Beasley Broadcast Group, Inc. — Q1 2016 Form 10-Q
Business and period: Radio broadcaster operating 52 stations across 12 U.S. markets. This unaudited report covers the three months ended March 31, 2016, compared with Q1 2015; balance-sheet figures are compared with December 31, 2015. Management cautions that radio revenue is seasonal and Q1 results may not indicate full-year results.
Financial performance
| Metric | Q1 2015 | Q1 2016 | Change |
|---|---|---|---|
| Net revenue | $24.25 million | $27.45 million | +13.2% |
| Operating expenses | $21.68 million | $23.33 million | +7.6% |
| Operating income | $2.58 million | $4.13 million | +60.3% |
| Operating margin | 10.6% | 15.0% | +4.4 percentage points |
| Interest expense | $0.95 million | $0.99 million | +4.3% |
| Income before taxes | $2.10 million | $3.10 million | +47.7% |
| Net income | $1.30 million | $1.82 million | +40.2% |
| Basic and diluted earnings per share | $0.06 | $0.08 | — |
| Net cash from operating activities | $1.56 million | $6.09 million | +$4.52 million |
| Capital expenditures | $0.46 million | $0.66 million | — |
| Cash dividends paid | $1.03 million | $1.03 million | — |
Q1 2016 net margin was approximately 6.6%, versus 5.4% in Q1 2015. Cash and cash equivalents were $15.56 million at March 31, 2016, up $1.24 million during the quarter. Current assets were $37.83 million and current liabilities $11.09 million. The filing reports total debt and capital lease obligations of $86.74 million before unamortized issuance costs; balance-sheet debt, net of issuance costs and current installments, was $84.96 million.
Changes and management commentary
- Revenue growth was driven mainly by Tampa–St. Petersburg, up $2.1 million, and Charlotte, up $0.6 million; other clusters were broadly comparable.
- Station operating costs rose $2.2 million, including increases of $1.1 million in Tampa–St. Petersburg and $0.3 million in Charlotte. Revenue growth nevertheless outpaced operating-expense growth.
- Operating cash flow improved by $4.5 million. Management attributed the increase principally to $4.2 million more cash receipts from advertising and $2.2 million less income tax paid, partly offset by $1.5 million more cash paid for station operating expenses. Cash taxes paid were $23,850, versus $2.23 million in Q1 2015.
- Q1 2015 included $0.4 million of insurance proceeds for a weather-damaged radio tower, contributing to the year-over-year decline in other income. Q1 2015 also included $0.3 million of radio-station exchange transaction costs; none were reported in Q1 2016.
Debt, liquidity, outlook, and risks
- The term loan balance declined from $89.0 million at year-end to $86.0 million at March 31. The $20.0 million revolving facility was undrawn and available. The credit facility carried a 3.9% LIBOR-based rate and matures November 30, 2020.
- The company reported compliance with all financial covenants; its consolidated total debt ratio was 2.97x against a current maximum of 4.5x, and its interest coverage ratio was 6.78x against a 2.0x minimum. Covenant limits tighten over time. Breach could accelerate outstanding debt; substantially all company and subsidiary assets secure the facility.
- Management expected liquidity and capital resources to be sufficient for obligations over the next 12 months. It warned that poor results or unexpected expenses could impair covenant compliance, restrict future revolver borrowing, or create additional financing needs. No quantified revenue or earnings guidance was provided.
- Management intends to continue quarterly dividends for the foreseeable future, subject to quarterly board review and discretion. A $0.045-per-share dividend, approximately $1.0 million total, was declared in March and paid April 8, 2016.
- Key business sensitivities include advertising demand, economic conditions, competition, audience share, and seasonality; management says revenue is typically lowest in Q1. The filing reports routine litigation, including FCC indecency matters, but no proceeding it believes likely to materially affect financial condition or results.
- On May 3, 2016, the company contributed an additional $166,667 to Digital PowerRadio, LLC, maintaining an approximately 20% interest; further pro rata contributions may be requested. The entity is managed by a firm partly owned by an independent director.
Important facts for investors to verify
- Whether advertising growth, particularly in Tampa–St. Petersburg and Charlotte, continued after Q1 and translated into cash generation.
- Future covenant headroom and debt repayment capacity as maximum leverage limits tighten; confirm the revolver remains available under the credit agreement.
- Whether dividends remain supportable alongside debt service, capital needs, and any further Digital PowerRadio contributions.
- The effect of seasonality, local and national advertising conditions, and potential unusual items on comparisons with subsequent quarters.
- Potential effects of recently issued accounting standards, including lease-liability recognition; the company had not determined their impact.