Specifically, net revenues grew +1%, coming in at the high-end of the “down 1% to up 1%” pace management provided on its Q3’19 earnings call. Excluding political, revenues were up 3%. Given the results include contributions from its recent podcast acquisitions, we are not sure how underlying core advertising revenues came in – but given the strong result, we venture to guess that core came in on the high end of the “flat-to-up 1%” core guide. We hope to get more color on organic trends on the call.
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CMLS had a solid Q4 print, with revenues coming in-line and EBITDA beating by 13% on lower expenses. But, the Q1 revenue outlook was a bit disappointing, as same station revenues ex. political is pacing “down LSD” – implying that spot and network (which we define as “core”) is pacing down in the 3-4% range, lower than our -1% expectation. The weakness in core seems to be broad based across local, national and network, a slowdown from what we saw in most of 2019. With the core business continuing to be challenged, we find it tough to be excited about this name – hence, our Peer Perform rating.
The hottest names this week were WWE (706 bps better than the S&P), SSP (493 bps), DISH (338 bps), NFLX (228 bps), and ATUS (185 bps). DISH’s print was hot – with really nice financials (revenue and EBITDA beat Consensus by 300bps and 1,600bps respectively) and satellite sub additions (beat Consensus by 22k) outweighing the large Sling subscriber miss (below Consensus by about 200k). Unfortunately we didn’t get a whole lot of new news on the wireless front, which is what can (and probably will) really move the stock when the time comes.
After reviewing our model ahead of the Q4 print, we fine-tuned our estimates to better incorporate the impact of CMLS’s recent divestitures / swaps (5 in total), all of which closed in Q2 and Q3 of 2019. Specifically, we tweaked the cadence of our 2020 quarterly estimates to better incorporate the timing of the transactions. Net of all the changes, our 2020 revenue and EBITDA stay pretty much the same – declining by less than 30bps each, as shown in Exhibit 1 on pg. 2. With our FY estimates staying relatively intact, our YE 2020 price target of $19 remains the same.
BBGI’s Q4 print was mixed, as reflected in today’s (02/18/20) stock price performance, -3% vs. S&P -0.3%. Revenue beat by ~200bps, but EBITDA came in light due to higher expenses – a recurring theme for this name. Q1 revenue, on the other hand, is pacing in-line with our estimate with higher political offset by lower core. As we look out to the rest of 2020, we expect BBGI to better monetize its investments in digital but worry that the rev. gains will again be offset by higher expenses. As a result, we raised our 2020 and 2021 revenue by ~1% each, but keep our 2020 and 2021 EBITDA unchanged. We maintain our Peer Perform rating and $4 YE 2020 price target.
On an as-reported basis (which includes the impact of the WDMK-FM as of Aug. ‘19), net revenues beat at -4.6% vs. our -7.1% est. and the “down HSD” pace mgmt. provided on its Q3’19 earnings call. The y/y decline in revs was mostly due to tough comps from the absence of political. Ex. political, the release characterized the Q4 ad environment as “healthy,” with “six of our markets generating y/y increases.” Our sense is that core adv. was still down organically but ended the year better than expected given the top-line beat.
The NFL’s TV rights negotiations are about to HEAT UP. Standing in the way is the collective bargaining agreement (CBA) between the league and the players, which the NFL reportedly hopes to wrap in the next few weeks (despite the CBA running through the 2020 season, or another 18 months). According to today’s WSJ, the NFL wants to lock down a new deal ASAP, as ratings were strong this year on the back of young new stars – plus the league wants to get in front of any potential economic downturn or the 2020 Presidential election, which could dampen ratings and hurt its negotiating leverage (i.e. ratings fell 8% in 2016). From the studios’ perspective, we think getting a deal done sooner rather than later would remove an overhang for the stocks – as some investors still question if a meaningful portion of the rights will go to digital players (we strongly disagree).
The hottest names this week were ETM (866 bps better than the S&P), MDP (652 bps), NFLX (375 bps), SSP (299 bps), and GTN (199 bps).
We had a chance to tour ETM’s Studio down in TriBeca with a group of investors, followed by meetings with management (CEO CEO David Field, CFO Rich Schmaeling, Chief Digital Officer J.D. Crowley and NY Regional President, Susan Larkin). Our biggest takeaway is how the narrative for the company has finally taken a turn. We didn’t get a single question about USTN or legacy CBS Radio stations. Rather, investors were most interested in ETM’s multi-platform audio strategy – i.e. how ETM plans on integrating its newly acquired podcast platform with its core business, radio.com and its analytics group – along with capital allocation (some thought ETM should be buying back more stock) and the 2020 political opportunity.
We hosted an investor meeting today (1/28) in NYC with ETM’s CEO David Field, CFO Rich Schmaeling, Chief Digital Officer J.D. Crowley and NY Regional President, Susan Larkin. Overall, we came away feeling more confident about ETM’s digital strategy - we highlight the important takeaways below.
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