Monday, May 18, 2020

CEO Field Believes Entercom Better Positioned For Recovery

Entercom Communications Corp. is trying to balance navigating the crushing financial impact of Covid-19 with reimagining what the company could look like in a post-pandemic world.

The Philadelphia Business Journal reports CEO David Field and Chief Financial Officer Richard Schmaeling offered a glimpse at both during last Thursday’s first-quarter earnings call. They said listenership could increase following the health crisis as many people will look to avoid public transportation in favor of their cars and that many of the company's more than 4,400 employees spread across 46 U.S. markets could continue to work remotely on a permanent basis.

Asked how traditional radio and podcasting listenership would fare if working from home becomes a more permanent aspect of everyday life, Field noted that those driving in cars account for 40% of the company’s listenership model but 60% comes from those at home and work. While ratings have been impacted by Covid-19, he said weekly data is already starting to turn around.

David Field
“But as we look forward, people are not going to be locked up in their homes, they’re going to be out and about,” Field said. “And I think that one big sea change event that we may see here is that mass transit and ridesharing are going to be a hell of a lot less popular going forward for quite some time than personal vehicles. And so we may see a surge in automobile ownership. And that probably leads to a greater amount of driving and a greater amount of radio consumption as a result.”

Field believe Entercom and the broader radio industry will be better positioned for a recovery than it was after the Great Recession of 2008. He said a decade ago, Entercom was a one-dimensional business. Now it has thousands of customers in its analytics platforms as well as its digital and podcasting platforms.

To mitigate the financial impact of Covid-19, Entercom implemented a series of cost-cutting measures in late March that included a “substantial” reduction in its workforce and temporary salary reductions impacting every full-time employee making over $50,000 per year. Field said by moving “quickly and deeply” the company has been able to reduce second-quarter operating expenses by more than $80 million, has cut 2020 capital expenditures by over 40% and suspended its dividend. Field also noted the company “took the precautionary step” of drawing down on its revolving line of credit in March and had $189 million in cash on hand as of March 31.

Rich Schmaeling
Schmaeling said the company is still trying to figure out exactly how much of the $80 million in cost savings it can retain after the pandemic. He said the layoffs alone will deliver annual savings of $30 million, and he sees other changes resulting from the pandemic that are making management rethink how it conducts business.

For now, Entercom's most immediate concern is staving off the financial impact of the pandemic. Despite net revenue increasing by 7% in January and February, the company finished with a 4% revenue dip for the first quarter. It declined to provide numbers for April but Field said, while there are no guarantees on the trajectory of the national recovery in these unprecedented times, April appears to be the bottom.

“May is a little better than April, and June is trending somewhat better than May,” Field said. “Furthermore, the tone and tenor of our advertiser conversations has improved. Auto is a good example of a business that has been largely idle for the past several weeks in most markets and is looking forward to getting back to work.”

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