Beasley Broadcast Group Inc.

08/15/2022 | Press release | Distributed by Public on 08/15/2022 07:04

Quarterly Report for Quarter Ending June 30, 2022 (Form 10-Q)

Form 10-Q
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
No. 000-29253
BEASLEY BROADCAST GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
65-0960915
(State of Incorporation)
(I.R.S. Employer
Identification Number)
3033 Riviera Drive, Suite 200
Naples, Florida34103
(Address of Principal Executive Offices and Zip Code)
(239)
263-5000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading
Symbol
Name of Each Exchange
on which Registered
Class A Common Stock, par value $0.001 per share
BBGI
Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule
12b-2
of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated
filer 		☐ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class A Common Stock, $0.001 par value, 12,880,701 Shares Outstanding as of August
8
, 2022
Class B Common Stock, $
0.001
par value, 16,662,743 Shares Outstanding as of August
8
, 2022
Table of Contents
INDEX
Page

No.
PART I
FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements. 3
Notes to Condensed Consolidated Financial Statements. 7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations. 14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk. 22
Item 4.
Controls and Procedures. 22
PART II
OTHER INFORMATION
Item 1.
Legal Proceedings. 23
Item 1A.
Risk Factors. 23
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds. 23
Item 3.
Defaults Upon Senior Securities. 23
Item 4.
Mine Safety Disclosures. 23
Item 5.
Other Information. 23
Item 6.
Exhibits. 24
SIGNATURES
25
Table of Contents
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31,
June 30,
2021
2022
ASSETS
Current assets:
Cash and cash equivalents
$ 51,378,642 $ 45,918,446
Accounts receivable, less allowance for doubtful accounts of $1,720,477 in 2021 and $1,648,342 in 2022
53,378,437 45,628,769
Prepaid expenses
4,044,056 6,330,503
Other current assets
3,397,418 3,983,998
Total current assets
112,198,553 101,861,716
Property and equipment, net
49,843,166 52,658,061
Operating lease
right-of-use
assets
34,155,175 36,970,653
Finance lease
right-of-use
assets
320,000 313,333
FCC licenses
508,413,913 503,003,909
Goodwill
28,596,547 22,739,996
Other intangibles, net
22,697,207 23,373,197
Other assets
5,863,501 7,688,682
Total assets
$ 762,088,062 $ 748,609,547
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term debt
$ - $ 2,000,000
Accounts payable
6,995,081 9,637,062
Operating lease liabilities
7,693,831 7,385,483
Finance lease liabilities
1,945 -
Other current liabilities
29,811,226 30,842,734
Total current liabilities
44,502,083 49,865,279
Due to related parties
372,193 101,087
Long-term debt, net of current installments and unamortized debt issuance costs
293,789,892 287,641,142
Operating lease liabilities
28,747,450 36,635,544
Deferred tax liabilities
115,689,317 112,930,112
Other long-term liabilities
15,904,829 15,899,359
Total liabilities
499,005,764 503,072,523
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued
- -
Class A common stock, $0.001 par value; 150,000,000 shares authorized; 16,249,312 issued and 12,696,857 outstanding in 2021; 16,503,979 issued and 12,880,701 outstanding in 2022
16,248 16,502
Class B common stock, $0.001 par value; 75,000,000 shares authorized; 16,662,743 issued and outstanding in 2021 and 2022
16,662 16,662
Additional
paid-in
capital
150,896,611 151,502,437
Treasury stock, Class A common stock; 3,552,455 shares in 2021; 3,623,278 shares in 2022
(29,021,360 ) (29,127,067 )
Retained earnings
142,220,494 124,174,847
Accumulated other comprehensive loss
(1,046,357 ) (1,046,357 )
Total stockholders' equity
263,082,298 245,537,024
Total liabilities and stockholders' equity
$ 762,088,062 $ 748,609,547
3
Table of Contents
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended June 30,
2021
2022
Net revenue
$ 59,574,705 $ 64,810,450
Operating expenses:
Operating expenses (including stock-based compensation of $176,349 in 2021 and $75,368 in 2022 and excluding depreciation and amortization shown separately below)
48,494,420 53,626,592
Corporate expenses (including stock-based compensation of $225,850 in 2021 and $303,462 in 2022)
3,957,854 4,567,470
Depreciation and amortization
2,850,923 2,451,102
Impairment losses
- 8,619,097
Other operating income, net
(1,500,000 ) -
Total operating expenses
53,803,197 69,264,261
Operating income (loss)
5,771,508 (4,453,811 )
Non-operating
income (expense):
Interest expense
(6,865,369 ) (6,823,217 )
Other income, net
8,080 190,210
Loss before income taxes
(1,085,781 ) (11,086,818 )
Income tax expense (benefit)
(1,299,394 ) 3,554,469
Income (loss) before equity in earnings of unconsolidated affiliates
213,613 (14,641,287 )
Equity in earnings of unconsolidated affiliates, net of tax
(25,919 ) 186,570
Net income (loss)
187,694 (14,454,717 )
Net income (loss) per Class A and Class B common share:
Basic and diluted
$ 0.01 $ (0.49 )
Weighted average shares outstanding:
Basic
29,235,009 29,418,951
Diluted
29,324,614 29,418,951
4
Table of Contents
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
Six Months Ended June 30,
2021
2022
Net revenue
$ 107,786,745 $ 120,530,718
Operating expenses:
Operating expenses (including stock-based compensation of $247,280 in 2021 and $153,591 in 2022 and excluding depreciation and amortization shown separately below)
91,462,291 103,636,141
Corporate expenses (including stock-based compensation of $675,720 in 2021 and $452,489 in 2022)
7,863,143 8,800,930
Depreciation and amortization
5,802,824 4,967,002
Impairment losses
- 10,476,323
Gain on disposition
(191,988 ) -
Other operating income, net
(400,000 ) -
Total operating expenses
104,536,270 127,880,396
Operating income (loss)
3,250,475 (7,349,678 )
Non-operating
income (expense):
Interest expense
(12,643,440 ) (13,672,254 )
Loss on extinguishment of long-term debt
(4,996,731 ) -
Other income, net
46,493 191,082
Loss before income taxes
(14,343,203 ) (20,830,850 )
Income tax benefit
(3,902,280 ) (2,621,977 )
Loss before equity in earnings of unconsolidated affiliates
(10,440,923 ) (18,208,873 )
Equity in earnings of unconsolidated affiliates, net of tax
(56,024 ) 163,226
Net loss
(10,496,947 ) (18,045,647 )
Earnings attributable to noncontrolling interest
129,249 -
Net loss attributable to BBGI stockholders
(10,367,698 ) (18,045,647 )
Net loss attributable to BBGI stockholders per Class A and Class B common share:
Basic and diluted
$ (0.35 ) $ (0.61 )
Weighted average shares outstanding:
Basic and diluted
29,268,717 29,395,003
5
Table of Contents
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
2021
2022
Cash flows from operating activities:
Net loss
$ (10,496,947 ) $ (18,045,647 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation
923,000 606,080
Provision for bad debts
(1,779,188 ) 588,751
Depreciation and amortization
5,802,824 4,967,002
Impairment losses
- 10,476,323
Gain on disposition
(191,988 ) -
Amortization of loan fees
791,574 754,085
Loss on extinguishment of long-term debt
4,996,731 -
Deferred income taxes
(3,902,280 ) (2,747,810 )
Equity in earnings of unconsolidated affiliates
56,024 (163,226 )
Change in operating assets and liabilities:
Accounts receivable
4,835,493 7,160,917
Prepaid expenses
(2,320,101 ) (2,286,447 )
Other assets
(1,684,017 ) (2,176,152 )
Accounts payable
(5,837,685 ) 2,641,981
Other liabilities
13,446,861 5,003,953
Other operating activities
208,725 (28,264 )
Net cash provided by operating activities
4,849,026 6,751,546
Cash flows from investing activities:
Payment for acquisition
- (2,000,000 )
Capital expenditures
(2,553,787 ) (6,486,902 )
Proceeds from dispositions
362,500 1,185,312
Net cash used in investing activities
(2,191,287 ) (7,301,590 )
Cash flows from financing activities:
Issuance of debt
310,000,000 -
Payments on debt
(268,500,000 ) (4,802,500 )
Payment of debt issuance costs
(7,604,215 ) -
Reduction of finance lease liabilities
(35,086 ) (1,945 )
Purchase of treasury stock
(136,779 ) (105,707 )
Net cash provided by (used in) financing activities
33,723,920 (4,910,152 )
Net increase (decrease) in cash and cash equivalents
36,381,659 (5,460,196 )
Cash and cash equivalents at beginning of period
20,759,432 51,378,642
Cash and cash equivalents at end of period
$ 57,141,091 $ 45,918,446
Cash paid for interest
$ 1,837,493 $ 12,921,869
Cash paid for income taxes
$ 1,526,303 $ 1,546,500
Supplemental disclosure of
non-cash
investing and financing activities:
Acquisition of noncontrolling interest
$ 4,490,130 $ -
Extinguishment of trade sales payable
$ 934,500 $ -
Class A common stock returned to treasury stock
$ 670,594 $ -
6
Table of Contents
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1)
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of Beasley Broadcast Group, Inc. and its subsidiaries (the "Company") included in the Company's Annual Report on Form
10-K
for the year ended December 31, 2021. These financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments necessary for a fair statement of the financial position and results of operations for the interim periods presented, and all such adjustments are of a normal and recurring nature. The Company's results are subject to seasonal fluctuations; therefore the results shown on an interim basis are not necessarily indicative of results for the full year.
(2)
Acquisitions and Dispositions
On June 22, 2022, the Company completed the acquisition of Guarantee Digital, LLC, a digital marketing agency, for $2.0 million in cash. The Company is currently determining whether the acquisition should be recorded as a business combination or an asset acquisition and has temporarily recorded the purchase price in other intangibles, net in the accompanying balance sheet as of June 30, 2022. The purchase price allocation is expected to be completed during the third quarter of 2022.
On April 1, 2022, the Company completed the sale of substantially all of the assets used in the operations of
WWNN-AM
in West Palm Beach-Boca Raton, FL to a third party for $1.25 million in cash. As a result of the sale, the Company recorded an impairment loss of $1.9 million related to the Federal Communications Commission ("FCC") license during the first quarter of 2022.
(3)
FCC Licenses
Changes in the carrying amount of FCC licenses for the six months ended June 30, 2022 are as follows:
Balance as of January 1, 2022
$ 508,413,913
Radio station disposition (see Note 2)
(790,232 )
Impairment losses (see below and also Note 2)
(4,619,772 )
Balance as of June 30, 2022
$ 503,003,909
FCC licenses are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the FCC licenses might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that its FCC licenses are impaired. If the Company determines it is more likely than not that its FCC licenses are impaired, then the Company is required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of the FCC licenses with the carrying amounts of such licenses. If the carrying amounts of the FCC licenses exceed the fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing FCC licenses for impairment, the Company combines its licenses into reporting units based on its market clusters.
Due to an increase in interest rates in the U.S. economy, the Company tested its FCC licenses for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, the Company recorded impairment losses of $2.8 million related to the FCC licenses in its Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters. The impairment losses were primarily due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of the FCC licenses due to certain risks associated with the U.S. economy.
The fair values of the FCC licenses in the Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as follows:

Revenue growth rates
(1.9)
% -
15.9%
Market revenue shares at maturity
0.6% - 44.0%
Operating income margins at maturity
19.2
% -
32.6%
Discount rate
9.5%
7
Table of Contents
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(4)
Goodwill
Changes in the carrying amount of goodwill for the six months ended June 30, 2022 are as follows:
Balance as of January 1, 2022
$ 28,596,547
Impairment losses
(5,856,551 )
Balance as of June 30, 2022
$ 22,739,996
Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company's goodwill might be impaired. The Company assesses qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, the Company will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit. For the purpose of testing goodwill for impairment, the Company has identified its radio market clusters and esports as its reporting units.
Due to an increase in interest rates in the U.S. economy, the Company tested its goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, the Company recorded impairment losses of $5.9 million related to the goodwill in its Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL and Tampa-Saint Petersburg, FL market clusters. The impairment losses were primarily due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of goodwill due to certain risks associated with the U.S. economy.
The fair values of the goodwill in the Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL and Tampa-Saint Petersburg, FL market clusters was estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as follows:
Revenue growth rates
(1.9)% - 11.1%
Operating income margins
5.4% - 29.8%
Discount rate
9.5%
(5)
Long-Term Debt
Long-term debt is comprised of the following:
December 31,
2021
June 30,

2022
Secured notes
$ 300,000,000 $ 295,000,000
Less unamortized debt issuance costs
(6,210,108 ) (5,358,858 )
293,789,892 289,641,142
Less current installments
- (2,000,000 )
$ 293,789,892 $ 287,641,142
On February 2, 2021, the Company issued $300.0 million aggregate principal amount of 8.625% senior secured notes due on February 1, 2026 (the "Notes") under an indenture dated February 2, 2021 (the "Indenture"). Interest on the Notes accrues at the rate of
8.625
% per annum and is payable semiannually in arrears on February 1 and August 1 of each year. The Notes are secured on a first-lien priority basis by substantially all assets of the Company and its majority owned subsidiaries and are guaranteed jointly and severally by the Company and its majority owned subsidiaries. The Indenture contains restrictive covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, guarantee indebtedness or issue disqualified stock or, in the case of such subsidiaries, preferred stock; pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; make certain investments or acquisitions; sell, transfer or otherwise convey certain assets; create
8
Table of Contents
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
liens; enter into agreements restricting certain subsidiaries' ability to pay dividends or make other intercompany transfers; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of its subsidiaries. Prior to February 1, 2025, the Company will be subject to certain premiums, as defined in the Indenture, for optional or mandatory (upon certain contingent events) redemption of some or all of the Notes.
In April 2022, the Company repurchased $5.0 million aggregate principal amount of the Notes for an aggregate price equal to 96% of the principal amount. As a result of the repurchase, the Company recorded an aggregate gain on repurchase of long-term debt of $0.1 million during the second quarter of 2022. In July 2022, the Company repurchased $2.0 million principal amount of the Notes for a price equal to 75% of the principal amount. As a result of the repurchase, the Company recorded a gain on repurchase of long-term debt of $0.5 million during the third quarter of 2022.
(6)
Stockholders' Equity
The changes in stockholders' equity for the three and six months ended June 30, 2021 and 2022 are as follows:
Three months ended June 30,
Six months ended June 30,
2021
2022
2021
2022
Beginning balance
$ 252,739,797 $ 259,689,019 $ 267,101,820 $ 263,082,298
Stock-based compensation
402,199 378,830 923,000 606,080
Acquisition of noncontrolling interest
- - (4,490,130 ) -
Purchase of treasury stock
(22,471 ) (76,108 ) (807,373 ) (105,707 )
Net income (loss)
187,694 (14,454,717 ) (10,496,947 ) (18,045,647 )
Elimination of noncontrolling interest
- - 1,076,849 -
Ending balance
$ 253,307,219 $ 245,537,024 $ 253,307,219 $ 245,537,024
(7) Net Revenue
Net revenue is comprised of the following:
Three months ended June 30,
Six months ended June 30,
2021
2022
2021
2022
Audio
$ 51,215,234 $ 53,417,896 $ 92,944,836 $ 100,783,041
Digital
7,983,343 10,719,410 13,747,071 18,527,660
Other
376,128 673,144 1,094,838 1,220,017
$ 59,574,705 $ 64,810,450 $ 107,786,745 $ 120,530,718
The Company recognizes revenue when it satisfies a performance obligation under a contract with an advertiser. The transaction price is allocated to performance obligations based on executed contracts which represent relative standalone selling prices. Payment is generally due within 30 days, although certain advertisers are required to pay in advance. Revenues are reported at the amount the Company expects to be entitled to receive under the contract. The Company has elected to use the practical expedient to expense sales commissions as incurred. Payments received from advertisers before the performance obligation is satisfied are recorded as deferred revenue in the balance sheet. Substantially all deferred revenue is recognized within twelve months of the payment date.
December 31,
2021
June 30,
2022
Deferred revenue
$ 3,085,370 $ 5,112,294
Three months ended June 30,
Six months ended June 30,
2021
2022
2021
2022
Losses on receivables
$ 602,253 $ 373,333 $ 1,697,566 $ 660,886
9
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BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Audio revenue includes revenue from the sale or trade of aired commercial spots to advertisers directly or through national, regional or local advertising agencies. Each commercial spot is considered a performance obligation. Revenue is recognized when the commercial spots have aired. Trade sales are recorded at the estimated fair value of the goods or services received. If commercial spots are aired before the goods or services are received, then a trade sales receivable is recorded. If goods or services are received before the commercial spots are aired, then a trade sales payable is recorded. Other revenue includes revenue from concerts, promotional events, talent fees and other miscellaneous items. Such revenue is generally recognized when the concert, promotional event, or talent services are completed.
December 31,
2021
June 30,
2022
Trade sales receivable
$ 881,885 $ 1,087,601
Trade sales payable
614,467 723,239
Three months ended June 30,
Six months ended June 30,
2021
2022
2021
2022
Trade sales revenue
$ 1,075,325 $ 1,504,105 $ 2,004,922 $ 2,876,678
Digital revenue includes revenue from the sale of streamed commercial spots, station-owned assets and third-party products. Each streamed commercial spot, station-owned asset and third-party product is considered a performance obligation. Revenue is recognized when the commercial spots have streamed. Station-owned assets are generally scheduled over a period of time and revenue is recognized over time as the digital items are used for advertising content except for streamed commercial spots. Third-party products are generally scheduled over a period of time with an impression target each month. Revenue from the sale of third-party products is recognized over time as the digital items are used for advertising content and impression targets are met each month.
(8)
Stock-Based Compensation
The Beasley Broadcast Group, Inc. 2007 Equity Incentive Award Plan (the "2007 Plan") permits the Company to issue up to 7.5 million shares of Class A common stock. The 2007 Plan allows for eligible employees, directors and certain consultants of the Company to receive restricted stock units, shares of restricted stock, stock options or other stock-based awards. The restricted stock units that have been granted under the 2007 Plan generally vest over one to five years of service.
A summary of restricted stock unit activity is presented below:
Units
Weighted-
Average
Grant-Date

Fair Value
Unvested as of April 1, 2022
918,816 $ 2.75
Granted
531,582 1.49
Vested
(211,333 ) 3.51
Forfeited
(30,000 ) 2.47
Unvested as of June 30, 2022
1,209,065 $ 2.07
As of June 30, 2022, there was $1.9 million of total unrecognized compensation cost for restricted stock units granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 2.0 years.
(9)
Income Taxes
The Company's effective tax rate was (120)% and 32% for the three months ended June 30, 2021 and 2022, respectively, and (27)% and (13)% for the six months ended June 30, 2021 and 2022, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes, certain
non-taxable
income, and certain expenses that are not deductible for tax purposes.
10
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BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(10)
Earnings Per Share
Earnings per share calculation information is as follows:
Three months ended June 30,
Six months ended June 30,
2021
2022
2021
2022
Net income (loss) attributable to BBGI stockholders
$ 187,694 $ (14,454,717 ) $ (10,367,698 ) $ (18,045,647 )
Weighted-average shares outstanding:
Basic
29,235,009 29,418,951 29,268,717 29,395,003
Effect of dilutive restricted stock units and restricted stock
89,605 - - -
Diluted
29,324,614 29,418,951 29,268,717 29,395,003
Net income (loss) attributable to BBGI stockholders per Class A and Class B common share - basic and diluted
$ 0.01 $ (0.49 ) $ (0.35 ) $ (0.61 )
The Company excluded the effect of restrictive stock units and restricted stock under the treasury stock method when reporting a net loss as the addition of shares was anti-dilutive. As a result, the Company excluded 136,119 shares for the three months ended June 30, 2022, and 77,908 shares and 171,501 shares for the six months ended June 30, 2021 and 2022, respectively.
(11)
Financial Instruments
The carrying amount of the Company's financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these financial instruments.
The estimated fair value of the Notes, based on available market information, was $295.9 million and $228.6 million as of December 31, 2021 and June 30, 2022, respectively. The Company used Level 2 measurements under the fair value measurement hierarchy to determine the estimated fair value of the Notes.
(12)
Segment Information
The Company currently operates three operating segments (Audio, Digital, esports) and two reportable segments (Audio, Digital). The identification of segments is consistent with how the segments report to and are managed by the Company's Chief Executive Officer (the Company's Chief Operating Decision Maker). The Audio segment generates revenue primarily from the sale of commercial advertising to customers of the Company's radio stations in the following radio markets: 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, and Wilmington, DE. The Digital segment generates revenue primarily from the sale of digital advertising to customers of the Company's radio stations and other advertisers throughout the United States. Corporate includes general and administrative expenses and certain other income and expense items not allocated to the operating segments.
Non-operating
corporate items including interest expense and income taxes, are reported in the accompanying condensed consolidated statements of comprehensive income (loss).
Reportable segment information for the three months ended June 30, 2022 is as follows:
Audio
Digital
Other
Corporate
Total
Net revenue
$
53,417,896
$
10,719,410
$
673,144
$
-
$
64,810,450
Operating expenses
43,187,604
9,171,535
1,267,453
-
53,626,592
Corporate expenses
-
-
-
4,567,470
4,567,470
Depreciation and amortization
1,564,338
4,613
700,953
181,198
2,451,102
Impairment losses
8,619,097
-
-
-
8,619,097
Operating income (loss)
$
46,857
$
1,543,262
$
(1,295,262
)
$
(4,748,668
)
$
(4,453,811
)
Audio
Digital
Other
Corporate
Total
Capital expenditures
$
5,039,229
$
8,982
$
(1,598
)
$
64,514
$
5,111,127
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BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Reportable segment information for the three months ended June 30, 2021 is as follows:
Audio
Digital
Other
Corporate
Total
Net revenue
$
51,215,234
$
7,983,343
$
376,128
$
-
$
59,574,705
Operating expenses
39,715,005
7,910,418
868,997
-
48,494,420
Corporate expenses
-
-
-
3,957,854
3,957,854
Depreciation and amortization
1,911,236
4,142
796,019
139,526
2,850,923
Other operating income, net
-
-
-
(1,500,000
)
(1,500,000
)
Operating income (loss)
$
9,588,993
$
68,783
$
(1,288,888
)
$
(2,597,380
)
$
5,771,508
Audio
Digital
Other
Corporate
Total
Capital expenditures
$
1,276,776
$
87,432
$
-
$
160,311
$
1,524,519
Reportable segment information for the six months ended June 30, 2022 is as follows:
Audio
Digital
Other
Corporate
Total
Net revenue
$
100,783,041
$
18,527,660
$
1,220,017
$
-
$
120,530,718
Operating expenses
84,050,529
17,573,298
2,012,314
-
103,636,141
Corporate expenses
-
-
-
8,800,930
8,800,930
Depreciation and amortization
3,186,165
9,077
1,396,301
375,459
4,967,002
Impairment losses
10,476,323
-
-
-
10,476,323
Operating income (loss)
$
3,070,024
$
945,285
$
(2,188,598
)
$
(9,176,389
)
$
(7,349,678
)
Audio
Digital
Other
Corporate
Total
Capital expenditures
$
6,221,223
$
10,826
$
59,084
$
206,744
$
6,497,877
Reportable segment information for the six months ended June 30, 2021 is as follows:
Audio
Digital
Other
Corporate
Total
Net revenue
$
92,944,836
$
13,747,071
$
1,094,838
$
-
$
107,786,745
Operating expenses
74,450,474
15,168,333
1,843,484
-
91,462,291
Corporate expenses
-
-
-
7,863,143
7,863,143
Depreciation and amortization
3,915,613
4,142
1,607,922
275,147
5,802,824
Gain on disposition
(191,988
)
-
-
-
(191,988
)
Other operating (income) expense, net
500,000
-
-
(900,000
)
(400,000
)
Operating income (loss)
$
14,270,737
$
(1,425,404
)
$
(2,356,568
)
$
(7,238,290
)
$
3,250,475
Audio
Digital
Other
Corporate
Total
Capital expenditures
$
1,989,721
$
87,432
$
2,852
$
473,782
$
2,553,787
Reportable segment information as of June 30, 2022 is as follows:
Audio
Digital
Other
Corporate
Total
Property and equipment, net
$ 48,624,289 $ 76,296 $ 75,224 $ 3,882,252 $ 52,658,061
FCC licenses
503,003,909 - - - 503,003,909
Goodwill
19,520,896 - 3,219,100 - 22,739,996
Other intangibles, net
1,907,547 2,000,000 19,285,987 179,663 23,373,197
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BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Reportable segment information as of December 31, 2021 is as follows:
Audio
Digital
Other
Corporate
Total
Property and equipment, net
$
45,696,008
$
74,547
$
21,644
$
4,050,967
$
49,843,166
FCC licenses
508,413,913
-
-
-
508,413,913
Goodwill
25,377,447
-
3,219,100
-
28,596,547
Other intangibles, net
1,974,093
-
20,543,451
179,663
22,697,207
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
General
We are a multi-platform media company whose primary business is operating radio stations throughout the United States. We offer local and national advertisers integrated marketing solutions across audio, digital and event platforms. We own and operate radio stations in the following radio markets: 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, and Wilmington, DE. We refer to each group of radio stations in each radio market as a market cluster. Unless the context otherwise requires, all references in this report to the "Company," "we," "us" or "our" are to Beasley Broadcast Group, Inc. and its subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This report contains "forward-looking statements" about the Company within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future, not past, events. All statements other than statements of historical fact included in this document are forward-looking statements. These forward-looking statements are based on the current beliefs and expectations of the Company's management and are subject to known and unknown risks and uncertainties. Forward-looking statements, which address the Company's expected business and financial performance and financial condition, among other matters, contain words such as: "expects," "anticipates," "intends," "plans," "believes," "estimates," "may," "will," "plans," "projects," "could," "should," "would," "seek," "forecast," or other similar expressions.
Forward-looking statements, by their nature, address matters that are, to different degrees, uncertain. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Factors that could cause actual results or events to differ materially from these forward-looking statements include, but are not limited to:
•
the effects of the
COVID-19
pandemic, including its potential effects on the economic environment and the Company's results of operations, liquidity and financial condition, and the increased risk of impairments of the Company's Federal Communications Commission ("FCC") licenses and/or goodwill;
•
external economic forces that could have a material adverse impact on the Company's advertising revenues and results of operations;
•
the ability of the Company's radio stations to compete effectively in their respective markets for advertising revenues;
•
the ability of the Company to develop compelling and differentiated digital content, products and services;
•
audience acceptance of the Company's content, particularly its radio programs;
•
the ability of the Company to respond to changes in technology, standards and services that affect the radio industry;
•
the Company's dependence on federally issued licenses subject to extensive federal regulation;
•
actions by the FCC or new legislation affecting the radio industry;
•
increases to royalties the Company pays to copyright owners or the adoption of legislation requiring royalties to be paid to record labels and recording artists;
•
the Company's dependence on selected market clusters of radio stations for a material portion of its net revenue;
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•
credit risk on the Company's accounts receivable;
•
the risk that the Company's FCC licenses and/or goodwill could become impaired;
•
the Company's substantial debt levels and the potential effect of restrictive debt covenants on the Company's operational flexibility and ability to pay dividends;
•
the potential effects of hurricanes on the Company's corporate offices and radio stations;
•
the failure or destruction of the internet, satellite systems and transmitter facilities that the Company depends upon to distribute its programming;
•
disruptions or security breaches of the Company's information technology infrastructure;
•
the loss of key personnel;
•
the Company's ability to integrate acquired businesses and achieve fully the strategic and financial objectives related thereto and their impact on the Company's financial condition and results of operations;
•
the fact that the Company is controlled by the Beasley family, which creates difficulties for any attempt to gain control of the Company; and
•
other economic, business, competitive, and regulatory factors affecting the businesses of the Company, including those set forth in the Company's filings with the SEC.
Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. We do not intend, and undertake no obligation, to update any forward-looking statement.
Financial Statement Presentation
The following discussion provides a brief description of certain key items that appear in our financial statements and general factors that impact these items.
Net Revenue.
Our net revenue is primarily derived from the sale of commercial spots to advertisers directly or through national, regional or local advertising agencies. Revenues are reported at the amount we expect to be entitled to receive under the contract. Local revenue generally consists of commercial advertising sales, digital advertising sales and other sales to advertisers in a radio station's local market, either directly to the advertiser or through the advertiser's agency. National revenue generally consists of commercial advertising sales through advertiser agencies. National advertiser agencies generally purchase advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions.
Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors:
•
a radio station's audience share in the demographic groups targeted by advertisers as measured principally by periodic reports issued by Nielsen Audio;
•
the number of radio stations, as well as other forms of media, in the market competing for the attention of the same demographic groups;
•
the supply of, and demand for, radio advertising time; and
•
the size of the market.
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Our net revenue is affected by general economic conditions, competition and our ability to improve operations at our radio market clusters. Seasonal revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our revenues typically are lowest in the first calendar quarter of the year. In addition, our revenues tend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. This political spending typically is heaviest during the fourth quarter of such years.
We use trade sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services; however, we endeavor to minimize trade revenue in order to maximize cash revenue from our available airtime.
We also continue to invest in digital support services to develop and promote our radio station websites, applications, and other distribution platforms. We derive revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet. We also generate revenue from selling third-party digital products and services.
Operating Expenses.
Our operating expenses consist primarily of programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations. We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our radio market clusters.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:
•
it involves a significant level of estimation uncertainty; and
•
changes in the estimate or different estimates that could have been selected have had or are reasonably likely to have a material impact on our results of operations or financial condition.
FCC Licenses.
FCC licenses are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our FCC licenses might be impaired. We assess qualitative factors to determine whether it is more likely than not that our FCC licenses are impaired. If we determine it is more likely than not that our FCC licenses are impaired, then we are required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of our FCC licenses with the carrying amounts. If the carrying amounts of the FCC licenses exceed the fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing FCC licenses for impairment, we combine our FCC licenses into reporting units based on our market clusters.
Due to an increase in interest rates in the U.S. economy, we tested our FCC licenses for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, we recorded impairment losses of $2.8 million related to the FCC licenses in our Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters. The impairment losses were due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks associated with the U.S. economy.
The fair values of the FCC licenses in our Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as follows:
Revenue growth rates
(1.9)% - 15.9%
Market revenue shares at maturity
0.6% - 44.0%
Operating income margins at maturity
19.2% - 32.6%
Discount rate
9.5%
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The carrying amount of our FCC licenses for each reporting unit and the percentage by which fair value exceeded the carrying amount are as follows:
Market cluster
FCC

broadcasting

licenses
Excess
Atlanta, GA
$ 832,300 13.1 %
Augusta, GA
6,113,075 57.1
Boston, MA
137,856,160 0.2
Charlotte, NC
56,418,151 9.4
Detroit, MI
29,978,201 8.2
Fayetteville, NC
8,974,679 9.3
Fort Myers-Naples, FL
9,131,300 -
Las Vegas, NV
33,655,100 -
Middlesex, Monmouth, Morristown, NJ
21,896,900 1.6
Philadelphia, PA
119,674,192 11.2
Tampa-Saint Petersburg, FL
61,787,351 16.7
Wilmington, DE
16,686,500 -
Goodwill.
We are required to test our goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our goodwill might be impaired. We assess qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, we will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, we will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit. For the purpose of testing our goodwill for impairment, we have identified our radio market clusters and esports as our reporting units.
Due to an increase in interest rates in the U.S. economy, we tested our goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment test performed as of June 30, 2022, we recorded impairment losses of $5.9 million related to the goodwill in our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL and Tampa-Saint Petersburg, FL market clusters. The impairment losses were due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our goodwill due to certain risks associated with the U.S. economy.
The fair values of the goodwill in our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL and Tampa-Saint Petersburg, FL market clusters were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as follows:
Revenue growth rates
(1.9)% - 11.1%
Operating income margins
5.4% - 29.8%
Discount rate
9.5%
We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our FCC licenses and goodwill, however, these estimates and assumptions are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of our indefinite-lived intangible assets below the amounts reflected on our balance sheet, we may recognize future impairment charges, the amount of which may be material.
Our remaining critical accounting estimates are described in Item 7 of our Annual Report on Form
10-K
for the year ended December 31, 2021. There have been no additional material changes to our critical accounting estimates during the six months ended June 30, 2022.
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Recent Accounting Pronouncements
There were no recent accounting pronouncements that have or will have a material effect on our financial condition or results of operations.
Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021
The following summary table presents a comparison of our results of operations for the three months ended June 30, 2021 and 2022, with respect to certain of our key financial measures. The changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of this report.
Results of Operations - Consolidated
Three Months ended June 30,
Change
2021
2022
$
%
Net revenue
$ 59,574,705 $ 64,810,450 $ 5,235,745 8.8 %
Operating expenses
48,494,420 53,626,592 5,132,172 10.6
Corporate expenses
3,957,854 4,567,470 609,616 15.4
Impairment losses
- 8,619,097 8,619,097 -
Other operating income, net
1,500,000 - (1,500,000 ) (100.0 )
Income tax expense (benefit)
(1,299,394 ) 3,554,469 4,853,863 373.5
Net income (loss)
187,694 (14,454,717 ) (14,642,411 ) (7801.2 )
Results of Operations - Segments
Three Months ended June 30,
Change
2021
2022
$
%
Net revenue
Audio
$ 51,215,234 $ 53,417,896 $ 2,202,662 4.3 %
Digital
7,983,343 10,719,410 2,736,067 34.3
Other
376,128 673,144 297,016 79.0
$ 59,574,705 $ 64,810,450 $ 5,235,745 8.8
Operating expenses
Audio
$ 39,715,005 $ 43,187,604 $ 3,472,599 8.7 %
Digital
7,910,418 9,171,535 1,261,117 15.9
Other
868,997 1,267,453 398,456 45.9
$ 48,494,420 $ 53,626,592 $ 5,132,172 10.6
Net Revenue.
Net revenue increased $5.2 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. Audio revenue increased $2.2 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to continued recovery from the
COVID-19
pandemic. Digital revenue increased $2.7 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to continued growth in the digital segment.
Operating Expenses.
Operating expenses increased $5.1 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. Audio operating expenses increased $3.5 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to continued recovery from the
COVID-19
pandemic. Digital operating expenses increased $1.3 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to continued investment in the digital segment.
Corporate Expenses.
Corporate expenses increased $0.6 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to an increase in compensation.
Impairment Losses.
Due to an increase in interest rates in the U.S. economy, we tested our FCC licenses and goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment tests, we recorded impairment losses of $2.8 million related to the FCC licenses in our Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters and impairment losses of $5.9 million related to the goodwill in our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL and Tampa-Saint Petersburg, FL market clusters. The impairment losses were primarily due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of FCC licenses and goodwill due to certain risks associated with the U.S. economy.
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Other Operating Income, Net.
Other operating income, net for the three months ended June 30, 2021 includes life insurance proceeds of $3.0 million related to the death of Mr. George Beasley, the Company's former Chairman, in June 2021, partially offset by certain payments totaling $1.5 million that were accrued in accordance with Mr. Beasley's employment contract.
Income Tax Expense (Benefit).
Our effective tax rate was approximately (120)% and 32% for the three months ended June 30, 2021 and 2022, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes, certain
non-taxable
income, and certain expenses that are not deductible for tax purposes.
Net Income (Loss).
Net loss for the three months ended June 30, 2022 was $14.5 million compared to net income of $0.2 million for the three months ended June 30, 2021 as a result of the factors described above.
Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021
The following summary table presents a comparison of our results of operations for the six months ended June 30, 2021 and 2022, with respect to certain of our key financial measures. The changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of this report.
Results of Operations - Consolidated
Six Months ended June 30,
Change
2021
2022
$
%
Net revenue
$ 107,786,745 $ 120,530,718 $ 12,743,973 11.8 %
Operating expenses
91,462,291 103,636,141 12,173,850 13.3
Corporate expenses
7,863,143 8,800,930 937,787 11.9
Impairment losses
- 10,476,323 10,476,323 -
Other operating income, net
400,000 - (400,000 ) (100.0 )
Interest expense
12,643,440 13,672,254 1,028,814 8.1
Loss on extinguishment of long-term debt
4,996,731 - (4,996,731 ) (100.0 )
Income tax benefit
3,902,280 2,621,977 (1,280,303 ) (32.8 )
Net loss
10,496,947 18,045,647 7,548,700 71.9
Results of Operations - Segments
Six Months ended June 30,
Change
2021
2022
$
%
Net revenue
Audio
$ 92,944,836 $ 100,783,041 $ 7,838,205 8.4 %
Digital
13,747,071 18,527,660 4,780,589 34.8
Other
1,094,838 1,220,017 125,179 11.4
$ 107,786,745 $ 120,530,718 $ 12,743,973 11.8
Operating expenses
Audio
$ 74,450,474 $ 84,050,529 $ 9,600,055 12.9 %
Digital
15,168,333 17,573,298 2,404,965 15.9
Other
1,843,484 2,012,314 168,830 9.2
$ 91,462,291 $ 103,636,141 $ 12,173,850 13.3
Net Revenue.
Net revenue increased $12.7 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. Audio revenue increased $7.8 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to continued recovery from the
COVID-19
pandemic. Digital revenue increased $4.8 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to continued growth in the digital segment.
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Operating Expenses.
Operating expenses increased $12.2 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. Audio operating expenses increased $9.6 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to continued recovery from the
COVID-19
pandemic. Digital operating expenses increased $2.4 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to continued investment in the digital segment.
Corporate Expenses.
Corporate expenses increased $0.9 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to an increase in cash compensation, contract services, and travel expenses.
Impairment Losses.
Due to an increase in interest rates in the U.S. economy, we tested our FCC licenses and goodwill for impairment during the second quarter of 2022. As a result of the quantitative impairment tests, we recorded impairment losses of $2.8 million related to the FCC licenses in our Fort Myers-Naples, FL, Las Vegas, NV, and Wilmington, DE market clusters and impairment losses of $5.9 million related to the goodwill in our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL and Tampa-Saint Petersburg, FL market clusters. The impairment losses were primarily due to an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of FCC licenses and goodwill due to certain risks associated with the U.S. economy. On April 1, 2022, we completed the sale of substantially all of the assets used in the operations of
WWNN-AM
in West Palm Beach-Boca Raton, FL to a third party for $1.25 million in cash. As a result of the sale, we recorded an impairment loss of $1.9 million related to the FCC license during the first quarter of 2022.
Other Operating Income, Net.
Other operating income, net for the six months ended June 30, 2021 includes life insurance proceeds of $3.0 million related to the death of Mr. George Beasley, the Company's former Chairman, in June 2021, partially offset by certain payments totaling $1.5 million that were accrued in accordance with Mr. Beasley's employment contract, payments of $0.6 million for consulting services related to the
COVID-19
pandemic and expenses of $0.5 million related to the early termination of a programming contract.
Interest Expense.
Interest expense increased $1.0 million during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The primary factors affecting interest expense were an increase in long-term debt outstanding and the applicable interest rate.
Loss on Extinguishment of Long-Term Debt.
We recorded a loss on extinguishment of long-term debt of $5.0 million during the six months ended June 30, 2021, resulting from the issuance of the Notes on February 2, 2021 and the use of proceeds to repay the credit facility.
Income Tax Benefit.
Our effective tax rate was approximately (27)% and (13)% for the six months ended June 30, 2021 and 2022, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes, certain
non-taxable
income, and certain expenses that are not deductible for tax purposes.
Net Loss.
Net loss for the six months ended June 30, 2022 was $18.0 million compared to a net loss of $10.5 million for the six months ended June 30, 2021 as a result of the factors described above.
Liquidity and Capital Resources
Overview.
Our primary sources of liquidity are internally generated cash flow and cash on hand. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and radio station acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to continue to be, related to the maintenance of our office and studio space, the maintenance of our radio towers and equipment, and digital products and information technology. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations.
In response to the
COVID-19
pandemic, our board of directors has suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company's stockholders. In addition, as discussed in "Secured Notes" below, the Indenture governing our Notes limits our ability to pay dividends.
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Secured Notes.
On February 2, 2021, we issued $300.0 million aggregate principal amount of 8.625% senior secured notes due on February 1, 2026 (the "Notes") under an indenture dated February 2, 2021 (the "Indenture"). Interest on the Notes accrues at the rate of 8.625% per annum and is payable semiannually in arrears on February 1 and August 1 of each year. The Notes are secured on a first-lien priority basis by substantially all assets of the Company and its majority owned subsidiaries and are guaranteed jointly and severally by the Company and its majority owned subsidiaries. The Indenture contains restrictive covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, guarantee indebtedness or issue disqualified stock or, in the case of such subsidiaries, preferred stock; pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; make certain investments or acquisitions; sell, transfer or otherwise convey certain assets; create liens; enter into agreements restricting certain subsidiaries' ability to pay dividends or make other intercompany transfers; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of our subsidiaries.
In April 2022, we repurchased $5.0 million aggregate principal amount of the Notes for an aggregate price equal to 96% of the principal amount. As a result of the repurchase, we recorded an aggregate gain on repurchase of long-term debt of $0.1 million during the second quarter of 2022. In July 2022, we repurchased $2.0 million principal amount of the Notes for a price equal to 75% of the principal amount. As a result of the repurchase, we recorded a gain on repurchase of long-term debt of $0.5 million during the third quarter of 2022.
From time to time, we repurchase sufficient shares of our common stock to fund withholding taxes in connection with the vesting of restricted stock units. We paid $0.1 million to repurchase 70,823 shares during the six months ended June 30, 2022. From time to time, we may seek to repurchase, redeem or otherwise retire our Notes through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases, redemptions or other transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.
We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:
•
internally generated cash flow;
•
additional borrowings or notes offerings, to the extent permitted under the Indenture governing our Notes; and
•
additional equity offerings.
We believe we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our financial obligations for the next twelve months and thereafter. However, poor financial results or unanticipated expenses could give rise to default under the Notes, additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect, and we may not secure financing when needed or on acceptable terms.
Off-Balance
Sheet Arrangements.
We did not have any
off-balance
sheet arrangements as of June 30, 2022.
Cash Flows
. The following summary table presents a comparison of our cash flows for the six months ended June 30, 2021 and 2022 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of this report.
Six Months ended June 30,
2021
2022
Net cash provided by operating activities
$ 4,849,026 $ 6,751,546
Net cash used in investing activities
(2,191,287 ) (7,301,590 )
Net cash provided by (used in) financing activities
33,723,920 (4,910,152 )
Net increase (decrease) in cash and cash equivalents
$ 36,381,659 $ (5,460,196 )
Net Cash Provided By Operating Activities.
Net cash provided by operating activities was $6.8 million during the six months ended June 30, 2022, as compared to net cash provided by operating activities of $4.8 million during the six months ended June 30, 2021. Significant factors affecting the $1.9 million increase in net cash provided by operating activities included a $14.2 million increase in cash receipts from revenue, partially offset by an $11.2 million increase in interest payments, and a $1.2 million increase in cash paid for corporate expenses.
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Net Cash Used In Investing Activities.
Net cash used in investing activities during the six months ended June 30, 2022 included payments of $6.5 million for capital expenditures and a payment of $2.0 million for the acquisition of Guarantee Digital, LLC, partially offset by proceeds of $1.2 million from a radio station disposition. Net cash used in investing activities for the same period in 2021 included payments of $2.6 million for capital expenditures.
Net Cash Provided By (Used In) Financing Activities.
Net cash used in financing activities during the six months ended June 30, 2022 included Notes repurchases of $4.8 million. Net cash provided by financing activities during the six months ended June 30, 2021 included proceeds of $300.0 million from the issuance of the Notes and proceeds from a $10.0 million loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act, partially offset by credit facility and promissory note repayments of $263.5 million, the repayment of a $5.0 million loan provided by George Beasley, and payments of $7.6 million for debt issuance costs related to the Notes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule
13a-15(b)
as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of the end of the period covered by this report.
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We currently and from time to time are involved in ordinary routine litigation and are the subject of threats of litigation that are incidental to the conduct of our business. These include indecency claims and related proceedings at the FCC, as well as claims and threatened claims by private third parties. However, we are not a party to any lawsuit or other proceedings, or the subject of any threatened lawsuit or other proceedings, which, in the opinion of management, is likely to have a material adverse effect on our financial condition or results of operations.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risks affecting our Company as previously disclosed in Item 1A, "Risk Factors" of our annual report on Form
10-K
for the year ended December 31, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Repurchases of Equity Securities
The following table presents information with respect to purchases we made of our Class A common stock during the three months ended June 30, 2022.
Period
Total Number
of Shares
Purchased
Average Price
Paid per
Share
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Program
Approximate
Dollar Value
of Shares

That May Yet
Be Purchased
Under the
Program
April 1 - 30, 2022
2,965 $ 1.70 - -
May 1 - 31, 2022
22,430 1.50 - -
June 1 - 30, 2022
29,221 1.28 - -
Total
54,616
On March 27, 2007, our board of directors approved the Beasley Broadcast Group, Inc. 2007 Equity Incentive Award Plan (the "2007 Plan"). The original ten year term of the 2007 Plan ended on March 27, 2017. Our stockholders approved an amendment to the 2007 Plan at the Annual Meeting of Stockholders on June 8, 2017 to, among other things, extend the term of the 2007 Plan until March 27, 2027. The 2007 Plan permits us to purchase sufficient shares to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock. All shares purchased during the three months ended June 30, 2022 were purchased to fund withholding taxes in connection with the vesting of restricted stock units.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
Exhibit
Number
Description
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) (17 CFR 240.15d-14(a)).
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) (17 CFR 240.15d-14(a)).
32.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) (17 CFR 240.15d-14(b)) and 18 U.S.C. Section 1350.
32.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) (17 CFR 240.15d-14(b)) and 18 U.S.C. Section 1350.
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BEASLEY BROADCAST GROUP, INC.
Dated: August 15, 2022
/s/ Caroline Beasley
Name: Caroline Beasley
Title:  Chief Executive Officer (principal executive officer)
Dated: August 15, 2022
/s/ Marie Tedesco
Name: Marie Tedesco
Title:  Chief Financial Officer (principal financial and accounting officer)
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