Good morning. Welcome to the Beasley Broadcast Group Fourth Quarter 2023 Earnings 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 in this morning's news announcement on the company's website.

I would also like to remind listeners that following its 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 in 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, Sherry, and good morning, everyone. Thank you for joining us to review our fourth quarter and full year results. Marie Tedesco, our CFO, is with me this morning.

The combination of cyclical, political revenue and overall ad softness led to a fourth quarter revenue decline of 8.7%, slightly better than the expectation we provided when we reported third quarter of minus 9%. However, excluding fourth quarter '22 political of approximately $5.1 million, fourth quarter revenue would have declined just 2.4%.

Similarly, full year revenue dropped 3.6%, but excluding political, full year revenue would have declined just 0.9%. Same-station ex-political would have been down just 0.3% and down 0.6% for the full year. And as a point of reference, total net political for fourth quarter ‘22 and full year ‘22 was $5.1 million and $7.5 million respectively.

With our focus on expense control, we managed to reduce our expenses primarily from headcount reductions in 2023 and brought our total expenses down 3.3% year-over-year for fourth quarter and 2.3% for the full year. And as a result, fourth quarter SOI declined by $4.3 million.

However, when excluding political, SOI would have been down 1.2% or just $113,000. And on a full year basis, excluding political, SOI increased 5.4%. And on a same station basis ex-political, for the fourth quarter and full year, SOI increased 9% and 16.9%, respectively. Now breaking down our fourth quarter revenue performance.

Over-the-air local spot was down 6.1% or $2.5 million. And on a same-station basis, excluding political, local was down 2.5% or $986,000.

We remain focused on developing new local direct business, and our efforts paid off as our new business increased 52% year-over-year for the fourth quarter, and we saw a 20% increase for the full year compared to 2022.

In addition, we saw a shift between local direct and local agency, where local direct as a percentage of total local increased 7% for the quarter. National remained challenged, decreasing 36.8% or net $5 million and that is primarily due to political revenue. Excluding political, net national declined $1.2 million or 12.4% for the quarter.

Furthermore, national for the fourth quarter represented 12.7% of total revenue and 13.2% for the full year.

This compares to digital revenue, which was 18.2% of fourth quarter revenue and 18.4% of total revenue for the full year of 2023, clearly out-billing national as we have been successful in offsetting the national declines with growing digital revenue for the full year.

We expect national to continue to decline ex political, which is why we are prioritizing the growth of our digital platform and continuing to aggressively develop local direct new business. Q4 digital revenue was essentially flat at $12 million and now represents 18.2% of total revenue. That's up from 16.6% in the year ago fourth quarter.

Full year digital increased 11.4% or $4.7 million to $45.4 million and accounted for 18.4% of total ‘23 revenue, just shy of our goal of digital accounting for 20% of total revenue.

And we expect digital to account for between 20% and 25% of total revenue in 2024, driven by content creation and the continued success and growth of our digital services. Now moving to sports betting. We recorded $5.2 million in Q4, amounting to an increase of 58% or 7.9% of total revenue in this category, which was driven by our Boston cluster.

Full year sports betting revenue increased 33% to $16.5 million, with more than 50% coming from Boston, where we required multi-year commitments for sports betting contracts. Now I'd like to update you on a couple of transactions we closed on in fourth quarter. Number one, in October, we closed on our Wilmington single station sale.

And since this station was sold to a non-comm buyer, we kept the majority of the digital cash flow by moving it to our digital agency. And then number two, with Activision Blizzard sale to Microsoft, the Overwatch Franchise League was discontinued, and our Houston Outlaws team was dissolved.

As a result, we received compensation for the franchise license.

And while we will no longer be competing in the gaming space, given our learnings and experience of the past four years, we're continuing to create gaming content, and we have pivoted this business towards the Gen Z entertainment space with heavy emphasis on content oriented video, live streams and social media under our new brand, Outlaws Entertainment.

We used the proceeds from both transactions, along with a small portion of our cash on hand to buy back $20 million face value of our debt at a discount of approximately 34%, reducing our bond debt to $267 million as of the end of the year.

And with the return of political in ‘24 and our growth expectations for digital this year, we intend to continue to opportunistically address our debt. And as a point to note, we've reduced our debt by $33 million since we closed on our bond deal. So now I'm going to turn it over to Marie, who's going to give you a deeper dive into the quarter..

Thanks, Caroline, and good morning, everyone. As Caroline mentioned, fourth quarter net revenue decreased 8.7%, or $6.3 million, to $65.7 million. Boston, Fort Myers, and Tampa recorded positive revenue growth year-over-year when comparing to prior year, which included $5.1 million of political revenue.

Excluding 2022 fourth quarter political, revenue declined 2.4% or $1.6 million, driven by a decline in agency business. Full year total revenue decreased 3.6% or $9.3 million to $247.1 million. And excluding 2022 political, full year revenue decreased 0.9% or $2.3 million, again driven by a decline in agency revenue.

Looking closer at the quarter, October was down 16.3%, driven by prior year political. November was down 9.7%, also driven by 2022 political. And December increased 1.7% year-over-year. Operating expenses for the quarter decreased 3.3% year-over-year or by $1.9 million, and SOI declined $4.3 million compared to fourth quarter ‘22.

Excluding political, SOI would have dropped just 1.2% or $113,000. The main driver of the fourth quarter expense savings came from previous headcount reductions.

Full-year operating expenses declined $5 million, also from wage reductions, somewhat offset by increased third-party digital expenses, bad debt expense, and our continued investment in cybersecurity. Our full year SOI ex-political would have increased $2 million or 5.4%.

Same-station revenue for the quarter, which excludes the divested Boca, Atlanta, and our Wilmington station, as well as our Las Vegas asset exchange and the dissolution of our esports team declined 6.3% to $65.1 million, and same-station SOIs declined $2.9 million or 21.5%.

Looking at the full year same-station revenue, it declined 3.1% and full year same-station SOI increased 1.6% or $700,000. When comparing same-station SOI ex-political for the quarter and full year, SOI increased $840,000 or 9% and $6.3 million or 16.9% respectively.

Now looking at our revenue categories for fourth quarter, consumer services remained our largest revenue category at 27.6% of total revenue with a drop of 10.1% year-over-year. Our second largest category was entertainment, switching place with retail, and entertainment was up 17.1% for the quarter at 16.5% of total revenue.

We saw entertainment spend increase in Boston by more than $2.6 million due to sports betting, which was partially offset by sports betting declines in Philadelphia. Retail landed in third place, representing 16.1% in the quarter, and retail fell 2.2% year-over-year.

The auto category saw revenues down 4.9% or $290,000 year-over-year, and the category accounted for 9% of our total revenue. We saw increases in auto at our Boston, Philadelphia, Augusta, and Fayetteville clusters, as well as a 70% increase in the auto category from our digital agency.

Consumer products came in fifth place at 5.5% of total revenue, up 8.3%, and telecom landed in sixth place with 4.1% of total revenue.

Now looking at the full year, consumer services accounted for 29.4% of total revenue and was down 2.6%, retail down 1.6% and accounted for 16% of total revenue, entertainment increased 3.9% and accounted for 15.5%, and auto increased 1.1% to 9.1% of total revenue for the full year.

Corporate G&A expenses for the quarter increased 19.6% or $800,000 compared to the same quarter a year ago to $4.9 million. The year-over-year increase in corporate G&A is mostly related to a catch-up of non-cash stock-based compensation and increased corporate digital expenses.

Full-year corporate G&A increased 1.4% or $245,000, primarily related to corporate digital expenses and cybersecurity costs, partially offset by a reduction of wages. Non-cash stock-based compensation increased $130,000 to $313,000 in the quarter and decreased $213,000 to $846,000 for the full year 2023.

And we paid $1.4 million in income taxes for the full year.

Fourth quarter 2023 operating income increased $39.3 million to $7.6 million compared to a loss of $31.7 million in the year-ago quarter, which was impacted by prior year non-cash impairment charges of $42.4 million related to FCC licenses, goodwill, and franchise rights, which was somewhat offset by current year fourth quarter non-operating income of $6 million related to the dissolution of the Overwatch League.

Full year operating income declined $47.7 million year-over-year to a negative $82 million, again related to a non-cash impairment charge of $99.8 million in the 2023 compared to impairment charges of $52.8 million in 2022.

Fourth quarter interest expense increased $224,000 year-over-year to $6.8 million related to amortized interest expense from our divested Wilmington station. Full-year interest expense was $26.6 million, down from $26.9 million in 2022. We ended the year with total debt of $267 million, reflecting $20 million of bond buyback within the fourth quarter.

And we made our semiannual interest payment on February 1, 2024. EBITDA for the fourth quarter was $4.7 million, a drop of 52% or $5.1 million from the prior year quarter, and full year EBITDA decreased 18% or $4.5 million compared to 2022.

Now excluding political, EBITDA for the quarter and full year would have been a decline of 17.3% or $910,000 for the quarter and an increase of 9.4% or $1.7 million for the full year.

Adjusted net leverage, including add-backs, such as certain taxes, non-cash compensation, pro forma of our agency build-ups, our July and October risks, and pro forma of our Outlaws and Atlanta divestitures were 7.96 times where debt is reflecting net of cash on hand. And we ended the quarter with cash on hand of $26.7 million.

Our capital expenditures for the quarter were $1.1 million compared to prior year fourth quarter of $2.4 million. And full year CapEx spend was $4.2 million compared to 2022 full year CapEx spend of $13.4 million, which included the Boston office and studio build-out.

Looking into 2024, we expect our CapEx spend in the range of $4 million to $5 million. And with that, I'll turn it back to Caroline..

Thank you, Marie. While we're looking forward to ‘24 political revenue, we're laser focused on digital revenue and specifically the strategy that was put in place mid-year ‘22, which helped drive an 11.4% growth in our digital revenue for the full year.

Digital has greatly surpassed national and we continue our focus on driving revenue and growing this segment. In addition, our multi-platform local content strategy again drove audience growth in the fourth quarter year-over-year. Our owned and operated audience monthly reach is over 31 million in 2023, and that compares to 27.5 million in ‘22.

This is a 13% overall average monthly audience increase year-over-year. Now I would like to note that the digital content industry has experienced a decline in digital audience page views and digital display impressions due to Google's core updates that happened in both third and fourth quarters.

As we navigate these updates that have limited search engine traffic to digital publishers like ourselves, we're laser focused on the quality of our impressions and our content in leading to a more loyal audience, and this focus has started to pay off.

As a result of the Google updates in Q4, digital revenue remained relatively flat with higher than expected revenue from our digital audio category because of the initiatives in place to optimize our digital audio impressions and this is despite lower monthly page views. We've seen increases in CPMs this year.

In fact, across our programmatic categories, CPMs have increased 58% since Q1. So while we expect a decline in digital display impressions through the first half of ‘24, we do expect to continue to grow total digital revenue, and we're optimistic that these strategic updates will help our audience to rebound by the second half of the year.

Now, our radio brands continue to maintain dominant positions in Nielsen, where our PPM market share grew by 2% year-over-year with a key demographic of adults 25-54. And we maintain the highest average PPM cluster share when compared to the other major broadcasters.

It's also important to highlight the success of our company-wide community of caring commitment.

From creating ongoing public service initiatives focused on a variety of important topics, such as mental health awareness, to making a direct impact in the lives of our listeners and their families, we remain committed to making a difference in the local communities we serve.

As an example, this past November, WMMR-FM, Preston & Steve's 26th annual Camp Out for Hunger raised over 1.7 million pounds of food and nearly $1 million in cash to benefit individuals and families in need in the Delaware Valley. It is the single largest food drive of its kind in the entire country. Now let's take a look at first quarter 2024.

As of today, we're pacing down 4.2% compared to prior year, and on a same-station basis, we're pacing down 2.3%. As of this writing, we have not received any significant political dollars in the first quarter. As always, we're very mindful of the current environment, and we will be monitoring our revenue pacing and managing expenses based on such.

Our goal remains to improve margins, reduce leverage, and generate free cash flow. So with that, I thank you very much for being on the call today. I do want to acknowledge our team members across the company for everything that they've done and are doing.

And, Marie, I do think that we do have some questions, so if we could open it up, that would be great..

Absolutely. Most of the questions that we received were addressed in our prepared notes, but we have two additional questions that I will address at this point.

The first one, Caroline, is can you update us on political expectations for 2024?.

Sure. Even though first quarter is light, particularly in Pennsylvania where we thought that we would be receiving more political dollars in first quarter than we actually are going to be, we do still seem to think that we will generate $11 million for the full year. That will be primarily in third and fourth quarters..

Thank you.

And the last question then is, does the company own any BMI shares?.

Yes, we did own BMI shares and we will receive approximately $6 million as a result of the sale..

Great, thank you..

All right, thank you very much. And as always, should you have any questions, please feel free to contact either Marie or myself. Hope you all have a great day..

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation..