Q4 2020 Entercom Communications Corp Earnings Call
Welcome and thank you for standing by the conference will begin shortly we're having a little bit of an issue with the web streaming line. So please continue to hold will begin momentarily.
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Good morning, and welcome to enter Com's fourth quarter 2020 earnings release Conference call, all participants will be and in a listen only mode. This conference is being recorded I would like to introduce your first speaker for todays call, Mr. Richard Schmeling, CFO and executive Vice President.
Sir you may begin.
Thank you Catherine.
Welcome to Entercom Sports quarter earnings Conference call. This call is being recorded.
Play will be available on our company website. Shortly after the conclusion of today's call and as a whole book by telephone at the <unk>.
Replay number noted in our release during.
During this call the company May make forward looking statements, which are based upon the company's current expectations and involve risks and uncertainties.
Company's actual results could differ materially from those projected and these forward looking statements.
Cash flow information concerning factors that could cause actual results to differ materially are described and the risk factor section and the Companys annual report on form 10-K.
Such risks and uncertainties may be updated from time to time and the company's SEC filings.
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 and we refer you to the investors page of our website entercom.
Dot com for reconciliations of such measures and other pro forma financial information.
With that I'll hand, it over to David field CEO. Thank you Paul.
Thanks, Rich and good morning, everybody and thanks for joining our fourth quarter earnings call.
And you're the one year anniversary as the official declaration of a pandemic I'd like to start off today's call by sharing some perspective and I want her comments fared through this historically challenging period.
And it does it began we committed ourselves to force taken care of our team and making sure that everyone was safe, while ensuring we didn't miss a beat and serving our listeners and customers. We also dedicated ourselves to not just navigating the storm effectively.
And 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've been purposefully transforming the organization into a leading multi platform audio content and entertainment company with scaled audience reach and a leadership position and virtually every segment of the dynamic and growing audio market.
Moving broadcasting Podcasting digital network events music news and sports.
Did I entercom is the country's number one creator of original premium audio content and strategically well positioned to expand our customer relationships and accelerate growth.
We are excited about what lies ahead and other things you are coming together across your company Entercom.
Entercom today is a very different company than before and emerging as an important player and the growing and evolving audio business. We have made a number of strategic acquisitions and wash a plethora of internal initiatives to move the company forward.
While the progress was masked by the enormous challenges and the pandemic and its impact and a large percentage of our customers. We are making great strides and building rapidly growing digital podcast and 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 our business before turning it over to rich and 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 to $32 million, enabling a significant enhancement of our sports betting business capabilities, We also announced a multiyear partnership with bandwidth.
Fourth quarter net revenues of $320 million were down 22% versus last year and sequentially up 19% growth just 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 and Q4 operating expenses versus prior year, enabling us to deliver adjusted EBITDA of $67 million more than doubled and $31 million, we generated and the third quarter.
During 2020, sorry during 2020, we successfully achieved for them and an annual expense reductions of $100 million, while improving our capabilities to serve listeners and customers.
Digital revenues, which includes our podcast and business had a strong quarter growing 23% over prior year led by robust growth and streaming and podcasting along with a solid contribution from our digital marketing solutions products. It.
It is worth noting that our digital business has now grown to 18% of total revenues and 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 arms 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 organic spending.
As noted earlier, our bench business, obviously has been shut down we are hopeful that we will see a partial with target and this business later in 2021.
Our spot business has been the laggard declining 24% during the quarter, reflecting the continuing deep impact of the pandemic and local economics and important business segments.
And 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 and Vince Jens restaurants stores sporting events nightclubs theaters movies concerts fares travel casinos and more.
And that makes her disproportionately Ralph on the go places and do things business and that is insurer and had a substantial impact on local radio advertising.
Well, the spike and infections hospitalizations and deaths injured or other economic progress over the past couple of 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 and 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 are radio brands remained strong we are increasing our focus on driving innovation to enhance the listener experience and capitalize on our abundant multi platform and scale driven opportunities.
<unk> Dot com, our digital platform had another terrific quarter of growth across all metrics.
And fourth quarter, our monthly active users reached 34% over prior year, while our smart speaker listenership surge by 53%.
Radio Dot 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 thousand hours. We were essentially sold out of our streaming inventory I get and fourth quarter and demand remains high.
Our podcast and business also had a very strong quarter across all metrics, including revenue downloads unique listeners and rpms and 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 and we continue to receive a number of our shows have appeared on 2020 best of lists from time, and New York Times Rolling Stone, the Atlantic Teen Vogue, and New Yorker and more.
And the New York Times, and the Guardian and both named Wyndham changed from a Pineapple Street Studios team and number one podcasts and 2020 and another one and pineapple shows back issue was named one of the best original podcast through the year by time, the Atlantic and Spotify.
We also continue to be the partner of choice for leading studios streaming services and developing companion part. Yes. We are very pleased to note that Hulu has just come on board as a new partner, joining HBO and Netflix among others we.
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 law form series, doubling or 2020 output up 11 originals.
Several of these shows have also appeared on a number of most anticipated podcast of 2021 less we are also continuing to expand our premium network of shows with leading Influencers and entertainers.
Last week, we announced the first three podcasts from RC 13 features projects. She says Gee 13 features as a new partnership we formed with endeavor content to develop feature labs fiction podcasts designed to be highly adaptable to television and film.
The announcement of our first and 13 features projects was very well received and is already garnering studio interest.
On a related note in December we announced the sale of Tds TV adaptation rights for wind of change to Hulu and we have recently option a number of other projects to major studios streaming services all in our derivative sales with television and film more than doubled in 2020, and while a small number we believe we will see this area of our business and Merck as a modest contributor and the years Ed.
This is also a very active quarter for our sports betting business as I mentioned earlier, we announced the landmark multiyear partnership with tangible and establish the single largest advertising deal and the history of the radio industry.
<unk> made this long term commitment to capitalize on the power of our unrivaled sports radio leadership and deep local fan relationships. In addition to bandwidth and we continue to expand our business with other sports book operators as well all and we are expecting our combined sports betting AD revenues to grow by at least 50% in 'twenty and 'twenty one.
While most states have still not legalize mobile sports betting we expect to see a significant number of states coming online and the next few years, which should fuel robust ad growth and the category.
We continue to expect sports betting to grow to a $100 million 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 <unk> App a rapidly emerging sports betting data and predictive analytics platform generating value, creating and sites for sports betters debt.
<unk> business is driven almost entirely by subscription revenues and affiliate fees from sports books for customer acquisition.
We believe that <unk> is a terrific complement to our sports audio and sports betting businesses. As you know we have the unrivaled number one sports radio platform and the U S, reaching tens of millions and sports fans with leading patients across the country, including WFAN in New York, The score and Chicago, Wip, and Philadelphia, and Atlanta, Washington, D C and many more.
And other broadcast home to 41 proteins.
And in fact, we have three times the audience and 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 best you out platform.
While these are early days and the numbers are small and we're off to a terrific start and converting radio screaming and podcast listeners Tibet QL, we're posting triple digit growth and debt <unk> and they use new subscribers and sports book affiliate revenues, while Arco 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 Texas recently acquired Lockdown and sports podcast network. We also recently announced the launch of the new.
P QL audio network with initial distribution and Los Angeles, and Denver, plus radio Dot com and everywhere.
We have exciting plans to expand the network with significant additions to both the content offering and distributions.
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 is 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 and continue to make investments and new growth areas to augment or opportunities.
Our radio and events businesses are well positioned to rebound, it's 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.
All other opportunities we.
And we're excited about the future and look forward and 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 and total full year and benefited from the post election day run offs in Georgia.
Our digital revenues for the fourth quarter were up 23% year over year to $58 8 million driven by growth and streaming and podcasting.
Our event revenues continued 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 and December versus 44% and September and 55% and the month of June.
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 and 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 remained significantly disrupted by Covid top historical categories like concerts seasonal events casual dining and travel remains significantly depressed.
Our sales teams and each of our markets continue to call on and to support these businesses and we remain optimistic and as the impact of the virus subsides that our local spot advertising revenue will rebound.
And the first quarter, we are seeing sequential month over month revenue improvement.
<unk> of this improvement and 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 pacing and local and national is improving each month during the first quarter and based on our current piece and 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 five.
And <unk> 4 million for costs related to COVID-19.
Excluding these onetime and unusual costs and adjusting out noncash items like DNA.
Our total cash operating expenses came in at $253 million were 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 nonrecurring consulting and legal settlement costs that we incurred in the quarter and decided to incur subsequent to our third quarter.
Our earnings release.
For the full year, our cash operating expenses were $949 million and were down $241 million or 20% versus our 2019 expenses on a pro forma basis for our 2019 podcasting acquisitions.
Sure.
Looking at the first quarter, we expect that our total cash operating expenses will be down.
Year over year by a 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 and as David mentioned, we invested $32 million to acquire the QL gaming group, bringing unrivaled sports betting and analytics to our leading sports sports platform and creating new opportunities to serve the nearly 30 million fans that engaged of our stations.
And each month.
Our adjusted free cash flow for the quarter was $38 million up from $2 million and the third quarter.
At year, and 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 day.
$29 million from the and just last year.
And our net capital expenditures expenditures totaled $8 9 million and 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 and the rapidly growing digital audio advertising market.
In regards to cash income taxes, we expect to receive a federal income tax refund of approximately $15 million during the second quarter and.
And we do not expect to pay income taxes this year.
With that we'll now go to your questions Catherine.
We will now begin our formal question and answer session. If you would like to ask your questions. Please press star one on your telephone keypad record only your first and last name. Your name is required to announce your question to withdraw. Your question you May Press Star two.
First question is coming from Craig Huber of Huber Research partners. Your line is open.
Oh, great. Thank you.
A few things.
Can you talk about the potential for permanent damage to the advertising base out there.
Just given with the environment, we're going through and all the pressure and maintenance and closures and bankruptcies of small businesses out there and stuff.
As you sort of think out here or do you think it's possible for your radio advertising to get back to peak levels and a station per BOE for station basis within a couple of years. That's my first question. Thank you.
And so David if I could start and I'll hand, I'll hand, it to you. So we've we've looked at that at length, Craig and and Theres no doubt that the two.
2000, and 'twenty was a tough year for bad debt and bankruptcies or bad debt expense in 2020 was $16 3 million when you add it all up versus only $4 5.002 million and 19 and when we can.
Look at bankruptcies.
And you know and 2019, we experienced 10 and.
And and the L. T M revenues associated with those bankruptcies was hundreds of million dollars.
And 2020, we experienced 69 bankruptcies and the L. T M revenue associated those bankruptcies was about $7 million.
So not insignificant.
And obviously, a significant increase versus 2019, but relative to our total revenues and.
It's immaterial and ER.
And we've seen when we look at our advertising base and influx of new companies and I'll point, specifically to the direct to consumer space.
So.
And and as I mentioned and my comments about.
The outlook.
For the first quarter and beyond you know our teams are continuing to call on and to engage with the local advertisers who are still struggling and.
And we don't see a lot of evidence that there's another wave of significant bankruptcies that we'll see and 2021 things are getting better and.
So.
Long and short of it Craig I don't see a lot of evidence of permanent damage to our local or national Advertiser base.
I do see and we do hear about the continued disruption.
And particularly as we saw Covid cases hit all time highs and deaths.
In late December and early January that's clearly subsiding rapidly and and we're optimistic what would you add to that David.
Yeah, I mean, I think you covered greg's question, well, but I guess I would just add debt you know this is a unique.
Event and that we have basically shut down and large parts of our economy and as I said before.
What we specialize and sort of the go places and do things business and you know to your question you have to ask yourself or theme park is going to come back or people are going to go back to games, our nightclubs going to reopen and are people going to go to you know people are going to travel and I think while there are individual business is going through very difficult times ultimate.
And those those businesses come back and so yeah. The live nations of the world come back and spend money with us and a significant way as they were.
The ramp up and I think what we're excited about of course is the pent up demand and I think true optimism about.
Returning to normal here before too long.
And as we're seeing all of the evidence, including just the latest debt. We should have 130 million Americans capacity to fully backed into 130 million Americans by the end of March 31, So we feel very good about that recovery going forward sorry for the long weighted answer to your question, but I think we've tackled it pretty thoroughly.
No I appreciate that my next question if I could maybe I missed this what was the podcast revenue and the quarter Please and.
And what was the percent up year over year. Please thank.
Thank you.
Yeah, we don't break that out separately.
To us its digital inventory and and we reported that our digital revenues were up 23% year over year.
Okay and my other bigger.
Picture question here is.
And you guys know lover love them or hate them Rush Limbaugh had 15 million weekly listeners on the radio.
Given what's happened here.
Where do you think those listeners are gonna go and more importantly for Entercom.
Offerings do you have that could pick up a substantial piece of those listeners out there.
Loyal listeners.
And when do you see this beautiful.
And here I'm, sorry, I'm, sorry, Greg and I thought you were done.
I was just saying do you think it's a big opportunity for your company to pick up a significant piece of those 15 million weekly listeners.
And you're on your digital and radio properties.
I know, it's not your side of Kitting program here, but just big opportunities and for you guys or no.
Well I I would frame it this way and Russia, certainly terrific and had an extraordinary following and an extraordinary career I'm on.
On the radio.
We did not have rushed on a lot of our radio stations.
As it turned out because we tend to you know our new stations are a non.
And on non partisan and strictly news our news talk stations tend to skew a little bit more local in terms of their orientation.
There are plenty of other you know terrific personalities of course, local and national all across the country and I think that you know those listeners that rush and of course also listen to lots of other other shows so.
While it's you know, it's it's a it's a sad passing and obviously past fairly young.
You know, where we feel very good about the future of our news and talk and spoke and workstations going forward and you know I think you know it's hard to know exactly where all that was and the stewardship is going to fall out in terms of the various options that we are we and our competitors present.
I'm, sorry, if I could ask and you do not have a lot of conservative leaning opinion folks on your radio.
Operations and you could pick off a good chunk of them and three hours a day for 15 million and focus obviously.
To pick up a chunk of what's most loyal listeners right I'm just curious, but yeah. No I think we tend to be I would say you know a couple of our you know if you look at IHOP and Cumulus they tend to be skewed they tend to be a little more weighted into conservative talk radio and then we are.
Okay very good thanks, guys.
Our next question is coming from Steven Cahill of Wells Fargo. Your line is open.
Thank you.
And for me I'll, just kind of rattle them off theyre not in particular order maybe first just a that Q1 revenue guidance down upper teens was that per spot or was that for total company.
The total company.
Okay, Great and then.
Maybe just a second David could you help us quantify how you anticipate <unk> gaming and locked on to contribute a digital and broadcast revenue growth and in the years ahead I know, that's a very sort of strategic and synergistic opportunity. So how how should we think about that impact.
Sure. So by the way just to elaborate a second on your first question. The number Rich gave you is a total number obviously.
Obviously, we face political comps and also no event again and the first quarter. So if you look absent those areas it would be.
A bit better to your P well and blocked on question.
Really excited about the growth opportunities across the.
And the sports and sports betting.
Space and.
They're just a lot of sort of symbiotic opportunities, we see there and if it's at its essence, we are.
Arguably.
The home of the most engaged sports fans and the country and the opportunity to.
Drive additional revenues from those audiences as we introduce them to the debt QL product line gives us the opportunity to start participating in what over time will be I think a rapidly growing.
Set of subscription revenues and affiliate revenues from sports books as well so start small, but they've got great technology, they're highly respected and our high performers and we see that being sort of very rapid growth.
And from a small base here as we go forward you know locked on is a great enhancement to our portfolio and we are and want to continue to be the.
And the best place for sports fans to engage and connect with great personalities like the boom or <unk> and the great Cartons, and New York and so many of our stores all across the country and expanding that into podcasting and you know where we have Kevin Durant for instance is one of them.
And that we're partnered with and so forth. So there's just a lot of great content out there and we just see tremendous entrepreneurial opportunities for us to grow revenues and profitability and in many different ways.
I have just one point to what you said David about the first quarter I think it's useful to say that.
You know political last year and the first quarter was was heavy given all the money that Michael Bloomberg spent and we also still had a pretty I'll say normal slate of live events and those two combined political and events were about $15 million of revenue or about five per.
<unk> of our total one Q2 thousand and 'twenty revenues.
Obviously.
When you think about the or.
And the upper teens guidance, you need to put that in context.
Yes, Okay, and then and podcast thing. So yeah. I think you were really early and in terms of buying cadence <unk> and Pineapple Street, which are probably worth considerably more now than than what you paid for them and I'm just thinking about how you kind of think about these within the portfolio because when I look at where.
It seems like a lot of your business is headed you got a great you know sort of focus on sportswear and keep all gaming and locked on and the sports betting opportunity I think we're seeing podcast thing you know really starting to work well and it can be paired with whether it's hosting or programmatic and so I'm. Just wondering as you also think about deleveraging cadence and 13 and.
Pineapple are probably worth a lot.
They are the right assets for you to hold on to versus what they might be worth two to a third party at this point.
Great question. So let me just first I'm.
Just to fill and a data point for those who may be less familiar with our story, we acquired both of those companies collectively purchased under current.
And just under $50 million and based on.
Comps and the market to your point, Steve and if there were several times debt.
That said, we view that as a core business and would have no interest and exiting the space. We think we are very well positioned to compete and thrive and the business.
Our current business.
One of the three largest publishers.
Podcast publishers and believe that the competitive advantages, we have with distribution given the upkeep and radio dot com and also the.
$270 million or so folks who engage with our brands and our stations each month gives us a really powerful distribution platform and.
And also our monetization opportunities with our strong local and National sales force. So we we think we're positioned to win and the space. We don't think there's a winter if it's not a winner take all situation of course and.
There'll be I think multiple winners here, one of which will be us and as part of a holistic audio offering as we go to customers today and offer them a leadership position and broadcast radio podcast radio digital audio and so forth. We think it's in a central core component to our offerings and positions us really well from <unk>.
Growth.
Great and then just a couple and finish up from me, maybe one could you give us the radio dot com and they use and and lastly, rich and I know cost has been a big focus would you be willing to quantify how much fixed cost reduction do you think sticks, even as revenue fully recovers.
Let me answer the cost the cost one first day of it and you can hopefully cover the Mou sure. So when we think about the our cost base.
We did significantly impact our fixed cost, but it also impacts our variable costs. So we've executed a number of strategies to attack our variable cost and reduce their occurrence from relative to revenue.
And so that's why I.
Refined our model is working to.
And Polish up our plan for 2021, we're now looking at the.
And our total expenses fixed plus variable being down $100 million or more versus 2019 pro forma and that is a mix of both variable and fixed and those variable savings are permanent in nature also.
We've reduced them relative to revenue and we're working hard on other strategies to go even further so we're not done we think there's more to do and.
And you know, we're very focused on continuing to liberate expense from our historical operating model to fuel growth and there's a lot of you know when you look at the.
Gross savings is substantially greater than $100 million, and we've invested quite a bit and accelerating a number of key areas across our business from network to digital.
And as to your first question. If you look at the total and they use and I don't have the number in front of me, but I believe the latest numbers I've seen are approaching $40 million total and they use and that would be across sort of all of our of our digital radio dot com platforms and that would include a smaller percentage of those who are regular streaming audio.
Uh huh.
Users of our other platform.
Great. Thank you.
Thank you.
The next question is coming from Steven Emerson Emerson investment Group. Your line is open.
Thank you for taking my call and ask a lot of corridor.
I'm kind of share or would like to understand here.
Our philosophy of monetizing.
Gamblers are that are recruited by your radio and as an observation and true value creation per media is when you look at permanent right and.
No.
Gamer that is required debt not selling ads as exciting as 100 and smell put tenneco revenues.
And from fan to all I'm curious as to your child care plans.
Sure Stephen So let me let me just first clarify.
And something you just said you said future potential of 100 million and sandal.
That's not what we have said what we've said is that the total category, we believe grows to $100 million for us.
And several years <unk> would be a significant part of that but we work with lots of sports books.
To your broader question, we agree that it's not just advertising and.
As we touched on a moment ago. They really are sort of three buckets. There right. One is advertising. The other is a subscription opportunity that we have we are now participating in and we're excited about going forward and we think again its such a logical fit with what we do and it's enabled by the QL acquisition and <unk>.
And finally, there is the sports book affiliate fees, which you're you were alluding to that we're also participating and now through our <unk> platform. So yes.
Yes lots of opportunities and this space.
Thank you.
The next question is coming from John Alice Palmer Square Capital Management. Your line is open.
Hey, guys. Thanks for taking my question first do you think you could put a number to how much and much of the cost savings you guys have enacted they're gonna be permanent I know, you've kind of talked about the different opportunities, but like what what quality and it really does that look like.
Yeah. So when we we absolutely meant for the guidance of $100 million or more versus 2019 to be permanent.
And then.
Yes, and look you are over.
Over time as the business rebounds.
And obviously revenues will drive variable costs, but we do think and we're comfortable telling you. This year that we expect our total cost to be down.
$100 million are more versus two.
2000 and.
And 19 pro forma and as you know as you could imagine have some cushion against that that call.
Yes.
So thinking about that going forward in 'twenty and 'twenty, one 'twenty and 'twenty, two and probably we'll see that say and $100 million versus savings versus 2019.
Or does that.
Yeah look I think I think that as we move out into the future. We continue our efforts to transform our cost structure and to fuel growth. So you know as we get deeper into 2021 will give.
I'll give you more color about that.
What we see and 2022, but there was.
No one's plant and going backwards with and Entercom and people are very focused on.
Executing then and and driving continued productivity gains.
Perfect and that makes sense couple more from me can you talk about the increase and your revolver draw what was that used for.
Like it went up from.
And then.
And there was two two key drivers and the fourth quarter and.
And the acquisition of Q O gaming for $32 million and also just funding the rebound in revenue. So you saw that our fourth quarter revenues were up 19%.
Versus the third quarter, so sequentially, we did consume cash and working capital as we funded the the related the added receivables.
Okay that makes sense and then can you guys give what your cash flow from operations was for the quarter and year end.
We we did we said we said that our adjusted free cash flow and was $38 million and the fourth quarter versus $2 million and.
And the third quarter, and and you can see that and are the.
Earnings earnings tables attached to our earnings release.
Okay got it alright, thanks for taking my questions.
Sure.
And next question is coming from Matt Drudge and Millennium. Your line is open.
I think we lost and Kathryn.
Yeah.
We'll go ahead and go watch it.
Hi, Hello.
Yeah, Hi go ahead, Matt.
Hi, Thanks for taking the question so.
One other things.
I think that it could be interesting is it just sort of and understanding on.
The mobile the the active users on and radio Dot com.
And then sort of the opportunity for a paywall could you could you talk about that a little bit.
And on your first question I'm not sure what you're asking.
Well from my understanding is you guys have 40 million active users on radio Dot com.
<unk> shrunk of Nam are probably sticky related to some some interesting assets like the fat.
And you know as you look at things like Spotify and.
Other other services that have a paywall to them before access maybe is there an opportunity. That's that's you know are on the horizon.
<unk> for you guys in terms of monetizing those those that's sticky listener base.
Got it so look here's what I would I would respond.
We've been growing very quickly in terms of radio dot com and our digital audio offerings, but we have a lot of headroom and a lot of ways to go to get it to where we would like it to be.
And obviously, it's a competitive marketplace out there, but we believe we have a differentiated competitive advantage due to the quality of our premium exclusive content, which is second to none and that means everything from as you mentioned the WSI ends of the world.
Sure.
Winning new stations to local personalities and not you know and different music formats, and so forth to our award winning lineup of podcasts and that combination.
That content exclusive content and our.
The bully pulpit or distribution.
Our radio stations and puts us in a position, where we can grow radio dot com and its being even even more formidable.
Player.
And we have lots of plans to rich rich mentioned debt, we will be increasing our capex investment.
Investment in that platform this year.
Excited about opportunities for growth, there and value creation from shareholders and that's about as far as I think we can go at this point and time that you can imagine we just want to.
We'll announce things as we.
As we are rolling out.
Okay, and then and just a couple more from me on the on the back you Ala and it's a really interesting acquisition and certainly sort of different differentiated from some of the peer side given you have affiliate fees.
And on an burst at a place I think through you know through the back you up that take you to the sports books or whatever.
Could you talk a little bit about one and the affiliate fees debt that you receive and how those work and to this and how does the sort of the nature of the subscription on deck you out for example, like looking at the application and it looks a bit like a bloomberg for sports analytics and.
How many people you know subscribe.
Subscribe for two sports versus three sports, which is one sport like can you just sort of gives them and give some sense there.
And I don't want to I don't want to get too granular.
On that but let me let me try to answer the question as best I can be clear so on the subscription side.
But you all offers and a weekly monthly annual one sport to support three sport packages and so forth to help inform betters and make them more successful and enjoy the entertainment aspects of it as well and of course, that's and exploding business and those services and those offerings and we'll keep expanding but it's all based upon really.
Our full analytics and insights, which have made the platform you know very successful and and rewarding to our competitors and to the affiliate fees to some folks and how that works I'm. The sports books will pay a fee for debtors from first time betters, who make deposits.
And start using their platform so.
We see both as robust growth opportunities for us going forward.
Okay, and then I guess, and then I guess lastly, and.
Sort of the elephant in the room and towards a media personality.
Barstool radio has been off the the math or about a month here and you know we see obviously March madness and the college tournaments are coming quickly, which is a big moment for sports gambling and now legalized and large places around the country. They.
And they seem to.
Have a distance themselves from serious and have you guys thought about them as a as a potential as a potential partner and are there any roadblocks, we should consider such as you guys already have the fan or a or something like that.
Yeah, I mean, obviously, we're not going to comment on strategic relationships and so forth. The only thing I would say is we have lot of respect and those guys. You know, Dave and Erika have done a wonderful job of building a business and there you know there are there are strong and theyre strong player and <unk>.
And you know it's funny a lot of other folks come on the air with us occasionally and we have fun with them and you know, it's we wish them, we wish them well.
Okay Awesome. That's that's that's that's it from me. Thank you I appreciate it thank.
Thank you.
The next question is coming from Jim Devlin Henley <unk> Company. Your line is open.
Hey, guys are long term long time listener first time caller.
Just had a quick question.
And I guess, the 800 pound.
Gorilla, if you will and the room.
Hinges around the live event business right.
I just don't understand the disconnect between the Entercom and live nation, and maybe you can tie.
Kind of give us a better understanding wall street seems to be giving a pass to Mr. Rapino over at live nation and.
Their pitch to the street is we're through the 10th of Covid.
Apple has destroyed the recorded music business, where artists to generate income.
And we're looking at potentially the greatest lineups of musical apps.
And through the pipeline.
I'm not saying, if we get to Emasculate society, but to a society, where you can start filling venues with foot traffic again.
Their stocks.
And $90 trading at or about all time highs.
Wall Street's willing to give those guys a past willing to say hey, when it does open the pipeline looks robust this is a key.
Clearly a reopening play.
Why does wall Street.
Detract Entercom as live entertainment business, and if we do get to a point where things normalize how big is entercom and life of that business. That's my first question.
Yes, you know I don't know.
And that gets us to comment on valuations on you know companies like live nation. All I can say is that we do look forward to the best business coming back fully overtime.
We'll have to be thoughtful about that process in terms of density and indoor outdoor and all the obvious issues, but absolutely feel confident that that part of our business will be back and will be robust and you know on a personal level I'm sure many of us and can't wait to get back into watching watching live music and live and then to get.
But the pipeline when it does come back that that entertainment schedule. It does look very robust right.
Well I mean, I think everybody's waiting out and there is some bands that have started to schedule and tours and so forth, but yes.
Yes, it will be no doubt, there's huge pent up demand there. So it will be robust when it comes back and we'll just have to see how it all plays out Okay. And then if I could just one more question pre Covid you guys were pacing like really solid EBITDA numbers, probably the best you had right going into the teeth of Covid.
And at that time, you were talking about are rapidly delever.
Deleveraging the balance sheet and all the things you had hoped or kind of with the Cvs transaction to reverse Morris Trust transaction.
And over time you know.
Chipping and chipping and chipping away at the debt how.
How do we look as far as debt Paydowns and 'twenty, one coming out of the 10th of Covid and if live events and the sports continue to grow and the podcast thing and all the good things that you are growing how do we look at you know several years out down the road.
How much debt you think you can start chipping away out of free cash flow.
Let me just let me.
Start with this and then rich will will fill and so basically to your point, we had a really good year and 2019 was strong topline and bottomline growth.
We then started last year and nicely as well before the pandemic started with solid topline and Bottomline growth.
As well.
And you know obviously at this point and time.
We're looking forward to.
Coverage as it goes forward, obviously, there's been a lot of sequential improvement over the last couple of quarters, we have a ways to go and feel really good about the recovery of our local business and our events business and we feel really good about the work we've been doing to accelerate and our growth there are more rapidly growing areas.
And earlier that digital has now grown from 10 to 18 per cent of our business and growing by solid double digits and network business growing by double digits etcetera. So I think that as that goes forward that provides more free cash flow and and we'll look to continue to apply a very.
Significant component of that too.
Lower reducing our debt and obviously as our EBITDA grows and our debt goes down.
We will continue to improve our Oh Gee rich I don't know if you want to add to that.
Well look I think you know we are focused on ensuring that we are comfortably compliant with our covenants by the end of this year and.
And we believe we're on track to do just that and and I think you'll see us.
Reduce our debt this year as we did last year and and then.
And you know, it's all about recovery and it's all about accelerating.
Cash flow growth and using those free cash flow is to pay down debt. So we understand exactly what you're saying and that is a top priority from an organization Wow Wow. So can I get just one quick follow up I appreciate the time.
And you're expecting that the prescription from your covenants was four times leverage is that correct.
That's right that's our covenant.
So at $1.6 billion.
Is that Oh are you backing into $400 million type run rate EBITDA guidance.
No.
That math.
Does it make sense to me, but we are we are the.
We're working to be compliant with the our.
And our EBITDA and our first swing. So this is it's a first lien covenant, it's not a total okay. So on a first lien basis to be compliant with our covenant at the end of this year, Okay, and then do those covenants preclude the company from a.
Clearly not buying that are not bought only buying back debt.
Have you guys.
What would that preclude you guys from being able to buy back stock equity.
Yes, so we are precluded from remixing, making restricted payments right now.
Okay, Alright, very good. Thank you very much and continued success.
Thank you so much.
The next question is coming from Michal Krupinski of Noble capital. Your line is open and thank.
Thank you and thanks for taking the questions I was just trying to get a handle a little bit around the pacing data you provided.
Typically the company would enter the next month with the with as much as like 65, maybe even 70 per cent of advertising already book can you kind of give us a sense of how much of the business is booked from March at this point I know that you indicated that marches pacing better than February I'm, just trying to get an idea of.
How much business has had has been booked at this point.
Brett do you want to take that.
Yeah sure so when we think about it.
The full quarter.
You know we're.
You know, we're like 90 close to 90 per cent.
Booked of expected from those.
Of the expected final and and and looked at and that's based Michael on where we sit today and and we're all curious to see how the next weeks five weeks plays out because clearly you know COVID-19.
And that's gotten a lot better over the last.
Four to six weeks and.
We're just one month away or less and one months away from spring. So we'll be I think we're all curious and there's some chatter in the spaces, you spoke yesterday and the Cumulus folks.
And perhaps March gets better, but we'll see.
Yeah, and and certainly I know and business continues to be book pretty light. So that's kind of like why I was just trying to get a handle on.
I think getting into the sports betting business is brilliant given your sports platform.
Just curious how deep does the company plan to get in the sports betting business do you see additional acquisitions do you think there might be expansion into esports esports programming, maybe R. E sports betting I just wanted to kind of get a framework of what your thoughts are there long term.
I don't see us, making any plays and esports.
I think we really have a great.
Complementary set of businesses, you're now between you know again unrivaled sports radio.
Emerging strong podcasts and I mentioned, whether it's locked on her that Kevin Durant, and Soma and Jay Jay erratic and so many other.
A podcast that we have and the sports space.
Whether it's stuff, we're doing a radio dot com and of course fewer gaming group I think gives us the the tech and the.
The subscription platform to really bring it altogether. So you know we'll have to see how it all evolves, but right now Mike and we feel really good about our offerings and it's created some really interesting entrepreneurial.
Opportunities and you know I'll close by just mentioning weed.
We announced the launch of the.
The QL audio network and I think that's a great manifestation of where we can combine.
Some of the pieces that we're fortunate to have and create organic growth opportunities that could be pretty exciting.
Great. Thank you so much thank you.
Thank you.
The next question is coming from Avi Steiner JP Morgan Your line is open.
Thank you good morning, I appreciate the time I've got two questions. One for you Rich and then maybe a bigger picture one just in light of the free cash free cash flow comments made with respect and earlier question I'm wondering if there's any updated thoughts on your debt stack, maybe some other earlier maturities in light of what's still a receptive higher market.
Specially for radio of late and then I have one more thank you.
Yes. So we're we are closely monitoring the high yield market and the loan market.
And we have been thinking about possibilities and.
And we are considering those possibilities.
So.
Yeah.
And as you well know I'm moving.
The other markets.
Close to all time tights, and so we're we're very focused on that.
Okay, Great and then and then my bigger picture, one and and again. Thank you for the time, David you've always you've often talked about and audio was a resurgence and your business plays into audio strengths and you've got a terrestrial business podcasts and screaming.
And I'm curious if you have any thoughts, albeit early on on some of the audio offering springing up on from <unk>.
And with better skip from social media out there and whether.
It's clubhouse that folks are talking about or Twitter spaces offering.
And whether you see those kind of competitors to what you offer ultimately complimentary to the entire listening experience and thank you again.
Well, thank you Avi and it is a great question and I don't know if you have good answers yet right because it's all sort of merging what I would offer is that we're living at a time and sort of unprecedented interest and audio or at least you have to go back to the F. D. Our ear I guess to match that and that's really exciting and to be a company with our <unk>.
Kale and with our.
Differentiated exclusive premium content I think puts us in a place where we can do lots of interesting things to capitalize on these trends and.
And what's great is you're seeing lots of.
Consumer and the public interest and audio as well as more and more advertiser interest and audio and given disruption and other spaces and the media ecosystem. We think that's going to also bring more dollars and to play.
Specifically as it pertains to some of the social offerings that you mentioned you know it's hard to know overtime, what those trajectories look like right and whether those end up being badge, whether they end up being a powerful trends that create big businesses or products and so forth. What I can tell you is that too.
To the extent that social audio and mergers and a bigger way I think we're really well positioned to participate and that.
Given the nature again of our scale our reach.
The engaging.
Nature of our brands.
And.
And our and our all of our great personalities across the country. So if there's an opportunity there I am sure we will be.
<unk> robustly overtime.
Thanks again.
Thank you.
At this time, we have no further questions in queue I'll now turn it back to Richard Stanley.
Yeah. Thank you very much Katherine and thank you all for joining our fourth quarter 2020 earnings call Bye Bye.
And thanks, all bye now.
This will conclude today's conference all parties may disconnect at this time.