Audacy, Inc.

Thank you very much, Britney. Good morning and welcome to our third quarter earnings call.

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

During this call the company may make forward-looking statements, which are based upon the company’s current expectations and involve risks and uncertainties. The company’s actual results could differ materially from those projected in these forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially are described in the Risk Factor section of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. As such risks and uncertainties maybe updated from time-to-time in the company’s SEC filings.

We assume no obligation to update any forward-looking statements except as maybe required by law. During this call, we may make reference to certain non-GAAP financial measures.

We refer you to the Investors page of our website at entercom.com for reconciliations of such measures and other financial information. David?

Thanks, Rich. Good morning.

Thanks everybody for joining us for Entercom’s third quarter earnings call. I’m pleased to report that we achieved strong quarterly financial results in the quarter and in addition made great progress on our various strategic growth initiatives and enhancements to our core business capabilities.

Starting with the financial headlines, Entercom posted 13% EBITDA growth in the third quarter driven by 2% revenue growth and expanding margins. Ex-political revenues were up close to 3%.

Adjusted net income per share increased 23% for the quarter. We achieved double-digit growth in digital and network revenues.

Political revenue was of course down substantially in this off-election year and events revenue was also down as we continued to selectively trim our portfolio to eliminate poor performers while selectively adding a limited number of new events. In addition, during the third quarter, we capitalized on the strength and the scale of our outstanding station group and gained 210 basis points of share in spot radio revenues as reported by Miller Kaplan.

Notably, we gained share in most of the country’s largest markets including New York, Log Angeles, Philadelphia, Dallas, Atlanta, Houston and Washington D.C. which by the way are all legacy CBS Radio markets.

And in total, Entercom’s spot radio revenues ex-political were up 1% for the quarter. Our best performing ad categories were professional services, financial services, insurance, TV, cable, telecom, drugstore pharma and home improvement.

Of our top 15 ad categories, 12 were up and only two were down being auto and concerts/movies. July and August were the stronger months of the quarter with September being a bit softer.

Let’s turn to some noteworthy recent developments. On our last call we announced that we had taken an important step forward to establish Entercom as a leading player in the emerging, rapidly growing podcast space, by acquiring Pineapple Street Media and entering into an agreement to acquire Cadence13.

I’m pleased to report that we completed our Cadence13 acquisition in mid October. I’d like to share a few thoughts on these moves and their significance to our company going forward.

First, we should correct the record and note that the early news reports speculating on the purchase price on the transaction significantly overstated the cost. The total cost of both acquisitions including the 45% interest we acquired in Cadence13 three years ago was $48 million, which represents a purchase price of approximately one-time projected 2019 revenues which is well below the multiples and a number of other recent acquisitions in the space.

Second, the combined transactions establish Entercom as one of the three largest podcast enterprises in the United States with approximately 150 million downloads per month of programming that we create or represent for ad sales. Third, the podcast market is growing rapidly and is expected to exceed $1 billion by 2021.

We believe we are very well positioned for sustained success in this space due to the scale of our radio broadcasting platform and the powerful symbiotic opportunities driven by our leading position in sports, news and local personalities. Furthermore, we believe the podcasting margins will grow nicely in the years ahead and that we are positioned to generate significant shareholder value creation with these investments.

Even though it is early, we see a great deal of momentum across our podcasting business. In fact, our total podcast downloads grew by 72% during the third quarter.

During the quarter, we launched several new shows including Campaign HQ with David Plouffe, Long May They Run featuring the band Phish and a handful of new collaborations with HBO and Netflix. We also just announced that we will be launching the new Ronan Farrow podcast as a companion to its best-selling book Catch and Killwhich will debut later this month.

Turning to digital, RADIO.COM continues to be the fastest growing digital audio app in the country. MAUs grew 60% year-over-year during the quarter.

We also have beefed up our digital sales capabilities with the addition of a new Digital Chief Revenue Officer who will oversee all of our digital sales including podcasting. In addition, in October, we became the first and only company to develop and launch DVR-like functionality for live radio.

I want to give a shout out to our RADIO.COM development team for this significant achievement which we have rolled out as RADIO.COM Rewind on many of our leading news and sports stations. With RADIO.COM Rewind listeners on enabled stations can now for the first time easily listen to what they want, whenever they want, with the ability to pause, rewind and fast-forward shows for up to 24 hours without having to record them in advance.

We believe this feature is an important enhancement of the live radio listening experience and we expect to rollout additional compelling user features in the months ahead. During the third quarter, we also welcomed the station groups of Alpha Media and Salem Media to the RADIO.COM platform.

We have also added podcast for mid roll NBC News, MSNBC and Fox Media to the platform On the distribution front, we launched our Apple Music and HomePod partnership during the quarter, and yesterday announced a distribution deal with Samsung's Bixby. To put all of this in context, digital, including podcasting now represents 12% of our total revenues.

Turning to events, I'd like to add a little bit of color as a way of highlighting that we run a pretty significant events business across the country that includes both major concerts as well as boutique Money-Can't-Buy special listener experiences. For example, in October, our Annual We Can Survive concert at the Hollywood Bowl featured a stellar lineup of Taylor Swift, Billie Eilish, Camila Cabello, the Jonas Brothers, Lizzo and Marshmello.

This event lead sponsored by AT&T supported breast cancer research and sold out in under 10 minutes. We are also looking forward to a lineup of CHR, country and alternative music holiday concerts coming up in late November and early December, including our two-day Riptide Festival in Fort Lauderdale and our Not So Silent Night shows at venues, including the Barclays Center in Brooklyn as well as other major arenas across the country.

I also want to acknowledge the terrific work of two of our award winning all-news stations KNX in Los Angeles, and KCBS in San Francisco in the wake of the terrible wildfires in California, as a reminder of the important role our stations play in the lives of the American public. In fact, the recent LAPD's wildfire press conferences always concluded with the Police Chief advising everyone to stay tuned to KNX for real time vital information.

At times of crisis, we are reminded of the critical role radio plays keeping the public informed and safe. Whether it is California residents tuning in for vital fire information or passionate sports fans across the country deeply immersed in conversations about their teams are listeners who have developed deep connections as fans of our terrific lineup of leading local music station personalities across the country.

Our leadership position as the country's number one creator of regional local premium audio content has enabled us to build the scale and uniquely engaged audience. The addition of our podcast content and the enhanced user experience from new features like RADIO.COM Rewind will further enhance our listener relationships going forward.

A few summary thoughts before I turn it over to Rich. As we step back and look at our business, we note the following: Our good third quarter results mean that over the past 12 months, we've also posted strong double-digit EBITDA and adjusted net income per share growth over the prior comparable period.

We feel good about our outlook for 2020 based on the strong set of organic growth opportunities we have across the business. We expect to generate solid top-line and bottom-line growth in 2020.

Specifically, we have leapfrogged into a strong competitive position in the rapidly growing podcasting space and believe we are well positioned for growth in a number of other areas including RADIO.COM and our other digital products, the Entercom audio network, events political and sports gambling. We are also optimistic about the potential acceleration from our National Client Partnership team and their work to elevate our relationships with the country's largest national brands.

And the growing impact from Entercom Advanced Audio, which incorporates our data, analytics and attribution capabilities. And finally, we look for continuing sequential improvement in our local radio sales.

The competitive landscape, while presenting some challenges also offers great opportunities. Audio is growing nicely and experiencing a renaissance driven by podcasting, smart speakers, devices and audio search.

Radio remains strong as the number one reach medium and the most undervalued medium in United States at a time when other media are increasingly disruptive and new catalysts are emerging to facilitate advertisers reexamining their media mixes and increasing their allocations to radio. Entercom is well positioned to compete effectively within today's competitive marketplace, offering national scale, an unsurpassed local radio platform in the country's top 50 markets with terrific premium local brands and content, and a strong presence within other important growth markets including digital, podcasting, events and sports.

And we believe we are on a path to reduce leverage to around 4 times EBITDA by year end 2020. All of that said, our stock is trading at what we believe is a significant discount to value.

As of yesterday's close, the free cash flow yield over 30%. We do not control our share price.

But we do believe there is a disconnect relative to the strength of our business and our platforms and assets and the opportunities we see for growth and value creation. We are excited about the future and look forward to continuing to work hard to realize significant value for our shareholders.

And with that, I'll turn it over to Rich, and of course, then your questions.

Thanks, David. Our third quarter net revenues were up 2% and were up close to 3% ex-political.

For the fourth quarter, we expect our as reported net revenues to be down 1% to up 1% including $10 million to $12 million of podcasting revenues from our recent acquisitions. Ex-political, our as reported net revenues are expected to be up 2% to 4%.

We closed on the acquisition of Pineapple Street Media back in July and the acquisition of the remainder of Cadence13 in the middle of October. Combined, for full year 2019, these businesses are expected to generate between $48 million to $50 million of revenue.

So in 2019, we paid $38.3 million in cash to acquire both Pineapple and the remainder of Cadence13. And in 2017, Entercom paid $9.7 million in cash to acquire its initial stake in Cadence.

So cumulatively, Entercom paid $48 million in cash to acquire both of these businesses for about one-times their projected 2019 revenues. In the fourth quarter, we expect these podcasting businesses will be at about breakeven.

And in 2020, during our first full year of ownership, we expect them to grow rapidly, and that they will be accretive to our 2020 earnings. In their June 2019 report, IAB and PwC projected 2020 podcast market growth at 27%.

And they projected that the size of the podcasting market will top $1 billion by 2021. Our total as reported operating expenses for the quarter came in at $306.7 million and include $2.7 million of M&A, integration and restructuring costs and $1 million of costs associated with a cyber attack against the company during September.

For the third quarter, excluding these one-time costs and adjusting out non-cash items like D&A, on a same-station basis, our total cash operating expenses came in at $287.2 million or down 1.6% versus to $291.8 million in the prior year. In the third quarter, we realized about $11 million in net cost synergies, bringing the total to approximately $23 million September year-to-date.

Adjusted EBITDA in the third quarter grew 13% year-over-year and our EBITDA margin expanded by 2.5 points to 25.4% despite the slight headwind associated with this being a non-political year. For the fourth quarter, we expect our as reported cash operating expenses including our podcasting acquisitions will range between down 2% to up 1%.

On a same-station basis, we expect that our fourth quarter cash operating expenses will be down between 3% and 5% and that our full year net cost synergies will range between $38 million and $44 million. This would bring the cumulative total for our net cost synergies realized in P&L since closing the CBS Radio merger to between $96 million and a $102 million.

We expect to realize another $25 million or so of net cost synergies in P&L in 2020 as a result of the full year benefit of actions taken during the course of this year. Looking at our financial position, our net debt at quarter end was $1.68 billion.

Our first lien leverage was 2.7 times and our total net leverage was 4.7 times both calculated in accordance with our credit agreement. During the quarter, we repurchased 5 million shares of our Class A common stock for $18.3 million at an average price per share of [$3.67].

The cash used for this buyback is slightly less than the 2019 savings from the reduction in our dividend announced on August 9. As a result of this buyback, our outstanding share count is now $134 million and our free cash flow yield based on LTM adjusted FCF and yesterday’s closing price was over 30%.

The company intends to use most of next year’s $39 million in savings from the dividend reduction action to accelerate its deleveraging and our goal remains to reduce our total net leverage to about 4 times by the end of 2020. We have paid about $18.5 million in cash income taxes September year-to-date and expect to pay about $22 million more in the fourth quarter, bringing the annual total to approximately $40 million.

This projected annual total for cash income taxes is $10 million less than what we previously expected as a result of the benefit of acquired NOLs and added bonus depreciation amongst other items. The disruption caused by the cyber attack we experienced in September also cost us about $400,000 in lost revenues and has caused us to increase our IT CapEx investment by about $2 million as we rapidly further fortify our defences.

Our capital expenditures for the third quarter were $20.7 million net of TI reimbursements. Our full year net expenditures are now expected to total about $75 million due to added expenditures associated with the cyber attack, our acquisition of NASH from Cumulus and higher than anticipated costs on several facilities projects, which will all be fully completed by the end of this year.

For 2020, we expect that our capital expenditures will equal about 3% of our net revenues. With that, we'll now go to your questions.

Britney?

Great. We appreciate everybody joining us here this morning and we look forward to reporting back to everybody here in a few months.

So thanks all so much.