2016 Q1 Earnings.mp3

Saturday, September 15th


Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

I would like to introduce surfer is the speaker for can be called. Mr. these concerns CFO and executive vice president or eat meat became. Thank you very long then thank you operator thank you were one for joining us today happy mag. Like to welcome you to Entercom communications earnings conference call this call is being recorded. A replay will be typical company website shortly after the conclusion of today's call. And also available by telephone. At the replay now numbers noted on our release. We've noticed that today's call and ask that you submit your questions in advance of the call in addition. I'm always available for any follow up questions that you wish to call me directly 610. 660. By six or seven. The company make any forward looking statements such statements are based on current expectations. Ball rest and uncertainties. Companies that people could differ materially from those projected. Additional information concerning factors that could cause actual results to differs described in the company's SEC filings on forms 10-Q and date and they. The company assumes no obligation to update any forward looking statements during this call he made reference certain non-GAAP financial measures. We refer you to our web site it gonna conduct proper reconciliation. Of such measures and other pro forma financial information. So what that let me turn it over to David Field president and Chief Executive Officer. Exceed the morning everyone thanks for joining us first quarter earnings call. I am very pleased to report better not start the Euro and a great delivering an outstanding. Work. Revenues were up 23%. Enhanced fire 2015 acquisitions. But the bigger news is that we have another great quarter organic revenue growth. Things Asian revenues increased 6% for the quarter. We also grow margins enabling us to drive robot bottling group. Adjusted ebitda was up 32%. Free cash flow and earnings per share both more than doubled. Saw that was terrific quarter. What is important to note is that it is part of an increasingly consistent pattern that better I'm delivering solid growth quarter after quarter. It's now march 4 consecutive quarter of accelerating organic revenue growth breaker. And casual here a few moments are picking a song for the remainder of the year we are optimistic about her ability to continue to generate strong situation room. After provide he was an additional color first quarter numbers I have a couple of announcements to make and that will be if you want some recent developments. The first quarter local revenues were up heights in its national was down low single digits but recovered nicely in March. We grew revenue market share significantly during the quarter in fact only two over 23 better market lost share during the quarter. Our 6% growth compared to those single digit growth for our markets. January was the weakest month of the quarter. Political revenues were under 1% ever quarterly sales. As a result precinct station revenues excluding political were up 5%. Our best performing market during the fourth quarter were Miami San Francisco. Seattle and Indianapolis. Our best performing categories were auto help and medical and restaurants. It's worth stepping back taking longer term look at the trends in our business over the past few quarters. This reserve for straight quarter that single digit or better organic revenue growth. And if we look at our last twelve months vs prior twelve months. Same station basis are revenues were up 3% overall. And up 4% exportable. Over the same period are free cash flows up 21%. And in addition a leverages decline from one half times or four or five times to four point zero times. Over the past year notwithstanding the fact that we completed the Lincoln and Los Angeles should during that period. Performances being driven by many factors. Most notably our strategic focus on building strong local radio brands with compelling personality kind. And developing best in class marketing solutions for our customers along with a local sales execution. Capabilities. Our team across the country is doing an excellent job of executing our game plan and delivering results. On the heels of this terrific quarter I am very pleased to announce that the Telecom board approved the initiation of the cash dividend program. In and out that initial dividend payable as you. The dividend instead of seven and one half cents per share for the quarter were thirty cents a share annually. The board's decision reflected confidence in the company's strong operating performance. Significant cash flow generation. Moderate leverage an excellent growth prospects. Major current stock price to dividend that represented just under 3% yield. It is noteworthy that the dividend equals just 17%. Over trailing free cash flow. That means we will have ample capacity to continue to invest in our business. Pursued compelling growth opportunities. And reduce debt while delivering immediate cash returns torture. We also continuing to make progress in a number of other areas. Are focused on great local brands and content continues to pay off for a in the ratings as Erica remains the leader Yasser ratings were. We hear continuous and looking for ways to bolster our programming and grow our audience is indeed in their engagement. For example since the start of the year we about it number of new air personalities. Most notably it started land. And has successfully reach brain tumors station in Miami and San Diego. And I am pleased to report that we had entered into an agreement to become the flagship radio broadcaster for the San Diego partners. Starting at 2017 and continuing through 20/20 one power FM 949 in San Diego will be the home for all the Padres games. FM ninety or not it will it will retain its alternative rock format. Operator of listeners unique combination of great music sports and local personalities. In addition last Thursday we announced a renewal of our creator with the Boston Red Sox. We'll make our station WEEI. The team's home through 2023. We have enjoyed a wonderful long term relationship with the club and are delighted to continue our partnership will in the future. Turning to current business conditions second quarter is picking up or were sent on same station basis. We are experiencing strong growth in auto professional services. Restaurants. At home furnishings. Elaborate to remain in consequential for the quarter although we expected to slip from election related spending beginning September. And while it is very early our patience in the second half of the year but the strong. Looking to the future. Enhanced audience data and behavioral insightful and able to drive higher value ad sales. Any distribution of our brands over innovative platforms like next radio. Will enable additional opportunities for enhanced. Integrated marketing revenues. We have high expectations for our Smart reached digital business which we hope will grow into a meaningful player in the digital marketing solutions market. She's nice expansion opportunities in the events business. And perhaps most meaningfully at other competitive ad supported media continue to experience meaningful erosion of their audiences. And disruption of their business models. We think radio. Now the country's number one reached medium had an outstanding opportunity to grow a sure bet dollars in the years. It's all of this was an excellent borders rhetoric common essentially every level. And we are very well positioned for solid growth for the remainder of 2016 and beyond. We're driving strong organic revenue growth growing brands in audiences. Improving sales execution. Pursuant solid expense management. And making significant progress across a number of strategic initiatives that are enhancing our capabilities and growth potential. And we offer investors terrific value of their stock providing a 15%. Trailing free cash flow yield. With a very solid balance sheet strong organic growth. Great portfolio local brand contact. Number by creating growth drivers and that would have been as well. We that'll turn it over to your question. Well that is great and as you've just heard what a great way to start 2000 succeed. Our brands and operating team murdered so ratings growth industry leading revenues and all that believes that ebitda margin expansion. And impressive free cash for over. Clearly they're great quarter. But as we start this new year is relevant to point now this is also a continuation. Of the string of strong quarterly results this seems delivered here. Our positions of last summer performing great. Both are new properties and our operations are seeking market and its frequent words. We've reduced debt and significantly improved are already so balance sheet. I'm particularly pleased to point out you today that our leverage for the past quarter with a four point zero. Which means that today many second we were effectively below that benchmark or metric. Which leads to the announcement today with dividend program. The dividend declared today of seven and ten cents per share as David mentioned will be payable on June 15 to shareholders of record of making when he. Let you know you've financial highlights of the first quarter. We discussed on the recent earnings calls our expense improvement actions over the past few quarters and our newly acquired properties. So. Pair system prior owner's expense model. We have reduced. Station operating expenses on these news stations while simultaneously. Driving brand and revenue growth. Our core stage and expenses are also manage as you come to expect from us. Continuing our strong history of expense management. While still investing significantly in local content and capabilities. A court expenses for the quarter world less than 2% which is primarily auction variable expenses. On core revenue growth. Our corporate G and expense in the quarter with a bout with six point two million. A side note with the announcement last week of a new multi year contract for an com's CEO. And a related one time bonus triggered by this contractor expects second quarter. The current quarter second quarter here today to be about seven to seven point two million. And then drop to about six million per quarter from the second half of the year. Not parent company's compensation expense was one point five million in the first quarter. And I would expect the next three quarters for the remainder of 2016. To be about one point 6000001. Point six million per quarter. Net interest expense for the fourth quarter well first quarter was nine point four million which includes about 800000 and amortization. Non cash interest related items. DNA was 2.4 million for the quarter and represented pretty good run rate freer models for the remainder of the year. The first quarter we completed the sale and AM station in Denver for three point eight million which resulted in small bowl game. With a quarter. Our quarter GAAP book tax rate was about 17%. Now this was lower than normal due to a using unique one times date provision adjustments. Looking forward we believe our GAAP book tax rates should be about 40%. That is always subject to fluctuations. And as well the point oh please call that is a non care. Tax provision in our financial statements as we do not pay cash income taxes nor respect to for a few years. During the balance sheet. Significant progress we've finished the quarter with a net debt net of cash of approximately 554. Million. This resulted as a that are older pro forma leverage of four point zero divine credit agreement. And present great progress and further strengthening our for the so Belichick. Capex for the quarter was lower than prior year and frankly lower than our initial plan due to expenditures timing. We have refused station's studio relocation project plan this year. But we now think that the timing proportion of these will spill over into next year 2070. Or current thinking for 2016. Capex for the leader is seven to eight million which is slight reduction offer guidance. We have great free cash flow generation. In spite of some expensive and a half percent coupon notes that were placed four years ago during a period of credit market turmoil. This higher interest expenses serviceable. But corporate. Opportunities for savings. Those those extensive notes became call few months ago in December but at a premium. Clearly our credit profile does dramatically improved over the past here. And we are well aware that debt markets have improved in recent weeks although not quite back to the race or just as importantly the terms and conditions seen last summer. And we hope to refinance. We are also mindful that our bond call premiums stepped down by several million dollars this fall. That backed that factors into our thinking as we consider the tradeoff reduce interest rate. Verses the overall upfront cost of replacing some mobile or all of our existing credit facilities. So we continue to monitor market at all but simply put it's all good. As we continue to be leveraged to the rest of the year are reduced leverage. In improved credit profile should open up additional papal favorable financing options for the benefit shareholders. With a business model that provides outstanding free cash flow generation. The commencement of a quarterly dividend. The benefit of our significant and a well to shield future earnings. Future potential reduction and cash interest coupled with our insiders are ownership. Intercom clearly is an attractive platform the vote debt and equity investors. So that let's go to the question that it. David if you at all followed a similar profile and again for those listening to war on. Reading transcript. That that you like and follow. Do freely give me your calls the pressure 610. 660. By six or seven. David let me start first with the macro problem these diner at JPMorgan. Great quarter. Any issues to suggest that your core radio ad growth rate can't continue throughout 2016. None at all and in fact. As you mentioned on the the remarks are via piecing some very strong with the remainder of the year and our war. Organic metrics looked really good and you know I would say that he be on 2016. I noted that the war just a number of the investments we've made in the future as we see trend lines. For the industry and so forth where rove were pretty optimistic that the pretty good about our growth rate. I just this year and into the future. Let me duck tail off of that and the question from our seat right liquor bill Wells Fargo securities. You mentioned sort quarter and looking forward. How to cute shoes or specifically April and how do you see major. Yeah April until little softer than it may and June but still a solid growth month. And so you know if there's not a huge disparity between the two months. We go to questions from Mike Pence he has noble which by the way also represented if you people first. That. It after the data point for Q1 political. First quarter political or about 800000. In 2016 that was verses first quarter last year about 100000. Now let me two Mike's question which is broader reflect several others how do you seek political shaping up for the year and I'll call it. As straight in the question trump on fact of the buzz out there that perhaps from does not spending as much money rather. And do you see an impact on the business. Got a pattern this year is playing out consistently with what was seen in prior elections we don't tend to seem much. Radio political advertising and first half of the year portion of the city during the primary season so. We don't see anything but usual there and gently as we look to the ball and presuming that it is 88 Donald Trump and Hillary Clinton election. Would have no reason to expect anything different what is that. First of all much of the political revenue we receive is down ballot either on federal or state or local. Well elections and a federal level so who knows what we're gonna see in the Paula. And includes a lot of third party action as well. In what will be highly usual election cycle. And Columbia. Take the liberty adopted going back agave Mike that the data point on first quarter political of 800000. That actually an increase over our cycles what were. Left again in that team out looking forward. Let me go to questions from Aaron Watson that Deutsch of America. David you have the ability and that third quarter and third quarter pace since of this conflict here. Yeah we. Third quarter report pages of search obviously as we noted earlier and again at its very early and it's not and not something one way hanger on but but to actually. Gonna go to ask questions from Kyle Evans that says Stevens and several people last related. First I'll ask for data point on autos percentages sale but it. Kyle and and those on the air group. Has been fairly consistent as a amid scenes it is our largest category. I always remind people because they're been some questions on the so our rates are also remind people that it's besides. The new car which you always receivers and use cars car parts batteries and end. So auto obviously art category of the performing very well. Yeah we see strong growth in the first quarter was strong facing in the second quarter. Again very early basis. The wrong direction you. Let's let's go to the programming side you did mention ratings say that from my capacity. That noble financial coming back to count can you talk and I think you address all of this in your script can you talk about investments we've made in the border in local. Content and now. I mentioned the the when he show addition in Atlanta OnStar which were very excited about. The weak ratings we've done a couple of stations in San Diego Miami which are also good starts. And we continually look for opportunities. Strong local talent. Overseas. You see good opportunities of course. And that's been at war element of our growth over the over recent years and then he should expect it's something we'll continue to do well and future. Stay with a follow up questions from Micah like that it'll. The ratings performance that saw the company that David your growth. My question is is the ratings. Wrote sustainable. Through and through that your again we've been a leader with in Nielsen ratings I think. As well part of our strategy that's exactly why local. Personalities. That you you first mentioned the potter's field. Renewal of Red Sox. And and that we think that by continuing to focus on that war. That element. What drives or business absolutely continue to grow audiences and I loved the way Marcy record so well our word this next question. What got you over the who initiated dividends. You know what it was it was hot and we've been very transparent. In recent years about backed bid dividend was something that are work will look at. Went higher leverage got to do the little little wars look at the board zip code. And we also prudently wanted to digest the Lincoln acquisition. And everything came together and the companies and a great place right now and we're so very good about moving ahead with the dividend. At this time. It's it's also worth noting. That it is only 17% of our free cash flow and that percentage will likely decline here as we go to successive quarters of it gives us what stability and the wherewithal to continue to pay down. Yet and to look for other strategic opportunities. Should they should respond to go. I guess have been addressed the next question myself about several people asked about refinancing and an address some of that might screw up and app. The timing of the dividend was anyway certainly that timing on refinancing. So let me now turn around and addressed the questions say absolutely not the initiative the dividend is totally independent in your refinancing. The company's covenant so I'll work today and and half frankly. For the past several months I agree with what David board's decision was us. You get patently and to continue to be whoever. And I liked the way you phrase that it it was time. Now as we as I've pointed out in my comments. Circle you asked about future refinancing of the bank verses on the answers. Obviously we'll look at all of us that is set earlier comments as we continue to do you ever think it opens up. More opportunities perhaps for company Wednesday in an even stronger balancing. We are mindful that bond premium on the step down that involved and all well back for an earth thinking in the trio. Let me conclude kind of put another forward looking question David from many questions all linked together first. Question from Atlanta to Kansas dear city. As soon. Are there any so now they're reasonable valuations. And now linked to common questions from a wide variety of participants. Today in advance. Saying clearly CBS's announces strategic decision outfit they think about sepia does that relate to so let us when those two. Sure so. And I think everybody knows we don't speculate on potential acquisitions are there a direct activity of its kind other than that. To note that. We've been very consistent in noting that there are three fundamental criteria would which would look at any potential. Expansion which would be that it strategically it. Can we. Can we accomplish that we have the and increased value to shareholders and do it without impairing your balance sheet and so we'll look at any and all opportunities as the mayor the present themselves in the future. I think the most important thing of course to look at there track record and think about the deals that we did do it the deals we did not do it. We feel pretty good about disciplined and prudent surround that so. You know as to what opportunities area percent themselves in the future. It will take those wanted to Simon and make sure that Wednesday. True love what we've we've done in the past if you. Think it resulted in a great outcomes for shareholders. So that our calls. Questions submitted in advance Greg thanks everybody appreciate your being with us this morning and we're excited for it and outlook for the reporting back to again in another court.