Beasley Broadcast Group, Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015. Beasley operates radio stations and derives most revenue from advertising. Comparisons with 2014 are affected by the December 2014 CBS Radio asset exchange, which added the Charlotte and Tampa-St. Petersburg clusters; 2014 results also include the exchanged Philadelphia and Miami stations as discontinued operations.
Key financial results
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Net revenue | $27.0 million | $14.1 million | $51.3 million | $27.1 million |
| Operating income | $5.1 million | $2.3 million | $7.7 million | $2.9 million |
| Continuing-operations income (loss) | $2.5 million | $0.7 million | $3.8 million | $(0.9) million |
| Net income | $2.5 million | $3.0 million | $3.8 million | $3.7 million |
| Operating margin | 18.8% | 16.0% | 15.0% | 10.6% |
Reported revenue rose 91% in Q2 and 89% for the first half, primarily because of the added Charlotte and Tampa-St. Petersburg stations, rather than comparable growth across existing markets. Those clusters contributed $13.5 million of the Q2 revenue increase and $25.4 million of the first-half increase. Las Vegas revenue declined in both comparisons; Wilmington also declined in the first half. Q2 diluted EPS was $0.11 versus $0.13, with 2014 including $2.4 million of discontinued-operations income. First-half diluted EPS was $0.17 versus $0.16; 2014 included $4.6 million of discontinued-operations income and a continuing-operations loss.
Cash flow, debt and liquidity
- First-half operating cash flow was $5.5 million, down from $7.0 million. Management cited higher income-tax payments and lower advertising cash receipts, partly offset by lower station operating cash expenses.
- Investing cash outflow was $1.2 million, including $0.8 million of capital expenditures and $0.4 million for translator licenses. Financing cash outflow was $7.0 million, including $4.5 million of debt principal payments and $2.1 million of dividends. Cash declined $2.7 million to $11.6 million.
- At June 30, long-term debt was $93.2 million, down from $97.7 million at December 31, 2014. The $20.0 million revolving facility had $14.8 million available; its stated LIBOR-based rate was 3.4% and maturity is August 2019. Current assets were $35.9 million and current liabilities $12.0 million.
- The company reported compliance with covenants: total-debt ratio 3.27x against a 4.25x limit through June 30, 2015, and interest-coverage ratio 7.04x against a 2.0x minimum. Debt-ratio limits tighten beginning in the second half of 2015. The company stated it expected sufficient liquidity for at least 12 months, while warning that weak results or unexpected expenses could restrict borrowing or cause covenant issues.
Changes, outlook and notable items
- Operating expenses increased alongside the acquired stations; Q2 station expenses rose $9.7 million and first-half expenses rose $17.9 million. First-half transaction costs related to the CBS exchange were $0.35 million.
- First-half interest expense fell $0.43 million as debt declined. Other income included $0.4 million of insurance proceeds for a weather-damaged radio tower.
- The company acquired three FM translator licenses during the first half for approximately $0.4 million in total. It also contributed $0.17 million to Digital PowerRadio, maintaining an approximately 20% interest; further pro rata contributions may be requested.
- The board declared a $0.045-per-share dividend, paid July 10, 2015, and authorized up to $1.0 million of Class A share repurchases over one year. Management said it intended to continue quarterly dividends, subject to board review and discretion. No earnings or revenue guidance was provided.
- Management identified seasonal advertising fluctuations, economic conditions, competition and the radio industry as risks. It reported no material change in previously disclosed risk factors, no material litigation expected by management, and effective disclosure controls with no material quarterly change in internal control.
Investor facts to verify
- How much reported growth reflects the acquired Charlotte and Tampa-St. Petersburg clusters versus performance at comparable stations.
- Operating cash generation, tax payments and cash conversion relative to reported earnings.
- Covenant headroom as leverage limits tighten, and the capacity to refinance or repay the substantial 2019 debt maturity.
- Whether dividends and authorized repurchases remain supportable given debt service, liquidity and credit-agreement limits.
- The future contribution and potential funding obligations associated with Digital PowerRadio and the acquired translator licenses.