Audacy Inc (AUD) 2009 Q2 法說會逐字稿

Good evening, and welcome to Entercom second quarter earnings release conference call. All participants will be an 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.

Thanks, operator, and thanks, everyone, for joining us this afternoon on a beautiful Monday afternoon in the east coast. I would like to welcome you to the Entercom Communication's conference call for the second quarter of 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 also available by telephone replay at the number provided in your release. With the notice of today's call we ask that you submit your questions in advance of this call to the e-mail address, questions@Entercom.com prior to ten minutes to the call. We'll address those that were submitted in time.

In addition, I'm always available for follow-up questions if you wish to call me directly at 610-660-5647. Should the Company make any forward-looking statements such statements are based on current expectations, and involve risk and uncertainties. The Company's actual results could differ materially from those projected, additional information concerning factors that could cause actual results to differ materially is described in the Company's SEC filings on Forms 10-Q, 10-K and 8-K. The Company assumes no obligation to update any forward-looking statements. During this call we may reference certain non-GAAP financial measures, we refer you to our website,the Investor portion of Entercom.com, for a reconciliation of such measures other pro forma financial information.

With that I turn it over to Mr. David Field, President and Chief Executive Officer.

Thanks, Steve and good afternoon everyone and thanks for joining us on today's call. I'm pleased to report Entercom's second quarter results and provide you with an update on some recent develops. The second quarter improved modestly from first quarter as business conditions remained weak, but stabilized in strength and slightly off of their lows. Revenues declined 18% during the second quarter a modest sequential improvement versus our 21% decline in first quarter. Expenses were down 10%, resulting in a 30% decrease in station operating income and a 32% drop in EBITDA. Adjusted net income decreased 34% to $0.29 per share, while free cash flow was down 30% to $0.62 per share. I think it's worth noting that even in the midst of the worst recession we have endured in generations, Entercom has generated $2.15 of free cash flow per share over the past four quarters.

I'll share a few operating highlights from the quarter. First, a few of our markets performed substantially better than the normal during Q2, including Denver, Gainesville, Madison, Norfolk and Wichita. Local and national revenues were both down to a similar degree, while digital revenues were up significantly during the quarter. Our strongest categories were restaurants, entertainment, home furnishings, professional services and grocery, while our weakest categories were automotive, political and television, cable. On the ratings front, we're in the midst of receiving the spring Arbitron and so far we're pleased with the results. We have once again received strong ratings in Boston, where we have four of the top five stations with men 25 to 54, in Denver we had great results from Alice and Kozy, which now ranked number one and two respectively with women 25 to 54 and in Portland, we have three of the top four stations with adults 25 to 54 and we also received good report cards in San Francisco and Sacramento.

On a broader note we continue to make progress toward ours goal of emerging from the recession with enhanced capabilities, a stronger competitive position and an improved business model. Over Over the past 12 months we have trimmed our debt by well over $100 million, significantly and sustainable reduced operating expenses. Grown our broadcasting, streaming, and website audience ratings, and added new products and programs to increase our value to our customers. As we continue to augment our business development efforts and add new marketing products and capabilities we expect to see these initiatives making a increasing contribution to our overall revenue performance.

Turning to recent business conditions. Since our last call we have continued to see slow, modest improvement in activity. As I noted early, we sequentially improved our revenue performance from minus 21 in Q1 to minus 18 in Q2. We expect to make further sequential progress in Q3. July revenues were down approximately 14 to 15%. It is also worth noting that our comps get significantly easier as we get to fourth quarter when the bottom really fell out last year, albeit we did have the benefit of some significant political dollars. I do want to caution that conditions remain tepid and we are all well-aware the nation's economic recovery is far from robust. Nevertheless we're making tangible sequential progress and as the economy recovers we believe radio is well-positioned for revenue growth based on strong audience listening trends and the medium's outstanding value proposition to customers. At a time when some mediums are facing existential crisis, the number of radio listeners in the US set an all-time high this past year.

Unfortunately that story is usually lost in the midst of sloppy or biased reporting, but in the face of enormous changes in our media world, radio is once again proving itself to be an extraordinarily resilient medium. In addition, radio remains the most cost effective major reach advertising medium in the nation. The industry is rapidly reinventing itself through aggressive investments and new digital technologies and capabilities to further enhance its value to listeners and customers. At the end of the day, radio's strong underlying fundamentals and its compelling value proposition should enable it to gain significant share from other media facing major secular issues.

With that I will turn it over to Steve.

Thanks. And let me review a few big-picture thoughts before getting into some color on the quarter. In your May call we stated that business was stabilizing and showing signs of improvement. And as David just covered with you, indeed, this quarter we saw sequential improvement in your revenue results. Last fall, in response to the economic downturn, we initiated a series of cost-reduction actions. This enabled us to report operating expenses down 10% in the second quarter. In light of the economic uncertainty we have been focused on reduction of debt, towards that end we reduced net debt by 20 million in this quarter and net debt by 42 million in the fist six months of the year. Additionally, as a demonstration of the focus on debt-reduction, the board has allowed our share buyback authorization program to expire at the end of June, the normal one-year anniversary of that program. We have been and remain a champion of share buyback and would expect to revisit this method of return to cash to shareholders when business and leverage conditions improve. We have also reduced our capital expenditures with the target this year of approximately 3 million, which is down significantly from prior year, and is also down from prior guidance for the full-year 2009. We ended the second quarter with leverage as defined in our senior bank facility of 5.6 times. I would note that this test is an operating cash flow test as defined in our facility and not just a straight EBITDA test. For those who would like more color on this data point we have provide a reconciliation of our credit facility leverage calculation on our website, the Investor tab of Entercom.com.

A few other notes on the second quarter. As a result of the buyback of some of our senior notes, we recorded a gain of approximately $8 million in the quarter and in the second quarter we took a non-cash charge of approximately 68 million, just to adjust the value of intangible assets. Accounting guidance calls for an annual review. We'll do this annual review every year in the second quarter and also update that test on an ongoing basis. This adjustment in the second quarter reflects updated assumptions on a variety of valuation metrics, including into the cater such as comparable private market transactions and public equity valuations.

With that, we'll now go to the questions which you submitted to questions@Entercom.com prior to this.

I will serve as you're master of ceremonies and David, -- we had several questions along the same lines so I will paraphrase them both into wanting to know more input on second quarter revenue trends. What were the monthly trends within the quarter and several questions as well going along Q3, ad pacing and visibility. What do you see as you look out to the future in terms of pace and bookings?

The best month in second quarter was June, with April and May more or less in line. The visibility remains difficult. We continue to see customers placing orders quite late and we continue to add significant amounts of business and improve our pacing numbers in month and many quarter. At least that has been the pattern over the last couple of quarters and we're hopeful that based upon when we hear from customers, that seems to be the case.

I will do a follow-up question from Mike Kupinski which fits into that, are advertisers willing to commit to the future or being placed closer to air time?

I think closer to air time. I expect we'll see it begin to normalize a bit, as the economy continues to slowly recover and stabilize here, but for the moment we're seeing ads placed fairly late.

And somewhat related from Marci Ryvicker at Wachovia Wells Fargo. She asks that you said in the last call, March is the bottom. Is that still the case?

As far as we know. Barring some major shock to the economic system, think we were correct in noting, as many have, that March seemed to be the real bottom of the economic cycle, and we have seen sequential, steady improvement.

Next set of questions revolve around categories and I know in your remarks you gave many guidance as to categories up and down, but maybe a little more color. We have had several inquiries on auto and whether we have seen a pick-up on auto, and additional, have we see any benefit and I will use the phrase that is most often used "Cash-for-Clunkers. " Are we seeing any pick up from auto and any benefit from the Cash-for-Clunkers rebate program?

I don't know if we have enough clarity to determine how much the Cash-for-Clunkers program is impacting. I would say that there has been a some level of pick up in automotive. The tone of your discussions with our customers has improved. They are becoming a little more optimistic and a little more willing to invest in marketing, and we are starting in the very early stages of benefiting from that. Again, it's early, but I can't say that we have, again, enough color and don't believe we have any related specifically to cash-for-clunkers.

Next question I will direct to myself. It comes from an analyst. How do you intend to remain in compliance with your covenant and are you in discussion with bank group? Let me answer the second question first. We are not in discussions with our bank group about redoing our current facility. How do we intend to remain in compliance? There is no one single answer. We look at outlook of all factors that good into the calculation and go into our outlook on the future, which includes factors, such as revenue, expense-management and other gains and other items that fall into the calculation of that covenant compliance and believe that at least through the balance of the end of the year that we're fine. We understand that many of our peers have gone in and renegotiated. We are are aware of that option, but at moment, as indicated in my earlier conversation, we are not in discussions with our bank group. David, the next one is a little more strategic, if you will, and forward-looking, so I will throw this to you. When advertising demand does rebound, what do see we see as the top three issues or challenges facing Entercom and its radio broadcast peers? Price rationalization, competitive threats from alternative technology, shrinking listenership?

I think that the real answer to that goes to the lingering gap and a significant gap between the perception and reality of the health of radio. Our story is very strong, but it often doesn't get reported that way. If If you think about it, we remain an enormously successful reach-vehicle, as I mentioned in my earlier remarks an all-time high number of listeners, 235 million Americans, 12 and older listening to radio every single week in the face of an extraordinary paradigm shift in media usage. Radio has remained incredibly resilient while many other medium are facing existential threats. We remain the low-cost provider to reach the customer and we're reinventing ourselves. So our story is very, very good. I think the danger is that we fail to adequately tell our story and that we are impacted by false perceptions. The other thing that I look at is the overall supply-demand dynamic in advertising, and the choppy waters that we will likely continue to see as, again, some other media face existential threats, what does that mean long-term in terms of pricing and for all media? Again, I feel really good as the low-cost provider with pushing 93, 94% reach, and dramatic enhancement of the quality of the marketing we can do for our customers with our enhanced multi-platform capabilities.

Okay. I will take the other question that came in from Alice and wanted to know is there was any color on geographical differences among our market's performance and the answer is simple, no. I mean, obviously, within the down 18 revenue reported for Q2 or what we're seeing for Q3, there is variance by market, but frankly, we don't see any pattern of large markets, small market, east coast, west coast or anything like that that can lead to any conclusions that would help any analysts out. So we don't see anything there. David, I will through this one to you, because I'm losing my voice here. The question came in on EBITDA margins. They have been in decline for several years. Going forward in a normalized environment, where do we cash flow margins setting in, 25, 30, 35%?

I don't see any reason why we don't have a business model with sustainable 40% plus margins. That is what we had before. Since that time we have obviously been impacted by cyclical pressures on revenues that we believe will mitigate here over time and on the cost side we have made sustainable and fundamental improvements by taking meaningful expenses out of the model without adversely impacting our ability to generate revenue and generate audiences. So I'm quite optimistic that as we seek cyclical recovery, we will see a normalization of margins in the business.

Okay, with that, I have tried not to duplicate any questions that were previously answered in your prepared remarks. If any questions came in after the cutoff time, my apologies, I will try to call the questioners as a follow-up or feel free to call me today or tomorrow. So with that, thanks for joining us for Entercom's second quarter conference call. A summary of this will be posted on our website. We look forward to reporting back to you in 90 days on the third quarter. Thank you all.

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