That’s the conclusion Wells Fargo analyst Marci Ryvicker came to after meeting with Entercom CEO David Field and CFO Rich Schmaeling this week. The CBS stations have taken a beating in the press over the past 18 months, since the merger was announced. When the CBS Radio financials finally became public (CBS Corporate never broke them out), it was clear revenue was declining. In addition to that, many were saying the stations were being mismanaged and there was no leadership at the top. Ryvicker has high hopes for the stations now that Entercom has taken control of them.
Ryvicker, who covers Entercom for Wells Fargo, spent time with senior executives at Entercom during investor meetings in New York City. It was her first time to have face-to-face meetings with Field and Schmaeling since the merger closed. She says Entercom has been the most popular stock for Wells Fargo over the past few weeks, with most incoming calls seeming to be on the long side.
After meeting with Field and Schmaeling, Ryvicker believes CBS Radio is fixable; the synergy numbers the company announced are most likely on the conservative side and there is likely to be more upside potential than downside risk to this model.
Regarding the former CBS Radio stations, Ryvicker concludes the fixes are 100% doable. “There isn’t one major overhaul per say, but rather little changes that the management team has started to implement. These include some operational changes like bringing in best-in-class market managers and investing in research/analytics to find programming ‘holes’ in its markets, to cultural changes like actually listening to the needs of its staff and visiting each market cluster. While some might call this ‘touchy-feely,’ we call it low hanging fruit (or HIGHLY achievable).”
And about the $100 million in synergies the company announced on its last earnings call, Ryvicker says that number sounds conservative. “We don’t know by how much, and management was in no way ‘hinting’ at any specific number. But management’s body language suggested that the synergies could be larger and be recognized sooner than the company’s current guide (which we remind you is gross synergies of $50MM in ‘18 and $90MM in ‘19 – of which $30MM will be reinvested for growth).”
Everyone knows radio industry revenue has been flat in recent years. CEO David Field is hopeful, with his company now at scale, he can change that trend. Entercom’s recent marketing campaign proves Field is willing to do more than simply echo what too many radio executives have been repeating for too long, that radio needs to tell a better story. He’s actually going out to the advertising marketplace and telling radio’s story.
Ryvicker writes to investors that the revenue growth will likely come from data analytics, scale, and sports. “The newest and most impressive info, for us at least, was Entercom’s investment in data and analytics – specifically, Entercom Analytics, which is a tool that quantifies the impact of its radio campaign for advertisers. We absolutely think a bigger platform allows for this type of investment. We also may not have totally realized the importance of scale in sports – this alone has opened the door to CMOs of companies ETM does not otherwise talk to.”
Entercom CEO David Field has been chosen the Radio Ink Executive of the Year for pulling off one of the biggest mergers in radio history in 2017. He’ll be featured on the cover of the January 8 issue of Radio Ink Magazine.