With its stock falling to prices last seen in June 2009, its been a brutal year on Wall Street for Naples, Fla.-based Beasley Media Group.
The bleeding for its battered shares ceased on Thursday, following the release of third-quarter results that focus on “record” revenue and improvements in net income and Station Operating Income.
Prior to Beasley’s earnings call at 10am Eastern, opposite that of Urban One, shares were down … again.
Why the continued share dip for BBGI? Could it be a Free Cash Flow concern?
If that’s the reason, investors may be overreacting. FCF fell to $4.63 million from $5.94 million, but this was primarily due to higher Capex and income tax expenses, in addition to interest expenses and corporate general and administrative costs.
Importantly, Beasley is tackling its hefty station operating expenses, which were trimmed to $49.44 million from $50.35 million in Q3.
This helped Beasley achieve net income of $3.04 million (11 cents per share), compared to $2.63 million (10 cents) in Q3 2018.
The non-GAAP “SOI” — a popular figure used by radio station groups — rose to $16.67 million from $14.8 million.
While the decline in Free Cash Flow may not be worrisome to investors, the net decrease in cash and cash equivalents may be a trouble spot: In Q3 it fell to $1.54 million from $3.94 million.
At the same time, Beasley’s long-term debt grew to $245.34 million, from $242.78 million.
That’s a dangerous scenario, fueled by recent acquisitions, and perhaps puts a cloud over “record” Q3 net revenue of $66.11 million, rising from $65.15 million.
That said, added debt could be a short-term blip as Beasley seeks to monetize its newly acquired WDMK-FM in Detroit and the Detroit Praise Network, a group of FM translators offering a Gospel format.
Beasley paid $13.5 million for the stations, in a deal Ms. Beasley called “accretive and deleveraging.”
Beasley explains that Q3 operating income, net income and net income per diluted share were impacted by a $4.4 million charge “due to the change in fair value of contingent consideration in the nine months ended September 30, 2018 and a $3.5 million gain on dispositions in the nine months ended September 30, 2019.”
In prepared comments ahead of the Beasley Media Group Q3 earnings call with analysts and investors, CEO Caroline Beasley said that throughout the quarter, the company founded by George Beasley in 1961 “continued to advance our revenue diversification initiatives and actively manage our local radio broadcasting and digital platforms, while implementing our operating disciplines at recently acquired stations to drive SOI growth and margin expansion.”
Speaking on the conference call, Ms. Beasley noted that Beasley’s Philadelphia cluster now attracts 29% of the market’s radio advertising dollars.
That’s thanks to the return to Beasley of a station it launched in 1984.
“The success we are achieving through our disciplined approach to acquisitions is further reflected by the 24% year-over-year increase in pro-forma third quarter revenues at WXTU-FM, which returned to our Philadelphia cluster just one year ago,” Ms. Beasley said of the Country station. “Overall, we are extremely pleased with the value we are extracting from recent transactions, which have enhanced our revenue share and competitive position in several key markets.”
What sort of visibility for Q4 and for fiscal 2020 did Beasley give?
“Looking ahead, Beasley has built a solid foundation to continue pursuing a range of near- and long-term growth opportunities that create new value for our listeners, advertisers, online users, eSports fans and shareholders,” Ms. Beasley said. “Beasley’s ongoing initiatives to drive sales, productivity, diversification and efficiency across our platform, combined with prudent management of our capital structure, is a proven formula for sustained long term financial growth and enhanced returns for our shareholders.”
Ms. Beasley added during the earnings call that December is pacing up in the low-single digit range.
BREAKING DOWN THE CATEGORIES
On the earnings call for analysts, which again did not include Q&A but instead saw Ms. Beasley and company CFO Marie Tedesco address e-mailed queries, Tedesco offered a glance at what ad categories are performing well, or poorly, at Beasley’s stations.
Tedesco noted that No. 1 ad category Retail, which represents 16% of revenues, was up 1.5%.
Unfortunately, there’s softness elsewhere: Entertainment, the third-largest ad category for Beasley, was flat.
Automotive, the No. 4 ad category at Beasley, was down 5%, or down 6.5% on a same-station basis.
In contrast, Telecom rose 5% on same-station basis.
Lastly, Beasley’s 4x leverage target remains in place, Tedesco said.