Beasley Broadcast Group, Inc. — Q2 2023 Form 10-Q
Business and period: Beasley operates U.S. radio stations and sells audio, digital and event-based advertising. This unaudited report covers the quarter and six months ended June 30, 2023; interim results may be seasonal and are not necessarily indicative of full-year results.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $63.5 million | $64.8 million | $121.2 million | $120.5 million |
| Operating loss | $4.5 million | $4.5 million | $4.1 million | $7.3 million |
| Net loss | $10.4 million | $14.5 million | $14.0 million | $18.0 million |
| Loss per share, basic and diluted | $0.35 | $0.49 | $0.47 | $0.61 |
| Cash from operations | Not separately stated for Q2 | $23,711 | $6.8 million |
Q2 revenue declined 2.1%; audio revenue fell 5.6% to $50.4 million, while digital revenue rose 14.8% to $12.3 million. For the first half, revenue increased 0.6%: audio decreased 2.9%, while digital increased 20.2%. Management attributed audio weakness primarily to lower agency revenue and digital growth to continued expansion. Audio expense reductions reflected ongoing cost management; digital expense rose with continued investment.
Q2 operating expenses declined 4.3%, but the operating loss was roughly unchanged, in part because impairment losses increased to $10.0 million from $8.6 million. Net loss improved year over year, aided in part by an income tax benefit in Q2 2023 versus tax expense in Q2 2022. First-half operating and net losses also narrowed year over year.
Balance sheet, debt and liquidity
- At June 30, 2023, cash and cash equivalents were $35.5 million, down from $39.5 million at December 31, 2022. Total current assets were $104.4 million and current liabilities were $60.7 million.
- Long-term debt, net of issuance costs, was $283.2 million; secured-note principal was $287.0 million. The notes bear interest at 8.625% and mature February 1, 2026, are secured by substantially all company and majority-owned subsidiary assets, and include restrictive covenants.
- In Q2, the company repurchased $3.0 million principal amount of notes for 66% of principal and recorded a $1.0 million gain. First-half financing cash outflows included $2.0 million of note repurchases.
- First-half net cash from operations was only $23,711; investing used $2.0 million, primarily capital expenditures, and financing used $2.1 million. Cash decreased $4.0 million during the period.
- The board has suspended quarterly dividends. Management believes liquidity and capital resources will be sufficient to meet requirements for the next 12 months and thereafter, but cautions that poor results or unexpected expenses could create earlier financing or liquidity needs.
Material changes, outlook and risks
- The company recorded $10.0 million of Q2 2023 impairment losses related to certain audio assets due to potential sales. Management said reclassification to assets held for sale would not materially affect the June 30 balance sheet.
- Q2 2022 included $2.8 million of FCC-license and $5.9 million of goodwill impairment losses, primarily associated with higher discount rates; first-half 2022 also included a $1.9 million FCC-license impairment related to the sale of WWNN-AM assets.
- No specific financial guidance was provided. Management cited advertising demand and economic conditions, market competition, audience acceptance, digital execution, FCC regulation and licensing, royalty costs, concentration in selected markets, receivable credit risk, impairment risk, substantial debt and covenant restrictions, severe weather, technology and cybersecurity disruptions, and key-personnel risks.
- The company reported no off-balance-sheet arrangements and no material changes to previously disclosed risk factors. Management said disclosure controls were effective and reported no material quarterly change in internal control over financial reporting. Routine litigation is disclosed; management does not believe any current or threatened matter is likely to have a material adverse effect.
Important facts for investors to verify
- Whether the potential audio-asset sales proceed, their terms, and any further impairment or cash proceeds.
- Cash generation and working-capital trends, given near-zero first-half operating cash flow and the decline in cash.
- Ability to service and refinance the $287.0 million principal balance before the February 2026 maturity, including compliance with note covenants.
- Whether digital revenue growth can continue while controlling the segment’s rising expenses, and whether audio advertising stabilizes.
- Assumptions underlying the carrying values of FCC licenses and goodwill, and any future impairment testing results.