Beasley Broadcast Group, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; balance-sheet comparisons are to December 31, 2018. Beasley operates 64 radio stations across 14 U.S. markets. The company notes that radio revenue is seasonal and typically lowest in the first quarter.
Key financial results
| Metric | Q1 2018 | Q1 2019 | Change |
|---|---|---|---|
| Net revenue | $55.2 million | $57.7 million | Up 4.6% |
| Operating income | $0.4 million | $6.8 million | Improved $6.4 million |
| Operating margin | 0.7% | 11.8% | Improved |
| Net income (loss) | $(3.2) million | $1.4 million | Improved $4.5 million |
| Diluted EPS | $(0.11) | $0.05 | Improved |
| Operating cash flow | $4.8 million | $7.4 million | Up $2.6 million |
Q1 2019 commercial advertising revenue was $49.6 million, digital advertising $3.5 million, and other revenue $4.6 million. The filing does not provide a standalone EBITDA figure or a specifically stated gross margin.
Cash, debt and liquidity
- Cash increased to $16.4 million from $13.4 million at year-end. Current assets were $67.0 million and current liabilities $33.1 million.
- Term-loan principal was $249.5 million, down from $252.0 million; the balance-sheet debt carrying amount, net of unamortized issuance costs, was $240.8 million. No revolving credit facility borrowings were reported, and $20.0 million of revolving commitments were available.
- Debt bore interest at 6.5% at quarter-end. The term loan matures November 2023; scheduled principal repayments are concentrated in 2022–2023. Interest expense rose 26.6% to $4.6 million.
- Cash flow from investing was a $0.5 million use, including $1.8 million of capital expenditures and $2.5 million invested in Renegades, partly offset by $3.8 million of disposition proceeds. Financing used $3.9 million, including $2.5 million of debt repayments and $1.4 million of dividends.
- Operating lease liabilities recognized upon adoption of the new lease standard totaled approximately $41.8 million at March 31, 2019; total lease liabilities, including finance leases, were approximately $42.4 million.
Material changes and unusual items
- Revenue increased $2.5 million, principally reflecting $2.2 million of additional Philadelphia revenue, primarily from the WXTU-FM acquisition, and a $0.9 million increase in Tampa–St. Petersburg. Revenue at remaining clusters was generally comparable.
- Station operating expenses increased $1.9 million, including higher costs in Philadelphia, Boston and Tampa–St. Petersburg. Corporate G&A increased $1.7 million, including higher cash compensation and the absence of a $1.0 million Greater Media pension-plan termination gain recorded in Q1 2018.
- Q1 2019 operating income included $3.5 million of gains from dispositions: a $3.1 million gain on cancellation of a Chattanooga broadband radio license and a $0.4 million gain on the Augusta land sale. Q1 2018 included a $4.4 million expense from changes in fair value of contingent consideration.
- Beasley acquired Philadelphia station WXTU-FM for $38.0 million in September 2018, partially funded by $35.0 million of additional term borrowing. In March 2019, it invested $4.5 million in esports organization Renegades for an approximately 43% interest, using cash, shares and a three-year advertising commitment; additional cash investments totaling $1.5 million were scheduled for later periods.
- Effective January 1, 2019, the company adopted the new lease accounting standard, recording $43.1 million of lease liabilities and $38.8 million of right-of-use assets, with a $0.9 million cumulative reduction to opening retained earnings. Prior-period figures were not restated.
Outlook, risks and contingencies
Management provided no specific revenue or earnings guidance. It stated that it expects sufficient liquidity to meet obligations over the next 12 months, using internally generated cash flow and available financing. That assessment is conditional: poor results or unexpected expenses could impair covenant compliance, restrict revolver availability or create additional financing needs.
The company was in compliance with applicable debt covenants at March 31, 2019. Its credit agreement imposes leverage limits, mandatory excess-cash-flow and asset-sale prepayments in specified circumstances, and restrictions on dividends and share repurchases. The board declared a $0.05-per-share dividend, paid April 5, 2019. Principal risks identified include advertising demand and competition, digital-content and technology changes, FCC regulation and licensing, concentration in selected markets, receivable credit risk, substantial debt and covenant restrictions, and acquisition integration. Management reported no litigation likely to have a material adverse effect and no material changes to reported risk factors.
Important facts for investors to verify
- Whether revenue and operating performance remain positive after excluding the $3.5 million of Q1 disposition gains, and how much growth reflects WXTU-FM versus comparable-market trends.
- Debt leverage, covenant headroom, mandatory prepayment requirements and the effect of 6.5% borrowing costs on future cash generation.
- Whether operating cash flow is sustainable, given the significant contribution from collections of accounts receivable and the quarter’s seasonal profile.
- The cash and operating impact of the Renegades investment and its future scheduled commitments.
- Dividend sustainability under the credit agreement’s leverage-based restrictions and the company’s stated liquidity expectations.