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Entercom Communications (ETM)
Q2 2014 Earnings Call
August 05, 2014 10:30 am 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 Q4 2013 Results - Earnings Call Transcript
» Entercom Communications Management Discusses Q3 2013 Results - Earnings Call Transcript
» Entercom Communications Management Discusses Q2 2013 Results - Earnings Call Transcript
Stephen F. Fisher
Thank you, Shirley, and good morning, everybody. Thanks for joining us on this beautiful -- well, it is a beautiful sunny Tuesday morning in the Northeast. Those of you listening on the replay later may regret you're not with us today.
I'd like to welcome you to today's Entercom Communications 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 also available by telephone at the replay number noted in our release, which was issued this morning at approximately 8:30.
With our notice of today's call, we asked that you submit your questions in advance of this call to the email address email@example.com, and I have quite a few of your questions. In addition, I'm always available for any follow-up questions, if you wish to call me directly at (610) 660-5647.
Before we begin, I'd like to make a note that, 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 actual results to differ 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. And with that, I'd like to turn it over to David Field, President and Chief Executive Officer.
David J. Field
Thanks, Steve, and welcome, everyone. Thanks for joining today's call. I'll start with a brief summary of the quarter's highlights, followed by some color on recent developments before turning it over to Steve and your questions.
Second quarter revenues were down 1%, as results were impacted by sluggish business conditions that impacted a wide range of media companies during the quarter. Operating expenses increased 3%, primarily due to start-up expenses related to our new SmartReach Digital division, which we will discuss further in a few moments.
Here are some additional second quarter data points. The sluggish business conditions persisted throughout the quarter, although June was a bit better than April and May. Our best performing categories were insurance, telecom, TV and cable, grocery and professional services. Our best performing markets were Memphis, San Francisco, Milwaukee and Buffalo.
We continue to experience solid ratings performance across our markets. This is no accident but rather a direct reflection of our vigilant focus on investing in strong local brands and strong local personalities in our various markets. And our relative sales performance continues to improve sequentially as we outpaced our peers in most of our markets according to Miller Kaplan.
And circling back to my prior comment about Q2 expenses, which were up 3%, it is important to note that, that number includes our SmartReach Digital operations, which added about 2% to the quarter's expense increase. But I should add that spot reach had a negligible impact on Q2 revenues.
On a macro level, we are bullish on radio's future prospects. Broadcast radio fundamentals are strong, with growing mass of audience reach and a superior ROI to competitive forms of media. And Nielsen is now providing us with outstanding research, showing that radio is the #1 medium in the country from 5 a.m. to 5 p.m. daily, and that radio delivers a 6:1 return on investment, outperforming television and digital. To quote Ad Age, this is "an ROI double that of even the best results from any recent studies of digital or TV media."
With Nielsen as our research partner -- our research provider, we now have powerful information from the world's most respected research organization to support our efforts to get our fair share of ad spending. Currently, broadcast radio receives about 7% of ad dollars, while garnering roughly 23% of the public's time spent with media. Radio deserves a greater share of the media mix, and the Nielsen data provides an unprecedented and powerful catalyst for radio to be revalued by marketers and to be allocated a significantly larger share of ad dollars than it has historically received.
Now that said, while we believe radio can and should grow its share of ad dollars in future years, we are actively focused on developing growth opportunities that will enable Entercom to post meaningful revenue and cash flow growth, irrespective of radio secular performance. We continue to focus on investments in innovation, brand development and digital enhancements. Our goals are to improve our listener and customer experience and to enhance our growth potential.
I'd like to highlight 3 current examples of this innovation.
In June, we relaunched The End, our alternative station in Seattle, with a unique new business model. The End features the industry's first 2 Minute Promise, limiting commercials to 6 minutes per hour and never more than 2 minutes at a time. We were also revising The End's advertising model, focusing on a 360-degree millennial integration program, enabling customers to reach The End's valuable and hard-to-reach audience across our digital, radio and experiential platforms.