Audacy Inc (AUD) 2009 Q1 法說會逐字稿

Good morning and welcome to Entercom's first quarter earnings release conference call. All participants will be in a listen-only mode. This conference is being recorded.

I would like to introduce your first speaker for today's call, Mr. Steve Fisher, CFO and Executive Vice President. Sir, you may begin.

Thank you, operator and good morning, everyone. I would like to welcome you again to Entercom Communications' conference call for the first quarter 2009. This call is being recorded. A replay of this call will be available on our Company website shortly after the conclusion of today's call and it will also be available by telephone at the replay number provided in our release this morning.

With our notice of today's call, we ask that you submit your questions in advance of this call to the email address, questions@entercom.com. In addition, I'm always available for follow-up questions, if you wish to call me directly at 610-660-5647. Now, I would like to make this note. Should the Company make any forward-looking statements, such statements are based on certain expectations and involve risk and uncertainties. The Company's actual results could differ materially from those projected. Additional information concerning factors that could cause additional results to differ materially is described in the Company's SEC's filings on Form 10-Q, 10-K and 8-K. The Company assumes no obligation to update any forward-looking statements. During this call, we may reference concern non-GAAP financial measures.

We would refer to you our website at Entercom.com the investor tab for reconciliation of such measures and other pro forma information. With, that I will turn it over to David Field, President and Chief Executive Officer.

Thanks, Steve. Good morning, everyone. Thanks for joining today's call. I'm pleased to report Entercom's first quarter results and provide you with an update on some recent developments. Well, the best thing that I think can be said for the first quarter of 2009 is that it is now behind us. As you are well aware, business conditions in the first quarter were pretty awful as we faced a perfect storm of economic challenges. In the face of these conditions, we posted a 21% decline in net revenue for the quarter. We managed expenses down 8%, resulting in a 47% decrease in station operating income and a 51% decline in EBITDA. Same station results were identical. Adjusted net income declined to $0.01 per share, while free cash flow per share declined 57% to $0.12 per share.

Here are a few operating highlights for the quarter. A few of our markets bucked the trends and posted impressive results, like Denver, Wichita, Madison and Buffalo. Local and national revenues were both down essentially in line with our overall results, while digital revenues were up significantly during the quarter. Our strongest growing categories were grocery, drug stores, restaurants, which includes fast food, and professional services. Our weakest categories were automotive, political, television, financial, and retail. We were also quite pleased with the recently released winter ratings books. Most significantly, Boston became our second market to initiate Arbitron's PPM methodology and the results were stellar.

As usual WEEI had a terrific book. What was more noteworthy was the significant growth in our other three Boston brands. Mike FM jumped number four, with adults 25 to 54 and number three with men 25 to 54. WRKO surged to number four with men 25 to 54 and WAAF grew to number two with men 18 to 49. A few other highlights from some of our other networks. In Denver, KOSI had a strong book as the number one station with women 25 to 54, while the Mountain showed outstanding growth shooting up to number four with adults 25 to 54.

In Portland, KGON was the solid number one with both adults and men and in Rochester, all of our stations had great books. As the Buzz claimed number one honors with men, while the Bee nailed down number one adults and our other stations moved up strongly. Finally in Kansas City, KQRC showed nice gains as it widened its lead as number one in virtually all male and adult demos.

As pleased as we are with these individual stories, I think there's a broader point here that's important to make. We have a terrific group of brands across the country that are healthy and vibrant, each commanding large audiences of hundreds of thousands of listeners and these brands are not only continuing to maintain these large audiences on air, but increasingly enhancing their listener engagement online as well.

Switching gears. Over the past several months, we have taken a number of actions to significantly reduce our operating expense. We have made meaningful, sustainable improvements to our business model, reducing expenses and developing promising new revenue streams. We have accomplished this while still working to improve the quality of our products for listeners and customers and increasing our investments in certain key strategic growth initiatives. We are absolutely determined to emerge from the economic storm with stronger capabilities, an enhanced competitive position, and an improved business model, and are very much on track to achieve these goals.

Turning to business conditions we have been experiencing meaningful improvement in business activity over the past several weeks. Excuse me. It appears as though, we may have hit bottom at the end of March. Having said that -- and I want to be very clear here -- I think we need to keep this in sober perspective. For one, we started the second quarter considerably behind where we ended up Q1. The progress we have made over the past few weeks has enabled to us get back to roughly where we ended Q1. But since we are already in May, realistically there's not a lot of time left to impact this quarter. We are also cognizant of the fact that the economy is still fragile. While we are very much encouraged by the past few weeks, we don't want to get too far ahead of ourselves.

Finally, as we look to the future, we remain enthused about our longer-term growth prospects based upon very strong consumer radio usage trends and radio's outstanding value proposition to customers. Radio posted an all-time record number of listeners in 2008, and remains the most cost effective major advertising medium in the country. And the industry is rapidly re-inventing itself through aggressive investments and new digital technologies and capabilities. We are significantly enhancing the ways we interact with and engage our audiences. In addition, we are dramatically enhancing our value to our customers by enabling them to access our audiences across multiple platforms in ways we could not even imagine years ago.

At the end of the day, radio's strong underlying fundamentals and compelling value proposition should enable it to gain share from other media facing significant secular issues. With that, I will turn it over to Steve.

Thanks, David. David has already covered some of the key financial highlights for the quarter, so I will add a few more notes before we address your questions.

The Entercom team again took significant action in the Fall of last year, which enabled us to reduce our station operating expenses by 8% in this quarter. I note that we also realized a significant reduction in our corporate G&A expenses. Our expense management in the first quarter of 2009 follows a reduction of 7% in the fourth quarter of last year. So that you can see that we have taken swift actions to resize our business model, such that it will benefit shareholders into the future. On our balance sheet, we ended the first quarter with leverages defined in our senior bank facility of 5.4 times. Again, 5.4 times. For those who would like more color on this data point, we have provided a reconciliation of our credit facility leverage calculation on our web site, the investor tab of www.Entercom.com.

In the quarter, we reduced our outstanding debt by approximately $17 million, through a combination of free cash flow, plus the buyback of a portion of our outstanding bonds at a discount. In addition, we had another $9 million of cash on our balance sheet on March 31st. Our debt repurchases in the quarter resulted in a gain of approximately $8 million. And also in the quarter, Entercom repurchased approximately 700,000 of shares of our common stock. Another balance sheet item worth noting is that we expect to significantly reduce our capital expenditures in 2009. We would expect CapEx for the quarter to be around -- for the year, excuse me, to be around $5 million.

A note on our taxes. While we are not a current cash taxpayer, we do provide certain GAAP tax provisions in our financial statements. And in this quarter, our tax provisions for future obligations was lower or benefited more than normal due to a tax valuation adjustment made against future tax benefits, and there are always going to be these types quarterly trueups and adjustments. If you look at taxes into the future more painting the bigger picture, given the significant tax shields from our intangible amortizations, we do not expect to be a cash tax payer in this year. Frankly, for several more years into the future. With that, I will now go to the questions that you submitted by email prior to this call. I guess, I will serve as the moderator.

David, we did have quite a few questions coming in looking for color on second quarter pacings. How did April finish? And what do May and June look like?

April finished slightly better than Q1. May and June are works in progress now. As I indicated earlier, the overall second quarter is pacing essentially in line with where we ended up Q1.

And while you are on Q1, some -- the shareholders wanted to know what were the trends in Q1 how did Q1 build? What was the pace of the activity in the first quarter?

We saw -- February was the worst month during the quarter. January and March were both slightly better than the overall Q1 performance.

Okay. I will direct this question to myself. We did have an inquiry and I understand from the headlines of the day, wanting to know what is our exposure to Chrysler? As you know, Chrysler going through a restructuring. We have actually -- and when you say Chrysler, keep in mind you have Chrysler the Company, and then you have dealers, state associations, used car dealers and all.

If you look at Chrysler, the entity that's being restructured, we actually have fairly minimal exposure on that. I would make a color note, for those of you who read our 10-K from December 31st, 2008. You will note that we made a significant reserve against receivables at that time, and that was really for the unknowns of the economy for the Chryslers of the world.

So we had significantly bumped up our reserve at the end of last year and in anticipation of this. So I think the restructuring actions going on in Chrysler, do not signal anything in terms of bad debt on our books. Obviously, we are monitoring on the revenue side, and we will continue to keep you updated on that. While we're on automotive. David, I think the questions were what does automotive represent as a percentage of our revenue today versus prior year?

Right and as I mentioned earlier, in the first quarter, automotive was no surprise here. One of our worst performing categories and it had -- it declined from 17% of our revenues in the first quarter of 2008, down to 13% of our revenues in 2009.

We received several questions regarding the leverage. I think I addressed most of that in my prepared remarks, our covenant calculation under our senior bank facility is available on Entercom.com, the investor tab. People have asked are we in compliance with our debt covenants? The simple answer is yes.

And several have asked are we in discussions with our banks on an amendment? And the answer is, no, we are currently not in those discussions. There was also a question on color for interest rates going on forward, and you will see that we have had a significant reduction in our interest this year over prior years. Going forward, I think I would say that -- I would expect interest to be similar.

Yield curve for LIBOR and we basically play over LIBOR is indicated to be fairly flat. There's some vulnerability to that, but on the flip side, about two-thirds of our senior facility is hedged. I wouldn't expect to see any significant fluctuations and, indeed, as we pay down debt and were we to buy back additional bonds in the future, we will see a small decrease in our interest rate going forward.

David, I think the -- there's several questions which I will kind of bundle together to -- I will phrase it, these are my words not necessarily the words of the question. What does it feel like? Have we reached the bottom? Have things stabilized.

We touched on, that of course, in the remarks earlier. As of this moment in time, it looks like we may have hit a bottom at the end of March, but as I cautioned, I think that having been in the -- in the thick of this for the last several months, I think we need to remain sober and recognize that even though things are encouraging, things have absolutely improved over the last few weeks, you know, we are still living in a fragile economic world.

Okay. Well, I think I summarized the questions that came in prior to the call, and David, I will turn it to you for any concluding comments.

We appreciate everybody's time this morning and hope to come back to you with an even stronger report -- come back (multiple speakers) when we have a stronger report and hope Q1 is the worst that we will see in the business and the country. Thank you all, again, for being with us this morning.

Thank you.