Beasley Broadcast Group‘s two top executives had much to share in the way of positive Q3 results during the media company’s 17-minute conference call for the financial community on Monday morning.
But, one of the key items of discussion mentioned by CEO Caroline Beasley is the company’s leverage. It’s down — and nearly into what she considers to be the “comfort zone.”
In opening the Q3 call, Beasley noted that the company reduced its debt by $6 million in the quarter, and has made $49 million in repayments year-to-date.
As a result, Beasley’s total outstanding debt as of Sept. 30 stands at $225 million, compared to $240 million.
With the repayments, Caroline Beasley says her company presently stands at 4.17x leverage. With cash on hand of $13.5 million, this puts Beasley Broadcast Group leverage at 3.8x.
At the end of the Q3 call, in response to prepared questions sent to her and CFO Marie Tedesco, the leverage “comfort zone” in anything below 4x.
Thus, Beasley seems to be doing all the right things to manage its debt while also not taking its eyes off of growth markets — in particular, Detroit.
According to Tedesco, Beasley enjoyed growth of 29.4% in Q3 in Detroit. This compares to overall growth of 4.1% for the market, she noted, citing Miller Kaplan data.
This performance was addressed in the first question sent in for Tedesco and Caroline Beasley to answer in the end-of-call Q&A period. What was the driver of the strong growth rate in Detroit?
Caroline Beasley remarked, “The market is growing, and we are excited to be able to participate in that growth.”
But, she noted that format changes made in 2016 are catalyst for its growth in Detroit.
In the Motor City, Beasley took on from Greater Media heritage Classic Rocker WCSX-FM 94.7 and mainstream Rock mainstay WRIF-FM 101.1. Also in the mix is WMGC-FM 105.1. The station has seen a secession of formats since 1996, when the Woody Tanger-led Marlin Broadcasting sold it, leading to the end of its long run as Classical WQRS.
Weeks before Beasley decided to acquire Greater Media, WMGC was “Detroit Sports 105.1,” and the radio home of the NBA’s Detroit Pistons. At noon on July 1, 2016, WMGC adopted a classic hip-hop format, as “105.1 The Bounce.” On July 19 came word that Greater Media was being acquired by Beasley. The transaction closed on Nov. 1, 2016, and WMGC today is best-described as a Rhythmic AC heavy on crossover hip-hop from the 1990s through the recent past.
As of the Sept. 2017 Nielsen Audio ratings for Detroit, WMGC has a 3.9 rating 6+, ranking No. 13 overall. However, it is the third-ranked station of six rated stations primarily targeting African American listeners in the market. The October PPM results for Detroit are set for release Tuesday (10/31) by Nielsen Audio.
PANCAKE PROFITS
Yes, the dollars were up for Beasley in Q3. But, they were statistically flat. Softness was seen in both national and local spot revenue. The nonrecurrence of $620,000 in political revenue also proved to be a mild deterrent for Beasley in the quarter.
Ex-political, revenue was up 1%.
Political’s impact on 2016 will likely be stronger. With $4 million in political dollars seen in Q4 2016, pacings and projections are down in the high-single digits for Q4 2017, Caroline Beasley noted.
Asked to provide some color on the Q4 revenue trending, she added that the Automotive category was pacing down by low-single digits, while the retail category was pacing down by double digits.
Winter is coming … and for Beasley this means keeping the company’s focus on “protecting and growing our brands,” she says. Thus, continued investment in the company’s radio stations and diversification of its revenue stream will be priorities for Beasley.
Additionally, the company will continue in its mission of reducing debt, leverage and cost of capital, and returning capital to its shareholders.
REFI READY?
Caroline Beasley noted that, in addition to doubling down on its radio stations, the company is considering the repricing and refinancing of its existing credit facilities.
This could have a positive impact on debt reduction, but Ms. Beasley did not elaborate on the possibility.
In Beasley’s 10-K filed with the SEC along with its fiscal 2016 results, the company noted, “Our long-term debt is substantial.”
But, positively, Beasley has been making payments to reduce the debt.
In its 10-K, Beasley explained, “Our ability to reduce our total leverage ratio, as defined by our credit agreement, by increasing operating cash flow and/or decreasing long-term debt will determine how much, if any, of the remaining commitments under our revolving credit facility will be available to us in the future. Poor financial results or unanticipated expenses could result in our failure to maintain or lower our total leverage ratio and we may not be permitted to make any additional borrowings under our revolving credit facility.”
On Nov. 1, 2016, Beasley, through its wholly owned subsidiary Beasley Mezzanine Holdings, entered into a new credit agreement with a syndicate of financial institutions. Proceeds from the new credit facility were used to repay the old credit facility, pay a portion of the purchase price and related expenses incurred in connection with the acquisition of Greater Media and to repay existing third-party indebtedness of Greater Media. “In connection with the new credit agreement, we recorded a loss on modification of long-term debt of $0.8 million during the fourth quarter of 2016,” the company said.
As of Dec. 31, 2016, the credit facility consisted of a term loan with a remaining balance of $265 million and a revolving credit facility with an outstanding balance of $3 million and a maximum commitment of $20 million. “As of Dec. 31, 2016, we had $17 million in available commitments under our revolving credit facility,” Beasley notes.
Among the other topics Beasley discussed in its short Q3 call was its synergy expectation. Tedesco and Caroline Beasley were asked to quantify the company’s synergy expectation. Ms. Beasley noted that it stands at $9.8 million, and it was expected to be $9.6 million.
Additionally, there’s a refocus on Beasley’s podcast strategy and the long-term benefits from future monetization of this growing audio medium. Furthermore, all Beasley stations are now accessible by communicating with Alexa on the Amazon Echo device.
“We are reviewing our content opportunities in order to open doors to other revenue streams,” Caroline Beasley said.
Digital and nontraditional revenue outperformed in Q3 as revenue drivers, she added.
Beasley was also asked on the company’s thoughts regarding FCC regulatory changes to ownership limits for broadcast media.
She reminded the financial community that there is no mention of any relief for “subcaps,” which limit the number of stations one company can own in a market, based on the total number of stations in that markets.
But, when those changes likely come in 2018 with the quadrennial review of the FCC’s ownership regulations, per the mandate forged in the Telecommunications Act of 1996, Caroline Beasley will be welcoming such relief.
“In order to be competitive with many of the audio companies out there, ownership relief would be something we would welcome,” she says. “We realize that radio is a bit different than other companies with coding and algorithms. We actually have people out there in the community.”
“In order to be competitive with many of the audio companies out there, ownership relief would be something we would welcome.” — Caroline Beasley
That led Ms. Beasley to conclude on a positive note regarding her thoughts on leading a radio broadcasting company.
“We are very proud to being in the radio business,” she said, “We are a lifeline to our communities in times of crisis, and we are honored to serve our local communities, listeners and advertisers with critical weather, news and safety information.”
Ms. Beasley did not note that her company’s Ft. Myers-Naples stations largely offered simulcasts of a local TV station partner throughout Hurricane Irma, with little if any local programming originating from Beasley air personalities. That said, WXKB-FM “B103.9” studios suffered flooding damage as Irma’s size and strength brought its Boca Raton, Fla.-based AMs tower problems that silenced the station for days after Irma’s track north to Jacksonville.
