Beasley Broadcast Group, Inc. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020; the filing is an annual report, not a standalone fourth-quarter report. Comparisons below are against FY2019. Beasley operates radio stations in U.S. markets and sells audio, digital and event-based advertising; it also operates an esports business.
Financial performance and liquidity
| Metric | FY2020 | FY2019 | Change or context |
|---|---|---|---|
| Net revenue | $206.1 million | $261.6 million | Down 21.2% |
| Commercial advertising | $171.8 million | $224.3 million | Down $52.5 million |
| Digital advertising | $21.6 million | $19.8 million | Up $1.8 million |
| Operating income (loss) | $(4.3) million | $38.1 million | Operating margin approximately (2.1)% versus 14.6% |
| Net income (loss) | $(18.9) million | $13.4 million | Net loss attributable to BBGI stockholders was $17.8 million; EPS was $(0.63), versus $0.49 |
| Cash from operating activities | $4.2 million | $21.0 million | Down $16.8 million |
| Cash and cash equivalents | $20.8 million | $18.6 million | At December 31 |
| Current assets / current liabilities | $77.5 million / $40.5 million | $79.7 million / $53.2 million | Year-end working capital was approximately $37.1 million |
| Debt at December 31 | $263.5 million principal | $263.5 million principal | 2020 carrying value, net of issuance costs and current installments, was $258.3 million; no revolving availability remained |
Operating expenses fell 9.4% to $182.2 million and corporate expenses fell 26.3% to $15.6 million, reflecting cost controls, but these reductions did not offset the revenue decline. FY2020 also included $9.0 million of impairment losses, a $4.4 million gain on land dispositions, a $2.8 million debt-modification loss and a $5.2 million income tax benefit. Capital expenditures were $7.5 million. Cash from investing activities was a $3.8 million outflow; financing activities provided $1.7 million.
Material changes and notable items
- COVID-19 sharply reduced advertiser demand beginning in mid-March 2020. Management said sales began recovering near the end of Q2 and continued to recover through year-end, while the duration and full effect remained uncertain.
- FY2020 revenue included $14.3 million of political advertising for the 2020 elections. Digital advertising and esports revenue increased, partly offsetting lower commercial and other revenue.
- The company recorded $6.8 million of FCC-license impairment in Q1, primarily due to weaker projected revenue and a higher discount rate. A further $2.2 million impairment was recorded in Q4 for a license no longer used after the Charlotte land sale. No FCC-license impairment was recorded in the Q3 test; management reported no Q4 triggering event for its remaining licenses.
- On December 31, 2020, Beasley sold Charlotte land for $4.65 million and recorded a $4.4 million gain. The FCC-license impairment associated with the sale is included in the reported impairment figure.
- The board suspended future quarterly dividends in response to the pandemic. Dividends declared were $0.05 per share in 2020, versus $0.20 in 2019.
- In February 2021, after year-end, Beasley issued $300 million of 8.625% first-lien senior secured notes due 2026. Proceeds refinanced the credit facility and amended esports promissory note and repaid a $5 million loan from Chairman George Beasley. The notes are secured by substantially all company and majority-owned subsidiary assets and contain restrictive covenants, including limits on dividends and additional debt.
Outlook, risks and contingencies
Management provided no quantified revenue, earnings or cash-flow guidance. It expected expense reductions to continue into 2021 and stated that it believed liquidity would be sufficient for obligations over the next 12 months, while cautioning that poor results or unanticipated expenses could create earlier financing or liquidity needs. The filing says the pandemic’s full impact cannot be predicted.
- Advertising is the primary revenue source and is discretionary, cyclical and seasonal; first-quarter revenue is typically lowest. The Boston, Detroit, Philadelphia and Tampa–St. Petersburg clusters generated 66.3% of 2020 revenue.
- FCC licenses and goodwill are significant valuation exposures: FCC licenses were $508.6 million and goodwill $28.6 million at year-end. Q3 FCC-license fair-value headroom was particularly narrow in West Palm Beach–Boca Raton (0.3%), Las Vegas (0.9%), Wilmington (2.2%) and New Jersey markets (4.7%). Adverse changes in assumptions or markets could produce further impairment.
- Debt service, limited revolver availability at year-end, new secured-note covenants and the suspended dividend constrain financial flexibility. The February 2021 notes carry an 8.625% coupon.
- Accounts receivable are unsecured; the doubtful-account allowance increased to $5.0 million from $2.1 million, and receivable losses were $2.3 million in 2020.
- Other risks include competition from digital and streaming platforms, FCC licensing and regulatory requirements, technology and cybersecurity disruptions, hurricanes, and dependence on key employees. The Beasley family controls voting power; the Chairman and family also have related-party leases and other transactions.
- Management said routine litigation, including FCC indecency matters, was not expected to have a material adverse effect. The auditor issued an unqualified opinion on the financial statements; management reported effective disclosure controls and internal control over financial reporting. The auditor did not attest to internal-control effectiveness.
Investor facts to verify
- Whether advertising recovery continued after year-end, particularly in the largest revenue markets, and whether digital growth can offset weakness in commercial radio advertising.
- Actual operating cash generation, liquidity and compliance with the February 2021 note covenants; confirm the post-refinancing principal balance, interest burden and debt-service requirements.
- Updated FCC-license and goodwill valuations, especially in markets with limited disclosed fair-value headroom, and any subsequent impairment charges.
- Receivable collections and allowance adequacy as advertising customers recover or face financial stress.
- Dividend policy under the notes’ restrictions, and the terms and oversight of related-party arrangements given family voting control.