Q2 2021 Audacy Inc Earnings Call
[music].
Good morning, and welcome to Odyssey second quarter, 2021 earnings release conference call.
All participants will be in listen only mode.
This conference is being recorded.
I would now like to introduce your first speaker for todays call Mr. Richard Schmeling, CFO and executive Vice President Sir you may begin.
Thank you Robyn.
Well welcome to audit fees second quarter earnings Conference call. This call is being recorded a replay will be available. Shortly after the conclusion of today's call at the replay link our number and nobody in our release during this call and the company make 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 and these forward looking statements additional information concerning factors that could cause actual results to differ materially are described and the risk factors section of the company's annual report on form 10-K, as such risks and uncertainties may be update.
And from time to time and 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 make we may make reference to certain non-GAAP financial measures. We refer you to the investors page of our website at Odyssey and Dot com for reconciliations of such measures and other pro forma financial information.
With that I'll turn it over to David field, President and CEO.
Thank you rich good morning, everybody and thanks for joining Odysseys second quarter earnings call.
I am pleased to report a very strong and successful quarter of progress at Odyssey, and we significantly accelerated our recovery from the pandemic and at the same time continuing to implement important transformational changes across the organization to enhance our future growth and opportunities.
Starting with the financial highlights revenues grew 73% over the prior year.
Growth was led by a near doubling of our spot radio advertising and second quarter, posting a 98 per cent increase over the prior year at.
At the same time, we generated a 41% increase and digital advertising and a 23% increase and network radio advertising over prior year.
We are in the midst of another strong quarter of sequential progress in Q3, we expect third quarter revenues to grow about 10% from second quarter, 2021 levels and up by about 25 per cent over prior year.
July 2021 finished 27% above July 2020 rich will provide.
Some additional color on current business conditions, and our expectations for third quarter.
And should we look ahead to next year. We believe we are on our way back to a full recovery of our pre pandemic 2019, EBITDA and calendar 2020.2 as we noted on our last earnings call.
And with the expanded breadth of growth opportunities that we have ceded through our various acquisitions and growth initiatives. We believe we are well positioned to compete and accelerate our topline and bottom line performance across our various businesses and the years ahead.
We are fundamentally enhanced and stronger company today versus who we were just a couple of years ago, our acquisitions of cadence 13, Pineapple Street Studios, the QL gaming group and popcorn and our development of the Odyssey streaming platform along with our numerous growth investments and partnerships have greatly enhanced our ability to capitalize on broad.
Advertising trends augment our product line and better serve our listeners and customers.
Reflecting that transformation, we began the quarter with a total rebranding of the company, leaving behind the old brands and reintroducing ourselves as Odyssey and new named it better reflects the company, we have built and where we are headed.
Today, we are a leading multi platform audio content and entertainment company with scaled audience reach and and important leadership position across the full spectrum of the dynamic and growing audio market, including broadcasting podcast Ing Digital network events music news and sports.
During the quarter, we made important strides forward and elevating our podcast and sports betting digital audio and radio businesses, while planning the resumption of our events business.
I'd like to share a number of recent developments and highlights along with some additional color on these recent achievements.
First we are encouraged by the current pace at which we are writing business to a great extent earnings reports were trailing indicator, reflecting the aggregation of sales over the course of the past few quarters, including the darker days of late 2020 and early 2021business written in some ways is more of a leading indicator.
During the month of July we wrote 7% more business for third and fourth quarter and we wrote for the same periods and July 2019.
While this is just 1 month. This is the first month since the pandemic and which that has occurred and a positive harbinger for the future.
We've also seen improvement and a number of categories that were severely disrupted by the pandemic on the other hand, and the recovery is being constrained by the widely reported disruptions and supply chains and labor shortages that are impacted a number of our customers, including auto our largest category. We expect these disruptions to resolve themselves later in the year, which should generate a means.
And for lift and revenues as dorm and clients ramp up their advertising, although we remain wary of the rising tide of Delta variant infections and their potential impact on the recovery.
We are also encouraged by the acceleration and our digital revenues during the second quarter as we posted strong increases in all 3 primary areas of our digital business, including podcast and digital audio and digital marketing solutions, you may recall that our podcast and business had a softer Q1 due to a parting ways with 1 of our 2 largest partners Pushkin industry.
At the end of 'twenty, and 'twenty and a lighter calendar of new show offerings that dragged our overall Q1 digital growth down, but we noted on our previous calls and we expected podcasts to rebound in Q2, despite the loss of Pushkin based upon the strong underlying growth and our podcast and business at both cadence 13, and Pineapple Street Studios.
And in fact, we exceeded our own expectations and our guidance with digital revenues growing 41% year over year and 17% sequentially from Q1 digital.
Digital represented 20% of our revenues during the first half of the year double its contribution in 2019.
And we are posting very healthy growth and our various digital performance drivers streaming M. A use jumped 24% versus last year. Our overall streaming T. L. H was up 9% versus last year led by smart speaker growth up 31%.
Streaming rpms were up 67% over prior year and podcast Rpm's were even stronger up 93%.
And looking ahead, we are very excited by the latest enhancement to our Odyssey digital platforms as we continue to drive increases and audience and total listening hours.
At the end of June we launched over 350 exclusive new digital stations on our Odyssey platform. Most of these stations. Unlike many of our competitors who focused on Algorithmically driven platelets are curated by our top programmers personalities and a number of Atlas stars such as Chris Martin T. S. Doe J go and Sofia Carson and more to come.
We are also pleased to have Coca Cola, Macy's and Geico sign on as our launch partners on this important enhancement to our Odyssey digital platform.
Our sports betting business is also growing at a very rapid pace. We previewed as previously said that our sports betting revenue would grow 50% in 2020, 1 and now expect to exceed that number as we continue to expect sports betting to grow into a $100 million category for us and a few years as legalized sports betting and continues to spread across the country.
We made a handful of important strategic moves during the quarter to bolster our opportunities we announced the partnership with major League baseball, making Odyssey their official podcast thing and digital audio partner.
The deal includes a number of elements, including the exclusive sales rights to Mlps digital audio and exclusive use of both live and archived MLB games and other audio.
In addition, we continue to expand.
Betting platform during the quarter, we announced the launch of the bet QL network featuring live sports betting content throughout the day and evening distributed across the country on select radio affiliates as well as universally on the Odyssey digital platform.
It was also a strong quarter for development and a podcast studios, we announced a multiyear strategic partnership with American public media, the creators of marketplace and other prestigious podcast programming.
Under the agreement, which launched on July 1 Odyssey will be the exclusive podcasts sales representative for a P. M. And in addition, we will jointly develop future on demand programming initiatives co productions and collaborative new revenue opportunities. We also launched shining city audio our new podcast studio joint venture with Pulitzer Prize winning.
Author and a story and Jon Meacham.
Other major releases and announcements include 1 click now rated by Elle Fanning gangster capitalism season, 3 focusing on Jerry Falwell Junior and Liberty University, a second season of the blockbuster to live and die and L. A and partnership with tender foot and <unk>.
70 over 70, the highly acclaimed new series created and hosted by our own Max Lynskey, What's in your glass with Carmelo Anthony the 11th the New Monthly magazine show and tell me with Ellen Pompeii other among numerous others.
And we now reach 1 and for podcast listeners and the U S. According to the Edison infinite dial projected number of monthly podcast listeners.
And just this week HBO, Max announced and expansion of our existing Odyssey podcast and partnership to include additional HBO, Max and H B O documentary titles.
Also last week, we launched parts us our new audio video podcasts discovery show with Macy's as our launch partner and I want to mention that our newest acquisition popcorn. The podcast influenced your marketplace had a strong first quarter as part of the Odyssey Group and is now closing in on 50000 podcasts on its platform.
1 last podcast and note we announced the launch of 2400 sports our new dedicated sports podcast studio building on our leadership position and sports audio our new strategic partnership with MLB, making us their official podcast partner, well, obviously be and important cornerstone of the new studios properties, and we announced a related development deal with award winning podcasts producer.
Sure Joe Jodi African whose prior credits include Espn's 30 for 30 and project podcast projects with W. N Y C Apple and audible.
Turning to events, we are announcing the resumption of a select number of our primary events beginning in September next month, while we will not be back to 2019 levels. This year. It is great to be back with live shows and live audiences featuring a number of the country's top artists and finally radio ratings continue to recover and social mobility is.
Celebrated and should receive a further boost as a greater portion of the population returns should their workplaces after labor day.
The latest Nielsen data shows radio audience reach back to 98% of its March 2020 levels. In addition, it is interesting to note that radio now has a 76% share of all AD supported audio and audio listening and the U S led by and 87% share of AD supported listening and cars. This data from the spring 2021Eddie.
And Richard search share of ear study once again demonstrates the resilience and strength of broadcast radio and reaching and engaging the American public and scale.
As disruption accelerates across other media platforms radio and audio standard benefit and Audi Odyssey is well positioned to participate with our scaled premium multi platform content.
And some it was a strong quarter of strategic progress and pandemic recovery across our company as we continue to build transform and meaningfully enhance the organization Odyssey is rapidly emerging as a leading competitor and virtually all areas of the dynamic audio business distinguished by the premium nature of our exclusive content and well positioned for the future.
We continue to drive improvements and our business model, while investing in new content products data technology and talented leadership, we are emerging from the pandemic and meaningfully stronger and better positioned company with enhanced growth potential building and our core strengths and capabilities and our unique asset mix. We are excited by what lies ahead.
And with that I'll turn it over to rich.
Thanks, David Good morning, everyone for the second quarter. Our total net revenues came in at 3 O $4.5 million and were up 73% year over year.
We saw broad improvement across our revenue lines are spot revenues and local plus national were up 98% year over year.
Digital revenues were up 41%, our net revenues were up 23% and our sponsorship revenues were up by 49% looking.
Looking at our revenues by format sports is recovering strongly up 157% year over year, driven by the return of live sports and growth and sports betting advertising and.
And we continue to see encouraging signs of sequential improvement and our revenue performance comparing the month of June to the month of March we saw that the number of active spot advertisers on air was up by over 1000 or by about 19%.
Normal seasonality, we typically add under 200 advertisers in June versus March.
And our spot advertising revenues increased by 16% in June versus March.
We also saw significant improvement and a number of key local advertising categories. For example, the concerts category was up over 300 per cent in the months of June versus the months of March. This increase was more than 3 times the normal seasonal increase.
The casual dining category was up by 65 per cent.
And we normally don't see much change and this category between March and June.
These key local categories that require people to get out and go somewhere amongst other people are springing back to life.
Not surprisingly as mentioned by David our top local advertising category automotive dealers is still suffering from supply chain related issues and we suspect that this category will be a key driver of growth in 2022.
Looking forward to the third quarter, we are excited to start reactivating our live events business with a few shows in September. This business line historically contributed about 3% of our third quarter revenues and this year will be less and 1%.
But it is a start and it is 1 more step back towards normal and and the fourth quarter. We are planning is somewhat larger slate of shows.
For the third quarter based on our current pacing we project that our total net revenues will come in at about $335 million were up by 25% year over year.
This guidance implies that sequentially, we expect to narrow the gap versus 2019 revenues by 7 points to 13% and 3 Q versus the GAAP of 20% into Q.
The GAAP for 2019 was 22% and the first quarter.
Our total operating expenses for the second quarter came in at $286.5 million and excluding onetime and unusual costs and adjusting out non cash items like DNA. Our total cash operating expenses came in at $2.64.6 million were up $68.7.
Or 35% versus prior year were increased by less than half the rate of our revenue growth.
For the first half of this year, our cash operating expenses were down by 91 million or 15.5% versus our 2019 pro forma expense base.
Looking at the third quarter, we expect that our EBITDA margin will expand by 3 to 4 points compared to the second quarter.
We expect that our cash expenses will increase year over year by upper teens.
Turning to our financial position and liquidity.
Our first lien net leverage was 2.8 times as of June 30th computed on a compliance basis in accordance with our credit agreement and that's compared to our covenant of 4 times.
Subsequent to June 30th we entered into a new 3 year $75 million receivables securitization facility with DZ bank to provide additional liquidity to reduce our cost of funds and to repay outstanding indebtedness under our credit agreement.
This is a non recourse facility and the pricing is commercial paper plus 200 basis points.
We fully true this facility upon closing on July 15th and have used the proceeds to pay down our revolver.
Pro forma for this new facility, our first lien leverage as of June 30th was 2.5 times.
At the end of the second quarter, our liquidity was $194 million up from 160 million at year end.
Pro forma for our new receivable facilities.
Our liquidity was 269 million as of June 30th and <unk>.
April we filed a claim for a $15 million per federal income tax refund and we expect to receive this refund during the fourth quarter.
Net capital expenditures for the quarter totaled $12.3 million and our full year guidance remains $70.75 million about 2 thirds of this spend is in support of our key growth initiatives.
With that we'll now go to your questions operator.
Thank you.
Well now be conducting a question and answer session.
You'd like to ask a question today. Please press star 1 from your telephone keypad and a confirmation tone will indicate your line is and the question queue.
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1 moment. Please so we pull for questions and once again that is star 1 to ask a question. Thank you.
Yeah.
Right.
Yeah.
Thank you. Our first question is from the line of Steven.
Cahill from Wells Fargo. Please proceed with your question. Please proceed with your question.
Thanks.
I've got 3 so maybe I'll just go 1 at a time.
Maybe first excluding auto would you say, you're seeing sequential improvement with kind of each month. This year and wondering if you've got any conservatism for the delta variant baked into that our third quarter revenue outlook and you gave.
So we are seeing sequential improvement as we go from quarter to quarter 3.
And as we as we noted.
There is a where we're expecting about a 10% sequential growth there overall.
So far we've not seen any and.
Natural impact that we're aware of from the Delta variant and it is something we keep our ion and obviously, we're fairways through the quarter at this point in time. So I think it's probably more of an issue as we look towards fourth quarter, albeit at the margin you know of course, you never say never.
Great and then you talked about being to fully recovered EBITDA and next year I know last year, you took a lot of fixed cost or long term cost out of the business. So for next year is there incremental investments that we should be aware of or are you just staying conservative on some other revenue like you know again auto.
And that's why EBITDA is sort of back to you, but not above prior levels.
Well look we don't we don't preclude that will be 2019.
And that that depends on the recovery the rate of recovery and and categories that are disrupted today like auto dealers getting significantly better, which we reasonably expect will occur but hasn't happened yet that's for sure and and you have to look at from a <unk>.
Spence perspective, Steve.
You said that you know through the first 6 months were down about $91 million versus our 2019 pro forma expense base of $1..1 9 billion and we had previously guided that we thought it would be about 140 million below that on a full year basis, and that's still about right.
In 2022.
As you know revenues recover and more fully and there are variable costs.
Attached to that revenue growth and yes, we are continuing to make investments and accelerating our digital growth so and as.
As we mentioned on our last call we will give.
More guidance about the outlook for 2022 as part of our third quarter earnings call, including the you know more guidance about the outlook for our cost base.
And Steve and let me just add 1 more comment on 2020, 2 and what what what we're looking at is because of what rich just said and the fact that we have made great progress and are a cost side of our business notwithstanding the significant growth investments we're also making.
To bolster our opportunities as we go forward and the fact that our digital business has been growing so rapidly were able to get back to.
2019 levels of EBITDA.
Without getting back fully to 2019 levels of radio revenues.
That begs the question of where will we land next year and revenues and obviously, we're pretty optimistic about where things are headed but it's just to say that from a modeling standpoint, the opportunity is there to.
To do well here as we go forward.
Thanks, and then maybe just lastly, with sports and sports betting you've made a ton of investment.
Maybe you can just help us frame what percentage of the business on a go forward basis is kind of combined sports and sports betting and there's just all those pieces between back to you all and the marketing agreement with standard all as well as the sports radio content and advertising. So we just wanted to think about that as kind of a piece of the pie of Odyssey you know what.
What piece of the pie broadly speaking and sports and sports betting. Thanks.
Yeah, I don't know if we'd have liberty to go out and we have so if you look at you look at the supplemental breakdown of our revenues by format.
And the second quarter sports represented 21%.
Of our total revenues and and that's up 7 points versus last year, which was highly disrupted of course and.
But we do expect.
Over time the.
Sports revenues to become a somewhat larger percentage of our total revenues and that sports line and our supplemental disclosure by format includes the revenues associated with bad QL et cetera. So that's the intent is for that sports line to be.
All of our sports dedicated assets.
Great. Thank you.
Oh.
As a reminder, and ask a question and saying you May Press Star..1. The next question is from the line of day and day with B Riley's Securities. Please proceed with your question.
Yeah. Good morning, guys. Appreciate you taking my questions well when I think about kind of the EBITDA margin profile here. So I looked at 2018 and 19, you were kind of and the low twenty's.
You've obviously got.
Got it to some fixed cost reductions I think going forward the mix between broadcast radio and digital is obviously going to be different. So can you just kind of put that altogether and pro.
And I'd, some guideposts around where the margin profile, you think should shake out relative to kind of where it was and in 18 and 19.
Yeah. So when you think about the scenario of getting back to.
And.
As a.
And I'll say, a starting position.
2019 levels of EBITDA, which was $341 million, we see that the EBITDA margin being a low to mid twenty's. So we do think that and you know what we'll be able to expand our EBITDA margin over time, we think that and and.
2000 and.
And 'twenty 2 we get back to where we were in 2019, perhaps a little bit better and then we're going to build from there.
Great. Thanks, I appreciate it just 1 more on spend and looking at and you know a lot of.
The adoption and sort of programmatic solutions within podcast and digital audio broadly it seems to be basically nonexistent for podcasts and today really only a small portion of its digital audio so if.
And if you could just kind of frame the upside there for digital audio as Kennedy's AD tech pieces start to get built out.
You know of advertisers think and this is more along the lines of digital display mobile video and these things that they are buying self served programmatically that they haven't had the opportunity to do for audio like is that what's driving your digital growth and you're seeing that and kind of how should we be thinking about that moving forward.
Yeah. So you know a lot of the podcast and buys our audience base buys so I'm.
And they may not be being bought programmatically, but they're there they're targeted buys based on audience and.
So not demographics, but auto and tenders soccer moms et cetera and.
And then.
And you know poker.
Programmatic is an important component of our streaming and podcast revenues today we.
We have said, we expect that to be a much more significant percentage over time I do think that there are a lot of interest from the leading DSP is and access to the audio supply.
We'd like to think over time that that audio supply will include our data infused O T a inventory and.
And so we think there's a significant opportunity.
2.
Expand the exposure or of our inventory to them.
Digital demand pools that don't typically by the O T. A inventory today, but I think you know we have a few efforts underway with a number of advertisers who are focused on performance and they're buying or <unk> inventory and companion with our streaming inventory and we think that's.
Likely to become.
A much bigger thing overtime, and and we see a lot of opportunity for the company.
Great. Appreciate it guys best of luck. Thanks for taking my questions I'll turn it over.
Thanks.
Yeah.
Thank you that's a good question today, you May press Star 1.
Next question is from the line of Avi Steiner with J P. Morgan. Please proceed with your question.
Thank you and good morning.
I just want to go back to the expense side, if I can for a minute.
And maybe understand some of the drivers of of what.
The second quarter.
It is with lots of pushing it and maybe a higher margin loss that it didn't appreciate is it is there something on the and I apologize if you touched on some of this and you're opening script.
Is it something on the sports side, that's driving up costs, where there's some acquisitions maybe that contributed more expenses I just would love to get a little bit more colors, and we kind of think through the.
The euro and yen.
You know, our Avi our and <unk>.
Expense growth and 2 Q was better than our guidance. So we had we had given revenue guidance of 300 to 310 up 71% to 76%. So we're kind of right and the middle of that range and what we said was we expected our expenses to increase at about.
50% of our revenue growth and it actually came in at 48% so.
I'm not sure you know if there's a day.
And if people didn't hear that or just didn't believe us.
But that's what we said and ER.
And you know the expense growth is being driven by the recovery of revenue and so you know.
We've talked about podcasting is growing rapidly there is a variable expense associated with them.
Podcasts that we represent the you know there is we have a pretty significant digital marketing services business, that's growing quite rapidly there's cost the variable cost associated with that so you know.
Yeah.
We actually did better than our expense guidance, then and and.
And if you didn't hear it we did say that for the third quarter. We expect our revenue used to be up about 25% year over year, and our expense growth to be upper teens.
Did I hear and thank you for that clarification did I hear margin expansion talked about 3% to 4% did I Miss that Miss here that that's right. That's right. We expect so our March and here in the second quarter was 13%, we expect our margin and the third quarter to be 3 to 4 points.
Later.
And and we expect to build from there so maybe the outlook for <unk>, which obviously seasonally is the largest quarter of year it gets better.
And I appreciate that should get pension and <unk>.
If I could turn it over to auto for a second and again if it is.
If this was addressed I apologize.
But just in terms of visibility where you sit today.
Do you see any.
Real bounce back maybe in the fourth quarter as you kind of listen to the auto guys talk about shortages getting better and.
Dealer inventories, improving and is there a real science and visibility.
Where do you think that could come back to you relative to historic levels.
I think it varies a little bit by of course, which which manufacturer were talking about some are in better shape and others now.
What I will tell you is that we maintain close working relationships as you might imagine with dealer groups all across the country and.
And just anecdotally and 1 of our largest markets 2 of our 4 largest customers are currently off the air there happened to be auto dealers.
We're very close to them as I mentioned, and they're telling us they expect to be back to normal here.
Advertising with us and with their businesses and sometime later in this year and I'd say that is probably fairly par for the course I think on the outlier outliers are talking more Q1 next year, but I'd say more more often than not it's more of a fourth quarter recovery that we're hearing anecdotally.
And and that's why we said the avia and our remarks that we do expect auto to be a key driver.
And recovery in 2022, because clearly you know it looks it looks to us like through the third quarter at least.
Auto dealers and demand is going to remain fairly quite depressed and it's not because they don't want to be on there and they'd like to have more inventory and just to add a little bit more color to what David said, when we think about you know talking to our auto dealer.
The larger guys with you now.
Multiple brands you know they tell us like inventory levels that are 10% to 15% of normal so they have.
They have significant inventory issues right now and hopefully that does get.
Resolved toward the latter part of this year, but right now Theres still you know at inventory levels. There are dramatically less than what is normal for them.
That is a that is it.
Great point, and and maybe just 1 more on auto before I get to the other last 1 other balance sheet.
When auto comes back and and again from what Youre hearing anecdotally in talking to your dealer groups.
It doesn't come back to the traditional broadcast channels and your view or is it spend may be spread out more on digital and and other platforms.
Well I I forget I think a very healthy portion of it comes back to radio and that is what we're hearing from them and that said, we obviously are dealing with.
Global trends and our auto dealers are going to continue to.
Look to digital as a significant portion of their advertising and our product lineup has continued to evolve we're there to meet their needs across that spectrum of their advertising needs as well and so you know the level of business. We can do with auto dealers going forward, even as the composition evolves, we think remains very robust.
But again I do want to underline.
We're not hearing any.
Any talk of defecting from radio a it really is just a question of what that media mix looks going forward and we also think there's a lot of opportunity.
With other traditional media that are being disrupted at a pretty fast clip seeing.
And where those dollars are going to fall and audio has long since been underrepresented and those buys and that should get some upside there as well.
Great. Thank you last 1 from me just on the E R commentary.
Commentary rich is that meant to be additive to the revolver or ultimately, replacing it and can you just give us the availability on both facilities and thank you all for the time.
Thanks, Tommy Yeah, so so yeah.
You know the.
The $75 million receivable facility is additive and so at the at the end of the second quarter, our liquidity was 194 million and.
And we had I don't know $40.46 million of cash $45 million cash level.
We have like 90, something and 97 million outstanding against our revolver, that's $250 million and total.
And so you know the $75 million, we drew upon closing and we paid down our revolver and so it boosts our liquidity from that 194 pro forma to $2.69. So.
You know.
Difficult and boost to our liquidity, it's a lower cost of capital, it's 50 bps cheaper than.
And then our revolver.
And.
And of course, it's nonrecourse so.
This debt.
Net receivable facility that is not you know capital I indebtedness under our credit agreement.
Okay.
You answered my next question. Thank you very much for the time.
Thank you.
Our next question is from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.
Hey, guys. Thanks for having me on just 2 from me first 1 rich just to make sure I'm thinking about kind of the margin commentary correctly and you were at around 13% margin for the second quarter sounds like that's bumping up to 16% to 17% and the third quarter, maybe a little bit more margin expansion and the <unk>.
Fourth quarter, and you head toward getting to that low twenty's contact.
Is that being driven by just your expansion of your revenue growth faster than expenses is there any other kind of pushes and pulls and I said think about getting from where you kind of and <unk>.
'twenty, 'twenty, 1 and where you're saying you'd like to be kind of back and that 2019 type level margins.
No exactly so you think about here and the second quarter. We grew 74 per sorry, 73 per cent year over year and our expenses were up 48 per cent of that revenue growth up 35% and our and we expect youll see.
And the.
Third quarter GAAP not be as significant looking at 25% revenue growth upper teens expense growth, but we do expect to see that spread.
Sustained until we get back to you know the low to mid Twenty's to low to mid Twenty's EBITDA margin.
And there's a lot of work going on that too as we've discussed in the past, particularly.
And digital where you know the rep business that we acquired from <unk>.
You know it is not as profitable as we'd like it to be and where we expect it will be and and we see that being and.
And meaningful driver of margin expansion over time for the company as we continue to optimize the profitability of digital and grow that portfolio more rapidly some of our expense base of course, and our digital business is this fixed and semi variable so.
We we do expect in the third quarter to give a little more color about the outlook for 2022, and I do think that overtime.
And you'll see our EBITDA margin continued to expand.
Okay, and that's great and then.
1 for David just with your enhanced liquidity now post the <unk> facility can you just update us on how you're thinking about.
Use of capital in terms of investments and things you've already purchased and organically versus what opportunities you might see out there and to further boost your digital business, where even your station business.
Sure I think our first and foremost goal is to continue to deploy free cash flow to reducing debt and.
And that doesn't change.
That said as Richard alluded to we are clearly running the business.
To accelerate our growth and you see that and our capital expenditures and you see that day.
Some extended and operating expenses as well, but we are continuing to bolster and enhance our holistic multi platform. Our lineup and we were excited about where that's taking us at the same time, we're being measured and disciplined about that and balancing that again against.
And the desire to continue to be prudent and and and apply free cash flow towards debt reduction.
If you look at the acquisitions that we've done recently they've been relatively small in size and we think we've found great value and what is a frothy market popcorn as a you know as a as the leading a podcast influenced your marketplace. We think is going to be a big winner for us.
It's at a very very early stage, but we see great opportunity there.
We'll continue to keep our eyes open for disciplined and select purchases, where we can.
Meaningfully enhance our future opportunities, but at the same time do so again and a very measured fashion.
Okay, great. Thank you.
Do you like to ask a question you May press Star 1.
Next question is from the line of Craig Huber with Huber Research. Please proceed with your questions.
Great. Thank you.
You're spot revenues, obviously were up nearly double off the lows of a year ago and our second quarter can you maybe just break apart force local versus national I apologize. If you cover this system overlapping conference call earlier.
And we haven't given that detail Craig.
But.
National is performing.
<unk> continues to perform somewhat better than local and.
We are starting to see it.
And the third quarter.
Local.
Zero the GAAP.
National is is it.
It applied and our guidance the national continues to get better sequentially.
And from <unk> to <unk>, I'll say versus 2019 as.
As a quote normal measuring stick.
And but we're seeing.
Local pickup and and narrow the gap more fully versus 2019 and <unk> implied by our guidance. So.
Hopefully hopefully that helps.
That is helpful and then also.
What we're talking about.
Given the pandemic and the issues and the economy and all that.
Ramifications on the smaller advertisers out there is there any updated metrics you can give us on what percent of your AD revenue or percentage of clients is no longer advertising.
And with your company owned on the true.
Additional radio side, you've given that sort of and the peanuts and update.
Yes, it's hard to do that now because of you know there's a lot of normal attrition and the business. The 1 the 1 thing we did talk about Craig and I don't know if you heard it was that when we look at the months of June compared to the month of March the number of advertisers on air was up.
By over a thousand typical seasonality.
The increase from March to June in terms of the Advertiser count is under 200, and so we've seen a very significant increase.
About 19% and a number of advertisers on air and and that trends you know we expect to continue so it's hard to know and I think you know we talked about our bad debt experience number of bankruptcies. We saw last year, we have not seen a lot of our local advertisers.
Please go out of business.
And and disappear it just.
And we were and we talked about it.
Probably during the fourth quarter call. We were presently surprised and we were worried going into you know if.
We were talking back and in April of 2020, we were worried that it was going to be.
No.
And.
And then seemingly where it's ending up we have not seen a lot of our local advertisers and scope bankrupt, we're seeing a lot of them come back on the air and and we think there's a you know are our sales force is talking to all of these people and there's a lot of good signs.
That as things continued to get better and so if they're not back they're gonna be back.
And they can also talk about your network advertising, obviously with the change with Westwood 1.
Earlier, and you brought that inventory and in house I mean, you obviously, good quarter I thought it and network advertising here.
Second quarter, maybe talk about how you're thinking that's going from project of go out for the rest of the year.
Yeah look I think the.
Go ahead, sorry, David well no I just make 1 comment and then rich you can add to it and I think it's worth noting that we talked about the fact that our network radio advertising was up 23 per cent and a quarter. That's a net figure within that our audio.
Network was up significantly more but.
But that reflects the whole category. So to some extent you see the diminished amount of inventory that we are providing with with third party partners rich you want to extend and expand upon it.
Yeah, no. So I think I think that right now Craig we're gonna.
And see continued strong growth and network and frankly.
You know we were.
And we're doing some.
We've launched a couple of new products that help us drive sell out higher help us.
So inventory at higher.
Cost per points.
Before inventories spoil so there's a lot and there's a lot being done to optimize the inventory utilization.
And we do see a pretty good runway for growth and network I don't think we will continue to fuel that growth by adding more inventory to the part because frankly as local demand is returning and.
And national spot demand strengthens we can sell that inventory at a higher rate.
In other categories. So.
We're going to see continued strong growth and network I don't expect it's going to substantively accelerate net from the pace. We're at today, just given that there's a higher and better uses for that inventory and other sales channels.
And then also rich given the focus on the on the debt load here I guess, it's up $27.28 million and.
The first 6 months here, where do you expect your net debt to be at the end of the heater versus where you started the year.
So, yes, so sufficient or anything.
Right, Yeah. So look and ended this year, we expect our total net leverage to be down.
Several turns from where it is currently and and we expect if you. If if you play out the scenario that David discussed of getting back to.
2.2019 levels of EBITDA, and 2022, and and we put that out there as.
Our base scenario or our aspiration of course is to do better than that but if you just assume we get back to $3.41.
You know, we we expect if that's true we will pay down over $100 million of debt.
In 2022 and <unk>.
Our total net leverage by the end of 'twenty, 2 we'll be nicely inside 5 times. So you know I think I think Craig you're gonna see and.
Our leverage fall pretty pretty rapidly as this this.
The recovery continues to unfold and.
And we are focused like a laser beam.
And you know getting our leverage down to you know inside 5 by the end of next year and.
And you know not so long thereafter.
Getting inside 4.
Yeah.
And then nitpick question rich corporate expenses.
Excluding these 1 time items, it's running at about obviously 22 million in the second quarter here running on an annualized basis 88 million and why is it up so much I mean, you've talked about that last quarter. It was a lot of extra branding advertising and it was a company that's running through that 1 but what should we expect the remaining part of the year and maybe you'll go forward number as well what's the normal yeah.
Yeah, I don't have a and I don't have that handy.
And for that but you.
It's what's interesting is and maybe this is something we need to think about presentation because we.
We are growing I'll say a central.
Digital team. So we have digital resources at the market level, they're part of station operating costs, but there's also a growing and increasingly significant.
And the digital team that's not not.
Not housed at the market level and and and that is.
The most significant driver of our so called corporate expense growth and.
So.
I'll take the Russell offline. Thank you very much guys I appreciate that.
Thank you Craig and I try.
Yeah.
Thank you.
Each end of the question and answer session and I will turn the call over to David field for closing remarks.
Well. Thank you so much and thanks, everybody for joining the call. We're looking forward to reporting back to you after the summer everybody take care Bye now.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.