As we gear up to hear the quarterly numbers from all the public companies, we checked in with Galaxy Communications CEO Ed Levine. Levine recently announced his company would be purchasing a cluster of stations from Gamma Broadcasting in Massachusetts, so we asked him about that deal, where he’s getting his financing, how the economy was doing in his market, and political ad revenue. Here’s what he had to say…
Radio Ink: This week you announced a purchase of stations from Gamma. How long have you been working on that deal and why does this cluster/market work for you?
Ed Levine: This deal has been percolating for quite some time..two years in fact. The good news is that I became quite familiar with the operation and the people in that timeframe which only enhanced the desire to get it done. This cluster works because it’s only three hours from Syracuse and two hours from our Utica operation, so I can keep a good handle on things. I don’t mind driving as it allows me to actually listen to the stations, which is an undervalued benefit that more owners should do more of!
Radio Ink: Can you tell us what the multiple was?
Ed Levine: The multiple was a market multiple for an unrated market. Call it 5X. Fair deal on both sides.
Radio Ink: Do you expect to make any changes at the stations when you take them over?
Ed Levine: If it was a different manager and a different staff I might not have pursued this deal. I can’t say enough good things about the entire staff from Peter Barry to everyone I’ve met — and I’ve met just about everyone as we did a “town hall” last week when we announced the deal to the staff. The traffic manager, for instance, has been there for 40 years! These folks are lifers that are not looking to use this as a stepping stone and are deeply committed to the market and these radio stations.
The only “changes” I will be making would be “enhancements.” A new FM translator for instance. Some new community events. This baby is humming… My job is to let the staff do their thing and add a tweak here and there.
Radio Ink: What is your overall goal with Galaxy? How big would you like to get and do you have easy access to capital to get there?
Ed Levine: I’m comfortable with Galaxy at this size. Twenty radio stations in three markets is plenty for now. Plus, Pam Levine has the events division poised to increase its footprint all over the country, working with broadcasting partners on both the TV and radio sides. We could be in 40-50 markets tomorrow with our events division if we wanted to as the interest has been that high. Instead we will focus on 10-12 new markets for now and build it out intelligently. We want to make sure that we have the appropriate resources to execute flawlessly.
My financing plan is a bit different than what radio has seen over the past two decades. We intend to do most of the senior lending via SBA-backed loans at a very attractive rate. Pay down the loan balance over 8-10 years and make very nice investor returns along the way. Then, in 8-10 years, you have a company with little or no debt that becomes an annuity. No one can predict future trading multiples and no sane person would try. This plan makes future multiples largely irrelevant as the key investor metric is the cash-on-cash yield along the way. The multiple becomes the cherry on the sundae. We are seeing very strong interest on the banking side, and the investor side likes the stable cash flow of radio combined with the faster growth of the events side.
Radio Ink: What is the economy like in your market?
Ed Levine: The economy in CNY is definitely improving! As recently as July it was down double digits but the last few months it has been up 4-5% in Syracuse and even stronger in Utica-Rome.
Radio Ink: How have you done saleswise through the first three quarters?
Ed Levine: We are doing well in October, and November/December also look good. I still say flat to 1% overall for radio 2017 after two down years but I might be conservative. I hope I am.
Radio Ink: What categories are strongest? Which are the weakest?
Ed Levine: Auto, home furnishings are strong. Telecom is not.
Radio Ink: How are you doing with political revenue?
Ed Levine: Political is largely a rounding error for us as we don’t own TV or news/talk stations. Doesn’t change our life one bit but I hear from my TV friends it is not as strong as they hoped, so far.
Reach out to one of America’s best broadcasters, Ed Levine, email@example.com