Business context and reporting period
Beasley Broadcast Group, Inc. (Nasdaq: BBGI) filed this Form 10-K for the fiscal year ended December 31, 2019. It operates radio stations in U.S. markets and sells advertising across audio, digital, and event platforms. This is an annual report; the provided filing text does not give a standalone fourth-quarter income statement.
During 2019, the company acquired Detroit station WDMK-FM and the Houston Outlaws esports team, and invested in esports organization Renegades and technology company Quu.
Financial results and liquidity
| Metric | 2018 | 2019 | Change |
|---|---|---|---|
| Revenue | $257.5 million | $261.6 million | +1.6% |
| Operating income | $34.3 million | $38.1 million | +11.1% |
| Net income attributable to BBGI stockholders | $6.5 million | $13.5 million | +107.5% |
| Diluted earnings per share | $0.24 | $0.48 | — |
| Cash from operating activities | $24.4 million | $21.0 million | −$3.4 million |
Reported operating margin was approximately 13.3% in 2018 and 14.6% in 2019; the 2019 figure includes substantial disposition gains and impairment charges. Digital advertising revenue increased from $15.5 million to $20.3 million, while commercial advertising revenue was nearly flat. 2018 political advertising was $4.4 million versus $0.9 million in 2019.
Cash and cash equivalents were $18.6 million at year-end 2019; current assets were $79.7 million and current liabilities $53.2 million. Total debt, including the esports acquisition note, was $263.5 million, with $9.0 million of undrawn revolver capacity. Debt carried a 5.8% LIBOR-based rate at year-end; the term loan matures in 2023, with $239.0 million of scheduled principal due that year. The company reported compliance with its debt covenants at December 31, 2019.
Investing cash use was $5.0 million, compared with $45.6 million in 2018, reflecting $26.3 million of disposition proceeds and lower acquisition spending. Financing activities used $10.8 million, including $5.5 million of dividends. The declared annual dividend was $0.20 per share. Management said it expected sufficient liquidity for the next 12 months, while noting that weaker results or unexpected expenses could constrain borrowing and liquidity.
Material changes, outlook, and risks
- Revenue increased primarily with $6.8 million of additional Philadelphia revenue, largely related to WXTU-FM, partly offset by declines in Las Vegas, Fort Myers, and Tampa. Operating expenses rose 2.7%; corporate expenses rose 30.2%.
- 2019 included $20.7 million of gains on dispositions, including land, towers, and a license, and $13.7 million of impairment losses. The impairment included $12.4 million for FCC licenses in Atlanta and West Palm Beach-Boca Raton and $1.3 million for the LN2 DB investment. The filing attributes the license impairments mainly to reduced projected revenue share.
- Interest expense rose 12.7% to $18.0 million, primarily due to higher debt outstanding. Income tax expense fell to $6.6 million from $11.7 million; the effective tax rate was 33% versus 64%.
- No quantitative revenue or earnings guidance is provided. Management’s stated strategy is to build local content and integrated audio, digital, and event offerings, while developing esports activities.
- Key risks include competition from digital audio and major technology platforms, dependence on advertising and economic conditions, and concentration in Boston, Philadelphia, and Tampa, which generated 60.7% of 2019 revenue. FCC license renewal and regulatory exposure, impairment risk, debt service and covenant limits, and the 2023 term-loan maturity are also material considerations.
- George G. Beasley and family control approximately 59.3% of voting power. The company also disclosed related-party property and tower leases. It reported no litigation expected by management to have a material adverse effect and no off-balance-sheet arrangements.
Investor verification priorities
- Review debt leverage, covenant headroom, required prepayments, and the ability to refinance or repay the $239.0 million term-loan balance scheduled for 2023.
- Assess whether operating cash flow can support debt service, acquisitions, capital spending, and dividends; operating cash flow declined in 2019 despite higher revenue.
- Evaluate the assumptions and sensitivity behind the Atlanta and West Palm Beach-Boca Raton FCC-license impairment tests, and monitor other goodwill and intangible assets.
- Separate recurring operating performance from the 2019 disposition gains and impairment charges; confirm whether acquired stations and esports investments generate expected returns.
- Monitor market concentration, digital-advertising growth, and the company’s exposure to advertising cycles and competition from streaming and technology platforms.
- Check future dividend declarations against credit-agreement restrictions, and review related-party transactions and the effects of the Beasley family’s voting control.