Beasley Broadcast Group, Inc. — Q3 2019 Form 10-Q
Business and period: The company operates radio stations across U.S. markets and generates revenue primarily from commercial and digital advertising. This unaudited filing covers the quarter and nine months ended September 30, 2019; interim results may be seasonal and are not necessarily indicative of full-year results.
Financial results
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $66.1 million | $65.1 million | $189.5 million | $181.9 million |
| Operating income | $9.4 million | $9.3 million | $26.9 million | $20.4 million |
| Operating margin | 14.2% | 14.3% | 14.2% | 11.2% |
| Net income | $3.0 million | $2.6 million | $8.7 million | $4.4 million |
| Basic and diluted EPS | $0.11 | $0.10 | $0.31 | $0.16 |
| Operating cash flow | Not presented by quarter | $23.3 million | $15.8 million |
Q3 revenue grew 1.5%; net income rose 15.7%. Nine-month revenue increased 4.1%, and net income nearly doubled. The nine-month comparison includes a $3.5 million gain on 2019 dispositions, while 2018 included a $4.4 million charge for a change in contingent consideration; reported operating-income growth therefore includes these unusual items.
Financial position and liquidity
- At September 30, 2019, cash was $11.9 million, current assets $69.9 million, and current liabilities $42.3 million.
- Debt was $253.0 million gross ($245.2 million net of unamortized issuance costs), comprising a $243.0 million term loan and $10.0 million drawn on a $20.0 million revolver. The revolver had $10.0 million of unused commitments.
- Both facilities carried a 6.0% LIBOR-based rate at quarter-end. The term loan matures in November 2023 and the revolver in November 2022. Scheduled principal repayments shown are $10.0 million in 2022 and $243.0 million in 2023.
- Management reported covenant compliance and expected sufficient liquidity for the next twelve months, while warning that weaker results or unexpected expenses could constrain borrowing or cause default. The credit agreement restricts dividends and share repurchases.
- Operating cash flow of $23.3 million funded, in part, investing outflows of $21.6 million; cash declined $1.5 million to $11.9 million. Investing included the Detroit acquisition, capital expenditures, and investments. Financing cash outflow was $3.2 million, including $4.2 million of dividends.
Material changes and notable items
- Revenue growth reflected the Philadelphia market, primarily from the WXTU-FM acquisition, and stronger Boston results; Las Vegas revenue declined. Digital advertising increased to $5.1 million in Q3 from $3.5 million and to $13.5 million year to date from $10.8 million.
- Q3 station expenses decreased 1.8%, partly because Q3 2018 included $1.7 million of bad-debt expense related to United States Traffic Network. Corporate G&A increased 45.3% in Q3, primarily from higher compensation and contract services. For the nine months, G&A rose 38.0%.
- On August 31, the company acquired substantially all assets used to operate WDMK-FM in Detroit for $13.5 million, funded with $10.0 million of revolver borrowings and $3.5 million of operating cash.
- 2019 dispositions generated $3.5 million in gains: cancellation of a Chattanooga broadband radio license and sale of Augusta land and improvements.
- The company adopted lease accounting on January 1, 2019, initially recognizing $43.1 million of lease liabilities and $38.8 million of right-of-use assets, with a $0.9 million reduction to opening retained earnings. September 30 operating and finance lease liabilities totaled $43.3 million.
- Cash dividends declared were $0.05 per share in Q3; the aggregate $1.4 million payment was made October 7, 2019.
Outlook, risks, and contingencies
The filing provides no specific revenue or earnings guidance. Management cited external economic conditions, competition for advertising, audience acceptance, digital-product development, technology change, FCC regulation and licensing, market concentration, receivable credit risk, possible impairment, cybersecurity and infrastructure disruptions, key-personnel risk, acquisition integration, and substantial debt and restrictive covenants as risks. Management said no pending or threatened litigation was expected to have a material adverse effect; it reported no material change in risk factors during the quarter. Disclosure controls were deemed effective, with no material change in internal control over financial reporting reported.
Key facts for investors to verify
- How much reported 2019 operating-income growth reflects disposition gains versus ongoing operations, and how the acquisition affected comparable-market performance.
- Actual leverage and covenant headroom; the filing gives covenant limits but not a clear actual leverage ratio.
- Whether cash generation and available revolver capacity can support debt service, lease payments, dividends, and planned investment.
- Performance of the Detroit acquisition, Boston market, and digital advertising, alongside continued corporate cost growth.
- Timing and amount of the large scheduled 2023 term-loan maturity and the company’s refinancing or repayment plans.