Beasley Broadcast Group, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021. Beasley operates radio stations and sells audio, digital, and event advertising. Results are seasonal, and first-quarter revenue is typically lowest.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net revenue | $55.7 million | $48.2 million | +15.6% |
| Operating expenses | $58.4 million | $50.7 million | +15.2% |
| Operating loss | $2.7 million | $2.5 million | Loss increased $0.2 million |
| Net loss attributable to BBGI stockholders | $3.7 million | $10.6 million | Loss narrowed $6.8 million |
| Basic and diluted loss per share | $0.13 | $0.36 | Improved |
| Operating cash flow | $0.7 million | $2.4 million | Down $1.6 million |
| Capital expenditures | $1.4 million | $1.0 million | Increased |
Revenue growth reflected continued recovery from COVID-19 in audio and ongoing digital growth. Audio revenue rose 13.5% to $47.4 million; digital revenue rose 35.5% to $7.8 million. Audio segment operating income was $3.2 million; Digital reported a $0.6 million operating loss. The operating margin was approximately negative 4.9%, versus negative 5.2% a year earlier. No gross margin is reported.
The net loss narrowed despite a slightly larger operating loss, in part because Q1 2021 included a $5.0 million loss on debt extinguishment, while Q1 2022 recorded a $5.8 million income tax benefit. The 2022 effective tax rate was 61%.
Liquidity, debt, and balance sheet
- Cash and cash equivalents were $50.7 million at March 31, 2022, down $0.7 million from year-end 2021. Current assets were $99.5 million and current liabilities $37.8 million.
- Long-term debt had $300 million principal outstanding, with a $294.2 million carrying amount after unamortized issuance costs. The notes bear 8.625% interest, are due February 2026, and are secured by substantially all company and majority-owned subsidiary assets.
- Cash paid for interest was $12.9 million, compared with $1.8 million in Q1 2021; management attributed the decrease in operating cash flow mainly to higher interest payments. The filing does not explain the cash-payment timing difference relative to reported interest expense in detail.
- Cash used in investing activities was $1.4 million; financing activities used $0.03 million. The filing reports no off-balance-sheet arrangements.
Material changes, outlook, and risks
- Operating expenses increased 16.0%, slightly faster than revenue, reflecting recovery-related audio costs and continued digital investment. Corporate expenses increased $0.3 million, primarily from contract services. Interest expense rose 18.5% to $6.8 million.
- Q1 included a $1.9 million impairment of the WWNN-AM FCC license. On April 1, 2022, the company completed the sale of substantially all WWNN-AM operating assets for $1.25 million cash.
- In April 2022, the company repurchased $5.0 million principal amount of notes for 96% of principal and recorded a $0.1 million gain in Q2 2022.
- Management said it expects to have sufficient liquidity and capital resources to meet obligations for the next twelve months and thereafter. No quantitative revenue or earnings guidance was provided. Management cautioned that poor results or unexpected expenses could create earlier financing needs, and financing may not be available on acceptable terms.
- Quarterly dividends remain suspended; the debt indenture also restricts dividends and other payments. The notes include restrictive covenants limiting, among other things, additional debt, asset sales, investments, and distributions.
- Key disclosed risks include advertising-market and economic conditions, competition and audience acceptance, digital execution, FCC regulation and license impairment, substantial debt and covenant restrictions, accounts-receivable credit risk, severe weather, technology or cybersecurity disruptions, and dependence on selected radio markets. Management reported no material change to previously disclosed risk factors. Routine litigation is disclosed; management said no current matter is likely to materially harm results or financial condition.
Most important facts for investors to verify
- Whether audio recovery and digital growth continue, and whether revenue growth translates into improved operating results as expenses rise.
- The sustainability of cash generation given the high debt-service burden and the $12.9 million of interest paid in the quarter.
- Cash and liquidity after the April station sale and note repurchase, and compliance with the secured-note covenants.
- The effect of the WWNN-AM sale and $1.9 million FCC-license impairment, including any additional impairment risk.
- The impact of the 61% effective tax rate and tax benefit on the reported improvement in net loss.