Entercom Communications (ETM – $7.60) Reflections – Gabelli-No Recommendation Year BCF TEV/BCF 2020P $375M 7.2x Dividend: $0.36 Current Return: 4.8% 2019P 356 7.6 Shares O/S: 141 million shares 2018E 338 8.0 52-Week Range: $12.43 – $6.30 2017 160 16.9
COMPANY OVERVIEW Headquartered in Bala Cynwyd, PA, Entercom became the second-largest radio broadcaster in the U.S. with its November 2017 merger with CBS Radio Inc. The company now has a presence in all the top-15 markets in the U.S. and twenty-two of the top-25 markets. Entercom expects net synergies of $110 million from the transaction, significantly greater than its initial $25 million estimate. In February of 2018, the company acquired two more stations in St. Louis from Emmis Communications for $15 million filling out its cluster in that market. The company is a leading creator of live local audio content with a focus on news and sports. ETM’s stations reach over 100 million people weekly, including nearly 90% of people 12+ in the top-fifty markets. Entercom is also a leading podcaster through its investment in Cadence 13. It is also a creator of live events, including large-scale and smaller concerts.
Reason For Comment On June 7, 2018, Entercom’s CEO David Field and CFO Richard Schmaeling presented at the 10th Annual Entertainment and Broadcasting Symposium at the Lotte New York Palace.
Conference Takeaways · CEO David Field made a persuasive case for radio taking a greater share of the estimated $193 billion ad pie. Radio’s share this year is projected to be about $13.1 billion, or 6.8% (ex Olympics and political), despite being the #1 reach medium in the U.S.
· Radio’s perception with large advertisers and the ad community is not helped by the financial distress at iHeart and Cumulus. As those companies emerge from bankruptcy, major advertisers should feel better about placing more of their marketing dollars on radio. Operationally, as iHeart and Cumulus come out from bankruptcy, ad rate integrity and local spot loads could improve. Additionally, lower leverage at the two companies could result in divestitures to further reduce debt, potentially providing M&A opportunities for Entercom.
· The company has already captured about $65 million of $110 million of anticipated synergies from the CBS Radio acquisition. Local managers and formats have been changed and ETM is seeing improved listenership across the portfolio. More listeners should translate into higher ad rates later this year.
· Management is optimistic that it will be able to book revenues from US Traffic Network (USTN). USTN is a “conduit” that received valuable ad inventory. USTN can get back on its feet and a restructuring is in process.
· With regard to satellite and streaming competition, Field noted that local radio usage in the most advanced cars is 30x greater the newer entrants. ETM is also an important source of live audio content (news and sports).
· Major priority for free cash is debt reduction with a target of 3.5x leverage. The company bought back about $20 million of its stock in 1Q. Field noted that the family has purchased stock.