Audacy, Inc.

Thank you, Catherine. Welcome to 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 may be 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 pro forma financial information.

With that, I'll hand it to David Field, CEO of Entercom.

Thanks, Rich. Good morning, everybody.

And thanks for joining our fourth quarter earnings call. As we near the one-year anniversary of the official declaration of the pandemic, I'd like to start off today's call by sharing some perspective on how Entercom has fared through this historically challenging period.

When COVID began, we committed ourselves to first taking care of our team and making sure that everyone was safe, while ensuring we didn't miss a beat in serving our listeners and customers. We also dedicated ourselves to not just navigating the storm effectively, but to accelerating our transformation and emerging from the pandemic as a meaningfully stronger and better positioned company with significantly enhanced growth potential.

We believe we are well on track to accomplish that. For the past couple of years, we have been purposefully transforming the organization into a leading multiplatform, audio content and entertainment company with scaled audience reach and a leadership position in virtually every segment of the dynamic and growing audio market, including broadcasting, podcasting, digital, network, events, music, news and sports.

Today Entercom is the country’s number one creator of original premium audio content, strategically well-positioned to expand our customer relationships and accelerate growth. We are excited about what lies ahead and how things are coming together across our company.

Entercom today is a very different company than before, emerging as an important player in the growing and evolving audio business. We have made a number of strategic acquisitions, and launched the plethora of internal initiatives to move the company forward.

While the progress is masked by the enormous challenges of the pandemic, and its impact on a large percentage of our customers, we are making great strides in building rapidly growing digital podcasting, sports betting and network businesses and are optimistic about the recovery of our local advertising and events businesses as the pandemic abates. I will share a few headlines on the fourth quarter and some additional thoughts on the business before turning it over to Rich for your questions.

During the fourth quarter, we announced and completed the acquisition of the QL Gaming Group, a rapidly emerging sports betting data and predictive analytics platform for $32 million, enabling a significant enhancement of our sports betting business capabilities. We also announced our multi-year partnership with Fan Duel.

Fourth quarter net revenues of $320 million were down 23% versus last year, and sequentially up 19% versus third quarter. I would add that importantly, events represented 7% of our fourth quarter 2019 revenues and, of course, that essentially all went away this past quarter.

Our extensive enhancements of our business model yielded a 16% reduction in Q4 operating expenses versus prior year, enabling us to deliver adjusted EBITDA of $67 million more than double the $31 million we generated in the third quarter. During 2020 we successfully achieved permanent annual expense reductions of $100 million, while improving our capabilities to serve listeners and customers.

Digital revenues, which includes our podcasting business, had a strong quarter, growing 23% over prior year, led by robust growth in streaming and podcasting, along with a solid contribution from our digital marketing solutions products. It is worth noting that our digital business has now grown to 18% of total revenues in the fourth quarter versus 10% for 2019.

Our network radio business also posted a great quarter, growing 21%, partially reflecting progress we are beginning to make building national client partnerships, capitalizing on our scale, and our outstanding lineup of premium exclusive content. During the quarter we consolidated our various national sales zones into a single organization better focused and equipped to capitalize on the emerging strength of our holistic audio capabilities to grow our share of total national and ad spending.

As noted earlier, our events business obviously has been shut down. We are hopeful that we will see a partial return of this business later in 2021.

Our spot business has been the laggard, declining 44% during the quarter, reflecting the continuing deep impacts of the pandemic, on local economics, and important business segments. When you think about the fundamentals of the radio business, one of the things we do best is activate local audiences on behalf of our customers.

Our business is significantly led by advertisers looking to drive audiences to go places and do things, theme parks, events, gyms, restaurants, stores, sporting events, nightclubs, theatres, movies, concerts, fairs, travel, casinos, and more. Pandemics are disproportionately rough on the go places and do things business, and that has in turn had a substantial impact on local radio advertising.

While the spike in infections, hospitalizations and deaths, hindered further economic progress over the past couple months, we are quite encouraged by the current pandemic trends, and the accelerating rate of vaccinations, and the increasingly optimistic medical and economic expectations. We look forward to welcoming back our sideline customers as they recover and meet the pent-up demand for their businesses.

Strategically, we continue to make good progress across each of our key platforms. Our radio brands remain strong, and we are increasing our focus on driving innovation to enhance the listener experience and capitalize on our abundant multi-platform and scale-driven opportunities.

RADIO.COM, our digital platform had another terrific quarter of growth across all metrics. During fourth quarter our monthly active users reached 34% over the prior year, while our smart speaker listenership surged by 53%.

RADIO.COM total listening hours grew by 10%, continuing our industry leading streak of double-digit growth, which extends back to mid-2019. I had mentioned earlier that we had a very strong quarter of digital audio sales growth, driven by not only increasing listenership, but also very positive trends and streaming RPMs, or revenue per 1000 hours.

We were essentially sold out of our streaming inventory again in fourth quarter, and demand remains high. Our podcasting business also had a very strong quarter across all metrics, including revenues, downloads, unique listeners and RPMs.

Plenty of our shows made the Triton top 100 more than any other publisher. The quality of our work is reflected in the critical acclaim, we continue to receive.

A number of our shows have appeared on 2020, best of lists, from Time, New York Times, Rolling Stone, The Atlantic, Teen Vogue, The New Yorker and more. In fact, the New York Times and The Guardian both made a window change from our Pineapple Street Studios team, the number one podcast in 2020.

And another one of Pineapple shows, Back Issue, was named one of the best original podcasts of the year by Time, The Atlantic and Spotify. We also continue to be the partner of choice for the leading studios and streaming services in developing companion podcasts.

We are very pleased to note that Hulu has just come on board as a new partner, joining HBO and Netflix among others. We will be rolling out many more exciting shows with these partners later this year.

As we look ahead to 2021, we continue to ramp up our production of original shows. Together our Cadence 13 and Pineapple Street Studios are slated to create 22 original new long-formed series, doubling their 2020 output of 11 originals.

Several of these shows have also appeared on a number of most anticipated podcasts of 2021 list. We are also continuing to expand our premium network of shows with leading influencers and entertainers.

Last week, we announced the first free podcast from our C13Features project. C13Features is a new partnership we formed with Endeavor Content to develop future [indiscernible] podcast designed to be highly adaptable to TV and film.

The announcement of our first C13Features projects was very well received and is already garnering studio interest. On a related note, in December, we announced the sale of TV advertisements rights for Wind of Change to Hulu and we have recently optioned a number of other projects to major studios and streaming services.

All in our derivative sales of TV and film more than doubled in 2020, while a small number we believe you will see this area of our business emerge as a modest contributor in the years ahead. This is also a very active quarter for our sports betting business.

As I mentioned earlier, we announced the landmark multi-year partnership with Fan Duel, that established the single largest advertising deal in the history of the radio industry. Fan Duel made this long-term commitment to capitalize on the power of our unrivaled sports radio leadership and deep local fan relationships.

In addition to Fan Duel, we continue to expand our business with other sports book operators as well. All in, we are expecting our combined sports betting ad revenues to grow by at least 50% [ph] in 2021.

While most states have still not legalized mobile sports betting, we expect to see a significant number of states coming online in the next few years, we should feel robust ad growth in the category. We continue to expect sports betting to grow to a $100 billion category for Entercom over the next several years, more than tripling our expected 2021 levels.

As mentioned during Q4, we acquired the QL Gaming Group, which includes the BetQL app of rapidly emerging sports betting data and predictive analytics platform generating value creating insights for sports betters. BetQL business is driven almost entirely by subscription revenues and affiliates these from sports books for customer acquisition.

We believe BetQL is a terrific complement to our sports audio and sports betting businesses. As you know, we have the unrivaled number one sports radio platform in the U.S., reaching tens of millions of sports fans with leading stations across the country, including WFAN in New York, The Score in Chicago, WIP in Philadelphia, The Fan in Washington, D.C., and many more and are the broadcaster home of 41 proteams.

In fact, we have three times the audience of the next leading sports radio operator. We believe there are great cross platform opportunities to enrich our broadcast and streaming content and introduce our audiences to the BetQL platform.

While these are early days and the numbers are small. We are off to a terrific start and converting radio streaming and podcasts listeners to BetQL.

We are posting triple digit growth in BetQL and they use new subscribers and sports book affiliate revenues, while ARPU is up strong double digits. In addition, we recently announced two moves that will augment our opportunities within the sports betting space.

Last week, we announced the sales and content partnership with TEGNA’s recently acquired LockedOn Sports Podcast Network. We also recently announced the launch of the new BetQL Audio Network with initial distribution in Los Angeles and Denver plus RADIO.COM everywhere.

We have exciting plans to expand the network with significant additions, both the content offering and distribution. In conclusion, I want to salute the Entercom team for their leadership and their outstanding work to drive our ongoing transformation over the course of this highly challenging past year.

And certainly there was much hard work remaining in front of us. But it is exciting to witness our progress.

We are rapidly growing across all of our emerging new business areas, including podcasting, digital audio, digital marketing solutions, sports betting, and network radio. We have built strong competitive positions to continue to make investments in new growth areas to augment our opportunities.

Our radio and events businesses are well-positioned to rebound as vaccines take hold and many of our sideline customers are able to reopen their businesses. And we have taken $100 million of expenses out of the business.

While at the same time improving how we serve listeners and customers and enhancing our national sales organization to capitalize on our significant revenue development opportunities. We're excited about the future and look forward to what lies ahead.

And with that, I'll turn it over to Rich.

Thanks, David, and good morning, everyone. For the fourth quarter, our total net revenues were up 19% versus the third quarter and were down 23% year-over-year.

Our political revenues came in at $19 million for the fourth quarter and $32 million for the full year and benefited from the post election day runoffs in Georgia. Our digital revenues for the fourth quarter were up 23% year-over-year to $58.8 million driven by growth in streaming and podcasting.

Our event revenues continue to be significantly disrupted by COVID and were down 98% year-over-year in the fourth quarter. Looking at our local spot advertiser base which accounts for close to 70% of our total spot revenues.

42% of our top prior year accounts were off the air in December versus 44% in September and 55% in the month of June. The absence of these advertisers is the key driver of why our local spot revenues are down year-over-year.

In fact, the local advertisers on air in December spent 2% more on average than they did a year ago. No doubt as we have previously highlighted in detail, many of our top local accounts remain significantly disrupted by COVID.

Top historical categories like concerts, seasonal events, casual dining, and travel remain significantly depressed. Our sales teams in each of our markets continue to call on and to support these businesses.

And we remain optimistic as the impact of the virus subsides that our local spot advertising revenues will be bound. In the first quarter, we are seeing sequential month over month revenue improvement.

The weight of this improvement ebb somewhat in January as COVID cases and deaths hit all time highs. But February is pacing better than January and March is pacing better than February.

Our spot piecing local and national is improving each month during the first quarter. And based on our current piecing, we projected our total revenues will come in for the quarter down upper teens versus the prior year.

Our total operating expenses for the fourth quarter came in at $524.4 million and include a $247.4 million non-cash impairment charge and $1.7 million of restructuring costs. We also recorded a charge of $5.4 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 $253 million or down $48 million or 16% year-over-year. Our cash operating expenses for the fourth quarter were somewhat greater than we anticipated as a result of approximately $6.5 million of non-recurring consulting and legal settlement costs that we incurred in the quarter and decided to incur subsequent to our third quarter earnings release.

For the full year, our cash operating expenses was $949 million and were down $241 million or 20% versus our 2019 expenses on a pro forma basis for our 2019 podcasting acquisitions. Looking at the first quarter, we expected our total cash operating expenses will be down year-over-year by low double digit percentage.

And we now project that our full year operating expenses fixed plus variable will be down versus 2019 pro forma by $100 million or more. As previously noted, our total 2019 cash operating expenses on a pro forma basis for our podcasting acquisitions were $1.19 billion.

Turning to our financial position and liquidity. In November, as David mentioned, we invested $32 million to acquire the QL Gaming Group, bringing unrivaled sports betting and analytics to our leading sports platform and creating new opportunities to serve the nearly 30 million fans that engage with our stations t.

Our adjusted free cash flow for the quarter was $38 million, up from $2 million in the third quarter. At year end, our liquidity was $160 million, comprised of $129 million available under our revolver and $31 million of cash on hand.

Our total net debt was $1.66 billion, down $29 million from the end of last year. And our net capital expenditures totaled $8.9 million in the fourth quarter and were $30 million for the full year.

Looking forward to 2021, we now expect that our capital expenditures will range between $70 million to $75 million in 2021 as we increase our investment in the RTC platform and in the rapidly growing digital audio advertising market. In regard to cash income taxes, we expect to receive a federal income tax refund of approximately $15 million during the second quarter and we do not expect to pay income taxes this year.

With that, we will now go to your questions. Catherine?

Yes, thank you very much, Catherine. And thank you all for joining our fourth quarter 2020 earnings call.

Bye-bye.

Thank you all. Bye now.