National Broadcasting is Done
I’m sure you have all seen my mad ramblings on the radio industry that was published Monday. TLDR: most players in the broadcasting industry are over levered, too exposed to national revenues that are declining, high fixed costs from one-time sale leaseback of tower assets, terrible capital structures and unaligned management teams who control the company through super voting stock. A great industry for bottom fishing vultures like myself.
I keep an eye on the entire broadcasting industry with working financial models for each company. I listen to the earning calls and read through the transcripts every quarter. Update my years of notes on the industry to continue to try to find value in this quirky sector. Since my article Monday, a number of broadcasters have posted results, which were largely in line where I my general forecast came in.
Beasley Broadcasting (BBGI), a name I have patiently followed for years reported Q2 results. For some reason the market liked the results, but my high level take, they sucked. National revenues continued to slowdown. Major companies like Cumulus and Audacy are driving rates down across the industry in droves. From my take, national revenues will probably continue to fall and large broadcasters not on the local front will get squeezed to death.
Offsetting the large decline in national revenues was the increase in local and low margin digital revenue. Pacings were up 5% in June, which is a clear slowdown from the 11.1% pacing in April and 7.4% in May. Caroline Beasley warned analysts that of a slowdown, specifically in July and August. July pacings are down 4%, August is down 2% and September is up 8% (probably from political starting to leak in). What was most interesting to hear is that national revenues are down 16% across the board but local revenues are up.
The next day Audacy reported terrible results. If you read my note last Monday, I think Audacy is a zero and will be forced to restructure over the next few years. Revenues are all national and with the combination of a bad balance sheet, the only way out is bankruptcy. Audacy crashed 15% and is now trading for only $0.50 per share. The next stop is $0.25 and then zero, unless something drastically changes like an asset sale to shore up the balance sheet.
I bring up the decline of Audacy and Beasley to show how well local broadcasting revenue is performing. And I think most of the market is totally missing or not even paying attention to local broadcasting revenue. Because the companies with almost 100% local broadcasting revenue are flat, despite the outperformance of their national peers.
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