Entercom Swallows A Bitter Earnings Call Pill
After the market closed on Tuesday Entercom announced its first Earnings report since the merger with CBS Radio, and let’s just say it wasn’t pretty. Same station revenue declined 7.5% YoY, which is a pretty big miss compared to a radio industry which has essentially been flat for the past few years. Entercom’s biggest pain points included a $12M shortfall from United States Traffic Network, who buys inventory from Entercom and resells it on the open market. USTN itself is going through a sale and reorg, so their business disruption is having a ripple effect downstream on Entercom. Other downward factors included half a dozen format flips in major markets which usually requires an ad-free stunting period, and the elimination of “cash infusion deals” with barter shops which are used to prop up broadcasters who have short term cash needs.
Despite the flurry of bad news I respect Entercom CEO David Field for getting all the dirty laundry out on the line early. Right now Entercom is trying to digest the legacy infrastructure of CBS Radio (insert image of a snake trying to swallow a rat here), so it will take time to reset operations and begin running its own strategy. Field indicated that investors would see the turnaround start to happen during the back half of 2018. For Entercom’s sake I hope he’s right. In the two days since the Earnings call the stock has dropped an astounding 26%, so many nervous investors are already starting to jump ship.