Beasley Broadcast(BBGI) - 2019 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements show total assets increased to $739.9 million and nine-month net income nearly doubled to $8.7 million Condensed Consolidated Balance Sheets Total assets reached $739.9 million as of September 30, 2019, driven by new lease accounting standards and FCC licenses, with total liabilities rising to $458.4 million Condensed Consolidated Balance Sheet Summary | Balance Sheet Items | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $11,898,751 | $13,433,828 | | Total current assets | $69,923,468 | $70,945,768 | | FCC licenses | $529,626,671 | $516,735,554 | | Total assets | $739,883,343 | $681,085,079 | | Liabilities & Equity | | | | Total current liabilities | $42,295,514 | $28,859,360 | | Long-term debt, net | $245,228,469 | $242,776,520 | | Operating lease liabilities (long-term) | $35,800,025 | $0 | | Total liabilities | $458,414,451 | $406,050,988 | | Total stockholders' equity | $281,468,892 | $275,034,091 | - The company adopted new lease accounting guidance on January 1, 2019, resulting in the recognition of $38.8 million in right-of-use assets and $43.1 million in lease liabilities on the balance sheet[10] Condensed Consolidated Statements of Comprehensive Income Q3 2019 net revenue slightly increased to $66.1 million, while nine-month net income nearly doubled to $8.7 million due to revenue growth and dispositions Three Months Ended September 30 | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Revenue | $66,114,701 | $65,147,080 | | Operating Income | $9,411,752 | $9,326,142 | | Net Income | $3,185,277 | $2,631,776 | | Net Income per Share (Basic & Diluted) | $0.11 | $0.10 | Nine Months Ended September 30 | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Revenue | $189,461,003 | $181,926,003 | | Operating Income | $26,898,973 | $20,377,442 | | Net Income | $8,666,163 | $4,389,196 | | Net Income per Share (Basic & Diluted) | $0.31 | $0.16 | Condensed Consolidated Statements of Cash Flows Nine-month operating cash flow significantly increased to $23.3 million, while investing cash use decreased and financing activities shifted to a net use Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,313,498 | $15,833,485 | | Net cash used in investing activities | ($21,611,242) | ($43,069,058) | | Net cash provided by (used in) financing activities | ($3,237,333) | $23,292,684 | | Net decrease in cash and cash equivalents | ($1,535,077) | ($3,942,889) | Notes to Condensed Consolidated Financial Statements Notes detail new lease accounting, the $13.5 million WDMK-FM acquisition, $3.5 million gain on dispositions, and $253.0 million in long-term debt - On August 31, 2019, the company acquired WDMK-FM in Detroit for $13.5 million in cash, financed through $10.0 million in borrowings and $3.5 million from cash operations[11] - The company recorded a total gain of $3.5 million from dispositions in the first quarter of 2019, comprising a $0.4 million gain from a land sale in Augusta, GA, and a $3.1 million gain from the cancellation of a broadband radio service license in Chattanooga, TN[12][13] - The company made significant investments accounted for using the equity method, including an aggregate $5.0 million in esports organization Renegades Holdings, Inc. and an additional $1.5 million in technology company Quu, Inc[18][19] Revenue by Type (Nine Months Ended Sep 30) | Revenue Type | 2019 | 2018 | | :--- | :--- | :--- | | Commercial advertising | $164,125,289 | $157,761,002 | | Digital advertising | $13,507,547 | $10,826,473 | | Other | $11,828,167 | $13,338,528 | | Total | $189,461,003 | $181,926,003 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q3 revenue growth to the WXTU-FM acquisition, with nine-month net income significantly increasing due to revenue, dispositions, and prior-year charge absence Results of Operations Q3 net revenue increased by $1.0 million due to the WXTU-FM acquisition, while nine-month net income rose to $8.7 million driven by revenue growth and disposition gains - Q3 2019 net revenue increased by $1.0 million, largely due to an additional $1.3 million from the Philadelphia market cluster following the acquisition of WXTU-FM in late 2018[69] - Q3 2018 station operating expenses included $1.7 million of bad debt expense related to United States Traffic Network, which did not recur in 2019, contributing to a year-over-year decrease in this expense line[70] - For the nine months ended Sep 30, 2019, net income rose to $8.7 million from $4.4 million in 2018. Key drivers were a $7.5 million revenue increase, a $3.5 million gain on dispositions, and the absence of a $4.4 million charge related to the fair value of contingent consideration that was recorded in 2018[77][81][82][85] Liquidity and Capital Resources Liquidity is supported by operating cash flow and a $20.0 million revolving credit facility with $10.0 million available, with the company in compliance with debt covenants - As of September 30, 2019, the credit facility consisted of a $243.0 million term loan and a $10.0 million outstanding balance on a $20.0 million revolving credit facility, with $10.0 million remaining available[88] - The company is required to maintain a maximum First Lien Leverage Ratio of 5.75x through December 31, 2019, and was in compliance with all financial covenants as of the reporting date[91][93] - The credit agreement permits annual dividends up to $7.5 million if the Total Leverage Ratio is above 3.5x, and up to $10.0 million if it is at or below 3.5x. The company paid $4.2 million in dividends during the first nine months of 2019[95] Cash Flow Comparison (Nine Months Ended Sep 30) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,313,498 | $15,833,485 | | Net cash used in investing activities | ($21,611,242) | ($43,069,058) | | Net cash provided by (used in) financing activities | ($3,237,333) | $23,292,684 | Quantitative and Qualitative Disclosures About Market Risk Disclosure on market risk is not required as the company qualifies as a smaller reporting company - Disclosure is not required as the company qualifies as a smaller reporting company[103] Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[104] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[105] PART II OTHER INFORMATION Legal Proceedings Management believes no current legal proceedings are likely to have a material adverse effect on the company's financial condition or operations - The company is not a party to any lawsuit or proceeding that, in management's opinion, is likely to have a material adverse effect on its financial condition or operations[105] Risk Factors No material changes to the company's risk factors occurred during the third quarter of 2019 - No material changes to the company's risk factors occurred during the third quarter of 2019[106] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,875 shares of Class A common stock at $2.98 per share in Q3 2019 to fund withholding taxes for restricted stock vesting Share Repurchases in Q3 2019 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1 – 31, 2019 | — | — | | August 1 – 31, 2019 | — | — | | September 1 – 30, 2019 | 1,875 | $2.98 | - All share purchases were made to fund withholding taxes in connection with the vesting of restricted stock, as permitted by the 2007 Equity Incentive Award Plan and the company's credit agreement[108] Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities[109] Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[109] Other Information The company reported no other information for this item - The company reported no other information for this item[109] Exhibits The report lists filed exhibits, including CEO and CFO certifications and XBRL data files - Exhibits filed with the report include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to SEC rules, as well as XBRL Instance Documents[111]