Good morning, and welcome to Beasley Broadcast Group Second Quarter 2023 Conference Call. Now I will turn the call over to your host. Please go ahead. .

Thank you, operator. Good morning, everyone. 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 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 our website.

At this time, it's my pleasure to turn the conference over to your host, Beasley Broadcast Group's CEO, Caroline Beasley. Please go ahead, Carolyn. .

number 1, our owned and operated assets, which can with content creation driving the larger increase, and this has a higher profit margin for us. Third-party digital is number 2, which is primarily [SEM, SEO,] Facebook and Google and, of course, comes with a higher cost. And number 3, Web services, which we began selling late last year.

Our talented sales team has been able to combine our over-the-air and digital platform offerings to deliver marketing campaigns and brand solutions that work for our clients.

Our continued strong digital revenue growth has moved up to within a few basis points of reaching the bottom end of our goal of digital accounting for 20% to 30% of total revenue this year. Now breaking down the quarter's revenue trend. April was flat, May was down 1.6% and June, which was a bit more challenging, declined 4.4% year-over-year.

And as a point to note, same-station revenue was down 3%. Same-station expenses were down almost 7% and same-station SOI increased 14%. With strong results and a somewhat cautious outlook, we remain hyper focused on reducing our leverage by continuing to grow EBITDA and reducing our debt.

We took advantage of our bonds trading below par and reduced our debt by $3 million at the end of second quarter. And we're going to continue to monitor the market conditions to determine when we should repurchase our bonds going forward. With that, I'm going to hand it over to Marie, who has additional comments on the quarter. .

Thanks, Carolyn, and good morning, everyone. I will review our second quarter results and provide an update of our balance sheet. Second quarter net revenue decreased 2.1% or $1.3 million to $63.5 million, which includes $700,000 from our esports team.

Excluding a political revenue decrease of $490,000 and two, nonrecurring events of $840,000, our revenue would have been flat year-over-year. We generated positive revenue growth in 5 of our markets, including double-digit growth in Wilmington and mid- to high single-digit growth in Boston, Charlotte, Las Vegas and Fort Myers.

Digital revenue for the quarter grew 14.8% to $12.3 million and now represent 19.4% of total revenue for the quarter as we continue to grow this revenue stream and diversify our revenue sources. Moving to our revenue category for second quarter. Consumer services remained our largest revenue category at 31% of our total revenue.

This category declined [0.5%] year-over-year during the quarter. We have the largest increase coming from legal and the largest decrease coming from medical. Our second largest category was retail, which fell 8.3% year-over-year and accounted for 17% of total revenue.

Entertainment number 3 represents around 14% of 2Q total revenue and decreased 1% year-over-year. The entertainment category includes sports betting, which generated $3.4 million for the quarter. Auto, our fourth largest category saw revenues up 7% year-over-year, and the category accounted for 9.1% of total revenue.

We saw increases in auto in more than half of our markets, including double-digit growth in Boston and an almost 10% growth in Philadelphia. We have seen improvements in this revenue category and expect that, that will continue to improve throughout the year as there have been reports on inventory levels of millions of vehicles.

And sixth spot was Telecom down 7.5%, representing 4.4% of total revenue. Corporate G&A expenses for the quarter decreased 3.6% or $162,000 compared to the same quarter a year ago to $4.4 million. The year-over-year decrease in corporate G&A is related to a decrease in wage expense.

Noncash stock-based compensation decreased [52%] or $197,000 to $181,000 in the quarter, and we had an income tax benefit for the quarter of $822,000. Second quarter 2023 operating income decreased $54,000 to a negative $4.5 million, more or less in line with the year ago.

The negative operating income was driven by a noncash impairment loss of $10 million in 2Q '23 and a noncash impairment loss in 2Q 2022 of $8.6 million. So excluding the noncash impairment losses, we were positive on an operating basis in both periods.

Second quarter interest expense decreased $100,000 year-over-year to $6.7 million, and our outstanding debt at the end of 2Q was $287 million, reflecting a $3 million bond repurchase at a discount of approximately 34%. We also made another interest payment of approximately $12.3 million on August 1.

Second quarter 2023 EBITDA was up 16.8% or $1.1 million from the previous year quarter to $7.7 million. LTM adjusted net leverage, including add-backs such as certain taxes, noncash compensation, losses from our digital agency buildup, pro forma for our 2022 agency acquisition and pro forma 2022 risk decreased to 6.64x.

We ended 2Q 2023 with cash on hand of $35.5 million as we are generating cash from operations and continuing to build up our cash. We expect to generate positive free cash flow for the full year of 2023.

Our current cash balance will allow us the flexibility to continue to opportunistically reduce our debt, our leverage and interest expense, which we are hyper focused on as this increases free cash flow and derisks our equity. Our capital expenditures for the quarter was $847,000, which was mostly related to replacements and upgrades of transmitters.

That compares to 2Q 2022 CapEx spend of $5.1 million, which was related to our Boston build-out. Year-to-date CapEx spend is $2 million, and that compares to year-to-date 2022 of $6.5 million, again, reflecting the Boston build-out. We expect our CapEx spending for 2023 to be around $4 million to $5 million for the full year.

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

Thank you, Marie. So I'm pleased with our second quarter performance in an environment where we've had some headwinds. We continue to show growth in our digital business, partially offsetting the decline in spot. Our content strategy initiated midyear 2022 helped drive 14.8% growth in our digital revenue for the quarter.

So we're very excited about this opportunity as we continue through the balance of '23 and into next year. Notably, our multi-platform local content strategy continued to drive tremendous audience growth in the second quarter, and our owned and operated audience monthly reach is now almost $29 million.

That compares to $25 million during the same period in 2022. Again, this is a 14% overall monthly audience increase from last year. Our radio brands continue to maintain dominant positions in Nielsen, where our market share grew by 3% in our large PPM markets with the key demographic of adults 25-54.

And we maintained the highest average PPM cluster share when compared to the other major broadcasters. And overall, including both PPM and [indiscernible] markets, our average share grew by 6% year-over-year with adults 25-54.

However, like other recent quarters, the largest audience growth was seen on our digital O&O asset with unique users increasing by 62% from Q2 '22 to Q2 '23. This audience growth led to a 59% increase of sellable digital impressions for the same period. Digital now accounts for 44% of our total monthly audience.

That's up 2 points from last quarter, and we expect this trend to continue. Now moving on to esports. We now have moved into the second half of the 2023 Overwatch League season, with the team presently ranked number 2 in the world. We now have our eyes set on the October playoffs and grand finals, which will be played October 4 through 6 in Toronto.

Our focus remains on expanding our audience on our social platform and computing for prize money.

Now looking into third quarter and into the back half of '23, our goals remain on maximizing revenue and driving further revenue diversification, audience expansion, improving our margins, maintaining a strong and flexible balance sheet, reducing our debt, net leverage and growing free cash flow.

As of today, our third quarter revenue is pacing down 3% and breaking that down, July was down approximately 5%. That's pretty similar to where we saw June end. August is pacing down approximately 3% and September is pacing up 1%.

Now last year, we recorded approximately $2 million net of political revenues, with half of that book as of this date last year. So excluding political, we're currently pacing down 1% for the quarter, with July down 3%, August down 2% and September pacing up 4%.

We continue to be super focused on developing new local direct business and digital to offset the softness in the political comp. Finally, we are proud of the strong results we have delivered over the last several quarters, even against headwinds.

And before going into Q&A, I'd like to acknowledge our team members across the company for everything they've done and are doing. I'm absolutely thrilled with them as we clearly accomplished a lot as we pursue additional opportunities to strengthen the company and build shareholder value. So with that, I'm going to turn it over to Marie.

We do have some questions that were submitted to us.

So Marie, do you want to go through those questions?.

Yes, I will do as Carolyn said, we received a few questions that we would like to address.

And the first question is, could you give an update on your esports investment?.

Sure. So esports, we continue to make progress in this area and building our overall audience and also with a focus on winning price dollars, as I mentioned earlier in the script.

However, some of you may have read, there are some questions with [OL] and we are currently looking at all of our options with the Overwatch League, and we should have an update sometime in fourth quarter on this. .

Great. Also the next question, could you talk about your refinancing process of your bonds that are coming due in February of 2026. And I will take that. And yes, we are -- we certainly have our eye on this day, and we are hyper focused on continuing to reduce our debt and reduce our leverage.

We will be exploring all options regarding our refinance well in advance of our bonds due date.

And the last question is, would you consider divesting noncore assets?.

Yes. We discussed this last quarter, and that is something that we will consider doing. .

Great. All right. Thank you very much for your time today. And should you have any questions, feel free to reach out to either Marie or myself. Hope you all have a great day. Thank you..