Entercom Communications Corporation (ETM)

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Entercom Communications Corp (ETM)

Q4 2007 Earnings Call

February 21, 2008 4:30 pm ET

Executives

Steve Fisher - EVP and CFO

David Field - President and CEO

Analysts

Marci Ryvicker - Wachovia Securities

Lee Westerfield - BMO Capital

John Blackledge - JP Morgan

David Miller - SMH Capital

Mark Wienkes - Goldman Sachs

Bishop Cheen - Wachovia

Barry Schwartz - Chatham Asset Management

Jim Goss - Barrington Research

Presentation

Operator

Good afternoon and welcome to Entercom's fourth quarter earnings release conference call. All participants will be able to listen-only until the question-and-answer session of the call. This conference is being recorded.

I would like to introduce your first speaker for today's call, Mr. Steve Fisher, Executive Vice President and Chief Financial Officer. Sir, you may begin.

Steve Fisher

Thank you, operator. And thank you everybody for joining us this afternoon. Before I give the obligatory disclaimer I would like to make a note that there is a new phone number for the replay of the conference call that's noted in today's earnings release, which we just sent out. And now before we begin the meet of today's call I would like to remind you today's call will contain certain forward-looking statements that are based on certain 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 would refer you to our website at entercom.com for a reconciliation of such measures and other pro forma financial information we might mention.

And now, we turn the call over to David Field, President and Chief Executive Officer.

David Field

Thanks, Steve. And good afternoon and thanks everyone for joining us on today's call. As usual, I'll provide some additional color on the results we released today and then share some thoughts on recent developments and business conditions.

First, I'm very pleased to report a strong quarter of operating and financial results. Starting with operation same station revenues grew fractionally during the fourth quarter. We held same station operating expense growth to less than 1% enabling us to achieve margin growth and an increase in same station operating income. We achieved this performance despite challenging industry conditions and a deteriorating overall macroeconomic environment.

In fact, our increase in same station revenues compares quite favorably with our markets, which declined 4% during the quarter. Strong revenue development efforts, excellent cost controls and solid execution across our station platform enabled us to achieve these results.

Here are a few other significant headlines in the fourth quarter. It is worth noting that we are able to grow revenues despite a $2 million decline in political revenues during the quarter. In fairness I should point out that we did experienced significant increase in revenues related to the Boston Red Sox World Series victory. But this additional baseball revenue was equal to only about 1.5 of the political decline.

Our results were enhanced by significant growth in our core initiatives of business development, digital and brands and content. In fact, digital revenues nearly doubled. Fourth quarter performance was led by excellent execution and strong results in a number of our markets led by Seattle, Boston, Greensboro, Norfolk, and Indianapolis.

Finally, national and local results were essentially equivalent. I'm also very pleased to report strong earnings and free cash flow growth for the company during the quarter. Entercom's free cash flow per share grew by significant double digits to $0.80 per share. In addition adjusted income per share increased from $0.37 to $0.40. The ability to generate outstanding free cash flow has always been one of radio's strongest characteristics. Unfortunately, investors appear to have largely discounted or ignored radio's outstanding free cash flow generation. It is well worth noting that even in a difficult economic environment; we are not only able to produce enormous free cash flow, but to grow it further.

As I mentioned earlier on this call and throughout our calls and presentations over the past couple of years, we remain vigilantly focused on accelerating our revenue growth through a number of core initiatives, including business development, digital and brands and content. We are making significant investments in each of these core areas. And our efforts are bearing fruit and we are becoming increasingly adept and effective by developing innovative multiplatform marketing programs for our local and national customers.

Rather than just to make these sweeping overviews, I thought it would be constructive to provide a couple of snapshots of how our new initiatives are changing the way we do business. My first example is KNRK, our Alternative Rock station in Portland. KNRK plays a highly organic mix of Alternative music, including a healthy dose of local and regional artists, and is very active in the local music scene. They have made a number of evolutionary innovative changes to enhance the brand's engagement with local listeners, across multiple platforms.

For example, when major Alternative bands play concerts in Portland, one of our listeners is given backstage access and a video camera to create a bootleg video of the concert experience through their very own eyes. The footages are then placed on our website, where other listeners can access it.

We have also created a new HD2 based radio station that plays nothing but local Pacific Northwest Indie bands, and is also screened on KNRK's website. These are just two of a number of innovations that exploit the uniquely compelling opportunities to further engage our listeners with our brands, and the results are pretty compelling. In 2007, KNRK achieved double digit growth in ratings and double digit growth in broadcast cash flow.

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