With its Radio.com platform “thriving” and the national client partnership team running on all cylinders, Entercom is already looking forward to delivering a Q2 replete with revenue growth and strong EBITDA.
As noted by President/CEO David Field during a lengthy earnings call featuring a host of financial analysts participating in a Q&A session, the core radio business is showing signs of improvement, although Local lags National.
Where the improvements are is most noteworthy. Four former CBS Radio markets are its top revenue performers in Q1.
With CFO Rich Schmaeling at his side, Field noted that the gap seen between the former CBS Radio properties and the legacy Entercom stations has largely evaporated.
Schmaeling says that pacings between the two groups, separated for the benefit of Wall Street analysts, is “good” and that the quarter is 80% booked.
But Field’s revelation of just what Entercom’s biggest markets were in Q1 is likely the biggest news of the day for the company.
While Los Angeles remains an ultra-competitive market against iHeartMedia and both SBS and Univision Radio, it has made considerable headway in New York.
As such, New York joins Houston, Atlanta, and Washington, D.C. as four of the top performing markets seen in Q1 by Entercom.
Those markets join Denver and Sacramento as revenue leaders.
While Field took pride in sharing the news for analysts, he also shared that Entercom’s events arm, in addition to Local, lags behind digital and national.
Spot business was flat, he adds, while digital is now 10% of the overall business and was up “significantly” thanks to the strong growth of digital audio sales.
Event dollars were down, Field said, due to the discontinuation of a major Super Bowl concert event
ENTERCOM’S TOP AD CATEGORIES
Field also shared the leading advertising categories for Entercom during Q1: “Strong growth” was seen in the TV/Cable, Insurance, Gambling, Department Stores and Discounters, and “Recruitment.”
Automotive was off slightly.
But, with pacings for Q2 showing 4% growth, local is improving, although national digital and network dollars appear to be stronger.
Wolfe Research analyst Marci Ryvicker was the first to kick off the Q&A session, as Ryvicker is to the company as the late Helen Thomas was to White House press briefings.
Ryvicker inquired about FY2019 expenses and asked Schmaeling to clarify an adjustment in Entercom’s favor. He said that Q1 corporate expenses were elevated somewhat thanks, in part, to an accrual toward a franchise tax and that for fiscal ’19 corporate expenses are anticipated to be $65 million.
Ryvicker also wondered if EBITDA growth of a little less than 40% in Q1 would be replicated at all, or if such acceleration was indeed possible. No, Field said: EBITDA growth would be lower percentage-wise in subsequent quarters.
A SAFE BET ON STRONG REVENUE
For Curry Baker of Guggenheim Securities, the topic of sports gambling and its positive impact on Entercom was of utmost importance.
How quickly will the sports betting market ramp up for Entercom?
Field believes there will be “fairly rapid adoption of legislation” approving sports gaming across the states where Entercom has Sports stations. Should radio get a “reasonable chunk” of what Field considers to be a $2 billion market, sports gambling — in Field’s view — could end up becoming a $100 million category for the company, over time.
He wasn’t exaggerating.
“It is certainly a reasonable aspirational goal,” he told Baker.
Also on the call was B. Riley FBR analyst Zack Silver, who recently initiated coverage of Entercom. Seeking guidance on political dollars Entercom believes it will earn against television, Silver was told by Field that his stations will likely benefit from a “robust amount of ad spending,” and that radio represents a “terrific value” for candidates not solely due to its ROI but also because of radio’s share of audience offering.
