Beasley Broadcast Group, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Beasley operates radio stations; following the July 2015 disposition of WYDU-AM, it owned 52 stations in 11 markets. Results are unaudited and seasonal, and interim performance may not indicate full-year results.
Financial performance
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Net revenue | $26.3 million | $13.0 million | $77.5 million | $40.1 million |
| Operating income (loss) | $(0.1) million | $0.9 million | $7.6 million | $3.8 million |
| Net income (loss) | $(0.7) million | $2.5 million | $3.1 million | $6.2 million |
| Operating cash flow | Not separately provided | Not separately provided | $9.9 million | $13.2 million |
- Q3 operating loss included a $3.5 million goodwill impairment. Excluding this charge, reported operating income would have been about $3.4 million; this is a simple adjustment, not a company-reported non-GAAP measure.
- Nine-month operating margin was approximately 9.8%, versus 9.5% in the prior-year reported period. Q3 2015 operating margin was approximately (0.3%), versus 7.2% in Q3 2014.
- At September 30, cash was $11.1 million; current assets were $34.1 million and current liabilities $10.8 million. Long-term debt, including current portion, was $90.2 million, down from $97.7 million at year-end 2014. The company reported $4.5 million of available revolving-credit commitments.
- For the first nine months, investing cash outflow was $2.1 million and financing cash outflow was $11.0 million; cash declined $3.2 million. Financing included $7.5 million of debt repayments and $3.1 million of dividends.
Changes and comparability
- Revenue more than doubled year over year largely because the December 2014 CBS Radio asset exchange added Charlotte and Tampa stations to continuing operations. Those clusters contributed $13.1 million of Q3 and $38.5 million of nine-month additional advertising revenue. Station expenses also rose substantially with the added stations.
- The comparisons are not on a like-for-like basis: 2014 reported continuing results exclude the Philadelphia and Miami stations exchanged away, while 2015 includes the acquired station operations. The filing’s pro forma 2014 figures, assuming the exchange occurred January 1, were revenue of $27.5 million for Q3 and $83.3 million for nine months; these are estimates, not actual results.
- Nine-month continuing-operations income improved to $3.1 million from a $0.2 million loss. The prior-year total net income included $6.3 million from discontinued operations; 2015 had none. Thus, total net income fell despite improved continuing results.
- Operating cash flow fell $3.2 million, primarily reflecting $2.6 million more income tax payments and $1.6 million more cash station operating costs, partly offset by $1.1 million more advertising cash receipts. Interest expense decreased $0.5 million year over year for the nine-month period as debt declined.
Outlook, risks, and notable items
- Management said it expected sufficient liquidity and capital resources to meet obligations for at least the next 12 months. It provided no quantified earnings or revenue guidance.
- Management attributed the Wilmington cluster impairment to continuing lower cash flows and declining ratings, concluding the cluster would not meet 2015 cash-flow projections. The $3.5 million charge eliminated all goodwill assigned to that cluster.
- The credit facility matures August 9, 2019, bears LIBOR-based interest (3.9% at quarter-end), and is secured by substantially all company and subsidiary assets. Covenants include a maximum debt ratio of 4.0x through 2015 and minimum interest coverage of 2.0x. The company reported ratios of 3.39x and 6.59x, respectively, and compliance at quarter-end. Covenant breaches could accelerate debt maturity.
- The board declared a $0.045-per-share dividend, paid October 9, 2015. Future quarterly dividends remain subject to board approval. The company also reported a $1.0 million share-repurchase authorization.
- The WYDU-AM sale closed July 31 for $75,000, comprising $7,500 cash and a $67,500 note due in 2017. The company also acquired FM translator licenses for approximately $0.4 million during the nine months.
- Management reported effective disclosure controls and no material internal-control changes during the quarter. It said no pending or threatened legal matter was expected to have a material adverse effect; risk factors were unchanged from the 2014 Form 10-K.
Important facts for investors to verify
- How much of revenue and operating improvement reflects acquired stations versus performance at the continuing legacy clusters.
- Whether Wilmington cash flows and ratings stabilize, and whether additional impairment indicators arise.
- Available revolver capacity and covenant headroom as scheduled debt repayments and operating results evolve.
- The sustainability of operating cash flow and dividends given lower year-to-date cash generation and the company’s seasonal advertising patterns.