“Audio is hotter than it has been in decades,” says David Field, the amicable President/CEO of Entercom, a company founded by his father some 50 years ago.
Field believes Entercom is “well positioned to participate in the growth of the audio sector.”
Yet, Entercom’s top revenue markets once again aren’t the nation’s top 3-ranked markets. Is this a sign the former CBS Radio stations are revenue laggards challenged by other radio companies, or is it a reality that is reportedly leading Cumulus Media out of the nation’s top markets — the best ROI for radio is in markets outside the Top 5?
Field revealed during his company’s Q4 earnings call that the four top markets, in respect to revenue, for Entercom during the final three months of 2018 were Dallas-Fort Worth, Miami-Fort Lauderdale, Orlando and Sacramento.
Entercom’s strongest markets in Q3 included Miami-Fort Lauderdale, Orlando, and Sacramento — as well as Las Vegas and Seattle-Tacoma.
While media broker Larry Patrick suggested in comments made to RBR+TVBR this week that clusters with four to five stations, and in mid-sized markets, may be the most profitable for radio given their slower revenue erosion to digital media, investors nevertheless may be counting on Entercom to make Chicago, Los Angeles and New York big revenue centers — and not Miami, where Entercom benefits from a legacy AC and the presence of two major Sports Talkers.
Overall, national, political, digital and network and events were all growth areas for Entercom.
But, this offset a decline in local. This isn’t so much a concern for Entercom, but for the broadcast radio industry as a whole.
PRODUCT PATH
Of the strongest ad categories across Entercom, Consumer Products is tops — again.
“Consumer products” is a shining area of advertising activity for Entercom, and it more than doubled in Q3, the company noted in November 2018.
In Q4, the category tripled its revenue, year-over-year.
With “robust growth and significant upside” in that advertiser category, Entercom’s stations are also benefiting from ad dollars tied to internet services, home improvement, and the casino/lottery area.
Automotive? Think pancakes. It was flat. Again.
Auto was “flattish” in Q3, “down a little bit but not meaningfully,” Field noted in November.
Meanwhile, political played a role in Q4 for Entercom, but not detrimentally to pro-forma results: revenue in the quarter grew 2%, ex-political.
Meanwhile, Entercom is seeing positive advertiser response to the July 1, 2018, creation of the Entercom Audio Network. The national network counts among its clients Dell, Walgreen’s, Macy’s, CVS, and Hilton, among others.
This is a big reason why $100 million in non-radio sales was seen by Entercom.
Another reason is the start by Entercom of selling its own traffic inventory, following a dispute with U.S. Traffic Network that led to its ultimate demise.
With Entercom’s Q2 pacings “very very early but looking good,” the company appears to have turned an important corner in its integration and monetization of such stations as KROQ-FM in Los Angeles and WNEW-FM in New York, which were “neglected” and under-supported by its previous owner, in the eyes of Field and Entercom.
Still, Field reminded Wall Street analysts on the call — and those who assumed Entercom could immediately turn around all former CBS Radio markets — that patience pays off.
“Transformation takes time,” Field said, adding that Entercom tackled “unexpected and untimely challenges” in 2018 — mainly those associated with USTN.
Then, there are expenses. Lots of them. In Q4, they increased to $286.5 million, from $186.75 million. On a full-year basis, they topped $1 billion — at $1.09 billion, to be precise, up from $441.8 million a year ago.
But, CFO Rich Schmaeling noted to RBR+TVBR in a post-earnings call conversation, the company is already working on a reduction plan.
Unlike most radio broadcasting companies, Schmaeling and Field opened the call to questions from Wall Street analysts. Among those on the call was Deutsche Bank’s Aaron Watts, who asked about Entercom’s leverage.
Schmaeling noted that he expects improvement by the end of Q1, even as Field lamented that “local still lags.”
Even so, Entercom’s Q4 results set the stage for a strong 2019, if all goes according to a plan Field drafted months ago, and is now coming to fruition as anticipated.
