Westwood One has its ducks in a row


After hearing the first quarterly conference call by new CEO Tom Beusse [LINK], Ensley told clients he is maintaining his estimate that WW1 will post 2008 EBITDA of 80 million bucks. That assumes flat revenues and 5% expense growth. The analyst notes that the revenue line could grow with better clearance by CBS Radio, but he also notes that WW1’s outlook could prove difficult given the weak economy and radio ad climate in Q1.

Westwood One WON-$1.83-Peer Perform

Ducks in a Row – Focus Now on Operations

·    4Q Revenues Down 12%; EBITDA Down 28%. WON’s revenues declined by 11.8% to $118.3M, well below our $123.9M estimate.  Network revenues decreased by 6.3% (vs. our -3%), while traffic revenues decreased by 16.9% (vs. our -12%).  Revenues declined due to lower audience and inventory levels, a reduction in sales staffing, and increased competition.  4Q EBITDA decreased 28% to $27.2M (ahead of our $21.9M estimate, and guidance of $20M).  Operating costs decreased by 8.5%, vs. guidance of up low single digits.

·    2008 Guidance:  Revenues Up Low Single Digits; EBITDA Down 15%-20%.  Although network revenues are slightly up in 1Q, we believe traffic continues to struggle.  Despite a soft 1Q, management expects revenue growth to accelerate, likely due to better compliance and inventory clearance from CBS.  Expenses are projected to grow as WON invests in key initiatives and CBS meets its incentives.

·    Key Initiatives Underway.  WON outlined several initiatives for 2008, including 1) adding sales & affiliate personnel; 2) hiring a head of digital ops; 3) launching new programs; 4) investing in traffic gathering infrastructure; 5) monetizing WON’s library of live music; 5) pursuing partners and alliances with tech vendors; 6) becoming platform agnostic and embracing on-line and hand-held initiatives.

·    Ducks in a Row.  Recently WON has focused on getting its "ducks in a row" by 1) hiring a new CEO; 2) separating from CBS; 3) revising its CBS affiliation agreement; 4) amending its credit facility; and 5) raising capital to reduce debt and invest in programming.

·    Focus Now on Operations.  We are maintaining our 2008 EBITDA estimate of $80M, which assumes flat revenues and 5% expense growth.  With better clearance from CBS, revenues could grow (and station compensation with it), but WON’s outlook could prove difficult to achieve given the weak 1Q economic/radio ad climate.