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Executives

Marty Shea - Investor Relations

Leslie Moonves - President and Chief Executive Officer

Fredric Reynolds - Executive Vice President and Chief Financial Officer

Analysts

Anthony DiClemente - Lehman Brothers

Lee Westerfield - BMO Capital Markets

David Miller – SMH Capital

Victor Miller - Bear Stearns

Mark May - Needham & Co.

Doug Mitchelson - Deutsche Bank

CBS Corporation (CBS) Acquisition of CNET Networks (CNET) Call May 15, 2008 8:30 AM ET

Operator

Welcome to the CBS Corporation teleconference. Today’s call is being recorded. At this time, I would like to turn the call over to Marty Shea, Executive Vice President of Investor Relations. Please go ahead, sir.

Marty Shea

Good morning, everyone and thank you for taking the time to join us for our discussion of the CNET acquisition. Joining me today are Les Moonves, our President and CEO and Fred Reynolds, our Executive Vice President and CFO. Let me note that statements on this conference call relating to matters which are not historical facts are considered forward-looking statements which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation’s news releases and securities filings.

Now I’ll turn the call over to Les.

Leslie Moonves

Thanks, Marty. Good morning, everybody and once again thank you for joining us on such short notice. I am greatly pleased to announce today that CBS has signed an agreement to acquire CNET Networks, Inc. for $11.50 per share. This is a cash tender offer representing a value of just under $1.8 billion. Upon completion, CBS will become one of the top ten most popular Internet companies in the United States with more than 54 million unduplicated unique monthly users.

Based in San Francisco, CNET Networks owns many of the Internet’s leading entertainment, news and information sites including CNET, ZDNet, GameSpot.com, TV.com, MP3.com, CNETNews.com, UrbanBaby, CHOW, BNET, et cetera. Upon closing, CNET sites will be combined with CBS’ great stable of dynamic and growing interactive businesses which include CBS.com, CBSSports.com, CBSCollegeSports.com, CBSNews.com, et cetera; as well as a distribution system of the CBS audience network which is made up of more than 300 partner websites and reaches 82% of all online users in the United States.

So from entertainment to news to music to local services, CNET and CBS together will have the most recognizable, trusted, premium brands that offer us an attractive younger demographic and brands that fits nicely together, now and in the future.

As you know, we’re always looking for strategic acquisitions in higher growth businesses. The strategy is to target companies that complement our strengths in content, particularly interactive content. We’ve been extremely disciplined about how best to deploy our strong free cash flow and there are very few opportunities to acquire a profitable, growing, well-managed Internet company and CNET is certainly one of those.

Here is why we think CNET is such a terrific fit with CBS:

First, as we have seen, the two companies have highly complementary online businesses. Combined as a premier online content company, our footprint in the categories of news and information with CBSNews.com and CNET.com and BNET.com; in sports with CBSSports; in entertainment with CBS.com and TV.com; in music with MP3.com and Last.fm and CBSRadio.com; and video gaming with GameSpot virtually put us in every single part of the media sector in a major way.

Second, CNET provides a platform and the scale to not only boost our existing interactive businesses but to launch new and fast-growing sites as well.

Third, they offer us significant exposure to the fastest-growing advertising sector. CNET brings a large, talented online sales team and a new set of technology in video game advertisers. At the same time, CBS brings big online events like March Madness OnDemand and the Grammys online. We believe our combined size will accelerate the growth of CNET’s brands through CBS’ strong relationships with some of the largest advertising categories including automotive, retail, financial services and pharmaceuticals.

We love the international opportunities as well, especially having a profitable footprint in China. With CNET added to CBS internationally, including the United States, we’ll have about 200 million monthly uniques worldwide.

Finally, the people at CNET are a key part of our interest in this great company. Leading the way, Neal Ashe is as good an operator as there is in new media and we are thrilled to have him joining our team. Working with Quincy Smith and his team we will have some of the best talent in the industry working with some of the most exciting brands in the interactive space. Going forward, we are truly excited about the possibilities of what the companies can do together.

CNET’s 2007 revenue and EBITDA of $406 million and $79 million are expected to grow to revenues of $450 million and EBITDA of $92 million in 2008. As you look ahead, we think CNET and CBS Interactive have the ability to grow to a combined $1 billion in revenue by 2010 and 2011 with very attractive margins. In order to highlight the dramatic growth rates we expect, we intend to break out all of our combined activities into a single interactive segment after we close.

With that, I’d like to turn over the call to my colleague Fred Reynolds who along with Lou Briskman and Joe Ianniello and their teams were able to execute this deal brilliantly. I appreciate all of their hard work. We tirelessly put this deal together led by Fred, so now I’ll turn it over to him.

Fredric Reynolds

Thank you, Leslie and again, good morning. The financial terms of the acquisition is CBS will commence a cash tender for all the outstanding shares of CNET. The purchase price is $11.50 and CNET has approximately 155 million shares outstanding, bringing the total equity value of the transaction to just under $1.8 billion.

A minimum condition to the transaction is over 50% of CNET shares must be tendered to CBS. There is a break-up fee to CBS of approximately 2% and the transaction will be financed by our excess cash that as you know we have on our balance sheet. The tender offer will take about 30 business days and we expect to commence the tender late next week.

Assuming over 50% of the shares have been tendered, once the tender offer expires we would do a merger of those remaining shares outstanding that have not been received during the tender period.

While the tender and closing are subject to customary regulatory review due to the complementary nature of our businesses, we are quite comfortable with closing this transaction. In fact, we expect the acquisition to be completed in the third quarter of 2008.

The financial attractiveness of CNET to CBS is based on their strong brands -- really category-defining brands -- and significant reach. Ad revenues represent almost 89% of CNET’s total revenues with 77% of those revenues coming from the United States.

Acquiring CNET will be earnings per share and free cash flow accretive from the very start. We expect the acquisition to achieve an after-tax internal rate of return of over 13%, using fairly conservative growth and synergy assumptions.

As a result of this transaction, our debt leverage actually decreases and our coverage ratios improve from our already strong balance sheet position. The acquisition is very affordable and the acquisition will have no effect -- no effect -- on our current dividend which as you know last month we announced we are raising our dividend by $0.02 a share per quarter and this transaction will have no impact on our ability to increase our dividend into the future.

Going forward, as Leslie said, we would expect our combined interactive businesses to grow their revenues and expand their profits in the mid to high teens range for many years to come. We expect this to be a very fast-growing segment of our business with high growth in revenues mid teens, and margin expansion.

With that, we’ll open the call for your questions. Thank you.

Question-and-Answer Session

Operator

Your first question comes from Anthony DiClemente - Lehman Brothers.

Anthony DiClemente - Lehman Brothers

First of all, you have adjusted EBITDA guidance of 3% to 5%. I’m wondering if that guidance holds excluding the CNET acquisition.

On strategy, thinking about the business in terms of content and distribution Les, you’ve spoken a lot in the past about your ability to distribute the CBS video content under Quincy’s leadership, taking an open architecture stance in terms of distribution.

Does this correlate with that strategy? How does this fit with your premium video content distribution strategy? Is this simply a bolt-on Internet acquisition? How does it fit with your strategy around the distribution of your TV content?

Leslie Moonves

Anthony, I’ll answer the second question first and then Fred can do the first question. This absolutely fits with our strategy of having our content everywhere and anywhere we can. The audience network will only be enhanced by our being part of CNET, as well. It does not preclude our content to be distributed as widely as possible, as well as the opportunity to sell to brand new advertisers.

So strategically this fits perfectly with what we’re doing. Once again, it’s about premium content, premium brands just expanded over a wider universe. We think this has propelled us years ahead of what we had been doing in the past and that’s why we did it. So strategically it’s totally a great new distribution system that will help us in the future.

Fredric Reynolds

Anthony, the guidance was excluding any acquisition or divestitures. The guidance was our core business.

Anthony DiClemente - Lehman Brothers

Just to be clear, for most of the CNET or all of the CNET properties, can you talk about specifically which ones you will be distributing the CBS TV content on and which ones you don’t or do you not have an idea of that yet?

Leslie Moonves

Anthony, we are obviously integrating the interactive properties of both companies together. The CBS audience network will still be distributed to over 300 websites that they are being distributed to now. We will have a wider advertising base. Once again, we will take these on a case-by-case basis where they can be appropriate. Some of our sports content is all over the place and in as many places as possible. It’s about integration right now.

Fredric Reynolds

Anthony, I would add that TV.com which is part of CNET has a very significant reach of some 15 million uniques and so that will be another chance. As you know, video drives the users. So this is a terrific opportunity for us in addition to the audience network we have.

Operator

Your next question comes from Lee Westerfield - BMO Capital Markets.

Lee Westerfield - BMO Capital Markets

If you can talk a bit about the ad platforms that are in place now at your various interactive assets between CBS Interactive assets and CNET’s may be integrated over the next coming 18 months.

Fred, you mentioned that this transaction actually trims your debt leverage. Therefore does this presage forthcoming acquisitions in the same arena, gaining interactive acquisitions on a go-forward basis? How should we be thinking about areas of your balance sheet yesterday versus today versus tomorrow?

The third question is related to the embedding of video and the opportunity to embed video across different portions of your interactive assets, especially going into CNET now. What are you thinking in that area?

Leslie Moonves

In terms of embedding video, obviously we have a ton of video content at CBS in terms of our television content, our sports content and our news content. We are a video company and we’ll have the ability to add our entertainment content to TV.com, our news content to News.com, et cetera, and SportsLine CBSSports.com will continue to be a major video player which is an advantage we have and something that the CBS assets could add to CNET, although they do quite a bit of original video content as well.

In terms of the ad platforms, there are a number of existing plans in place, as you know. CNET just did a deal recently with Yahoo! which obviously will be incorporated into a lot of things that we do and we will be continuing along those lines.

There are different systems in place in both companies and we’re going to take the best in class and combine them. There are certain clients they have at CNET that we don’t have and as I mentioned, there are certain brands that they have never even dealt with that we do many, many millions of dollars of business with across our platforms in categories like automotive. So the ad platforms will be looked at very carefully and as I said, it will be best in class.

Fredric Reynolds

Lee, I would say that we’re going to look to a common ad platform. We think that they have a really good yield management system. They also have 250 people in their salesforce added to our salesforce. As Leslie said, our sales force is really on the big events like March Madness OnDemand and Grammys.

They have a good ad-serving technology as we do. So this is really a combination of the best and brightest, because we’re doing a lot of new platforms so we’re state of the art. They have done it and so combined we should have a state of the art ad platform, yield management and ad serving.

As far as acquisitions, I think we’ve always been very prudent. I think having the scale of CNET allows us to bolt-on other sites that might be attractive for us. But I don’t think we see anything of any size or scale out there, certainly not of this size or scale.

Our balance sheet will remain strong and again, we want to emphasize that we want to make sure that both constituencies, those that want the return of capital through dividends and the constituencies that want growth, that we serve both of them. I think this is the biggest one we see right now.

Leslie Moonves

To have the balance sheet that we have offers us the ability to move quickly. The dividend we will continue to feel very strongly about and we’re in very good shape.

Operator

Your next question comes from David Miller – SMH Capital.

David Miller – SMH Capital

Fred, on the loose guidance that you gave with regard to numbers for CNET in ‘07 and ‘08, correct me if I’m wrong, I think you said ‘08 revenue is $450 million, EBITDA $92 million. That’s a pretty good growth rate on the EBITDA line.

Is that driven mostly, would you say, or will that be driven mostly by back office synergies, cost management, eliminating redundancies? Or is that all revenue synergies combined with your existing properties? If you would care to comment, that would be great. Thanks.

Fredric Reynolds

David, as you follow CNET, that is the guidance that they gave in their full year 2008 and they reaffirmed it in the first quarter. The range was $450 million to $460 million in revenue, $88 million to $96 million on EBITDA. As you may know, they had a number of costs in ‘07 that related to backdating of options and other issues that they were dealing with that were probably out of the ordinary.

But again, I think they are very excited about the agreements that they have signed, the performance of the site driven by the GameStop, by CNET.com, the re-launch of BNET. As you know, they also in the first quarter announced a reduction in force. So that’s baked in for the full year.

Again, we’re comfortable that they will hit their targets and so that’s what Leslie was referring to earlier about what their expectations are for ‘08. They are on track to achieve that through the first four months of the year. That was the basis of those comments.

Leslie Moonves

Some of that increase is due to the new Yahoo! deal. It does not include the combination of us and all the new stuff. That was their guidance.

David Miller – SMH Capital

Do you think that this deal ends the current proxy contest going on with CNET right now?

Leslie Moonves

The board of directors at CNET is very excited about our deal. I got a very gracious call from him last night, being thrilled with how this was all handled and looking forward to letting us take over their baby. We are looking forward to that.

Operator

Your next question comes from Victor Miller - Bear Stearns.

Victor Miller - Bear Stearns

Fred, you talked about breaking out a separate line item for this new business, including all the CBS, now CNET assets. Could you let us know on a pro forma basis as you pencil it out, what does it look like in terms of percentage of revenue and cash flow generated from this new line item?

Secondly, when you talk about the growth being in the high to mid teens for the foreseeable future are the CNET operations growing at the same rate, above that, below that? What is the operating leverage so we can actually think about what CNET’s cash flow growth would be relative to the top line growth? Thank you.

Fredric Reynolds

Hi, Victor. We will make this a separate segment, as Leslie said at the outset. We think it will put a spotlight on our fast-growing interactive businesses. Right now to do pro formas I’d rather wait until I know when the transaction closes but our expectation is it will be the third quarter. I mean, there’s an outside chance it could be at the end of the second quarter. So I think again you’ll see the size and scope of our existing CBS interactive along with theirs and it will be a very attractive segment.

I think the growth rate clearly is they’re going to grow; CNET standalone now would probably grow high single-digits, low double-digits revenues. The costs would grow at a fraction of that. The way they have it, it grew with the reductions they took.

You add in our sites, which are growing faster off a smaller base, we are growing our ad revenues in interactive in the 25% to 30% and as you know we’re investing a lot of that growth rate and revenues back into growing new sites. That reinvestment will be now on a bigger platform so we should be able to leverage that because of their reach.

It’s going to be driven by scale, their scale and our scale, our higher revenue growth and their attractive revenue growth. I think that’s why we’ll see, again, mid teens revenue growth and my expectation is we would certainly see that in profit growth, if not a little bit higher as we stop reinvesting in some of the sites and they start producing more cash flow.

Operator

Your next question comes from Mark May - Needham & Co.

Mark May - Needham & Co.

I have covered CNET for several years and the revenue growth and the margins of the company have been disappointing for the last couple of years. Revenue growth last quarter was 3% year over year and EBITDA margins were 2%. I do think the guidance implies an improvement from those levels right now; second half of the year EBITDA margins of 29% in their guidance and they did 2% in Q1 and are guiding to 16% in Q2.

So the question is what are your strategies or plans for accelerating revenue growth from where they’ve been recently to this high single-digit to low double-digit range? How do you expect to improve the margins from where they’ve been at least in the last couple of quarters?

Fredric Reynolds

We think that they have obviously the assets to do that. They have revamped a number of sites. I think combined with us, as we are trying to articulate, we reach a different set of advertisers. They currently have less than 2% of their revenue in automotive, less than 2% of revenue in financial services, less than 2% of revenue is in pharmaceutical.

Those are areas where we are very strong because of the big events that we have. As we mentioned, if you don’t follow CBS, it’s like March Madness OnDemand, the Grammys, sports. We think that combination, opening the door to these very attractive demographics they have because the people on CNET.com, the game sites, really have attractive demographics for these other advertisers they’ve not been able to reach.

On the other hand, I think they are able to reach a number of advertisers that we don’t reach, particularly consumer electronics companies, game sites, other more technical sites. So I think the combination is going to be great on the top line.

There will be obviously efficiencies. There won’t be any public company costs. We think there will be certainly, as we have said before, common ad platforms. We’ll be able to make significant leveraging of both companies’ scale. We’ll be able to, on the CBS side, take advantage of their scale. So I think the combination should result in faster revenue growth and expenses growing at a fraction of the revenue growth.

Operator

Your final question comes from Doug Mitchelson - Deutsche Bank.

Doug Mitchelson - Deutsche Bank

I am going to ask a bit of a strange question. I think you guys might think since you just cut this deal, but looking at what’s going on broadly in the Internet with Microsoft at one point pursuing Yahoo! and maybe they’ll do that again, if you look out three or five years, obviously you just stepped up your scale vastly. But do you think this will be enough scale relative to where the Internet’s going when you look out a few years? What’s in your future plans? Is this just one step or is this the last step? Thanks.

Leslie Moonves

We have just tripled the size of our interactive activity. I think that’s a pretty big leap to the future. Are there possibilities to do some tuck-in content acquisitions that may fit with our overall branding? That’s possible. As we’ve always said, we look at everything, but right now we have taken a major leap forward to become a top ten Internet company for the future. We are very happy with the cards we’re holding now with CNET.

So to predict what will happen five years from now, I’m having trouble predicting what happens five weeks from now. This is a big step for us and we’re very, very excited about it.

Fredric Reynolds

Doug, I would add that, listen, this is obviously just step 1. But I think the other steps are really powering our content through this reach. It’s not about other acquisitions or needing to do something, that we’re missing something. Now we have got the size and the scale that we needed to just power our content. We are a content machine. We think that’s what is going to drive this. Maybe we’re in the top 10 now. Maybe we’ll be in the top 5 in a five-year period but we don’t see acquisitions doing it, we think it is just taking advantage of this.

Leslie Moonves

We just want you to remember at the end of the day premium content with these brands through a major online distribution group is a great future for us.

Marty Shea

Thank you very much, everyone, for joining us and we’ll be around for the rest of the day to answer your questions.

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