Audacy, Inc.

Richard Schmaeling - Executive Vice President and Chief Financial Officer David Field - President and Chief Executive Officer

Thank you so much, operator. Good morning everyone and welcome to our call.

As mentioned, today’s call is being recorded. A replay will be available on our website shortly after the conclusion of today’s call and is available by telephone at the replay number noted in our release.

With our notice of today’s call, we ask that you submit your questions in advance. Should the company make any forward-looking statements, such statements are based upon 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 actual results to differ materially are described in the company’s SEC filings on Forms S-4, 10-Q, 10-K and 8-K.

We assume no obligation to update any forward-looking statements. During this call, we may reference certain non-GAAP financial measures.

We refer you to our website at entercom.com for a reconciliation of such measures and other pro forma financial information. Now I would like to hand the call over to David Field, the President and Chief Executive Officer of Entercom Communications.

David?

Thank you, Rich. Good morning, everybody.

Thanks for joining our first quarter earnings call. I want to formally welcome Rich to the Entercom team.

We have been very fortunate to have had an outstanding CFO in Steve Fisher for over 18 years. Steve did a wonderful job.

We greatly appreciate all of his contributions to Entercom. But I could not be more pleased that our search for our next CFO resulted in Rich joining Entercom.

Rich is a wonderfully talented and accomplished executive with an outstanding reputation from his time as CFO of LIN Media, and as VP Finance at Dow Jones and other organizations. He is also deeply experienced in large media integrations, most notably leading the efforts to bring together LIN and Media General and News Corp and Dow Jones.

He will be a great partner as we move forward to build Entercom to the next level and drive meaningful shareholder value. We have a lot to cover on today's call as this has obviously been a very busy and exciting time at Entercom.

I will cover our first quarter results and then provide an update on our progress on the CBS merger plus share a few other updates. First quarter revenues were up 1.4% as reported.

They were down 1% on a same station basis ex-political. And of course, we also lost a day during the quarter as 2016 was a leap year.

So on apples to apples basis we were essentially flat. On the cost side, we experienced a highly unusual degree of large one-time only expenses during the quarter that drove our costs considerably higher, most notably our CFO transition, the return of a station license in Sacramento, and the CBS transaction, each had a meaningful impact on first quarter costs.

We will continue to incur some additional expenses related to our transformational growth as we work through the approval process and ramp up the organization in preparation for the merger. The important point for investors, of course, is to focus on how the combined company will look post-closing.

We have already articulated our belief that the transaction will generate synergies of at least $25 million conservatively. Our work over the past couple of months has only increased our comp and our ability to achieve this level of synergies or higher, while still being able to enhance the competitiveness of the organization.

So we expect that after the merger is completed synergies will drive margin expansion across the organization. So you should bear this in mind as you look at our expenses during these months of transition to a significantly larger enterprise.

Let me share some additional color on first quarter revenues. January was the strongest month of the quarter, while February was the weakest.

Local outperformed national with solid growth in digital revenues. We gained revenue share in a significant majority of our markets during the quarter.

Our best performing categories were home furnishings and improvements, telecom and TV cable. And our best performing markets were Atlanta, Miami, and Milwaukee.

First-quarter interest expense declined from $9.4 million to $6 million as a result of our fourth quarter refinancing, increasing annual free cash flow by roughly $0.30 per share, and we had an even more successful pricing of the committed financing for this CBS transaction in March that will result in additional savings upon closing. Rich will discuss that further during his remarks.

Finally in January, we closed on our $24 million acquisition of four radio stations in Charlotte. Turning to second-quarter pacings, as you heard from a wide range of other reporting companies, business conditions have been a bit choppy although we have seen some modest increase in improvement.

We are currently pacing down 2% on a same station basis in the second quarter. April was a particularly weak month.

May was significantly better and we are currently pacing up low single digits in June. On the CBS transaction I am very pleased with our progress on all fronts as we continue to plan and prepare for our transformational merger.

The merger will create a leading local media and entertainment company with a preeminent radio platform covering almost all of the country’s top 50 markets and including many of the most iconic brands and most popular local personalities. We will be a leader in sports, news and talk and music and entertainment programming, and we will have complementary and robust digital and events businesses as well.

We will have a strong and compelling financial profile with total leverage of approximately 4 times and a business model that generates outstanding free cash flow and supports an attractive dividend. And for the first time in many, many years there will be of mid-cap, well capitalized radio broadcasting company for investors.

This will truly be a game changing event for Entercom as we will achieve a number of scale-related benefits, including the ability to compete far more effectively against other media for a larger share of advertising spending. One example of where we see game changing opportunities is in sports, where we will have a robust national platform of leading sports stations with top personalities and play-by-play relationships.

We believe this platform positions Entercom to attract significant interest from major national advertisers who have either been non-users or very light users of radio. In order to spearhead our national sports value creating initiatives, last week we announced the hiring of Mike Dee, in the newly created role of President of Entercom Sports.

Mike is an outstanding sports executive, who over the course of his career has served as the CEO of the San Diego Padres, the CEO of the Miami Dolphins and the COO of the Boston Red Sox. He is a terrific leader with a particular talent for driving revenues as an entrepreneurial dealmaker and a creative sales and marketing professional.

Mike and Rich are both high impact additions to the best in class management team we are working to assemble to enable us to thrive in the years ahead. The team will consist of top leaders from Entercom and CBS Radio, plus a number of highly talented individuals from outside the industry.

We have also been developing our plans in a number of other areas for tangible post merger scale-driven opportunities for growth and value creation. Among the more significant areas we have identified are ratings improvements, digital platforms, events, cost synergies and enhanced operations.

Plus we will have interesting opportunities to expand our strong verticals in news, music and entertainment. We will have more to share on these and other value drivers in the future.

We are also in active discussions with other radio groups on our required divestitures. We have received a significant number of strong offers in the form of cash and trades for all of the proposed [spinouts].

We feel excellent about where we stand in the process. Finally, as we have frequently noted, we believe radio is the country's most undervalued medium.

It is remarkable that radio is number one in the nation in reach, number one in daytime usage, the least disruptive of any traditional medium and arguably number one in return on investment, yet receives only a paltry 7% of ad spending. Meanwhile hundreds of billions of dollars are spent on media that reach fewer people for shorter periods of time, charge more and deliver lower ROI.

Radio has suffered from inaccurate perceptions that fail to grasp its vibrancy and effectiveness, and radio has suffered from a woefully insufficient industry advocacy effort. And as a result, radio punch is well beneath its weight class.

With this merger, Entercom will have the scale and resources to compete more effectively with other competitive ad based media. We will emerge as the leading creator of live, original, local audio content able to deliver advertisers the power of radio’s local listener connections at a national scale.

We strongly believe that with a second major voice advocating the power of radio, and presenting customers with a compelling advertising alternative we will help to enhance radio’s perceptions and cause advertisers to give radio greater consideration for future advertising and marketing spending. This is particularly true as other media continue to wrestle with significant disruption and other challenges, making radio a more viable and competitive choice for agencies and customers is a win for everyone.

The potential is clearly there for radio to be rediscovered by frustrated advertisers looking for ways to improve the efficiency and effectiveness of their buys by shifting the media mix a bit more towards radio, and this merger creates a catalyst for this to happen and the opportunity is significant. So in summ, we are very pleased with our progress and getting our deal completed and preparing to hit the ground running.

We are in the process of building a best in class team that will work aggressively capitalize on a number of scale driven growth opportunities as well as significant synergies, and we cannot wait to get started. With that, I will turn it over to Rich before we answer your questions.

Thanks David and good morning again everyone. For the first quarter, our net revenues came in at $97.5 million, up 1.4% compared to $96.1 million in the prior year and benefited from the acquisition of four stations in Charlotte, North Carolina from Beasley, which closed on January 6.

On a same station basis, our first-quarter net revenues were down about 1% ex-political. Political dollars for the first quarter were about $300,000 versus about $1 million last year.

Our station operating costs for the quarter increased by $3.9 million or 5% to $75.4 million, close to $3 million of this increase was attributable to our Charlotte acquisitions. Our same station increase was only about 1%.

Our corporate expenses for the quarter were up $2.8 million year-over-year to $9.2 million largely due to a couple of nonrecurring items. We expect our corporate expenses will fall back to about $7 million in the second quarter and range between $30 million and $32 million for the full year.

We incurred $10.3 million of M&A costs in the quarter related to the CBS transaction and expect to spend about another $4 million in the second quarter. As you likely saw, we filed our Form S-4 with the SEC on April 12 and our preliminary proxy statement related to the merger on April 19.

These M&A expenses are not all tax-deductible, which is why you will see that our effective tax rate in the quarter jumped to 55.6%. Although this percent is eye-popping, please remember that Entercom has significant NOLs and is not currently a cash taxpayer.

This quarter we also recorded a $13.5 million non-cash loss related to the relinquishment of an FM license in Sacramento to the SEC in order to facilitate the CBS merger. Looking at our balance sheet, last fall the company issued $480 million in new senior secured debt at L plus 3.50%, with a 1% floor, which was used to redeem our existing unsecured notes and refinance our credit facility.

We also put in place a new $60 million revolver. With the retirement of our notes plus this new pricing, we reduced our interest expense for the quarter by $3.4 million to $6 million down from $9.4 million last year.

We entered the quarter with approximately $458 million outstanding on our term loan and $7 million on our revolver. Our consolidated leverage at March 31st as defined under our credit agreement was 4 times compared to 3.7 times at the end of last year.

Looking ahead in anticipation of closing the CBS merger, Entercom and CBS tapped the credit markets in late February to secure committed financing to take out Entercom’s existing credit facility and redeem the outstanding $27.5 million of preferred stock issued in conjunction with the company's Lincoln Financial acquisition in 2015. This committed term loan B will only be drawn upon the merger and will be issued at par and bears interest at L plus 2.75% with no floor.

The 75 basis point reduction in the margin on this new loan will save the company close to $4 million per year in cash interest expense. Our first-quarter capital expenditures were $4.2 million, and we had several office and studio facility relocation projects underway this year, which will cause our capital expenditures to be higher than normal.

For the full year, Capex is expected to range between $14 million to $16 million. With that we will now go to questions.

David the first question is from Marci Ryvicker at Wells Fargo. She says at your last earnings call ATM was pacing down 2%, but reported down 1% to finish off the fourth quarter.

What drove the acceleration in the second half of 1Q?