Audacy, Inc.

Thank you, Missy, and welcome to Entercom's first quarter earnings conference call. A replay of this call will be available on our company website shortly after 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 may be 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 turn it over to you David.

Great. Thanks, Rich, and good morning, everybody.

Thanks for joining Entercom's first quarter 2020 earnings call. I want to start by saluting the Entercom team for their outstanding work and all they are doing to rise to the unique challenges of these unprecedented times and serve the American public, our customers and our communities.

COVID-19 has taken its toll on our business, as it has such a large swath of the American economy. We ended the year with a great deal of optimism and high expectations, coming off a solid 2019, during which we posted 2% revenue growth, 3% ex-political and 10% EBITDA growth.

We got off to a strong start to the year and we're gaining momentum across our business lines. Through February, year-to-date revenues were up over 7% versus prior year, with significant margin expansion and strong double-digit EBITDA gains.

While we are on track to have a great quarter, in March, revenues declined 22% for the month as we experienced a large number of cancellations across our business related to the pandemic. As a result Q1 revenues declined 4% and EBITDA was down 19%.

Local spot advertising and events were both down significantly, reflecting the impact of COVID-19 on local businesses and the cancellation of most of our March event slate. There were however a number of bright lights for the quarter, including our digital revenues, which grew by 41% year-over-year, led by strong podcasting and streaming audio advertising growth, as well as continued strong double-digit Entercom audio network growth.

We also saw healthy political advertising demand in the quarter. On today's call, I want to first discuss how COVID-19 has impacted our business, the actions we have taken to address and mitigate the various challenges and how we are well positioned to weather the pandemic financially.

Afterwards, I will share some thoughts on the company's strategic evolution in the broader audio landscape and how that positions us competitively, both in the current environment and after we come through this and get to the other side. But before we get to that, I'd like to share a few words on how we are engaging the American public during these difficult times.

Radio has always played an important role with the American public at a time of crisis and COVID-19 is no exception. Radio is the country's number one reach medium and particularly in difficult times, Americans rely on radio for news, information, guidance, reassurance, entertainment and companionship.

Entercom is the nation's leader in local radio news and I am particularly proud of the great work our local news teams are doing across the country. Ratings were up significantly, including a 56% increase among adults 25-54 at KNX in Los Angeles, 63% at WBBM in Chicago and 100% at 1010 WINS in New York.

Our news in these top stations have been providing excellent news coverage and guidance, along with the platform to engage with governors, mayors and other federal state and local officials and connect them with anxious citizens. In addition, our stations are distributing related information via regular podcasts, e-mail newsletters and other digital and social platforms, helping to keep tens of millions of Americans informed and safe.

At the same time, across our non-news stations in RADIO.COM, we are providing an array of special programming for these unusual times, including a series of live concerts and other unique content. Recent data from Nielsen, Mindshare, Havas and Edison Media Research have all confirmed radio's strong vitality.

For example, Nielsen reports that 83% of Americans are listening to the same or more radio than prior to the crisis. And Havas study shows a surge in radio listenership among millennials, with 33% of 18 to 24 year olds and 40% of 25 to 34 year olds listening more to radio as a result of the pandemic.

And while as you might expect, in-car listeners shifted down for the moment, as Americans have been staying more at home. In-home listenership has surged across smart speakers and other connected devices.

For example, in March, smart speaker listeners to Entercom stations jumped 82% over the prior year and 27% over the prior month. As the threat of COVID-19 first emerged, our team responded quickly and vigorously to address the impact of the pandemic on our business.

Our first priority has been, and continues to be the health and safety of our team. We formed a cross-functional COVID-19 task force in late February and moved rapidly to shift the vast majority of our team to work-from-home.

Our prior investments in technology enabled us to do so with virtually no impact on operations to continue to serve our listeners, customers, and communities, without interruption or diminished effectiveness. I want to give a special thanks to the task force and to our outstanding engineering and IT teams, who have worked tirelessly and performed wonderfully.

In late March, we moved aggressively to mitigate the financial impact of COVID-19 on our revenues, by implementing a comprehensive set of measures to significantly reduce expenses. These actions included a substantial reduction in our workforce, temporary salary reductions impacting every full-timer making over $50,000 per year, and a number of other steps.

By moving quickly and deeply, we've been able to reduce Q2 operating expenses by over $80 million, 8-0. In addition, we have cut our 2020 capital expenditures by over 40% and suspended our dividend.

We also took the precautionary step of drawing down our revolver in March, and had $189 million in cash on hand as of March 31. It is important to note that we have no material debt repayments due until late 2024.

After studying a range of scenarios we have concluded that our liquidity is sufficient to meet all of our financial and operating requirements. Furthermore, once we get through this, we intend to remain highly focused on reducing our total leverage to under four times as rapidly as possible.

Turning to business conditions, as you know, they have been extremely challenging over the past 60 days. The abrupt shutdown of so much of the American economy has been unprecedented, and has had a very significant impact on local advertisers in particular.

We have also been hit by the cancellations of sports, play-by-play, an area in which we are the industry's largest operator by a wide margin although, that will be offset by a pro rata reduction in rights fees. Similarly, we have also been able to eliminate virtually all of the expenses from our various major events, all of which have been canceled.

Current business conditions have sought a bit after the tsunami of closures and cancellations that occurred in March and the first half of April. While there are no guarantees on the trajectory of our national recovery in these unprecedented times, April certainly appears to be the bottom.

May is a little better than April, and June is trending somewhat better than May. Furthermore, the tone and tenor of our advertiser conversations has improved.

Auto is a good example of a business that has been largely idle for the past several weeks in most markets, and is looking forward to getting back to work. These advertisers have important stories to tell the public about how their businesses have returned, and how they would be able to serve customers in today's world.

Radio is the perfect storytelling medium for advertisers for a number of reasons. It is local.

It reaches more people. It has minimal production costs, and messaging can be changed immediately.

And it is built on its one-to-one personal connection with listeners. We have been working closely to support our customers even those with canceled advertising as their businesses closed and expect a return to the airways as conditions allow.

This is an important time of introspection for all organizations. As we step back and think about how we are positioned for the future, Entercom today is a fundamentally different and far stronger company than we were just 2.5 years ago, when we completed our merger with CBS radio.

At that time, Entercom was the country's fourth largest radio broadcaster with a lineup of leading high-performing radio stations across the country, but we lacked scale and recognized that scale was essential to transforming the company into a fully competitive, strategically relevant organization, with strong multi-platform digital assets and capabilities, fully able to meet the evolving demands of our listeners and customers. Since the closing of the merger, we have transformed ourselves into a leading audio-based integrated media and entertainment company with outstanding positions across broadcast, digital and podcasting.

Capitalizing on our scale, we launched Radio.com, which is the fastest-growing digital audio platform in the U.S. In this past year, we acquired Cadence13 and Pineapple Street Studios, and established Entercom as one of the country's largest podcasting publishers.

Scale has also enabled us to develop a strong and emerging set of data and analytics capabilities, and build out a national client partnership and marketing solutions team. But it isn't just the scale or quantity of our offerings, it is also the premium quality of our original content, both across our stations and podcasting that distinguishes the company.

As a result of these strategic actions, today Entercom is one of the four strongest multi-platform audio companies in the U.S. and is well positioned for the future.

We have what is arguably the best platform of local radio stations in the top 50 U.S. markets and are the number one creator of original local audio content as well as the unrivaled leader in news and sports radio.

In addition, we are one of the two largest commercial podcast publishers in the U.S., with a rapidly growing business, competing at scale that has grown to 28 million monthly unique listeners worldwide and more than 150 million podcast downloads per month. We focus on premium high-quality content offerings and have distinguished ourselves by the large number of high-quality hits in our portfolio.

As of this week we had 26 of the top 100 shows on the Triton chart, and seven of the top 25 on the Apple chart, both more than any other party. In addition, we are the only audio company in the world, who have received multiple nominations in the recently announced Peabody Awards, which are the world's most prestigious award for excellence in electronic journalism, celebrating the highest quality radio TV or digital stories.

Our product lineup includes chart-topping influencers like Dr. Brené Brown, Andrew Yang, YouTube sensation Dávid Dobrík, Malcolm Gladwell, Pod Save America; and Jon Meacham's new series Hope Through History which chronicles how our nation has persevered through other great challenges including polio and World War II.

In addition, we just launched the latest original hit dramatic series Winds of Change in partnership with journalists and author, Patrick Radden Keefe which debuted in the top five on Apple's chart. We have high expectations for our podcasting business and believe it will be an important driver of future growth generating significant symbiotic benefits to drive listenership and revenues across our various audio platforms.

I'd also like to share a few words about Radio.com. As noted earlier Radio.com has been the fastest-growing digital audio platform in the country and now delivers over 40 million users excluding podcasting.

According to Comscore our monthly average uniques grew 71% in March significantly outpacing the other leading platforms. And our year-to-date TLH is up 22%.

We continue to expand our distribution having recently launched on the Xfinity X1 platform and announced an enhanced Sonos relationship. The strong audience growth is enabling significant double-digit revenue gains and we look forward to continued progress in the future.

Our transformation is elevating our competitive position and enabling us to develop exclusive new multi-platform marketing programs with national brands. For example we recently launched a custom national marketing partnership with Dell, driven principally around podcasting, but also incorporated virtually every arm of our business including broadcast radio, network radio Radio.com social and a custom podcast featuring Malcolm Gladwell and Michael Lewis both of whose podcasts are on our platform.

We are one of only two companies in the U.S. with the scale and capabilities to offer customers the ability to leverage all of these capabilities and it is enabling us to elevate our engagement with a number of the country's leading brands.

We expect programs like this to be an increasingly important driver of our business going forward. In closing unfortunately after a strong start to the year COVID-19 has altered many of our hopes and plans for 2020 just as they have for everyone.

With that said we are excited about where we are headed on the other side of this. We fully expect to emerge as a strong healthy fully competitive company positioned for success in the years ahead.

That means continuing to work vigorously to capitalize on the significant new opportunities we have enabled through our strategic transformation into a scaled multi-platform audio leader with outstanding original premium content. It also means ensuring that we have enhanced our business model to effectively and efficiently operate under the current challenges and put ourselves in the best possible position to drive significant bottom line growth in the post COVID-19 world.

Once again I want to express my appreciation for the terrific work and versatility of our team and extend our continuing commitment to work closely with our partners and customers to get through this together to support our communities and emerge in a better place as a nation. With that I'll turn the call over to Rich.

Thanks David and good morning everyone and thank you for joining us. I'd like to start by also recognizing and thanking the hard-working Entercom team that has rapidly adapted to this temporary new normal and has seamlessly continued to provide vital news information and entertainment to our listeners and support to our advertising clients during these unprecedented times.

As discussed by David after a strong start to the year, we experienced a sharp downturn in revenues during March and the extent of this decline was even more severe in April. For the first quarter after being up over 7% February year-to-date, our revenues for the full quarter ended down 4% due to the impact of COVID-19.

Our digital revenues for the quarter were still strong and were up 41% year-over-year propelled by the growth of podcasting and digital audio advertising. Our total as reported operating expenses came in at $285.7 million for the first quarter and include $4.8 million of integration and restructuring costs and a $1 million non-cash impairment charge.

We also recorded a onetime charge of $2.5 million for an industry-wide settlement with BMI and $3 million for unusual items related to COVID-19. Excluding these onetime and unusual costs and adjusting out non-cash items like D&A on a same-station basis our total cash operating expenses came in at $260 million were down $18.2 million or 7% versus $278.3 million in the prior year.

This savings is primarily flowing through from integration cost synergies enacted during the course of last year. As you will recall, we had previously guided that we'd realize another $25 million of net cost synergies during the first half of 2020.

Turning to the second quarter, given the highly disruptive and uncertain economic environment we will not be providing guidance. Nevertheless, we are cautiously optimistic that if states lift stay-at-home orders and businesses start to reopen that the advertising environment will begin to improve.

And based on our Pearson data this belief is buttressed by the fact that the current outlook for May looks better than April and June looks better than May. As stated by David it appears that April was the bottom.

In addition, although we have limited visibility, we believe it is reasonable to expect that we will see continued sequential improvement during the third quarter as GDP begins to rebound, and due to the expected resumption of live sports and our play-by-play coverage. And in the fall, we still expect to benefit from a strong presidential election cycle.

Previously, we stated that we expected our political revenues would be up year-over-year by over $20 million, and we expect about 60% of this revenue will run between September and Election Day. At the outset of this national emergency, our team responded quickly and aggressively to mitigate the impact of the downturn of revenues and to preserve liquidity.

We suspended our quarterly dividend and fully drew our revolver as precautionary measure. At the end of March, we had $189 million of cash on hand.

We deferred lower priority CapEx projects and reduced our planned expenditures for this year by over 40% to a range of between $25 million to $30 million. We executed a series of actions expected to reduce our fixed expenses by approximately $150 million over the remainder of this year, including a reduction in force that will generate about $30 million of ongoing annual savings, reductions in compensation for our senior management and other employees, furloughs of employees whose jobs have been highly disrupted by the pandemic, suspension of new hiring travel and entertainment and our 401(k) matching program, and a significant reduction in outside services and other discretionary expenses.

In addition, due to the suspension of the NBA and NHL seasons and the delayed start of the MLB season, we will be able to reduce our play-by-play sports rights fee obligations pro rata based on a number of games canceled under virtually all of our agreements. We will also see reductions in our variable expenses due to canceling all of our planned second quarter events and due to the decrease in revenues.

These costs, including cost of sales associated with our digital agency and podcast and product lines amount to about 20% of our revenues. Adding it all up, and looking specifically at the second quarter, we expect that our cash operating expenses fixed plus variable will be down year-over-year by over $80 million.

Looking at other elements of our liquidity, we realized $10.8 million of proceeds from the sale of WAAF FM in Boston in April. We now expect that our full year cash income tax payments will be less than $10 million given the benefit of a number of the CARES Act provisions including the immediate full deduction for qualified improvement property.

Under the CARES Act, we also expect a deferral payment of about $14 million of federal tax – federal payroll taxes until 2021 and 2022. And given the significant decrease in LIBOR, we now project that our full year cash interest will be nicely inside $90 million.

Turning to our outstanding debt. Last year, we executed a series of transactions to amend and extend our revolver and to create added cushion against our first lien covenant.

As a result of these transactions, 98% of our debt matures in November of 2024 or later and our first lien leverage at the end of the first quarter was 2.5 times compared to our covenant of four times calculated in accordance with the requirements of our credit agreement. Our total net leverage at the end of the first quarter was 4.9 times and our total net debt was $1.64 billion.

Our first lien covenant is our only maintenance covenant and is solely for the benefit of our revolving credit facility lenders or the 11 relationship banks that make up our syndicate. To evaluate, whether we will be able to maintain compliance with this maintenance covenant and to assess the adequacy of our liquidity, the company has run a range of scenarios bearing the assumed timing and rapidity of the recovery.

This in-depth analysis led us to conclude that our liquidity will be sufficient to weather this storm and that we will likely be able to maintain compliance with our covenant. With that said, the company is continuously monitoring business conditions and updating its projections, and will proactively seek a covenant waiver if deemed necessary.

Such a waiver would require the approval of six of our 11 syndicate banks. The term loan lenders do not participate in this process.

With that, we'll now go to your questions. Missy?

Thank you, Davis. And just want to thank everybody for attending the call in these challenging times and wish everybody all the best for staying safe and being well and look forward to reporting back to you all in the times ahead.

Thank you.

Thank you very much. Bye-bye.