Over the last month or so, Dave Seyler and I have been dutifully sitting in on the earnings conference calls of the TV station groups and writing stories about them. However, upon reflection, we feel that we may not have given you a complete picture. At the same time, we realize that you don’t have time to listen to or read all the transcripts. So, as a reader service, we have produced a single composite transcript that seems to cover everything. Read on.
Hot Stock Tip Of The Day: Amalgamated Media
Unidentified Person: Ladies and gentlemen, thank you for standing by. Welcome to the Amalgamated Media Operations Corp. fourth quarter 2017 earnings conference call. Participating on the call today are Founder, Chairman and CEO Larson E. Whipsnade and CFO Egbert Souse.
Certain matters discussed on this call may include forward-looking statements regarding future operating results. Such statements are subject to a number of risks and uncertainties. You have the right to remain silent. Anything you say can and will be used against you in a court of law. Call your doctor if your depression worsens or if you have unusual changes in behavior or thoughts of suicide.
I would now like to turn the conference over to Mr. Whipsnade.
Whipsnade: Thank you, my dear. The last quarter of 2017 was a record-breaker for Amalgamated. We run AMOC with the interests of our shareholders front of mind, and posted record 4Q results, including a 75% gain in revenue with similar gains in free cash flow and EBITDA. We successfully integrated a flock of new stations gained via the merger with Federated Licenses Corp. during the prior summer, and they were accretive. I was told to say “accretive” in my opening remarks, so mission accomplished.
Now Egbert will give a little more insight into our numbers.
Souse: On a pro forma same-station basis, not including the Federated stations, revenue was down 25%, with similar decreases in free cash flow and EBITDA. Part of the problem was the typical unfavorable comparison with 2016’s political income; part of the problem was that two-thirds of our core advertising categories were in the toilet.
One bright spot was digital, where we saw a 47% increase in the quarter. If it continues at that clip for the next several quarters, it will exceed our Sunday morning revenue, which, by the way, now includes a cut of the collection plate from Mass for Shut-Ins. Bottom line: We think the internet is here to stay.
Increasing shareholder value remains a primary goal, and we hope to accomplish it this year by using the tax cut to buy up as many shares as possible and reduce the number of shareholders, who are whiny, ungrateful and tight with a buck. Seriously, when’s the last time you saw a shareholder pick up a check?
Whipsnade: Before we take questions, I would be remiss if I didn’t thank our more than 5,000 employees, especially the ones who will be pink-slipped over the next few months as we make good on our synergy promises and scour the NAB Show for any technology that reduces head count.
Unidentified person: With that, we would like to open it up to questions. The first question is from Daisy Mae Scragg of Dogpatch Investments.
Scragg: What’s the latest on programmatic selling?
Whipsnade: For crying out loud, don’t call it programmatic selling! It’s automated selling, and we are absolutely committed to taking the friction out of buying spot.
In that regard, we finally found the courage to fire Harriet in our traffic department in Cleveland and we have ordered new fax machines for every station, earning a bunch of Staples loyalty program discounts, which you will see reflected on the balance sheet.
Hershey Witalmods, Sweet Spot Brokerage: What are your feelings about reverse compensation?
Whipsnade. Well, they’re pretty complex, Hershey. For starters, the network dishes up some shaggy dog shows and calls it primetime entertainment, chasing the average viewer to some cheesy reality cable network, where we have to try to find them and haul them back just in time to see our lucrative local news programming.
On those very same cable channels, the cablers are telling the viewers that we are a bunch of money-grubbing extortionists, so taking all of that into account, it is a sheer joy to fork out more than 50% of our hard-won retransmission consent income in exchange for an occasional network sporting event.
Aafaaq Emoji, LOL Securities: It’s an even-numbered year. We all know what that means.
Whipsnade: Sure do — political! We are expecting big things this year. As we always do in election years, we will profit handsomely from unfettered campaign fundraising and the extreme depths to which politicians will sink in using TV to smear their opponents with lies and half-truths and to spread fear and loathing across the land.
And with all the heat that social media is taking for their role in the 2016 election, we are hopeful that the Russians will shift some of their spend from digital to TV. That would be a refreshing change, and perhaps the beginning of a long-term trend. Rubles, bitcoins, dollars — they’re all the same to us.
Klaus Frühstücksfernsehen, Doucha Bank Securities: I’m a little concerned with the spike in corporate overhead in the quarter.
Whipsnade: Let me answer that by not answering that. We are always looking for new efficiencies so that we can increase shareholder value. This quarter we are implementing a new one — the MMJ-AE. We’re retraining our MMJs to be more than just reporters and videographers.
Now, after they post to social media, do a live standup, produce packages for the website and the evening news, they look around to see if there are any businesses near the crash or fire and then try to sell them some advertising.
What’s great is they have the gear to shoot a commercial right on the spot. This program shows great promise so far, and the commissions our first MMJ-AEs are earning make us less embarrassed about the salaries we pay them.
Tilde Squiggle, Obfuscation Research: I have a question for Mr. Souse.
Souse: That’s Soo-SAY, accent grave over the “e.”
Alfalfa: Sorry. Mr. Soo-SAY. What’s the deal with auto? That category appears to be driving off a cliff.
Souse: That’s cute how you put that — driving off a cliff. You won’t be on the next call.
Hammer Alfalfa, Investorama: Congratulations on the Federated merger. That’s one less company I have to follow. Can you offer some color and cadence about your other top 10 core categories? How are they looking for 1Q?
Whipsnade. Well, Ham, the picture is not as bright as we would hope. Ambulance chasers, waxing salons and thrift stores are slightly up, but the other six — massage parlors, tarot card readers, lunch wagons, cash-only pain clinics, payday lenders and home video stores — are flat-ish to majorly down. And we fear the downturn in home video may be more secular than cyclical.
Souse: As for pacing, we have no reliable data. Pretty much, advertisers are wandering in with DVDs 25-30 minutes before they want to put something on the air, confident that there will be available inventory. Visibility is limited to the next couple of hours, generally.
Ambrose Toadstool, Fungus Capital: What about national core? Do you see any upside there?
Whipsnade: That’s a good one. Thanks for the laugh. These calls get too darn serious sometimes.
Gandalf Gray, Wizard Securities: What is the M&A market looking like, and what are your plans in the wake of your merger with Federated?
Whipsnade: There are stations on the shelf, but we only shop in the accretive section of the M&A store, where the selection is more limited. Our policy is to make only strategic deals, which enhance shareholder value, which roughly translates into grabbing any station we can get our paws on in the hope that somebody figures out how the hell we are going to cover the debt when the next recession hits.
Souse: Gandalf, it’s Egbert. I should add that we have a different take on duopoly than other groups. For us, it means having the same market in different states.
For example, we have a station in Greenville, S.C., and one in Greenville N.C. Unlike in a traditional duopoly, they may both be affiliated with the same network, and our savings on signage and other promotional materials are ongoing year after year.
We have similar duopolies in Columbia, S.C., and Mo., and in Columbus, Ohio and Ga. And if the FCC approves our bid for the ABC affiliate in Springfield, Ore., we will have a triopoly with our Springfield stations in Missouri and Illinois.
Further, we have filed to change the name of Yuma, Ariz., to Myrtle Beach, but so far it’s been a heavy lift since Yuma is in the middle of a desert.
We have time for one final question.
Eggs Benedict, AM Tissue Restoratives: Larson, I heard your comments on visibility, but despite that, can you give us any glimpse into your prospects for the remainder of the year? Anything at all?
Whipsnade: Thanks for the question, Eggs. And yes, I can comment. We have instability in the White House, intractability in Congress, and injustice in the Judiciary. We have a rapidly-changing retail market that has manufacturers and agencies spooked.
And we struggle for survival in a TV ecosystem that is really a jungle filled with depraved, vicious and merciless predators. I’m speaking here mostly about the networks’ affiliate relations departments.
So, I guess our guidance is: Pour yourself a cup a coffee, sit back and enjoy the show.