Entercom Q4 down; optimism for Q1


EntercomIt was another tough quarter for Entercom, but not as bad as in Q3, when revenue fell 4% from $102.3 million in Q3 2012 to $98.4 million in 2013. This time, the comps weren’t as bad. Net revenues for the quarter decreased 2% to $99.6 million. Station expenses decreased 1% to $61.3 million. Station operating income decreased 5% to $38.3 million. Adjusted EBITDA decreased 7% to $32.8 million. Adjusted net income per share was flat at $0.31. Free cash flow increased 2% to $22.5 million.

Said David Field, Entercom CEO: “Entercom’s fourth quarter revenues declined 2% while revenues excluding political advertising posted a 2% increase. 2014 began on a solid note with January revenues up moderately over the prior year. We are optimistic about 2014 performance based on improving sales capabilities and execution, strong ratings and meaningful local growth opportunities.”

In December, Entercom repriced its $300 million Term B loan and reduced the borrowing rate by 1.0%, generating savings of some $3 million per year. The company reduced its outstanding debt by $14.2 million (net of cash) during the quarter. As of Q4, Entercom had $12.2 million in cash and $517.1 million of senior debt and senior notes.

Full Year highlights:

–Net revenues for the year decreased 3% to $377.6 million

–Station expenses decreased slightly to $251.8 million

–Station operating income decreased 8% to $125.8 million

–Adjusted EBITDA decreased 9% to $104.9 million

–Adjusted net income per share was flat at $0.79

–Free cash flow decreased 4% to $60.4 million

Noted Marci Ryvicker, Wells Fargo Securities Senior Analyst: Revenue beat our expectations. Total revenue of $100MM (-2%, or +2% ex-political) beat our and the Street’s $98MM (-4%, or flat ex-political) expectation. EBITDA came in ahead on the higher revenue. EBITDA was above our estimates, at $32MM (-6%) vs. our and the Street’s $30MM (-10%), due to the higher than expected revenue. Q1 2014 Guidance: Revenue is currently pacing down 1% (we were at +1%), but has been improving as of late. Interest expense should be $9.7MM (we were at $10.1MM).

Color on Q1 revenue pacings. Though revenue is currently pacing down 1% management noted that it expects to end the quarter better than that. It also cited a tough comp (it no longer airs the Celtics games in Boston, which is a 100bps drag) and the inclement weather negatively impacted revenue early in the quarter.

2014 Guidance: Specifically, ETM expects: political revenues of $6-7MM (we were at $6.9MM), with most coming in Q4. Core station expenses to grow 1% (we were at 1%), with additional investment in branding pushing total station opex to +2-3% (we were at 1%). Corporate expenses of $21MM (we were at $20.7MM). Capital expenditures of $7-8MM in 2014 (we were at $6.7MM). Equity comp of $5MM (we were at $5.5MM). A tax rate in the mid 40% range (we were at 45%).

Re-tooling of the sales department has become a tailwind. Management noted that the reorganization of the sales department is complete and has finally become constructive to revenue, rather than disruptive.

Entercom plans to be ”opportunistic” with M&A. CEO David Field stated that if the right opportunity arose (one that could create value for ETM shareholders without impairing the balance sheet) the company would take a good look at it.

Capital returns are likely when leverage falls below 4.5x. Management mentioned that both a dividend and share repurchases are a possibility. According to our estimates, this could be as early as the second half of this year.”