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Entercom Communications (ETM)
Q3 2013 Earnings Call
November 05, 2013 5:00 pm ET
Stephen F. Fisher - Chief Financial Officer and Executive Vice President of Operations
David J. Field - Chief Executive Officer, President, Director and Member of Executive Committee
Previous Statements by ETM
» Entercom Communications Management Discusses Q2 2013 Results - Earnings Call Transcript
» Entercom Communications Management Discusses Q1 2013 Results - Earnings Call Transcript
» Entercom Communications Management Discusses Q4 2012 Results - Earnings Call Transcript
Stephen F. Fisher
Thank you, operator, and thank you, everybody for joining us this afternoon. By the way, for those of you with local and state elections, it is Election Day. I'd like to welcome you to Entercom Communication's earnings conference call. This call is being recorded, a replay will be available on our company website shortly after the conclusion of today's call, and available by telephone at the replay noted in our release, which is on the wires as of now.
With our notice of today's call, we ask that you submit your questions in advance of the call to the email address, firstname.lastname@example.org. In addition, I'm always available for any follow-up questions, if you wish to call me directly at (610) 660-5647.
This note, should the company make any forward-looking statements, such statements are based on current expectations and involve risks and uncertainties. The company's actual results could differ materially from those projected. Additional information concerning factors that could cause the actual results to differ materially is described in the company's SEC filings on Forms 10-Q, 10-K and 8-K. The company assumes no obligation to update any forward-looking statements.
During this call, we may reference certain non-GAAP financial measures. We refer you to our website at entercom.com for a reconciliation of such measures and other pro forma financial information. So with that, I'll turn the call over to David Field, President and Chief Executive Officer.
David J. Field
Thanks, Steve. Good afternoon everyone, and thanks for joining today's call. I'm working on a little bit of a sore throat here, so I apologize for that. I'll start with a brief summary of the quarter's financial highlights followed by some color on recent operational developments in 2014 before turning it over to Steve and your questions.
Third quarter revenues were down 4% to $98.4 million, while station expenses increased 5% to $66.9 million. As a result, adjusted EBITDA decreased 22% to $26.2 million. As we have guided on our recent earnings calls, the year-over-year growth in station expenses in third quarter was primarily due to a significant one-time expense credit recorded last year as a result of the industry-wide settlement with BMI. We expect expenses to decline slightly in Q4, consistent with the downward trajectory we have achieved over the past couple of years due to our prudent expense management. Steve will elaborate further on expenses in a few minutes.
We also continued to direct our substantial free cash flow towards debt reduction. During the third quarter alone, we cut our net debt by $20 million, and have now lowered our net debt by nearly $450 million over the past 6 years. Here are a few operational insights on the quarter. Local was down 5%, while national revenues were flat. August was the weakest month of the quarter -- down high-single-digits, while July and September were better. Political was down $1.1 million versus prior year. Our best-performing markets were Memphis, Portland and Sacramento. Our top-performing categories were insurance, professional services, telecom and medical. Auto was up as well. And total radio market revenues in the markets in which we compete, were up 1%. So we obviously lost share for the quarter. Plain and simple, our sales performance in third quarter was poor. We failed to get the job done and that is unacceptable. We lagged our radio peers by a significant margin, and failed to capitalize on our strong brands, ratings and marketing capabilities.
On our last earnings call in August, we made it very clear that we anticipated a weak third quarter, so our results should not come as a surprise to anybody. On that call, we also explained that our poor performance was attributable to weak sales execution. We elaborated on our sales issues, explaining that we have made a number of significant changes in our sales strategies and practices. And that while these changes will make us a stronger and more successful selling organization, they have also caused some disruption adversely impacting performance.
I also stated that the problems are entirely fixable, and that we are executing very well in the other facets of the business. Noting that our brands and ratings are in a great shape, and that we have invested millions in new personnel and capabilities in a number of key areas to bolster our growth potential. Specifically, we have made significant investments in our new brands, our digital platforms, and our marketing capabilities. So with that all said, let me bring you up to speed with how we're doing. Our operating team has been hard at work, and while we still have ways to go, I'm pleased to report that we have made significant progress in reinvigorating our sales performance. Over the past couple of months, core pacings, ex- political for the fourth quarter, have improved significantly from down high-single-digits to flat. The improvement has been steady and consistent. I would add that our internal sales activity metrics have also accelerated significantly over the past couple of months reaffirming our progress. While we have fought our way back to flat in core Q4 revenues, overall, with the impact of political included, the quarter is currently pacing down 5%. Obviously, we are not where we want to be yet. But we have made meaningful tangible progress in our numbers, and are accelerating momentum into what I believe, is a very promising 2014. I think there is good reason to be optimistic about next year, as we are positioned with the potential for solid topline and free cash flow growth. Revenue should benefit from the improving performance of our sales organization, and meaningful headroom in a number of our markets as we capitalize on our strong competitive position.