely due to the comp last year, which included $7.6 million of net political advertising, and November and December are pacing up 16% and 13%, respectively.

Excluding political, our pacings would be up 25.5% and we are currently pacing 1.8% down when compared with fourth quarter of '19. So we are further closing the gap with '19, and we hope that we will be at even or even better than '19 by the end of the quarter.

So now I'm going to turn it over to Marie, and she's going to give you a further update on third quarter..

Thanks, Caroline. And as I said, I will begin with a review of the financial results followed by a balance sheet update. Third quarter net revenue increased 26.7% or $13.3 million to $62.9 million, which includes approximately $500,000 from our esport operations.

Core ad spends were solid as we generated just $225,000 in net political revenue during the quarter compared to $3 million net political in the prior year third quarter. Breaking down the quarterly revenue, Audio increased 28.6% or $12 million, and Digital rose 67% or $3.3 million, with Digital now representing 13.2% of total revenue.

Looking closer at the quarter, July station revenues was up 39% or $5.2 million compared to prior year. August was up 29% or $4.8 million and September was up 16% or $3.2 million year-over-year. As Caroline noted, excluding political, our third quarter revenue growth was 34%.

Station operating expenses for the quarter increased $9.6 million or 23.1% to $51.2 million, resulting in third quarter 2021 SOI of $11.7 million, a 45% increase compared to $8.1 million in the year ago period.

Our third quarter expense increased of $9.6 million is inclusive of the higher ad revenue-related cost of sales, which inclusive of our digital direct agency, represents approximately $6.3 million of the increase or 66%.

Other factors are the institution of the 2020 wages to pre-pandemic levels, including bringing back certain furloughed employees, which combined represents around $1.5 million. And we increased our concerts and marketing expenses year-over-year by approximately $1.5 million. Moving to our revenue categories. We saw upward improvement across the board.

Consumer Services remained our largest revenue category at 28.2% of our total revenue and Consumer Services increased 36% compared to third quarter 2020. Entertainment jumped to a #2 category, much in part due to the growing sports-betting revenue and represented 15.8% of total revenue, and the Entertainment category increased 139% year-over-year.

Our third largest third quarter category Retail represented 14.8% of total revenue and was up 20% year-over-year. Auto, our fourth largest category, saw revenue flat and represented 8.8% of total revenue for the quarter.

Notably, despite continued labor, chips and supply chain issues, which held back spending, the auto category showed an year-over-year increases in most of our markets with plastic lines in Boston and Philadelphia.

We expect Auto to continue to strengthen towards the end of the year and to have significant growth in 2022, as inventories become more available and automakers again promote new models and compete aggressively for electric car sales.

Our fifth largest category was Consumer Products, which represented 7.1% of the quarter's revenues, and this category increased 63%. Telecom and Utilities was 5.2% of total revenues and increased 7%.

With fans back at sporting events, we are also seeing significant revenue increases at our stations in Boston and Philadelphia, where sport stations, WBB and WPEN, had a combined revenue increase of 37% year-over-year. Overall, sports represented approximately 18% of our total revenue for the quarter.

Looking at our market performance according to Miller Kaplan, 7 of our 15 markets, representing about 83% of our third quarter revenues, reports to Miller Kaplan, including our top 5 markets. On a combined basis, Beasley market clusters drove a revenue increase of 26.9% for the quarter, significantly outperforming our market, which rose 20.5%.

We're taking a larger local share of revenue in the market and that is very evident when looking at local spots as our cluster share increased 30.6% compared to the combined market, which increased 22.5%.

Our outperformance is broad-based as we exceeded the market revenue increase on a combined basis in local, total spots, digital, network and NPR revenue. Corporate G&A expenses, excluding stock-based compensation for the quarter, increased 7% or by $268,000 compared to the same quarter a year ago to $7 million.

The year-over-year increase in corporate G&A primarily reflects the reinstatement of the 2020 expense wage reductions. Noncash stock-based compensation increased 10% to $261,000 in the quarter, and we had no income tax expense for the quarter.

Our third quarter 2021 operating income increased $4.1 million to $4.9 million compared to $835,000 in the year ago quarter. The increase in operating income is organic and reflects the increase in SOI for the quarter.

Total third quarter interest expense increased $2.5 million year-over-year to $7 million, reflecting the recent capital structure changes. We don't have any scheduled loan payments and our second semiannual interest payment is scheduled for February 1, 2022.

Third quarter 2021 free cash flow improved meaningfully to a positive $1.7 million compared with a negative $533,000 in the 2020, 3rd quarter. This continued turnaround is significant and again reflects our growing revenue share, strong market position and the hard work of the Beasley team.

Our total debt at the end of third quarter remains at $300 million, with an additional $10 million in an outstanding PPP loan, which is eligible for forgiveness. Moving on to our liquidity. We ended the quarter with $48.1 million cash on hand.

Our CapEx spend for the quarter was $1.2 million compared to $1 million in the 2020, 3rd quarter and $3.7 million year-to-date 2021 compared to $7 million year-to-date in the 2020 year. And with that, I'll turn it back to Caroline..

Thank you, Marie. So our priority and strategic focus is creating top quality own air and digital content and growing our audience, which in turn drives revenue growth. In the summer Nielsen Audio ratings period, our largest PPM market saw a 4% share increase year-over-year with the top advertising demographic of adults 25-54.

And we continue to maintain dominant positions in our largest markets of Boston, Detroit and Philadelphia, with the #1 station in all 3 metros. Plus according to Nielsen, we had the highest average PPM cluster share of any major radio broadcaster with adults 25-54.

And with that I am extremely proud as it is a direct outcome of our culture and focus on providing consumers with the best audio entertainment, news and information, and it's representative of the phenomenal team we have in place. Now moving to our digital platform.

The investments we've made on our content side are clearly value creating and resulted in Q3 being a record high quarter for impressions on our website platform, up 13% year-over-year with well over 53 million impressions for the quarter. Additionally, our streaming audience was up 17% year-over-year. Moving on to esport.

Let me provide a quick update on the Houston Outlaws as we just wrapped up to #4 in the final year playing Overwatch 1. Season 5 is expected to start sometime in April or May of 2022, coordinated with Activision Blizzard's release of the Overwatch 2. And this is the long awaited revamp game that is expected to take the video gaming industry by storm.

We are actively signing players for next season, and we're planning to roster a mixed lineup of Eastern and Western players. And as a follow-up from the last call on Rocket League and after a summer wide search to find and sign our first expansion team, we launched Team AXLE-R8 into the league on October 8 for the kickoff of their inaugural season.

This team required a far smaller investment than the Outlaws and is already profitable as our learnings from our esport operations, plus our existing infrastructure has made us more efficient, leading to a faster path to profitability.

And as a reminder, the Rocket game has younger fill, is a nonshooter-PG friendly game, and this will allow us to compete in the games that can be played on virtually every device. We expect to finish 2021 strong and looking into 2022, our main goals remain the same.

Grow and diversify our revenue, create great and compelling content, and grow our free cash flow and deleverage and return capital to shareholders in the form of dividends. As we celebrate our 60th anniversary this year, our values have never been more important.

At our core, we're a local media company that produces compelling content and in certain cases, life-saving local content across multiple platforms. And so before closing, there are a couple more points that I'd like to touch on, 1 being the nationwide labor shortages that many of us are confronting.

These labor shortages are resulting in higher wages and could have an impact on expenses going forward. However, on a positive note, we've not been affected by cost increases from our vendors to date and we don't see any supply chain issues preventing us from continuing to produce engaging content.

Some of our advertisers are experiencing some supply chain issues and have decreased or delayed their ad spend until next year. So more to come on that. Finally, I can't say enough of how proud I am of our hard working teams as our markets have opened, we're returning to a new normal that again includes events.

That makes the team extremely proud of the way our corporate and station level leaders, digital and esports team members have worked tirelessly to enable Beasley to generate positive SOI and free cash flow growth in the third quarter of 2021. So with that, I thank you for listening this morning.

We did not have any questions that were submitted that we did not cover in our script, but if anything comes up, please feel free to reach out to either Marie or myself and we'll be happy to answer those questions. Thank you very much..

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