Audacy, Inc.

Thank you, Ted. Good morning and welcome Entercom’s fourth quarter earnings conference call.

This call is being recorded. 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 Factors section of the Company’s Annual Report on Form 10-K. As such, risks and uncertainties may be 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 reference 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 pro forma financial information. I’ll now hand the call to David Field, CEO of Entercom.

Thanks, Rich. Good morning, everybody.

Thanks everybody for joining us for Entercom’s fourth quarter earnings call. Q4 was our fifth consecutive quarter of growth.

For the full year 2019, Entercom delivered strong financial performance with net revenues up 2% or 3% ex-political; adjusted EBITDA up 10%; and adjusted net income per share up 19%. Our significant investments in podcasting, digital, and data and analytics along with the expansion of our sports, network and events businesses are beginning to reshape our Company and position us for sustained growth as we enhance our integrated multi-platform offerings to advertisers, increasingly interested in the undervalued and emerging audio space.

As we think about our business at a time when podcasting, smart speakers, hearable devices, and audio search are leading an audio renaissance and at a time when competitive media is increasingly disrupted, we are evolving to capitalize on our scale. We are making strong progress in enhancing our product line and capabilities, expanding our lineup of original content and elevating our customer relationships.

We are the number one creator of original local audio content in the United States, and one of the two radio broadcasting companies with nationally competitive scale. The strength of our station line-ups across the country’s top 50 markets is second to none.

And now, by virtue of our acquisition of Cadence13 in the fourth quarter, and Pineapple Street Studios during the third quarter, we are also one of the country’s three largest podcasting companies. I’m pleased to report that the podcast that our Company now creates or exclusively represents, just surpassed 2 billion annual downloads at our current run rate.

Our podcast portfolio features numerous titles that have reached the Apple top 10 list and includes revisions history with Malcolm Gladwell; Gwyneth Paltrow's Goop; The Clearing, Ronan Farrow's Catch and Kill; Anything Goes with Emma Chamberlain, Pod Save America; Against the Rules with Michael Lewis; and new this year, unlocking us with bestselling author, Dr. Brene Brown, whose trailer just debuted at number one on the Apple chart.

This is just a small sampling of the list. In addition, we have built RADIO.COM, essentially from scratch into the fastest growing digital audio app in the country during 2019, and established important strategic relationships with partners including Apple, Amazon, Google and others.

Our events data continues to grow nicely, and in 2019, featured a host of shows across the country headlined by the likes of Taylor Swift, Billy Eilish, Mumford & Sons, The Killers, Zac Brown Band, Keith Urban, among many other A list artists. And the Entercom audio network completed its first full year of operations with rapidly growing revenues and profits and it’s positioned for significant growth in the future.

In sum, we are significantly stronger company today than a year ago. I will share some additional color on our progress in each of these areas, but first I’d like to touch on our financial results for the quarter.

Fourth quarter revenues increased 1%, 3% ex-political. Adjusted EBITDA was up 2% for the quarter, while adjusted net income per share increased 14%.

Revenue growth was driven by solid increases in digital, events, national and network. Political revenue was down significantly as expected, albeit stronger than a typical off-cycle fourth quarter.

Spot radio ex-political was flat for the quarter. We also achieved modest margin growth during the fourth quarter.

For 2019, as a whole, we grew margin by close to 2%. Rich will provide further color on our financial results during his remarks.

As the business evolves, scale is becoming an increasingly meaningful competitive factor within the radio industry. Having a multi-platform, integrated product line that can deliver robust, nationally scaled solutions to clients through broadcast radio with its unmatched reach along with podcasting, digital and data is becoming an important factor in building marketing partnerships with large clients.

And this is particularly significant as national advertisers who have long since underinvested in radio are becoming more interested in rethinking their media mix strategy, and increasing their audio investment. Entercom is well positioned for the emerging opportunities in this new competitive landscape.

As I touched on earlier, Entercom has a local station line of second to none in the top 50 markets, plus our newly established leadership position in podcasting and our strong platforms in sports, digital, data and analytics, and events offer a powerful set of capabilities for customers at scale. To add some context to this point, let’s take a quick look at Entercom New York and how it provides a uniquely powerful platform for customers.

Our station group there includes WFAN, the most listened to support station in the United States. 1010 WINS, the most listened to all new station in the United States, plus all new WCBS-AM and top music station including the WCBS-FM, new 102.7 FM, ALT 92.3 and New York’s Country.

We are also the radio home for the New York Yankees, Mets and Giants, plus the Jersey Devils and the Brooklyn Nets and feature a robust lineup of local events, digital products, and so much more. We have similarly powerful positions in most of the country’s leading markets and are the number one radio revenue producer in many of these markets.

I’d also like to provide a little more color on a few other areas of the business. Our events business is driving higher revenues and margins and is now enhanced by the addition of four new performance spaces that we recently constructed at our facilities in Los Angeles, Philadelphia, Atlanta and Miami.

This January, Coldplay performed live at our grand opening show at the new HD Radio Sound Space in Wilshire Boulevard in Los Angeles, in front of 300 invited guests. Similarly, the New Verizon Theatre in Miami and our new facilities in Philadelphia and Atlanta should be active spaces for small exclusive boutique shows, live podcasts and other programs and entertainment across the year.

We have recently begun live video and audio streaming of some of our shows on RADIO.COM along with other social platforms, including our Coldplay show, as well as our Zac Brown Band show, the night before the Super Bowl. We continue to achieve significant progress from our national client partnership team and their work to elevate our marketing relationships with the country’s largest brands.

And we are growing our unrivaled local radio sports business with further opportunities as more states legalize gambling. Last week, we announced the sale of a non-strategic FM station in Worcester, Mass that provided limited coverage to the Boston Market for $10.75 million.

The sale is accretive and the proceeds will be used to reduce debt. Our RADIO.COM digital platforms continue to grow nicely, posting double-digit, total listening our growth and making us the fastest growing of all the major commercial broadcasters over the past 6 months according to Triton’s webcast metrics.

Our TLH growth is being driven by an acceleration in listening across smart speakers, continued expansion of our strategic distribution relationships and lift from our new RADIO.COM Rewind feature. As a reminder, on our previous earnings call, we announced RADIO.COM Rewind, the audio industry’s first automated end-to-end DVR-like experience.

We are also achieving strong growth in monthly active users of RADIO.COM, surging by over 50% in 2019. Streaming revenues were also way up due both to audience growth and improved revenue per thousand listening hours as we enhanced digital sales execution.

One final note on digital, we continue to deepen our strategic relationships with key partners, becoming the only commercial broadcaster to serve as a beta partner for the new Google News audio product on Google Assistant, and the first partner to launch on Amazon’s new radio skills kit for Alexa. A few summary thoughts before I turn it over to Rich.

We feel good about our outlook for 2020 based on the growth opportunities we see across the business in areas including digital, podcasting, events, sports, political, plus the work of our national client partnership team, and the increasing impact of our Entercom advanced audio products with its data analytics and attribution capabilities. As a result, we expect to generate solid revenue, EBITDA and free cash flow growth in 2020 and continue to build on our five consecutive quarters of growth.

We are focused on reducing leverage from our current level of 4.8 times by at least half a turn by year-end 2020. We believe the current stock valuation remains disconnected from the strength of our business and the opportunities that we see for growth and value creation.

It currently trades at a free cash flow yield of 25%. We are excited about the future and look forward to continuing to work hard to realize great value for investors.

I’ll now turn it over to Rich and then your questions. Rich?

Thanks David. 2019 was an important transition year for Entercom.

We made significant investments in support of and progress against our strategic growth initiatives while posting solid EBITDA and net income per share growth. During 2019, we completed the CBS Radio integration program, which generated over $175 million of gross cost synergies and about $100 million of realized net cost synergies through the end of 2019.

We’ll recognize another $25 million of synergies from 2019 actions during this year and we are already hard at work to finding the next round of initiatives to continue to transform our cost structure and adapt to the rapidly evolving advertising landscape. We also made significant strides in building the Entercom audio network, gaining momentum in the national advertiser direct sales channel through our national prime partnership team, and fielding an audience targeting and attribution offering, fueled by our significant first party data that is second to none in our industry.

We are also excited about the power of the acquisitions of Cadence13 and Pineapple Street Media in combination with Entercom. We are just getting going.

Podcasting is highly complementary to our Entercom’s core business and over time, this new high-growth business will also be a source of significant revenue synergies. Turning to our results for the fourth quarter.

Our net revenues were up 1% and were up close to 3%, ex-political. Our podcast revenues came in for the quarter at $12.4 million versus our guidance range from $10 million to $12 million.

Our fastest growing markets during the fourth quarter were New York, San Francisco, Philadelphia, Washington D.C., Cleveland, Pittsburg and Richmond. Overall, across all our markets, we continued to gain spot revenue share in the quarter and for the full year, as reported by Miller Kaplan.

Our best performing ad categories were professional services, financial services, insurance, entertainment, gambling, home improvement and beverages. December was the strongest month of the quarter and October was the weakest, largely due to decline in political year-over-year.

Our total operating expenses for the fourth quarter came in at $869.6 million that include a $545 million noncash impairment charge, $5 million of refinancing, integration and restructuring costs, and a $5 million nonrecurring charge included within our corporate expenses for the estimated combined costs to settle the FCC matter discussed in our third quarter 10-Q and for cyber event related costs. Our annual impairment assessment conducted during the fourth quarter concluded that they carrying value of our goodwill exceeded the fair value based on an independent appraisal and as implied by our prevailing stock price.

After this charge, our remaining goodwill balance of $44 million represents the goodwill associated with our recent acquisitions of Cadence13 and Pineapple Street Media. For the fourth quarter, excluding the impairment charge and onetime costs and adjusting out $12.5 million of podcast costs and non-cash items like D&A, our total same-station basis cash operating expenses came in at $288.6 million or down 4% from the $300.2 million we reported in the fourth quarter of last year.

For the full year, our same-station total cash operating expenses were down $18 million to 1.5% and our realized net cost synergies for the year totaled $41 million. As mentioned earlier, we expect to realize over $25 million of cost synergies in P&L this year from actions taken during the course of last year.

In addition, the Company is hard at work developing new strategies and actions to continue to transform our cost structure and leverage our significant investments in technology and data. We’ll provide further details about these ongoing efforts as the year progresses.

Adjusted EBITDA in the fourth quarter grew 2% year-over-year and our EBITDA margin expanded by 30 basis points to 27.3%, despite the impact of a significant decline year-over-year in political revenues. For the full year, our EBITDA margin was 22.9% and was up 170 basis points year-over-year.

Our adjusted free cash flow for the fourth quarter was $59.5 million and $145.6 million for the full year. Given our diluted share count of 134 million, our current free cash flow yield based on 2019 adjusted free cash flow is over 25%.

For the first quarter, we expect our revenues will be up to 3% to 4% year-over-year and we expect our adjusted EBITDA will grow by low to mid-single-digits. Turning to our financial position.

During the fourth quarter, we amended and extended our revolver to better align its maturity of our term loan B. We also repriced our term loan B, reducing the margin by 25 basis points and added on $100 million to our second lien notes.

We used these proceeds to partially pay down our term loan B. After these transactions, our weighted average cost of debt was unchanged at 5.4%, and our percent fixed is now 48% versus 21% at the end of 2018.

Our net debt at year-end was $1.69 billion. Our first lien leverage was 2.5 times and our total net leverage was 4.8 times, both calculated in accordance with our credit agreements.

The Company’s top priority for the use of its free cash flow is to pay down debt, and we expect to reduce our leverage by one-half turn or more by the end of this year and to get to our total net leverage target of 4 times before the middle of next year. Our capital expenditures for the fourth quarter were $10.2 million, net of tenant installation reimbursements.

And our full year net expenditures totaled $68.3 million. Now that the CBS Radio integration program is behind us, we expect that our capital expenditures will decline in 2020 and equal about 3% of net revenues.

With that, we’ll now go to your questions. Ted?

Great. We appreciate everybody showing up this morning for the call.

We look forward to reporting back in another few months. Thank you.

Take care.