Entercom Communications Corporation (ETM)

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Entercom Communications Corp. (ETM)

Q1 2008 Earnings Call

April 24, 2008 9:00 am ET


Stephen F. Fisher - Chief Financial Officer & Executive Vice President, Operations

David J. Field - President, Chief Executive Officer & Director


Christopher Ensley for Victor Miller – Bear Stearns

Marci Ryvicker – Wachovia Securities

Bishop Cheen – Wachovia Capital Markets

John Blackledge – J. P. Morgan

Leland Westerfield – BMO Capital Markets

Tony Wible – Citigroup

Mark Wienkes – Goldman Sachs

James Goss – Barrington Research

Michael Kupinski – Noble Financial Group



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, CFO and Executive Vice President.

Stephen F. Fisher

Thank you everybody for joining us this morning for our first quarter earnings conference call. Before I turn it over to David Field I’d first like to note that today’s call will contain certain forward-looking statements that are based on current expectation 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 and we would refer you to our website at www.Entercom.com for a reconciliation of such measures and other pro forma financial information.

With that preamble I’ll turn it over to David Field, President and Chief Executive Officer.

David J. Field

Good morning everyone and thanks for joining us on today’s call. As you are aware we released our first quarter results this morning and also announced that we will be reducing our dividend from $0.38 to $0.10 per quarter. I will begin with my remarks for the review of first quarter results and the provide some thoughts on the second quarter before discussing the dividend change.

I’m pleased to report that during the first quarter we achieved strong growth in our bottom line financial results despite the challenging state of the US economy. Free cash flow per share surged 76% from $0.17 to $0.30 while adjusted net income per share increased 44% from $0.09 to $0.13. While same station revenues declined 4% excellent expense controls enabled us to reduce our same station operating costs by 3% and achieve a 3% increase in EBITDA for the quarter.

Here are a few other significant headlines from first quarter, we achieved excellent results in a number of our markets led by Austin, Buffalo, Madison, Norfolk and Providence. Local revenues were significantly stronger than national for the quarter. Digital revenues more than doubled to just over $2 million and now represent just over 2% of our revenues. I would also note that while we continue to find ways to improve our business model and prudently reduce operating expenses we are still significantly increasing our investments in our core growth initiatives. We continue to add personnel and other capabilities to develop our digital and business development efforts and we continue to see great growth and opportunities in these areas. We are achieving a significant reduction in our financing costs as well and have taken a number of steps to capitalize on current financial market opportunities and ensure that we lock in attractive borrowing rates for the next two years. Steve will provide some further color on this in a few moments.

Turning to the second quarter business conditions are marginally better than first quarter. Current basings are down low single digits. We expect second quarter same station revenues to be down low to mid-single digits versus last year.

Which brings us to the dividend, why did we make this move? First and foremost, and I want to be very clear here, we did not make this move because we felt we had to. We are not concerned about our ability to pay the dividend which represented just about two-thirds of our free cash flow in 2007. As I noted earlier on this call our free cash flow is growing and our leverage is stable. Furthermore we remain committed to the principal of returning significant free cash flow to our shareholders. So why did we make this move? The short answer is because we believe that putting greater emphasis on share repurchases in the near term is a wiser deployment of our free cash flow. Let me elaborate a bit on that answer.

When we first declared our dividend in the first quarter of 2006 our stock was considerably higher and the initial dividend yield was at a more normal level of approximately 5%. As our stock prices declined our yield of course has gone up and today it has reached a stunning and stratospheric 18%. This has resulted in a bizarre yet unintended consequence. To many investors the mere fact that the stock is yielding 18% serves as a red flag and likely dissuades them from owning the stock fearing an eventual reduction or elimination of the dividend or some other unknown or unforeseen negative event that might looming in the future or hanging out there.

This psychological overhang has become a distraction for investors and created negativity and uncertainty around our stock that is simply not constructive. In addition over the past nine quarters of dividends we have not attracted a significant number of yield based investors. In fact only one in 30 of our top holders as of the latest available information is a yield based fund. The fact that only a very small portion of our shareholder base is primarily yield oriented was a very important consideration as we discussed the impact of the dividend change on our investors.

Read the rest of this transcript for free on seekingalpha.com