Audacy, Inc.

David J. Field - CEO, President, Director and Member of Executive Committee Stephen F.

Fisher - CFO and EVP of Operations

Thank you, operator, and thank you all for joining us today, Monday morning. I’d like to welcome you to Entercom Communications third quarter earnings conference call.

This call is being recorded. And a replay will be available on our Company Web site shortly after the conclusion of today’s call and also available by telephone at the replay number noted in our press release this morning.

With our notice of today's call, we ask that you submit your questions in advance of this call to the email address provided in the release. In addition, I'm always available for any follow-up questions, if you wish to call me directly at (610) 660-5647.

In today’s call, should the Company make any forward-looking statements, such statements are based on current expectations and involve risks and uncertainties. The Company's actual results could differ materially from those projected.

Additional information concerning factors that could cause such results to differ is described in the Company's SEC filings on Forms 10-Q, 10-K and 8-K. The Company assumes no obligation to update any forward-looking statements.

During this call, we may also reference certain non-GAAP financial measures. We refer you to our Web site at entercom.com for a reconciliation of such measures and other pro forma financial information.

So with that housekeeping, let me turn it over to David Field, President and Chief Executive Officer.

Thanks, Steve, and good morning, everybody. Thanks for joining today's call.

I'll start with a brief summary of the quarter's highlights, followed by some color on recent developments before turning it over to Steve and your questions. Overall, we’re feeling pretty good about the direction of our business.

Our performance accelerated during the third quarter, highlighted by a robust September, during which revenues were up 7%. Excluding political revenues, September was up 5%.

Overall, third quarter revenues were up 1.4%, overcoming a weak August. You may recall that our pacings were flat at the time of our early August earnings call.

And fourth quarter is coming along solidly as well. I will cover that a bit more [ph] [substantively] in a few minutes.

Turning back to third quarter, operating expenses increased in line with our guidance, up 3%. As we’ve discussed on prior calls, our cost increases are primarily due to our ramping investment in our new SmartReach Digital business unit.

Excluding SmartReach, our core station operating expenses were up just 1%. And as we look ahead to fourth quarter and 2015, we feel very good about our cost trajectory as we continue to do a good job of making smart and prudent decisions about expenses.

Steve will add some additional color on the business model in a few minutes. Operating income decline by 3% in third quarter as modest core operating income growth was offset by start-up expenses on SmartReach.

Here are some additional third quarter data points. September was the strongest month of the quarter, up 7% as I previously noted, while July was flat and August was down low single-digits.

Our best performing categories were TV and cable, entertainment, and home furnishings. Our best performing markets were Buffalo, Kansas City, Rochester and San Francisco.

National and local were pretty much in line with the quarter, with national slightly better. As we look ahead to 2015, we’re increasingly excited about our free cash flow story.

With a $1.44 in trailing 12 months free cash flow per share, our stock is now trading around 15% free cash flow yield. We are optimistic about our ability to grow free cash flow organically in 2015, but are also looking ahead to the opportunity to take out and refinance the expensive 10.5% paper on our balance sheet which is callable at the end of 2015.

Our ratings remained quite solid as we continue to experience great performance across the country, most notably in a handful of key markets. While we have a powerful competitive positions in virtually all the markets we serve, I want to single out Boston in particular, as this is a market in which we’ve struggled a bit over the past couple of years.

But our ratings have bounced back nicely over the course of 2014. We are now in a strong position with our two key brands; they’re now both ranked among the top four with men 25 to 54.

Organizationally we continue to focus our efforts on working to enhance our value to listeners and customers and to increase our growth potential for the future. To that end, we believe our competitive position, sales execution, and capabilities have all significantly improved over the past year and should enable enhanced performance in the year ahead.

Over the past few months, we launched Q102 in San Francisco, a new rhythmic Adult Contemporary station and have deployed a new business model on the end in Seattle. Most recently we launched The Wolf, a new country station in Memphis.

We continue to work with our peers on collaborative efforts such as next radio. And we’re also working on building our emerging SmartReach Digital Division that we launched in a handful of our markets in Q2.

Let me give you a bit more of an update on that. As you may recall, SmartReach is a new division of the Company that provides digital marketing solutions for small and medium sized local businesses.

We are running SmartReach as a separate business with a joint management team of full digital agency and a dedicated sales team. We added a few more markets over the summer and are now up and running in 12 of our markets.

Start-up expenses continue to add about 2% to our overall costs, and revenues are ramping nicely albeit with the caveat that we remain at an early stage of the business. We are great believers that this addition to our product line presents an attractive opportunity to serve the growing market for digital marketing solutions and leverages our existing customer relationships, robust marketing capabilities and powerful local brands.

SmartReach significantly bolsters our ability to achieve our goal of being the preferred choice to meet the advertising and marketing needs of our customers. We expect SmartReach to make an accelerating contribution of our growth in 2015 and beyond.

And radio industry fundamentals remain strong. Broadcast radio is the most undervalued medium in the country.

It offers a growing massive reach of roughly 93% of the population and its superior ROI to competitive forms in media. Nielsen Research showed that radio is the number one medium in the country from 5AM to 5PM daily and that radio delivers a 6 to 1 return on investment outperforming TV and Digital.

And now Nielsen is working to get the word out. Just recently they hosted an event in Denver to highlight radios outstanding ROI and the enormous ratings of Colorado’s radio and TV broadcasters that dwarf other media, most notably including various Internet based audio competitors.

And interestingly the radio advertising bureau in the United Kingdom just released a massive study conducted by Holmes & Cook that reaffirms Nielsen’s ROI work. Using confidential data from nine econometrics agencies representing all major ad agencies, and covering over 2,000 media campaigns.

The study showed radio had a 7.7 to 1 ROI and that advertisers could optimize their ROI by increasing their radio spending to 20% of their media mix. Now realistically it takes some time to change perceptions and behavior and all of this unprecedented ROI information has only recently been published.

But with the commitment of companies like iHeart, [ph] [Cox], CBS and others including ourselves and the declining value of competitive media options, perceptions will change and Radio should be able to drive a larger share of that dollars. Turning to current business conditions, our fourth quarter was currently pacing up 2.5%.

However, last year’s Boston Red Sox World Series run I think only enhanced our prior year’s results. Excluding Red Sox, our fourth quarter revenues are pacing up 4%.

One more data point in order to give you a complete picture, if you strip out Red Sox revenue and Political, our Q4 pacings are up 1%. Looking ahead, as we’ve said in the recent past, we’re optimistic and confident that our relative performance will continue to accelerate as we capitalize on our strong ratings, a powerful local platform, our enhanced sales and marketing capabilities, our innovation and the emergence of SmartReach Digital in the quarters ahead.

With that, I’ll turn it over to Steve, for his thoughts, before we turn to your questions.

Thanks, David. Before I cover expense items, I realize many of you like to have detailed information on political revenues.

David gave you some macro on our pacings and looking forward in the fourth quarter. Let’s look back now over the year.

As David mentioned, at the beginning of the year, we suggested that political this year if compared to the last congressional election cycle of 2010, might be between 6 million to 6 million for Entercom, and indeed we will be in that range. And looking at this year’s political activity then, let me give you some detailed data points for the third and fourth quarter of this year and last year.

Our third quarter political revenue was a little over $1.5 million versus $100,000 last year. And in the fourth quarter with the elections scheduled for tomorrow we currently have about 3.6 million of political book this year versus 600,000 last year.

Our third quarter expenses were up about 3% over prior year, which was at the low-end of what we forecasted on our call last -- in August. This quarter's expenses included increased investments in brand and digital, specifically the impact of the rollout of our SmartReach Digital business which David covered.

Excluding the impact of SmartReach investment, our station expense growth would have been up by about 1%. Looking forward to the fourth quarter, we’d expect station operating expenses to again be up by about 3%, with expenses at core stations up slightly and our digital investments adding a couple of points to expense growth in the fourth quarter.

And if you add that guidance to the full-year, you’d note that in looking at the full-year we’d expect to see our full-year station operating expenses to then be up a little about over 2% -- were about 2.5%, which is inclusive of the SmartReach Digital expense ramp throughout the year. That works out to roughly flat station operating expenses offset by the build out of our digital initiative.

This is a important note because of a one-time item, our corporate expenses in the third quarter was $6.3 million, but that included about $1 million in unique one-time expense resulting from litigation at one of our stations, which we booked in the quarter. Our booked tax provision in the third quarter was 43%.

This is in line with our full-year expectation of a tax rate in the low to mid 40% range. And as recurring reminder, that our tax expenses, a GAAP tax provision as we do not pay cash taxes indeed when July significant tax shields and net operating losses which can apply to future earnings.

Third quarter net interest expense was $9.8 million. This amount as did the prior quarters includes about $1.1 million of amortization of noncash interest expense items.

And on the balance sheet we continue to reduce our debt, net of cash balances, our debt at the quarter was $466 million, and we paid down about $39 million of our term loan B facility thus far this year. Our September 30 leverage ratio, as defined by our credit facility, was 4.7x, which is well within our covenant.

Our Capital expenditures for the third quarter was $2.6 million, reflecting some larger projects this year and our full-year 2014 expense expectation for capital expense remains between $8.5 million and $9 million. And with those detailed comments, we’ll now go to your questions.

David, I gave -- just gave some data points on political, so that’s the quantitative side. Let’s go to the qualitative side from Abby Steiner, I think represents a macro point of view that several ask about this question, radio and TV broadcasters have suggested political was spottier and softer in the period leading up to mid term election.

Was political at Entercom below expectations or is it coming in later than expected?

Actually I think it came in exactly where we had expected. And we’ve always seen that radio, political comes in late and this year was no exception to that.

Steve as you already noted, we’re coming in right on top of the number we expected and feel very good about that.

Okay. Let’s turn our attention to revenue, a question from Marci Ryvicker at Wells Fargo.

How much did SmartReach contributed in Q3 revenues?

We covered -- we talked about SmartReach in our remarks. It was -- let me step back, you heard my comments, we feel very good about SmartReach, its enhancing our opportunities with customers and like we’re headed with that business.

But I also want to keep it in context, we launched in a few markets in Q2. Q3 was better than Q2.

Q4 is going to be better than Q3 and Q1 appears to be better than Q4. So we’d like the trend line, but its still small numbers consistent with the launch phase of a start-up.

Bottom line it was pretty negligible in Q3 and it looks like it will be just over one half of 1% of revenues in Q4.

Okay. As long as around the revenue side with data points, let me stay with that theme from Aaron Watts.

I know you gave in your prepared remarks some color on local and national in the third quarter and the remarks you gave our fourth quarter pacing, do you have any color you can add on the local, national side in the fourth quarter pacing?

Yes, there is a not a huge gap between the two. National is performing a little better than local, but they’re both within range of our -- of each other.

Let me go to a macro question from Aaron Watts of Deutsche Bank. Aaron noted that Clear Channel recently signed a deal with Omnicom, a large deal, any thoughts on the ramifications for the radio industry, including any impact on the rates and pricing?

I think the Omnicom announcement is terrific. It’s a wonderful reaffirmation of the importance of radio in the media ecosystem.

I’ve talked on many occasions about radio being an undervalued and under recognized medium that has wonderful attributes that are not recognized and it share the marketplace, and we see announcements like Omnicom’s. We think that’s a wonderful statement about the importance of radio and the future and where we’re going.

I’d add one other -- couple of quick points on this. Number one, it also tends to fit into notion of are we changing perceptions, are we changing radios or is the Nielsen Research and other information that we now have beginning to change things?

And I’d like to believe that Omnicom is a headline consistent with that. And also would note that there continues to be great work being done by companies like ours to continue to eventualize around radio and we just recently hired a brand new head of national sales to our Company and its no accident that he comes with a strong background in magazine to another media and brings something else to the table in terms of telling our story to the media world at large.

Good. Let me do a balance sheet question.

I guess, I’m addressing this then to myself from David Saber at Wells Fargo. Any thoughts about addressing the high coupon bonds before the call date?

The answer is David; we continue to look at that. David mentioned that in his remarks, we’re well aware that we can finance at significant lower rates than what we currently pay on those notes.

The call date is December 15th and I think between now and then we’ll continually look at the opportunity when is the most opportunistic for an ROI to take a look at that. I think most realistically while not certainly put at stake in the ground, I think it’s the second half 2015.

But it clearly is going to be accretive to free cash flow for our shareholders. David noting our already existing free cash flow yields, so with that only enhances that.

And of -- let’s take kind of on the balance sheet theme, David a question from several investors on M&A with our reduced debt and improved leverage position, how do we think about M&A and let me stay with the follow-up question from Dennis Ybarra, any interest in the Disney AM stations that have been noted in the process for sale?

We have zero interest in the Disney AM stations. That said, as we’ve said before, we always have our eyes open for compelling opportunities, but it’s also important to note that we’re very comfortable with our current position.

What really matters in this business is strength of your local markets and we’ve a very strong competitive position in the markets we serve, great clusters, powerful brands, and great capabilities that we’re now augmenting organically with our SmartReach.

Let me jump to 2015 as we come to the end of the year, I know we don’t give guidance, but let me link to specific questions together, one from (indiscernible) at Rubicon Funds and one from Lance Vitanza at CRT, ask to how do we think about our business model for 2015? The questions by the way, they’re linked to one happened to be on expenses, one happened to be on revenues.

When I address expenses, David you take kind of how do we think about our business model as we go to 2015? I will do with the expense side first, we’re currently as many companies in the middle of our thinking and planning for 2015, I’ve given you specific color on the fourth quarter for expenses, let me just say as we look to 2015, we don’t see any unique or disruptive items to our business model that would cause anything out of the box.

I think we’re comfortable that there are no disruptive drivers in our business model as we think about 2015. Obviously, I’ll have a lot more color for you on our fourth quarter and year-end wrap up call in early February.

But David, why don’t you address kind of the brands people thinking as we going forward

Yes, look we’re feeling very good about things as we head into 2015. We like the acceleration we’re experiencing right now.

I think on a granular level, we’re improving our performance. We are executing better.

We are capitalizing on opportunities and have enhanced our competitive position and capability. So we think we’re well positioned for a good 2015.

Obviously, it will depend upon macro factors and other considerations beyond our control, but in terms of our ship, we feel pretty good about things as we head into the months and the year-end.

So let me wrap up with that Dennis. We think about [ph] [2015], there are a string of common questions from many of the analysts and shareholders about how do we think our balance sheet then in return of cash to shareholders as our leverages come down as we go into 2015, specifically I believe they’re commenting on you -- you commenting on M&A earlier, maybe comment on dividend and share buyback, shareholder cash repatriation?

How should people think about?

Yes, I think everybody is familiar with our company knows that we’ve had a disciplined long-term record of delevering and have delivered on that and put ourselves now into a nice position with our balance sheet. We are getting very close to our target, a leverage rate of the mid fours, at which point we say we will be considering a dividend.

And I think we will be taking a very hard look at this in 2015.

That was all the questions we had. I thank you for the call.

Any other final concluding remarks?

No, I appreciate everybody’s time this morning and thank you all and we will be reporting back to you again in three months.