Audacy, Inc.

Thank you, Courtney. Welcome to Entercom's third 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 may be required by law. During this call, we may make concerning - 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 pro forma financial information. I’ll now hand the call over to David Field, Entercom's Chief Executive Officer.

David?

Yes thanks, Rich. Good morning, everyone.

Thanks for joining Entercom's third quarter earnings call. We are now roughly eight months into the pandemic in its unprecedented impact on our nation.

While this has been a very difficult chapter in our country's history, I'm pleased to report that Entercom has continued to make great progress in our work to drive significant organizational improvements to bolster our strategic position and capabilities, accelerate our growth potential and enhance our business model. In fact, our work is meaningfully accelerated over the past several months, and we are confident that we will emerge from the pandemic as a meaningfully stronger and better positioned company.

Entercom is transforming into a leading multi platform audio content and entertainment company with scaled audience reach, strong data analytics and attribution capabilities and a leadership position in virtually every segment of the dynamic and growing audio market, including broadcasting, podcasting, digital, events, network, music, sports and news. Today Entercom is the number one creator of original premium audio content and strategically well positioned with the scale and enhanced capabilities to expand our customer relationships and accelerate growth.

Third quarter net revenues were up 53% from second quarter. While our continuing work on enhancing our business model yielded an 18% reduction in operating expenses versus prior year enabling us to deliver adjusted EBITDA of $31 million.

Ad sales continue to suffer from the deep impact of the pandemic, which is caused many of our advertisers in businesses such as concerts and live events, tourism, gyms, nightclubs, museums, movies, theme parks, public transportation, airlines, restaurants and others, to temporarily cease or significantly curtail their operations and advertising. We look forward to welcoming them back once the country emerges from the pandemic, which will add some interesting additional color on what we are finding with regards to which industries and customers remain on the sidelines.

You may also have noted that we have enhanced our reporting on revenue composition, excuse me - in our earnings release to provide additional detail of revenue by type and by format. Digital and podcasting lead the way for us in second quarter, growing 41% over prior year.

We announced a landmark partnership with FanDuel this past week. Before speaking that, I want to first briefly review Entercom’s unique and unrivalled leadership position in sports audio.

Entercom owns and operates most of the nation's leading sports radio stations, including WFAN in New York, The Score in Chicago, WIP in Philadelphia, The Fan in D.C., The Game in San Francisco, the Fan in Dallas and many more. We are also the radio home of 41 proteams and dozens of D1 collegiate programs and of most of the country's leading local sports talk hosts on our various stations.

There is no more deeply engaged audience than local sports radio listeners. And that is great appeal to advertisers and sports gambling providers in particular.

As you are all aware of sports gambling is an exploding new advertising category. And Entercom is uniquely well positioned to participate in that growth.

We are very excited about our new partnership with FanDuel, the number one sports book in the U.S. We believe the Entercom FanDuel partnership is the largest advertising deal in the history of the radio broadcasting industry.

Under the terms of the agreement, FanDuel will become our official sports book and capitalize on the power of our uniquely deep local fan relationships while collaborating with us on in depth integrations and coproduced content. To be clear, the deal is non-exclusive, and we will continue to do significant business with other sports books.

In fact, we expect to see robust growth in this category, as additional states legalize sports gambling in the years ahead. One thing to consider FanDuel made this long-term commitment after two years of advertising with us and deeply evaluating their data to evaluate the effectiveness and ROI of their investments.

This is a wonderful reaffirmation of the power of radio, and the power of Entercom’s uniquely influential, personality driven platform. Now we also had a highly successful quarter with our various content offerings.

In our broadcasting business, our leading brands continue to perform well with a healthy number of top rated stations in the largest markets. For example, we currently have the number one radio station among adults 25 to 54 in Los Angeles, and three of the top five.

We also have seen a big rebound in ratings across our sports stations reflecting the reemergence of live sports, with a 33% increase in ratings at WFAN in New York, a 24% increase at both WIP and Philadelphia in The Fan in Dallas, among many others. I also want to comment briefly on overall industry listening levels.

The initial disruption of the early lockdowns and deeply reduced mobility in March and April, plus some initial decline in radio listening levels. Albeit somewhat offset by a significant increase in radio consumption over digital platforms in the home, such as mobile and smart speakers.

Since then, radio listening - has rapidly recovered and is now returned to essentially pre COVID levels. Nielsen just reported this month, that average quarter hour consumption of radio is now about to 95% and reaches back to 97% of their previous levels.

In addition, Nielsen reports that time driving has rebounded across the country, with the average adult now spending one hour and five minutes daily in their cars, and heavy listeners spending two hours and 11 minutes daily, a full hour more than they spent in May. One other contributor as reported by Nielsen is that 20% to 27% of Americans are using less public transportation and shifting to cars.

We also continue to post excellent growth at Radio.com with our digital and streaming offerings. During third quarter our monthly average uniques jumped 36% over prior year, led by double-digit growth in mobile and connected devices, including smart speakers and connected TVs.

Radio.com total listening hours grew by 14% marking our 14 straight months of double-digit TLH growth, the only digital publisher to do so according to Triton Webcast Metrics. It is worth adding that our music station TLH increased by 22% while smart speaker TLH was up 90% as we continue to experience explosive growth on that platform.

We also had a great quarter on our podcasting business with downloads up 27% year-over-year. We now have over 26 million monthly average users.

During the third quarter through our Cadence13 and Pineapple Street Studios subsidiaries, we launched or announced a number of new podcasts, including projects with LeBron James’ Kevin Durant, Will Arnett, Elle Fanning, Jon Meacham, JJ Reddick and TikTok stars Charli and Dixie, plus three new titles in association with our partnership with HBO and two new titles in partnership with Netflix, among many others. We also launched Sofia with an F featuring the former co-host of Barstool’s Call Her Daddy, which debuted at number one on the Apple Podcasts charts.

We announced a new partnership with Unsolved Mysteries, launching in 2021 and have a significant number of other original series under [Technical Difficulty] stronger in three important markets while we exit a market where our position was weaker, and we were not well positioned for long-term success. Specifically, we acquired the team in Washington, adding the sports station to our local lineup which includes The Fan, D.C.

number one sports station, Hot 104.1 and the IP from The Lou in St. Louis, adding the markets two leading stations with African/Americans.

And WPHI-FM in Philadelphia, which will become the FM sister station of our KYW Newsradio station. We are also continuing to make meaningful, permanent improvements to our business models capitalizing on technology and on changing consumer behavior to enhance how we serve our listeners and advertisers, while at the same time making our operations more efficient.

For example, we are planning to reduce the size of our studio locations significantly to reflect expected post pandemic work structures, and anticipate significantly reducing the 70 seven zero million dollars we currently spend in studio leases over the next several years. In addition, we have significantly reduced the staffing and scope of our promotions departments and have discontinued some of the legacy practices which have diminishing value given the rapid adoption of our digital, social and other technologies.

While it is quite challenging to forecast in these unprecedented times, I continue to tell you that we continue to - improve sequentially and have done so in every month since April. We expect further improvement in both revenues and in particular EBITDA in the fourth quarter.

Our fourth quarter business that is currently on the books already exceeds the $269 million total revenues we booked in all of Q3. Political came in a bit stronger than we expected, national continues to improve, digital and podcasting remain strong, local is improving and of course our events business remains dormant.

All of that said, we know we’ve considerable concern the rising level of COVID-19 across the country, and worried about its implications on near term conditions. So far, we have not noted any deceleration from the recovery we have been experiencing, but we are keeping a close eye on things.

So in summary, we grew third quarter revenues by over 50% versus second quarter announced what we believe is the largest ad partnership in the history of radio broadcasting, continued to thoughtfully improve our business model while enhancing our listener and customer experience. Extended radio.com streak is the fastest growing digital audio platform and accelerated the growth of our podcasting business with an exciting slate of new products.

We were evolving and enhancing the company through the pandemic and will emerge as an even stronger organization and are excited about the opportunities ahead. And with that, I'll turn it over to Rich.

Thank you, David and good morning everyone. For the third quarter, our total net revenues were up 53% versus the second quarter, and we're down 30% year-over-year.

Ex-political, our total net revenues were down 31% year-over-year. Although we have seen five months of sequential improvement since April, an examination of our advertiser base makes clear that many of our local and national - spot advertising clients remain highly disrupted by COVID-19.

Focusing on local which accounts for close to 70% of our total spot advertising revenues, we see that 44% of our top prior year accounts were still off the air in September versus about 55% of such accounts in the month of June. Looking first at where we saw improvement in local spot advertising in the month of September, as compared to the month of June.

Our top advertising category, auto dealers was up 62%. Auto Dealer Associations, our sixth largest category was up 255%, gambling and casinos our seventh largest category was up 144%.

Fast foods are ninth largest category was up 108% and auto insurance, our 14th largest category was up 215% in the month of September versus the month of June. Now focusing on where we still see continuing significant disruption in our local advertising base.

And this time, we will look at the month of September versus prior year. Concerts historically our fifth largest local advertising category was down 98%.

TV stations which last year was a top 10 category, absent the new primetime fall lineup was down 88%. And looking at other categories that are usually in our top 30, the sports events advertising category was down 57%.

Casual dining was down 56%, amusement parks down 84% and the fairs and festivals category was down 91% in the month of September versus the prior year. Even categories that have recovered significantly due to the impact of COVID related disruption are still seeing - are still struggling.

For example, auto dealers, which make up our top local advertising category continue to have a limited supply of new car inventory on their lots due to COVID related supply chain issues. The auto dealer local spot advertising category was down 34% in the month of September versus the prior year.

Although we are actively on the lookout for evidence of advertisers shifting and mixed delay from spot radio, given the constant drumbeat in the tech focused press. We don't hear such reports from advertisers.

The story remains COVID disruption, and we are optimistic as the impact of the virus subsides that our spot advertising revenues will continue to recover. Focusing on political, revenues came in at $5 million for the third quarter, up from $1.7 million in the third quarter of last year.

Although political came in weaker than we expected in the third quarter, political pacing picked up significantly in October. And now that we are past election day we can say that our political revenues are total about $16.5 million for the fourth quarter, which is up slightly on a same station basis from 2016 pro forma and up more than 10% versus 2018.

For the full year, political revenues are now expected to come in at about $30 million versus $29 million in 2016 and $25 million in 2018. Turning to digital, our revenues were up 41% year-over-year in this third quarter to $47.3 million driven largely by growth in podcast and streaming advertising revenues.

You will see that we have provided a further supplemental breakdown of our revenues by type and by format in the financial - data tables included in our third quarter earnings release. We have also posted historical data for these breakdowns for the last eight quarters under the Investor Relations tab on our website.

You will see that our sponsorships and event revenues continue to be significantly disrupted as a result of COVID. And our event revenues were down 97% year-over-year for the third quarter.

Looking at the fourth quarter, the continued absence of live events will cause our revenues to be down 7% versus the prior year. And our remaining revenues are currently pacing down mid teens year-over-year.

I want to reiterate David's earlier comment that we are concerned about the recent uptick in COVID cases and how that may impact advertising over the remainder of this year. So our current pacing may not be indicative of how the quarter ultimately closes.

Our total operating expenses for the third quarter came in at $268.8 million and include and $11.8 million, non-cash and impairment charge and $1.2 million of restructuring costs. We also record a charge of $3.2 million for costs related to COVID-19.

Excluding these one-time and unusual costs and adjusting out non-cash items like D&A our total cash operating expenses came in at $237.4 million or down $50.8 million or 18% on an as reported basis versus prior year. And we're down $63.6 million or 21% pro forma for our second half 2019 podcasting acquisitions.

For the fourth quarter, we continue to project that our costs will be down high teens to low 20s. And the company continues to work on enhancements to its business model that will generate permanent savings, while enhancing how we serve our listeners and customers.

Many of these enhancements have already been implemented and looking forward to 2021. We expect that we will deliver $100 million or more of fixed expense savings versus 2019 pro forma for our podcasting acquisitions.

Our total 2019 cash operating expenses on a pro forma basis were $1.19 billion and 21% of these costs were variable. In 2021, we expect that variable costs will account for 24% to 25% of our cost base.

Turning to our financial position and liquidity, we used cash on hand during the quarter to pay down $166 million of our revolver to an outstanding balance of $77.7 million at the end of the quarter. Our net debt at September 30 was $1.63 billion down $66 million from the end of 2019.

Our liquidity at September 30 remained strong and was $198 million comprised of $165.6 million available under our revolver and $32.4 million of cash on hand. Our net capital expenditures totaled $5.8 million in the third quarter and are expected to total about $30 million for the full year.

As discussed on our second quarter call, the company executed an amendment to its first lien maintenance covenant on July 20. This amendment, among other things provides for a covenant holiday for the quarters’ ended September 30, 2020, and December 31, 2020.

It replaces actual 2020 EBITDA with prior year amounts for 2Q through 3Q and calculating LTM EBITDA. It increases the interest rate applicable to our revolver by 25 basis points and adds a new minimum liquidity covenant for our combined cash on hand and undrawn revolver of $75 million.

These amendment provisions fall away at the end of 2021. With that, we’ll now go to - for questions.

Operator?

Okay, well, again, we appreciate everybody joining us here today and look forward to reporting back three months from now. Thanks all as well.

Take care. Bye.

Bye-bye.