Beasley Broadcast Group, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; compared with the corresponding 2020 periods. The company operates radio stations and sells audio, digital and event advertising. Results are unaudited and may be affected by seasonality.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $62.9 million | $49.6 million | $170.7 million | $137.7 million |
| Operating income (loss) | $4.9 million | $0.8 million | $8.1 million | ($23.9 million) |
| Net loss attributable to BBGI stockholders | ($1.6 million) | ($2.4 million) | ($12.0 million) | ($29.0 million) |
| Basic and diluted loss per share | ($0.06) | ($0.08) | ($0.41) | ($1.02) |
- Q3 revenue rose 26.7%; management attributed the increase mainly to recovery from COVID-19 in audio and digital advertising, partly offset by lower political advertising. Digital revenue increased to $8.3 million from $5.0 million.
- Q3 operating expenses increased 23.1% to $51.2 million, below the revenue growth rate; interest expense rose 54.5% to $7.0 million, primarily due to higher debt and applicable interest rates. Operating margin was approximately 7.8%, compared with 1.7% in Q3 2020.
- For the first nine months, revenue increased 24.0%. Operating results improved from a $23.9 million loss to $8.1 million of income; 2020 included $6.8 million of FCC-license impairment charges. Interest expense rose to $19.7 million, and the 2021 period included a $5.0 million debt-extinguishment loss.
- Nine-month operating cash flow was negative $6.0 million, versus positive $0.8 million in 2020. Investing cash outflow was $0.3 million; capital expenditures were $3.7 million. Financing provided $33.7 million, principally reflecting the debt refinancing. Cash increased $27.4 million to $48.1 million.
Debt, liquidity and capital
- At September 30, 2021, cash was $48.1 million and current assets were $109.2 million against current liabilities of $43.8 million.
- Long-term debt had a net carrying value of $303.4 million, including $300 million of senior secured notes and a $10 million PPP loan, less unamortized issuance costs. The notes bear 8.625% interest and mature February 1, 2026; they are secured by substantially all company and majority-owned subsidiary assets.
- The company issued the notes in February and used proceeds to repay its prior credit facility, an esports-related promissory note and a related-party loan. Debt refinancing generated a $5.0 million extinguishment loss. The notes’ indenture includes restrictive covenants, including limits on dividends, additional debt and certain transactions.
- The board suspended future quarterly dividends; the notes’ covenants also restrict dividends. The company applied for forgiveness of the PPP loan on September 16, 2021, but forgiveness is not assured.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided. Management said it expects sufficient liquidity and capital resources to meet obligations over the next 12 months and thereafter, while warning that weak results or unexpected expenses could create earlier financing or liquidity needs and that financing may not be available on acceptable terms.
- COVID-19 continues to create economic uncertainty and could affect advertising, liquidity, receivables and impairment estimates. Management reported no FCC-license impairment triggering events in the first nine months of 2021; the company recorded $6.8 million of license impairments in 2020.
- Nine-month 2021 other operating income, net, was $0.4 million, including $3.0 million of life-insurance proceeds related to former Chairman George Beasley’s death, partly offset by employment-contract payments, COVID-related consulting and a programming-contract termination.
- In March 2021, the company exchanged its interest in Renegades for Renegades’ interest in Outlaws; Outlaws became wholly owned and Renegades was no longer consolidated. The filing reports no material change to previously disclosed risk factors and no litigation management believes likely to have a material adverse effect.
Important facts for investors to verify
- Whether advertising recovery, particularly digital growth, continues and how it affects operating costs and margins.
- Cash generation and debt-service capacity given negative operating cash flow, $303.4 million of net debt carrying value and 8.625% notes.
- Whether the PPP loan is forgiven and whether debt covenants constrain dividends, borrowing or other financial decisions.
- Potential ongoing effects of COVID-19, economic conditions and advertising competition on revenue, receivables and FCC-license or goodwill valuations.
- The terms and financial performance of the Outlaws esports business following the ownership exchange.