Entercom Communications, the Philadelphia-based radio broadcast company that’s acquiring CBS Radio in a tax-free merger, enjoyed a strong Q1 thanks to net revenue of $97.5 million — a 1.4% year-over-year again that easily beat the estimates of Wall Street analysts by a cool $1.37 million.
However, the company’s earnings per share fell short of Street estimates—by a penny. Will the narrow miss put a dent in this radio-industry pure-player’s stock on Monday (5/8)?
Savvy investors may have a hard time looking past this, as Entercom’s Q1 revenue, up from $96.1 million, is actually down about 1% on a same-station basis, ex-political.
Meanwhile, station expenses increased to $75.4 million, from $71.5 million, as corporate expenses surged to $9.2 million, from $6.3 million, ahead of the CBS Radio merger.
This played its part in swinging Entercom to a net operating loss of $15 million from net operating income of $14.75 million.
The net loss to common shareholders was $9.9 million (25 cents per share), a swing from net income to common shareholders of $4 million (10 cents).
Then, Entercom crunched the numbers, and with its reconciliation of GAAP net loss available to common shareholders to adjusted net income, there’s no net loss. However, there’s a still a dip.
Factoring in $10.3 million in merger and acquisition costs, and a $13.5 million write-down tied to the license relinquishment of KDND-FM 107.9 “The End” in Sacramento (more, below), adjusted net income available to the company was $3.3 million (7 cents per diluted share). That’s down from $3.5 million (9 cents) in Q1 2016, and analysts polled by Seeking Alpha anticipated adjusted net income of 8 cents per share.
DEBT BALLOONS FROM ‘HIGHLY UNUSUAL’ EVENTS—INCLUDING ‘THE END’
Entercom also revealed its current balance sheet data, and the company’s cash on hand shrank year-over-year to $4.7 million, from $14.6 million, as its Senior Debt tied to its Term B Loan and non-Revolver borrowings surged to $458.1 million, from $237 million.
Free cash flow sank to $5.66 million, from $8.14 million.
Adjusted EBITDA was down to $14.12 million, from $18.27 million.
Station Operating Income (SOI), a common non-GAAP measure used by radio broadcasting companies, fell to $22 million, from $24.6 million.
While not the most rosy quarter, Entercom President/CEO David Field is nevertheless upbeat—and that’s all due to what lies ahead in the second half of 2017 and beyond for the company.
“I am very pleased with our progress on all fronts as we continue to plan and prepare for our transformational merger with CBS Radio,” he said in a statement ahead of Entercom’s 10am Eastern conference call with financial analysts. “This will truly be a game-changing event for Entercom as we will achieve a number of scale-related benefits, including the ability to compete far more effectively against other media for a larger share of advertising spending.”
Yet, Field acknowledged that Entercom experienced a highly unusual degree of large one-time only expenses during Q1.
This included the surrender to the FCC of the license for the former KDND. That’s the radio station that held the infamous “Hold Your Wee For A Wii” contest that resulted in the death of contestant Jennifer Strange, and led local journalist Sue Wilson to lead a years-long effort to strip Entercom of its right to continue operating the station.
FROM THE RBR + TVBR ARCHIVES:
The CFO transition at Entercom is also a factor in its one-time expenses. On March 22, Entercom announced the appointment of Richard J. Schmaeling as EVP/CFO, effective April 18, 2017. He succeeds Steve Fisher, who will continue to assist with the CBS Radio integration through January 2018.
“Looking ahead to the completion of the merger with CBS, we expect synergies that will drive margin expansion,” Field said.
Based on Entercom’s current stock price, the combined company will have a pro forma equity value of approximately $1.6 billion and the strongest balance sheet of any of the major radio groups, he added.