Beasley Broadcast Group, Inc. — Q2 2022 Form 10-Q
Business context and period: Beasley operates radio stations and sells audio, digital and event-based advertising. This unaudited report covers the quarter and six months ended June 30, 2022, compared with the corresponding 2021 periods.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenue | $64.8 million | $59.6 million | $120.5 million | $107.8 million |
| Operating income (loss) | $(4.5) million | $5.8 million | $(7.3) million | $3.3 million |
| Net income (loss) | $(14.5) million | $0.2 million | $(18.0) million | $(10.5) million |
| Net loss per share | $(0.49) | $0.01 | $(0.61) | $(0.35) |
| Operating cash flow | Not separately presented | Not separately presented | $6.8 million | $4.8 million |
Q2 revenue rose 8.8%; audio revenue grew 4.3% and digital revenue 34.3%. For the first half, revenue increased 11.8%, with audio up 8.4% and digital up 34.8%. Operating expenses grew faster than revenue in both comparisons. Approximate Q2 operating margin was (6.9)% versus 9.7% a year earlier; the reported results include a substantial impairment charge.
For the six months, investing activities used $7.3 million, including $6.5 million of capital expenditures and $2.0 million for an acquisition, partly offset by disposition proceeds. Financing activities used $4.9 million, primarily for debt repurchases. Cash declined $5.5 million from year-end to $45.9 million at June 30.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $45.9 million; current assets were $101.9 million and current liabilities $49.9 million at June 30, 2022.
- Notes had $295.0 million of principal outstanding, with a carrying value of $289.6 million before separating the $2.0 million current installment. The senior secured notes bear 8.625% interest and mature February 2026; substantially all company and majority-owned subsidiary assets secure them.
- Management said it believed available liquidity and capital resources would meet obligations for the next twelve months and thereafter, while cautioning that weak results or unexpected expenses could create earlier financing needs or risk of default. Debt covenants restrict, among other things, additional borrowing, acquisitions, asset sales and dividends. Quarterly dividends remain suspended.
Material changes, unusual items and outlook
- The company recorded $10.5 million of first-half impairment losses: $5.9 million for goodwill and $4.6 million for FCC licenses. Q2 testing followed rising interest rates; management attributed the charges primarily to higher discount rates and economic risks. Impairments affected several radio market clusters. Management warned that less favorable market conditions could lead to further material charges.
- In April, the company sold substantially all operating assets of WWNN-AM for $1.25 million and recognized a $1.9 million FCC-license impairment in Q1. In June, it acquired digital marketing agency Guarantee Digital for $2.0 million; purchase accounting was incomplete at quarter-end, and the amount was temporarily recorded in other intangibles.
- In April, Beasley repurchased $5.0 million principal amount of notes for 96% of principal and recorded a $0.1 million gain. A subsequent July repurchase of $2.0 million at 75% of principal was expected to produce a $0.5 million gain in Q3.
- Management cited continued recovery from the pandemic as supporting audio growth and continued digital expansion, alongside increased digital investment. No numerical revenue or earnings guidance is provided in the supplied filing text. Radio revenue is seasonal, and the company identifies economic conditions, advertising competition, audience acceptance, regulation, technology, credit risk, hurricanes, cybersecurity and substantial debt as risks.
- The filing reports routine litigation, including FCC indecency matters, but no proceedings management believed likely to materially adversely affect results or financial condition. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Review the impairment assumptions and remaining valuation cushion, particularly for FCC licenses; disclosed fair value did not exceed carrying value in Fort Myers-Naples, Las Vegas or Wilmington.
- Check subsequent filings for the Guarantee Digital purchase-price allocation and the July note repurchase, including effects on debt, cash and interest expense.
- Assess whether revenue growth can outpace operating-cost growth and sustain positive operating cash flow after debt service and capital expenditures.
- Monitor the 8.625% secured notes, restrictive covenants, liquidity, and management’s stated capacity to meet obligations.