Strong revenue growth due to improved advertising returns.
Company carries a large debt load.
Net income and cash flow continue to grow.
Beasley Broadcast Group (BBGI) is a radio broadcasting company that owns and operates 63 radio stations throughout the United States.
Radio markets include: Atlanta, GA, Augusta, GA, Boston, MA, Charlotte, NC, Detroit, MI, Fayetteville, NC, Fort Myers-Naples, FL, Las Vegas, NV, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Philadelphia, PA, Tampa-Saint Petersburg, FL, West Palm Beach-Boca Raton, FL, and Wilmington, DE.
The addition of WBZ-FM Boston highlights the company’s focus on premium local programming and content, including live sporting broadcasts. The transaction is expected to be accretive to financial results.
Competition is intense to gain market share and customer attention. BBGI seeks to gain an audience through engagement with their audience and programming content.
Net revenue increased $96MM for FY16 to FY17 due to additional advertising revenue from the Boston, Philadelphia and the New Jersey radio stations acquired from Greater Media in 2016. Increase in operating expenses was due to additional expenses from the above stations, partially offset by divested stations. Decrease in transaction expense was related to the Greater Media acquisition in 2016 that did not occur in 2017. Gain on merger is related to the Greater Media acquisition. Increase in interest expense is due to the combination of higher interest rates and debt.
Net revenue grew 70% yoy due to increased revenue from several markets and contribution from recent acquisitions. Net income increased 84% due to a combination of increased revenue, favorable change in contingent consideration, gain on dispositions and exchange, and termination of post-retirement benefit plans. It is noted that diluted EPS expanded from $1.98/share to $3.14/share on a higher share count.
Total assets decreased from $662MM at FYE16 to $655MM at FYE17 and are largely due to a decrease in the beneficial interest in trust from $20MM to nil, partially offset by and increase in FCC broadcasting licenses from $452MM to $489MM due to the recent acquisition and asset exchange. Total long-term debt declined from $248MM at FYE16 to $212MM at FYE17.
FCC Broadcasting Licences
In the asset merger, BBGI gained approximately $36MM in FCC broadcasting licenses.
Debt and Contingencies
Beasely Mezzanine Holdings, LLC, a wholly-owned subsidiary, entered into a new credit agreement that included a term loan and a revolving credit facility. At 12/31/17, there was $20MM available on the $25MM revolving credit facility.
As part of the new credit agreement, there are excess cash flow recapture provisions and financial covenants.
There are no major debt maturities till after 2022.
Credit agreement has a negative covenant on dividends and share repurchases.
BBGI is engaged with several entities in lease agreements, including Caroline Beasley, CEO; Bruce Beasley, President and Brian Beasley, COO.
Statement of Cash Flows
Operating cash flow increased from $17MM in 2016 to $28MM in 2017 and the increase was largely supported by the yoy improvement in net income. It is noted that accounts receivable flipped from a cash use of ~$(500M) to a source of $4MM. Company is somewhat self-financing as demonstrated by the cash source derived from accounts payable over the last two years.
Cash flow from financing was a source of cash of $18MM in 2017 from a use of $(90MM) in 2016. Capital expenditures are largely maintenance-related in nature and increased from $3MM to $4MM. It is stated that this figure will gradually grow in future years. Free cash flow (Operating CF – CapEx) was $24MM in 2017, compared to $14MM in 2016.
Financing activities was a cash use of $(52MM) in 2017 due to debt repayment, partially offset by issuance of debt. Overall, the cash balance declined $6MM. Dividends increased on a dollar basis, but remained flat at $0.18/share.
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