Arbitron PPM Costs Hit Financial Results

US radio measurement specialist Arbitron achieved $310m in revenues in 2005, up 4.5% on 2004. However, costs and expenses - mainly on its Portable People Meters (PPMs) and Project Apollo multimedia measurement pilot - rose by 5.2%. The company expects ongoing investment in PPMs to 'negatively impact' next year's financial results.

The key figures for the fourth quarter and the year as a whole are as follows (figures in brackets show the change compared with the same period a year ago).

Fourth quarter 2005
Revenue $75.3m (+3.3%)
Costs and expenses $63.8m (+2.7%)
Earnings before interest and income tax expense (EBIT) $17m (+0.4%)
Net income $11.2m (16.2%)

Full year 2005
Revenue $310m (+4.5%)
Costs and expenses $216.3m (+5.2%)
Earnings before interest and income tax expense (EBIT) $101.4m (+3%)
Net income $67.3m (11%)

The increase in costs and expenses in 2005 was largely due to the PPM trial in Houston, and the rollout of the Project Apollo pilot. A number of national and regional advertising agencies, accounting for almost 70% of the national ad dollars spent on radio, have now signed up to use the PPM system (www.mrweb.com/drno/news5044.htm ).

The company also recently announced that it has reached its goal of recruiting 5,000 households for the Project Apollo pilot panel, which aims to measure participants' multimedia exposure and shopping behaviour (www.mrweb.com/drno/news5061.htm ).

According to Stephen Morris, President and CEO of Arbitron, 'The PPM-based growth initiatives - deploying the PPM as a local market ratings system and developing the Project Apollo service - both made significant progress in terms of marketplace acceptance in 2005.'

CFO Sean Creamer points to the ongoing costs of the two major initiatives: 'Moving PPM from concept to commercialisation will require that we invest incremental dollars to create the fixed cost infrastructure that will support a large-scale rollout of the PPM as a local market ratings system. In addition, we must also spend incremental dollars to lay the groundwork for Project Apollo.'

For the full year 2006, Arbitron expects revenue to increase between 6 and 8%. For the first quarter of 2006, it is also predicting a 6 to 8% increase in revenue. However, Creamer states that the investments in the PPM business, coupled with the required expensing of stock options in 2006, 'will negatively impact our financial results and will make year-over-year comparability difficult'.

The company also announced that its Board of Directors has authorised a stock repurchase program under which the company may buy back up to $70m in shares of the company's common stock. Shares may be purchased in either open market or private transactions at prevailing market prices until December 31, 2006. Arbitron previously conducted a $40m stock repurchase program for the year ending December 31, 2005 and a $25m program for the year ending December 31, 2004.

The company is online at www.arbitron.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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