An Earnings Downtrend For CBS Radio

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With Entercom Communications on track for a Q4 closing of its Reverse Morris Trust-fueled merger with CBS Radio, there has been heightened awareness of ongoing weakness at the unit of AMs and FMs that’s being spun from a company hot on “OTT” and other “new media” darlings of Madison Avenue. How did CBS Radio do in Q2? As expected, revenue was down.


CBS Radio revenue in Q2 dipped 2.2% to $306 million, from $313 million one year ago.

Adjusted net earnings came in at $30 million; net earnings in Q2 2016 were $50 million.

On a six-month basis, adjusted net earnings fell to $39 million, from $81 million.

Meanwhile, CBS’s consolidated net earnings of $58 million in Q2 were directly impacted by CBS Radio’s spin to Entercom — the results include a non-cash charge of $365 million in discontinued operations “to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom.”

The carrying value will continue to be adjusted based on the trading price of Entercom’s stock, which could result in future gains or losses.

But, is there concern that Entercom’s stock price is too low — low enough for CBS to “walk away” from its sale of CBS Radio?

CBS COO Joe Ianniello assumes ETM shares are low and that they hope it rises. He made the comments late yesterday on CBS’s Q2 earnings call with analysts. Among those on the call was Wells Fargo Securities senior analyst Marci Ryvicker, who specifically asked Ianniello and CBS about the valuation of Entercom shares as it relates to the CBS Radio spin.

There is a $30 million break-up fee if either CBS or Entercom were to abandon the CBS Radio deal. Entercom shares closed Monday at $9.50.


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