Beasley Broadcast Group, Inc. — Q3 2023 Form 10-Q
Business context and period: Beasley operates radio stations and offers audio, digital advertising, and event-related services. This unaudited report covers the quarter and nine months ended September 30, 2023; comparisons are with the same 2022 periods unless noted.
Key financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $60.1 million | $63.8 million | $181.4 million | $184.4 million |
| Operating income (loss) | $(85.5) million | $4.7 million | $(89.6) million | $(2.6) million |
| Net income (loss) | $(67.5) million | $0.5 million | $(81.5) million | $(17.5) million |
| Basic and diluted EPS | $(2.25) | $0.02 | $(2.73) | $(0.60) |
| Operating cash flow | Not separately reported for quarter | Not separately reported for quarter | $(5.0) million | $2.3 million |
- Q3 revenue fell 5.8%; audio revenue declined 8.8% to $48.3 million, primarily due to lower agency revenue. Digital revenue rose 9.1% to $11.2 million, reflecting continued growth.
- Nine-month revenue declined 1.6%. Audio was down 4.9% to $146.2 million, while digital increased 16.3% to $33.5 million.
- Q3 operating results included $78.2 million of FCC-license impairment and $10.6 million of goodwill impairment. Nine-month impairment charges were $88.2 million and $10.6 million, respectively. These noncash charges drove the reported operating loss.
- Q3 operating expenses excluding impairments decreased 2.7% to $50.1 million; corporate expenses decreased 12.5% to $4.5 million. For the nine-month period, operating expenses decreased 2.0% and corporate expenses decreased 4.0%.
Financial position and liquidity
- At September 30, 2023, cash was $29.7 million, down from $39.5 million at December 31, 2022. Total current assets were $91.3 million and current liabilities were $48.3 million.
- Total assets were $594.4 million; total liabilities were $451.9 million; stockholders’ equity was $142.4 million.
- Long-term debt, net of issuance costs, was $283.6 million; secured notes had $287.0 million principal outstanding. The notes bear 8.625% interest and mature February 1, 2026, are secured by substantially all company and majority-owned subsidiary assets, and contain restrictive covenants.
- During the first nine months, operating activities used $5.0 million of cash, investing activities used $2.8 million, and financing activities used $2.1 million. Capital expenditures were $3.1 million. Cash declined by $9.9 million over the period.
- The board has suspended future quarterly dividends. Management said it believes available liquidity and resources are sufficient for obligations over the next 12 months and thereafter, while warning that weak results or unexpected expenses could create earlier financing or liquidity needs.
Material changes, outlook, and risks
- Management attributed the impairments to higher interest rates and lower projected revenues. The FCC-license valuation used a 10.0% discount rate; management estimated that a 10.5% rate, with other assumptions unchanged, would have resulted in an additional $25.1 million impairment.
- On September 11, 2023, the company sold substantially all WWWE-AM Atlanta operating assets for $250,000. After quarter-end, on October 5, it completed the sale of substantially all WJBR-FM Wilmington assets for $5.0 million cash; it had recorded a $10.0 million FCC-license impairment related to that sale in Q2. The Wilmington operation was not classified as discontinued operations.
- In October 2023, the company bought back $10.0 million principal amount of notes for 63% of principal and recorded a $3.6 million gain. It had purchased $3.0 million principal in Q2 2023 for 66% of principal, recording a $1.0 million gain.
- No specific revenue or earnings guidance is provided. Management identifies economic conditions, advertising demand and competition, digital execution, FCC regulation, debt and covenant restrictions, potential asset impairments, and operational disruptions among the risks to results.
- Nasdaq notified the company on October 13, 2023 that its share price had again fallen below the $1.00 minimum bid-price requirement. The compliance period runs through April 10, 2024; the company said it may consider a Nasdaq Capital Market transfer or reverse stock split. Delisting could reduce share liquidity and increase volatility.
- Management reported effective disclosure controls and procedures, with no material change in internal control over financial reporting during the quarter. Routine litigation is disclosed; management said no current matter is expected to have a material adverse effect.
Important facts for investors to verify
- Whether advertising trends, particularly audio agency revenue, stabilize and digital growth continues.
- Whether further FCC-license or goodwill impairments arise if projections or valuation assumptions weaken.
- Cash generation, debt-service capacity, covenant compliance, and progress in managing the 2026 notes maturity.
- Completion and financial effects of the station dispositions and the October note repurchase.
- Whether the company regains Nasdaq’s minimum bid-price compliance by the applicable deadline.