Entercom Communications Corp【ETM】株式ニュース

CEOs Look Beyond Pandemic

Three see some bright linings despite revenue drops and business uncertainty

By Randy J. Stine
Published: October 26, 2020

CEOs from three of the largest U.S. commercial radio groups believe their industry is well positioned to move past the COVID-19 pandemic when the time comes.

Mary Berner, president and CEO of Cumulus Media; David Field, chairman, president and CEO of Entercom Communications; and Bob Pittman, Chairman and CEO of iHeartMedia participated in a group conversation for the recent 2020 Radio Show, which was produced online by the Radio Advertising Bureau and the National Association of Broadcasters.

The business leaders gave their views about the massive business disruption and the challenges and opportunities it has presented.

They described a phenomenon that many Radio World readers have experienced directly: The pandemic has accelerated some aspects of the industry’s technological evolution through forced adoption of work practices that increase efficiency and flexibility.

And their conversation touched on further possible changes as more of the radio air chain moves into the cloud.

The conversation never steered far from the economic environment caused by COVID-19, but the CEOs sought to project a positive attitude.

“Radio has persevered as it always does during times of crisis. This has provided us an opportunity to be stronger and better. The audio industry is in great position to thrive and move ahead faster than when we went into it,” Field said.

In some ways, said Bob Pittman, “We’ve actually strengthened our relationship with the consumer. We have seen this before. Following a disaster or tornado, radio come outs of it with a stronger relationship with the consumer because we are a reliable companion.”
iHeart multiplatform image
An iHeartRadio promotional image highlights the multi-platform nature of its audio offerings.

Cumulus describes itself as “an audio-first media and entertainment company,” and Berner’s choice of words in the conversation echoed that theme.

She says the industry’s ability to serve listeners from “anywhere and everywhere” has made the medium stronger during the crisis. “The audio platform has been extraordinarily resilient. Consumer behavior radically changed during the shutdown but yet audio has remained a vibrant part of the day-to-day lives of our listeners,” she said.

“People weren’t in cars as much, for broadcast radio listening dipped a bit, but that was more than set off by increases in streaming, listening on at-home devices and podcasting. Listening just shifted as opposed to going away.”

As Americans started getting back on the road, Berner said broadcast listening had rebounded to over 90% of pre-pandemic levels.

“The economic uncertainty is probably the biggest challenge the industry is facing. Nobody has a crystal ball. We are not sure what is going to happen. We all have to be very focused on the generation and preservation of cash and building up liquidity and shore up our balance sheets,” she said.

Shedding some insight into their power-player relationship, Berner disclosed that in the early phase of the pandemic, she spoke with Field and Pittman by phone “several times a week” as broadcasters began modeling what-if scenarios for operating in their new normal.

“We came together as an industry — for instance, in working together with Nielsen to determine a fair measurement of listening during this time of so many unknowns,” she said.

“I think we need to keep working together. We are all making decisions very quickly that may have taken months and months to consider. Some of them might have been uncomfortable in the moment, but they will be beneficial to the business in the long run.”

She also noted that “broadcasters won’t need the real estate footprint they thought” once they go back into their physical spaces.

Technological change coming

David Field of Entercom said the company is focused on what it will be when it emerges from the economic malaise of the pandemic.

“There is technological change coming, and the competitive dynamic is evolving. Consumer trends are evolving. Our companies have enormously powerful audio platforms of local and national celebrities, podcasting and digital audio,” he said. “We need to harvest that and become growing vibrant organizations on the other side” of the pandemic.

Accelerating the use of data analytics and attribution is crucial, Field said, to ensure that radio can become a more meaningful part of advertisement spending.

“Radio has often been the kids in the other room trying to get in. We were being held back by several things. One of those reasons has been scale. We didn’t have the scale as organizations in a highly fragmented industry,” Field said.

“Now Bob and Mary and our company can go to advertisers and to play at a much different level. We all have deep podcasting lineups and strong digital audio platforms. Our offering is much more robust and impactful. Now we have the data to go in and demonstrate how radio advertising works.”

Revenue hit

All three companies reported significant fall-off in revenue as a result of the novel coronavirus pandemic during the second quarter of 2020.

For example, for the three months ended June 30, Cumulus reported net revenue of $146 million, a decrease of 48% from a year ago. iHeartMedia Q2 revenue also was down by nearly half.

All three broadcasters were forced to institute cuts that included layoffs, furloughs and pay cuts earlier in the year. In addition, Cumulus and iHeartMedia recently sold off a number of broadcast tower holdings to raise cash.

The roundtable, moderated by Stephanie Ruhle of NBC News, briefly touched on possible policy changes regarding ownership rules and further deregulation of the broadcast industry.

“We are always navigating policy,” Pittman said. “It’s hard for policy to catch up with technology. Today we are still regulated as if all the technology is in one radio station and all that we do is with a transmitter and tower. The idea that we have all of the equipment in one location ignores that fact that the cloud is where everything is going.”

He continued: “If I have the studio in the cloud, then what do we have left in the building? And what regulations are related to that and which ones are not? It’s the inertia of what it was, and we have to change it to what it will be.”

Berner said broadcasters are still “really limited by policy to what we can do with consolidation and other moves we could make to strengthen the industry.”

The Supreme Court recently announced it would hear an appeal by the FCC and NAB seeking to reinstate several updates to the broadcast ownership rules. In November 2018 the commission decided to abolish the newspaper-broadcast and radio-TV cross-ownership rules and rework the radio AM-FM subcap regulations. However, those changes were blocked when the Third Circuit Court of Appeals concluded that the commission had not thoroughly analyzed the potential effect of the changes on female and minority ownership of stations.

Field said ownership rule changes would help ensure the long-term survival of the industry.

“The ownership rules around radio continue to be reflective from a different era from a competitive standpoint. We must preserve the sanctity of the AM/FM band.”

The panel chafed a bit when asked if innovations have been derailed because of the pandemic.

“I don’t think we stopped (innovating),” Berner said. “In fact, in some ways we have accelerated our adoption of new technologies and work scenarios. We want to be where the listeners are. We need to deliver great audio content wherever and whenever it’s needed. We have doubled down on smart speakers and invested in our podcast platforms.”

[Related: “How Will iHeart’s Centers of Excellence Strategy Play Out?”]

iHeartMedia is leveraging its stations to promote its iHeartPodcast Network, typically one of the top podcast publishers in the United States each month. In fact, the network had the most downloads and streams in September as measured by Podtrac.

“Nothing has the growth rate of podcasting,” Pittman said. “Our podcasting revenue grew 100% in the second quarter of this year (from 2019). Our usage is up 35% to 40% in that same quarter.

“It’s no secret that radio is having success with podcasting because it is very much a radio experience. It’s a host chatting about something,” he said.

“And the silver lining right now to this terrible situation we are in is that we have an opportunity to get people to try our new products like podcasting.”

The state of the economy is the ultimate challenge, Berner concluded.

“While better, it’s certainly not to the level pre-pandemic. We have a long road ahead of us, but fundamentally I think we are well positioned.”

And Field added a bright note, saying the pandemic disruption for now has lessened. “We have seen a substantial amount of pickup in demand for advertising into the fall. I’m optimistic we are climbing out of this.”

https://www.radioworld.com/news-and-business/business-and-law/ceos-look-beyond-pandemic

Entercom Communications: Easy Listening
Jul. 20, 2020 4:48 PM ET|

https://seekingalpha.com/article/4359467-entercom-communications-easy-listening?utm_campaign=twitter_automated&utm_content=article&utm_medium=social&utm_source=twitter_automated

Summary

Things were bad but look like they are slowly getting better.

COVID-19 forced cost cuts but those cuts will carry forward after COVID-19.

ETM is the second-largest producer of podcasts.

Financial metrics should improve throughout the remainder of the year.

Looking for more stock ideas like this one? Get them exclusively at Turnaround Stock Advisory. Get started today »

Entercom Communications (ETM) is one of the largest radio broadcasting companies in the country. Yes, radio is still alive and well with podcasts, sports coverage, and local news outlets besides other things.

And here's what ETM does:

Radio Broadcasting Stations
Advertising
Arts
Entertainment and Recreation
Podcasting

Things were going extremely well before COVID-19 but dropped off rapidly beginning in March.

In January and February, sales were up 7% year over year but dropped 22% in March. April was even worse as local businesses and professional sports dropped advertising. However, according to management, things are picking up.

Here are 5 reasons to buy ETM now.
1. Things Were Bad But Look Like They Are Slowly Getting Better

CEO David Field:

Current business conditions have sought a bit after the tsunami of closures and cancellations that occurred in March and the first half of April. While there are no guarantees on the trajectory of our national recovery in these unprecedented times, April certainly appears to be the bottom. May is a little better than April, and June is trending somewhat better than May.

Sounds like down big but on the way back. It would make sense as businesses and people frequenting those businesses get back to normal, so would ETM revenues.

As might be expected, news radio flourished with the constant drumbeat of COVID-19 news both good and bad. This is shown by huge increases in listeners recently.

Entercom is the nation's leader in local radio news and I am particularly proud of the great work our local news teams are doing across the country. Ratings were up significantly, including a 56% increase among adults 25-54 at KNX in Los Angeles, 63% at WBBM in Chicago and 100% at 1010 WINS in New York.

That shows the power of radio during crises.
2. COVID-19 Forced Cost Cuts That Will Carry Forward After COVID-19

Operating expenses were cut by $80 million in the second quarter and ETM expects $150 million for the year.

Richard Schmaeling - Chief Financial Officer:

Adding it all up, and looking specifically at the second quarter, we expect that our cash operating expenses fixed plus variable will be down year-over-year by over $80 million.

We executed a series of actions expected to reduce our fixed expenses by approximately $150 million over the remainder of this year

3. ETM Is The Second Largest Producer Of Podcasts

Podcasts are becoming the key ingredient in successful digital communications and ETM is one of the biggest and most successful. They actually create a lot of their own content rather than just buying material from other producers.

CEO David Field:

In addition, we are one of the two largest commercial podcast publishers in the U.S., with a rapidly growing business, competing at scale that has grown to 28 million monthly unique listeners worldwide and more than 150 million podcast downloads per month. We focus on premium high-quality content offerings and have distinguished ourselves by the large number of high-quality hits in our portfolio.

This is a valuable and rapidly growing part of digital broadcasting which grew at 44% in Q2 in spite of COVID-19.
4. Financial Metrics Should Improve Throughout The Remainder Of The Year

If April was indeed the low point of the year, then future results should rebound convincingly. We already know that professional baseball and football will be coming back, and I would think college football too.

Then, think of all the businesses starting up again and their need to build revenue back up. Advertising will certainly be one of the prime ways to achieve that goal.

In addition, the time between now and November should be full of political advertising adding about $20 million to revenues in the next few months.

Richard Schmaeling - Chief Financial Officer:

Previously, we stated that we expected our political revenues would be up year-over-year by over $20 million, and we expect about 60% of this revenue will run between September and Election Day.

And, it is expected FCF (Free Cash Flow) should be positive for the year in spite of the pandemic.

And, importantly, 98% of ETM debt is due beyond November 2024, and leverage is well below problem levels giving them more than enough time to recover.

As a result of these transactions, 98% of our debt matures in November of 2024 or later and our first lien leverage at the end of the first quarter was 2.5 times compared to our covenant of four times calculated in accordance with the requirements of our credit agreement. "

5. The Stock Price Has Dropped By More Than 60% In The Last 6 Months

ETM took the full-brunt of the pandemic reaction with thousands of their customers forced to cut back on advertising to help offset their customers' huge losses in revenue and traffic. Now is the time to start building that traffic back up and that should benefit ETM meaningfully over the next 6-12 months. And I fully expect ETM's stock price to reflect that over the same time period.

Conclusion

ETM has done an admirable job dealing with the business problems associated with the pandemic. Cutting expenses, expanding quality podcast material, working with customers even though they may have temporarily cut back, or even stopped buying from ETM, have all enhanced ETM's probability of recovering in full. ETM is a strong buy with a price target of $3 by the end of 2020 and $5 by the end of 2021.

ETM is a buy because it remains a viable, solid company that has dropped too far, too fast. I think they will 'Turnaround' and succeed over the next 6-18 months.

ETM is a buy under $1.50
Risks, Alarm Bells, And Red Flags

One problem with any media-related business is constantly evolving competition from a variety of media sources. It can change in a moment and new sources are constantly being invented.

In a volatile environment like we are facing now, cash is always a viable alternative.

In addition, there could be a recession coming or even a depression according to several economists. That may make profits elusive at best and provide losses at worst.

"Economic data in the near future will be not just bad, but unrecognizable," Credit Suisse economists led by James Sweeney wrote last week. "Anomalies will be ubiquitous and old statistical relationships within economic data or between market and macro data might not always hold... There is no blueprint for the current shock, and uncertainty about the extent of contagion and the economic consequences is overwhelming."

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