Entercom Shares Plunge On Missed Revenue

Wall Street punished radio giant Entercom Communications on Wednesday as second quarter revenues fell short of projections. Entercom stock cratered 42 percent in morning trading to $3.04 a share.

A slowing second-quarter advertising market and weak ticket sales to Entercom events produced a 2.3 percent boost to revenues in the second quarter, which was significantly lower than the 4 percent that Entercom CEO David Field had projected earlier this year

Investors seem to have lost patience with Entercom, which acquired the former CBS Radio empire in 2017 with plans to create a national radio juggernaut of news and sports, reports The Philadelphia Inquirer.

David Field

But the combined Entercom/CBS Radio has repeatedly run into problems merging the two radio companies in a difficult business environment for legacy media platforms. At the time the deal was announced in early 2017, Entercom’s stock traded between $15 and $16 a share.

An investor fear is that Entercom could drown in its debt if it can’t grow revenues and service its debt. Based on Wednesday’s trading, Entercom, the nation’s second largest radio company, had a stock-market capitalization of about $465 million but debt of $1.6 billion.

Entercom chief financial officer Richard Schmaeling said that the company should make progress cutting its debt by late 2020. He also said that expenses -- though they rose slightly in the second quarter -- would decline slightly for 2019.

“We are certainly sobered by the slowdown” in the second quarter, Field said in the conference call.

But Field also believed there was a “complete disconnect” between how Wall Street sees the company and what those inside Entercom view as its prospects, particularly with its new digital offerings, podcasting and national audio sports network.

Field noted in the conference call that the former CBS Radio stations such as those in Philadelphia performed better than the legacy Entercom radio stations. Entercom owns 235 radio stations nationwide.

Second Quarter Highlights

• Net revenues for the quarter were $380.7 million, up 2.3% compared to $372.1 million in the second quarter of 2018
• Total operating expense for the quarter was $315.9 million, which included $4.9 million in merger, restructuring and integration costs and $1.9 million in expense related to the Company’s issuance of 6.5% senior secured second-lien notes. This compared to $344.6 million in the second quarter of 2018, which included $10.9 million in merger, restructuring and integration costs and a $29.0 million impairment charge.
• Operating income for the quarter was $64.8 million, compared to $27.6 million in the second quarter of 2018
• Net income per diluted share for the quarter was $0.19, compared to $0.01 per diluted share in the second quarter of 2018
• Adjusted EBITDA for the quarter was $87.6 million, up 7% compared to $82.1 million in the second quarter of 2018