Q4 2022 Audacy Inc Earnings Call
Good morning, and welcome to Audacity Odyssey's fourth quarter 2022 earnings release conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If any much require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
I'd now like to introduce your first speaker for todays call Mr. Richard Smiling, CFO and executive Vice President Sir you may begin.
Thank you Rob.
Good morning, and welcome to order six fourth quarter earnings Conference call.
A replay will be available shortly after the conclusion of today's call at the replay link or number noted in our release.
During this call the company May make forward looking statements, which are based upon the current the company's current expectations and involve risks and uncertainties. The company's actual results could differ materially from those projected in these forward looking statements.
Additional information concerning factors that could cause actual results to differ materially are described in the risk factors section of the company's annual report on Form 10-K, as such risks and uncertainties may be updated from time to time in the company's SEC filings, we assume no obligation to update any forward looking statements.
Except as may be required by law.
During this call we may make reference to certain non-GAAP financial measures.
Refer you to the investors page of our website at.
At <unk> Dot com for reconciliations of such measures and other pro forma financial information.
I'll now turn the call over to David field.
David.
Thanks, Rich welcome all to Odyssey's fourth quarter earnings call.
2022 was certainly not the year, we expected we exited 2021 with strong revenue acceleration and got off to a great start in 'twenty, two with first quarter revenues up 14% and EBITDA up 152%.
But as we are all painfully aware macroeconomic and particularly advertising conditions began to deteriorate due primarily to the impact of the war in Ukraine inflation and the fed.
So even though we were still able to grow our revenues by 3% for the year. Our expenses were up 6%, taking our 2022 EBITDA down to $138 million a far cry from what we had anticipated.
In the fourth quarter, our revenues were down 0.8% in line with our flat to down low single digits guidance. However, our expenses were elevated rich will elaborate on our costs, but I want to note that we anticipate that expenses will be up low single digits in first quarter and be below 2022 levels for the remainder of the year.
<unk>.
In my comments this morning, I'd like to start with a brief overview of our position as we work to navigate the storm and drive our recovery.
The situation is challenging.
But we are addressing it with eyes wide open and vigorously executing our action plan, taking a number of concrete measures and making headway.
Before I share an update on our progress I think it might be helpful to look beyond the numbers and that has some broader context.
Over the past few years, we have made to strategically key decisions first to achieve scale through our acquisition of CBS radio tripling, our size and establishing a strong differentiated premium content position with leading positions across the country's largest markets and unrivaled leadership in sports and news radio.
And second to capitalize on our scale and transform into a true multi platform audio company through a number of acquisitions investments and initiatives.
As a result today, we are one of the country's leading podcast yours.
With an emerging high potential audio streaming platform and building competitive AD tech and data capabilities, all essentially from scratch at.
At the time of these decisions of course, we never expected to be hit with three hugely adverse extended events. The global pandemic sustained supply chain disruption and now an AD recession, along with difficult macroeconomic conditions enduring all three events, while in the midst of a comprehensive strategic transformation has been hard.
All of that said, we have made good progress in our work to weather the storm and to position the company for recovery when macro conditions improve.
Earlier this month, we completed the sale of a set of towers for $17 million, bringing our total non strategic asset sales since the summer to $73 million, providing meaningful added liquidity and we have a number of other non strategic asset sales working their way forward.
In addition, we continue to take significant actions to reduce expenses and as a result, we expect our 2023 expenses to be flat to down slightly versus 2022 actual.
We have made good progress in reducing cost even though we now have significant expenses in a number of key areas of the business that were essentially nonexistent before such as podcast in AD Tech and our audio streaming platform.
I would note that all of the expense actions, we have taken have been carefully manage so that we continue to fund our transformational initiatives and invest selectively in critical areas of the business, while ensuring that we are still serving our listeners and customers with excellence.
I would also add that we are cautiously encouraged by a number of green shoots as we work our way forward, we achieved record breaking performance with our annual local upfront sales program for 2023. This has helped our local business get off to a relatively good start for the year.
Auto our largest category continues to show positive signs of emergence from hibernation.
In Q4, our auto business was up 8%.
We are having constructive conversations with our auto customers across the country that lead us to believe that we will likely see acceleration in auto spend as we work our way through the year.
And since re launching the reinvented Odyssey streaming platform in late summer, we have seen some early signs of progress in our organic consumption during fourth quarter mobile app installs increased by 23% over the prior year and our monthly active audio users were up 11%, despite adding a registration wall in the App to drive our collection of <unk>.
<unk> data in.
In addition, the fundamental metrics within our Pud casting business remained solid with a 9% increase in Q4 downloads and a 15% increase in U S. Listeners, we reached 43 million unique listeners across our podcast network in fourth quarter, including $29 million in the U S. We are driving particularly strong growth across our 2400 sports podcast.
Studio, which launched 93 new titles in 'twenty, two and is currently generating over seven times, the number of downloads versus prior year, albeit from a small base.
As we look ahead the opportunities to capitalize on our key growth drivers as noted on our prior calls remain very much intact. Those drivers include our various digital businesses, our national enterprise sales team and accelerated audience growth from our streaming audio platform.
We also are making headway on building our AD tech and AD products to open important pools of demand and accelerate future performance by increasing our sell through rates and improving yields.
In addition, as economic conditions ultimately normalize we expect to see a meaningful degree of recovery of radio revenues, which remained substantially lower than pre pandemic levels and note that roughly 90% of those revenues flow through to EBITDA.
Some additional color on Q4 spot radio revenues were down 4% with local narrowly outperforming national.
Network radio was up 4% and digital was up 2% or up 5% ex podcast thing.
<unk> was down 8%.
Note that our podcasts numbers continue to be impacted by the departure of our largest podcast network publishing partner, which moved off of our platform in May <unk>.
Excluding that partner Q4 podcast revenues were up 14%.
For the full year digital revenues were up 9% podcasting up 1%, 19%, excluding the departed partner.
One other note on the quarter is that large markets continue to outperform sorry, underperformed smaller market growth specifically according to Miller Kaplan market data radio revenues in our markets, 26% and of over or smaller I should say, we're 6% stronger than in our top 25 markets.
Note that this is total market revenue and not just Odyssey since our company is significantly more concentrated in the largest markets relative to our peers. This continues to cause a meaningful relative performance issue for us.
Turning to pacings as reported by a host of other media companies add market conditions remained challenging, particularly with regard to national and network business. We are currently pacing down 5% and expect revenues to decline by mid single digits for the quarter.
A number of national advertisers remained sidelined or dampen AD spending due to market uncertainty.
Notwithstanding the challenges we face as we confront AD market headwinds at a time of deep organizational transformation. We believe we are making solid progress in executing our action plans in order to emerge healthy on the other side of the storm I want to close by underlining three key points.
Odyssey has a strong and differentiated scaled competitive position in the dynamic and growing audio space.
At a time when music is highly competitive Odyssey is unrivaled leadership in sports and news radio plus a deep lineup of compelling local personalities and award winning podcasts along with many of the country's most popular radio brands.
We believe we are the number one creator of original premium audio content and think that will be a meaningful driver of the growth and development of our Odyssey digital platform.
Second over the past few years through our transformational acquisitions investments and initiatives Odyssey has been fundamentally enhanced and today is a much stronger multi platform company with substantially elevated product and capabilities.
We are working hard to capitalize on our unique assets and further enhance our offerings with the vision of making auto see the audio brand of choice for listeners and customers.
And third in these turbulent times, we recognize it is difficult for many to look beyond the current challenges.
While we have much work in front of us and are subject to external factors beyond our control. We believe the earnings potential for today's enhanced Odyssey in a normalized economy should exceed where we were in 2019, we have no shortage of growth drivers and opportunities across the business and as noted earlier, while we expect a significant improvement in radio revenues as the economy.
Recovers and auto and other disruptive categories increase their spending we can achieve a healthy EBITDA recovery at substantially lower levels of radio ad spend than before.
Finally, before turning it over to rich I want to thank the outstanding team at Odyssey for their dedication and tenacity and all the great work. They are doing to enable us to navigate the storm and capitalize on opportunities. We are very fortunate to have such a talented group of individuals.
Team rich.
Thanks, David.
Our total net revenues for the fourth quarter came in at $3 $42 million down 1% year over year and down close to 4% ex political our core spot revenues were down 8% national spot continues to be somewhat weaker than local.
Our political revenues for the fourth quarter came in at $13 million versus $4 million in the prior year and for the full year. Our political revenues came in at $25 million and were up 19% compared to the 2018 election cycle.
Looking at our top spot advertising categories auto dealers, our largest category was up 9% year over year in the fourth quarter in auto in total including dealer associations was up 8%.
Our second largest category hospital hospitals, and clinics was down 10% for the quarter and our 12 month get out and go categories were also down 10%.
<unk> and mortgage lenders, our third largest category was down 6%, which was significantly better than the close to 40%. This category was down year over year in the third quarter.
And our fourth largest category sports betting was down 4%.
Our digital revenues in the fourth quarter were up 2% our growth is still weighed down by the loss last year of our largest podcast network client and it will continue to be weighed down by this loss through the second quarter of this year.
We also saw in the fourth quarter. These softening of demand for both streaming and podcast advertising.
Our network advertising revenues remained resilient and were up 4% year over year in the fourth quarter and our sponsorship and event revenues were up 20%.
Turning to the outlook for our first quarter revenue performance, we protected our revenues will be down about mid single digits for the full quarter.
National spot advertising has weakened further relative to local and our network advertising is now pacing down year over year.
We also see continued softness in advertising demand for both streaming and podcasting.
Moving to our fourth quarter expense performance, our cash operating expenses came in at $305 million or up 9% year over year or.
<unk> expenses were $10 million greater than we expected due to the accelerated recognition of deferred podcast content costs. As a result of revenues falling short of our projections for a number of titles.
This change in our accounting estimate also takes into consideration projected continued softness in the podcast advertising market versus our prior expectations.
During the course of 2022 the company enacted a series of actions to reduce its operating expenses and is in the process of implementing further actions during the first quarter.
For 2023, we expect that these actions will fully offset the impact of inflation and the projected growth in our variable selling expenses and that our total operating expenses for this year will be flat to down slightly.
These expense reductions have come across our full P&L and we continue to work to innovate within our cost structure and to drive higher levels of productivity.
This has and will continue to be an ongoing effort and since we closed the CBS radio merger five years ago. The company has steadily driven higher levels of productivity and these efforts have enabled us to reduce our full time and our part time workforce based on full time equivalents by over one.
Third while investing strongly in building our national sales team, our digital organization and our technology team among other organizational capabilities.
In the first quarter, we expect that our expenses will be up low single digits and that our expenses will be down.
Year over year for the remainder of this year.
Turning to our financial position as noted by David in the midst of this difficult economic period, we have continued to make progress in bolstering our capacity to sustain compliance with our financial covenants and we have improved our liquidity, including by monetizing non core assets and.
By amending our receivables purchase agreement has announced in January .
Our compliance basis first lien net leverage was three eight times at the end of December compared to our maintenance covenant of four times.
Our liquidity was $145 million at year end up from $115 million at the end of September and after accounting for the maturity of $22 7 million of our revolver in November .
Our fourth quarter cash flow benefited from strong political revenues $40 million of proceeds from the sale of land and property in Las Vegas in November .
A significant reduction in our investment in working capital, which is the fruit of a collaborative effort by many people across our organization and a two thirds reduction in our capital expenditures, which came in at $8 million for the fourth quarter versus an average of $24 million per quarter September .
Our year to date.
For 2023, we expect that our Capex will come in at around $50 million for about 40% less than what we spent in 2022.
And we expected our cash income tax payments for this year will be less than $10 million.
The company is continuing to work a pipeline of additional non core asset sales which are.
Being executed via our unrestricted subsidiary Odyssey Atlas.
What is the Atlas closed on the sale of a package of broadcast towers for $17 million earlier. This month, and we expect to generate another $25 million or so of proceeds from asset sales over the remainder of this year.
Which would bring the cumulative total of such sales since last summer to close to $100 million.
On January 27th the company entered into an amendment of its receivable purchase agreement with DZ Bank.
This amendment modify the annual financial statements provision regarding a going concern audit report to prevent such a qualification for 2022, if solely resulting from a potential breach of our first lien covenant under our revolving credit agreement.
This amendment makes the receivable purchase agreement covenant consistent with the existing similar provision under our credit agreement. In addition, the amendment reduced the minimum liquidity requirement from 75 million to $25 million.
As a result of these actions.
And the further actions we plan to take we continue to believe assuming that the advertising environment does not get significantly worse that over the next 12 months that we should be able to sustain compliance with the requirements of our debt facilities and we believe that our liquidity ought to be sufficient to support our operations.
And the normal seasonal fluctuations in our working capital.
None of the company's debt matures in 2023, and our upcoming 2024 maturities are all first lien.
The Companys second lien bonds do not begin to mature until four years from now in 2027.
Over the last several months the company has conducted a process working in close consultation with our board of directors and our advisors to evaluate.
Eight options to manage our liabilities.
Before the end of the second quarter the company plans to approach its lenders to explore refinancing opportunities.
Beyond this statement, we will not be providing any further details about our plans at this time.
With that we will go to your questions.
Operator.
Thank you.
At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Information tailwind to Kate Your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Aaron Watts with Deutsche Bank. Please proceed with your question.
Hi, guys. Thank you for having me on I've got a few questions here, David maybe I'll start with this can you talk a bit more about the cadence of advertising momentum is as you've progressed month to month, so far this year and what if any signs.
Are there currently that give you optimism for a pickup later in the second quarter in the second half of this year across.
Whether it's digital or your are your terrestrial station group.
Yes, thanks, Erin so.
We know anecdotally across.
Wide swath of our of our customers that many advertisers remain cautious.
About the business about business uncertainty and they all read the same headlines and all hear the same have the same concerns and so as reported by others as well.
We think advertisers have tightened their purse strings as we get through this quarter and.
Believe that many of them are looking to increase their spending going forward as things improve obviously that speculative. We do know that this economic cycle doesn't last forever, but we've been dealing with it now and we'll start lapping against comps from it.
As things slow down in the second quarter of last year.
Okay. That's helpful makes sense and then.
Maybe a question on on the margin side as you embark on this new year and given the current backdrop.
And with the fact I know you've been refining.
Our digital focus on your cost base, how should we think about your digital margins beyond this sort of temporary dampening due to the accelerated podcast expenses.
Look our we look at our digital margins.
At the contribution margin level.
And in our digital business is quite profitable.
<unk>.
Podcasting is clearly.
The laggard at the moment.
We're making progress in podcasts, it's been tough we've learned a lot really frankly since we acquired cadence 13, and the Companys a lot smarter today about how we're going to participate in podcast space going forward and where are there more fertile areas for growth and profitability.
<unk> talked about 2400 sports.
Natural place for us to grow our podcast presence we are growing our local podcast portfolio also trying to create a daily habit of podcast consumption from our local podcast studios.
Very profitable seen very significant growth there. So look I think we're now at <unk>.
A lot smarter today than we were several years ago and CE.
<unk> future in the growth of podcasting as essentially time shifted consumption of audio.
And we see.
In that time shifted consumption of audio.
People get get what they want anytime anywhere.
Proposition that we think.
There's a lot of headroom for growth.
Okay helpful. And then one last one if I could really a clarifier on the acceleration of the podcast expenses.
That you saw in the fourth quarter and it sounds like you'll see in the first quarter as well.
Okay.
Rivers' off though.
That acceleration in the.
The declining revenues and podcasts.
Is that something that if the environment remains challenged you could see happen again this year or do you think this this is more of a one time event.
Yes, So let me clarify how you're characterizing it so first.
What we've seen is a deceleration in the rate of growth.
These titles are growing they're not growing as rapidly as our model has anticipated. So we are a content studio we're producing content.
And capitalizing those costs and amortizing those costs over the life of a given title.
So the rate at which we recognize those costs is dependent upon future performance and we're always updating our estimate of the recognition of those costs. Then clearly we've seen a slowdown in the growth of podcasting, it's not it hasnt turned down it's still growing.
It's just not growing as rapidly as we previously anticipated.
And so that's caused us to recognize costs more rapidly than we thought and I think what we've done is fairly conservative, but I hope.
Erin that.
<unk>.
We won't have to penalize P&L going forward.
Because things turn down.
Worse than we expect I think we've tried to be conservative from that accounting judgment, but we continue to refine those estimates of course and account for any change in our estimates prospectively. So that we're focused on it like a laser beam.
You are asking about the future.
Maybe your Crystal ball is pretty good but it's hard to know let me just add one more thing to what rich has said and that is that we are seeing still great enthusiasm to expand podcast investment on behalf of brands that where we're seeing a.
A little Choppiness in the marketplace tends to be more on the Dr side.
And largely driven by some of the performance shops, DTC advertisers because funding for some of those companies has been cut back a little bit. So it is somewhat.
Driven by that and the overall tone and tenor of longer term investment in podcasting remains very enthusiastic.
Okay I appreciate the clarification and the time.
Thanks Sarah.
Our next question is from Steve Cahall with Wells Fargo. Please proceed with your question.
Good morning, This is Dan <unk> on for Steve.
Maybe just a follow up on the margin can you help us unpack your cost guidance with a little more detail you've taken a lot of fixed cost out of the business through Covid and announced additional cost actions.
Could you just help us think.
Through how those items both of the basin, where fixed versus variable cost splits currently.
Yes, so look our variable costs in 2023 are expected to be about 27% of our total costs.
When you look at the composition of our revenues.
Particularly within digital.
Our digital marketing solutions business continues to grow strongly I think you mentioned, David up over 20% in the fourth quarter.
And yes.
And we're seeing growth in other.
Product lines like podcasting that has cost of goods sold tied to it so those.
Those expenses are growing consistent.
Consistent with revenue.
And there are a driver of expense growth we have continued to.
Other expenses from our.
Facilities costs across the country.
To personnel costs.
A whole host of items.
And there's more to be done frankly, so that.
We have our guidance today.
Of.
Flat to down low single digits.
We're down slightly for the full year is really what's been.
Being enacted right now.
And we're still at work there is more.
Work to be done to refine our costs to drive higher levels of productivity over time, it's an ongoing effort.
And so I do think that.
For the full year, you'll see that our total expenses.
That will be that will be.
That to down slightly and that includes <unk>.
After the impact of our.
Variable expenses and after the impact of inflation.
That's really helpful.
And maybe just.
Switching over to add trends with the divergence between local and national that you are seeing how would you frame the potential risk of national being a leading indicator and local eventually seeing similar trends.
I hear the I hear the question I don't think we see any evidence of that I think that.
By and large the.
The sample size of the local advertising base is probably more indicative of the general tone and tenor of business today.
And I also know that from our <unk>.
Conversations with our national customers again, there doesn't seem to be so much a.
Sure.
Our sense of.
Sure.
Long term reduction it tends to be more one off.
Caution and restraint.
Again more than a definitive.
Long term reduction in in budgeting.
Got it and then maybe last one for US with your 50 million Capex guidance is there continued digital investment within that and then how should we think about the maintenance capital needs of the business moving forward.
The digital investments the primary driver of our non maintenance capex.
<unk> Capex is.
Down to about 20 ish million dollars.
And look there's a lot of so we launched our new.
Platform in July of last year, where our new features and benefits that will rollout over the course of the year that that platform will become increasingly.
We're active in.
We're increasing the level of <unk>.
Personalization and there's some really interesting features coming that we think.
Listeners are going to love.
And that's an ongoing investments kind of weak.
Think about it as a.
A generational investment frankly think about our companies in over 50 years old.
And broadcast technology that served us so well for the last 50 years is still serving us well, but the future is going to be increasingly we believe streaming and.
Going to serve listeners anywhere they want to listen and they are increasingly listening via streaming and we're going to have an offering we think that people are going to love.
Great. Thank you.
Our next question is from Avi Steiner with Jpmorgan. Please proceed with your question.
Thank you.
Yes.
Go back to the podcasting expense acceleration very quickly I guess, what happens timing wise from the November guidance on the expense side.
Some specific event that triggered it.
And then if I understand everything you've answered previously.
That's something that could reverse positive growth decelerated on the podcast side I just want make sure I understand that.
No.
Yes, Avi we heard your question, but if you could your voices somewhat quiet.
So what what evolved was the outlook for 2000.
'twenty three so as we.
Really completed our planning process for 2023 and took stock of the trends we were seeing.
In podcast demand and just commentary from others about the expectations for the overall advertising market, we tempered our view for growth in podcasting in 2023 and that.
What drove the revised estimates and our accounting judgment for the recognition of deferred podcast costs.
I Hope I got your question did I Miss anything.
I think that's I just wanted to if I could possibly reverse I think was the end of my question I'll touch on that.
Look if if.
If the economy starts to pick up in the second half of this year.
<unk>.
That likely means that our podcast margin is better than we than we were expecting and so I think thats, what you mean by reverse it would.
We recognized cost debt.
Based on our current expectations for revenue in 2023, and beyond and if things turn up and are stronger than our model currently anticipates that will cause our podcast margin to expand.
And let me just add one more thing which might be it might be helpful. On the whole podcast in front. The terms of most of these agreements tend to be a couple of years. So they tend to be relatively short and secondly, and you've heard this from others. The market has become.
More rational.
And the early goal, Russia land rush that occurred over in prior years has.
Dampened to some extent and now I'd say, there's more balance in the marketplace and so the deals that we're cutting.
I think are more friendly.
For us and that also I think will nor to the.
Fit of our margins going forward, because you add to that David.
When I look at the composition of our podcast revenues.
But an increasing percentage of our revenues is tied to our own content and we capitalize those costs and.
And recognize the cost of a title that we produce internally.
Our own proprietary content over the expected life of the title like a film studio.
And so it's both and we are working to increasingly.
The increase the proportion of our revenue for our own proprietary content.
And with a good mix of of great content from other publishers.
Long term view of that segment of audio is really quite robust.
Okay. Thank you for the clarification explanation just on that last comment about capitalization does that mean some of those costs I guess theyre running in Capex, initially or am I thinking about that correctly.
No no.
Sure.
Classified elsewhere on our balance sheet youre, not capex interest capitalized content costs.
No.
Okay perfect.
Thank you and then just on the unrestricted.
Subsidiary Atlas I don't know if you can tell us what assets are there today or.
And any way to frame the size the opportunity of asset sales.
Forward.
Yes, I think I think we've done that right. So the.
The company.
Did dropdown a package of assets into.
Our unrestricted subsidiary Odyssey Atlas.
We've sold over $70 million.
<unk> property.
And towers through.
At the end.
Well through this month.
And we gave guidance Bobby that we.
We expect by through the remainder of this year that we think we'll have another $25 million or so of added proceeds.
And look this is this is a measure.
To help us.
Whether the.
The storm.
And work our way out of.
What's been a difficult time.
That's the goal that's our objective.
We've said all along.
Just add one more thing to what rich has already provided.
Yes.
Every every sale that we've done to date and every sale that we plan is non strategic in nature.
Okay.
That is helpful. And then last one from me and thank you for the time.
So I guess borrowings are up on at least on a principle basis, particularly with.
About 24 maturity at night.
Hey, Avi you broke up there we didn't we didn't get we can't hear your question Alright.
Alright.
I'll go back in the queue. Thank you.
Thank you.
Our next question is from Dan <unk> with B Riley Securities. Please proceed with your question.
Yes. Good morning, guys I appreciate you taking the question so yeah.
Good morning.
It looks like we're past the.
The heaviest piece of the investment on the digital side.
And this transformation, both capex and Opex, just any guidance on and it might be tough to say.
Uncertainty around AD spend in the macro and all that just when you expect that to start.
Resulting in some incremental revenue and like what buckets that would be whether it's an AD tech initially or.
Just how you expect initially these digital investments to result in an upward.
Revenue in the timeline for that.
So.
You can classify it I think into into a few different buckets theres. The acceleration that we expect to see in terms of audience size and usage on the on.
The audio digital audio platform that we have reinvented and are in process of continuing to rollout.
There is increasing demand that we would demand pools that we currently can't access such as programmatic guaranteed revenues, which are becoming increasingly important.
And to that end we are building at.
AD tech and add products and.
And then in addition to that.
There is also just enhanced revenue operations and being more effective in driving multi platform business across the organization.
I think youre going to see.
Those <unk>.
Accelerating as we get into the second half of the year and really feeling.
A bigger bump in 2024 and beyond.
Yes, thanks for that one more for me I know over the last year or two you had sort of a concerted effort to bring in some individuals with stronger relationships with national advertisers trying to win some of those dollars back to Odyssey, obviously, the macro is tough, but if we put that aside.
Just any update on how those efforts are progressing specifically with kind of stronger ties the national advertisers.
Yes, it's great question.
Our.
I think objectively, maybe making great progress in that regard.
We are at this point a preferred partner or.
Okay.
Engaging brands at a much higher level and agencies at a much higher level.
And then in the past.
And we are.
<unk>.
And we have expectations of significantly higher revenues from several of those.
These large agencies based upon our dealings I would say that.
And you touched on your own answer Dan the current.
<unk>.
Significant slowdown in National and network advertising has dampened the pace or let's say.
The curve of which we are.
Capitalizing on that opportunity so thats, a long way of saying I think the strategy is sound the company's scale and differentiated assets and capabilities put us in a position to capitalize on that strategy, but we are running into some pretty stiff national headwinds that have delayed the.
Impact of that.
Of the rewards from that strategy for the time being but we do fully expect them as we go forward.
Understood.
Are you going to.
No.
Yes.
Just one more for me.
Sure maybe if you could just unpack a little bit more you talked about it a little bit in the prepared remarks.
A larger category for you so maybe just what youre expecting there.
You had said I think it was I don't know 40 or 50% down relative to 2019.
In the past just wondering if you could update us on where those dollar figures right now.
Sure. So your memory is good but a little exaggerated I think we've said, it's down 40% from where it was in 2019.
As we noted in Q4.
The digital radio expense of digital radio revenues were up sorry, our radio revenues from auto were up 8% and we're continuing to see growth in 2023.
Both in terms of radio and in terms of digital spending from those customers as well.
As you might imagine we have a pretty broad set of relationships.
With the tier one two and three players in the auto space and based on those conversations and the improvement in supply chain and the the realities of the car market today as opposed to where it has been over the last couple of years, we remain optimistic that we will see acceleration in order.
<unk> spend.
In the second half of 2023 and beyond.
Again based upon what we're hearing.
Okay, Great I appreciate the time guys. Thank.
Thank you Dan.
Our final question is from Craig Huber with Huber Research partners. Please proceed with your question.
Great. Thank you I've got a few questions.
Can you maybe just touch on a little bit further about your AD trends by month or maybe January versus March. This march materially worst I think you signaled that pace for the first quarter, we're tracking down about 5% or so the first question.
Yes, I would say January was better than February and March is probably likely to fall somewhere in the middle at this point in time.
Okay and then.
On the cost front you guys have obviously done a herculean job taking out cost shareholders last three years, given all the macro issues, you and others had to deal with here and stuff and obviously youre talking about cost this year.
<unk> is slightly down and stuff, obviously, you have deflation working against you and stuff.
Do you feel if the environment gets worse than you're looking for here do you have any room without permanent damage to the business be able to take out more cost that if things short term get worse on the revenue front.
Let me, let me tackle that at a high level, Craig and then rich may have some additional comments so.
Our P&L our margins are still saddled with the fact that there's sort of three components going on there that I think are hurting us one is the fact that we.
We have a number of sports play by play agreements that.
Our margin killers.
And we for example elected not to.
Renew the Chicago Bears play by play agreement this year, which will save us.
Bottom line $2 million to $3 million.
Which.
I think youll see us continue to be really disciplined going forward on some of those contracts.
In addition, as we've discussed on this call and others. We are spending a lot of money to transform the company and navigate the storm, but at the same time invest in where we think it's critical for us to be strategically and as we are rewarded for those investments that too will see margin improvement.
And to some extent, we have some belt and suspenders elements in our operations, where we are building.
Our future, but at the same time funding.
We've done things historically and so that has also obviously impacted cost and so we do think that as our new technologies take hold it will alleviate some of those costs.
And lastly, I think.
I mentioned earlier that our market composition continues to hurt us in the sense that the markets, where we're focused on a growing 6% slower than the smaller and middle sized markets and that too given the operating leverage in this business absolutely is.
As a margin killer, so I think all of those factors.
Point to stronger margins ahead, and the opportunities to reduce expenses.
As we continue on our product our AD product roadmap and <unk>.
<unk> continued to work through some of these opportunities rich do you want to add to that great.
Okay. My next question.
Ratings of your traditional radio can you just update us on the data you have on ratings nutritional radio and maybe compare that to the digital side of things if you would for latest period.
Our ratings I would say have been the general trend over the last few months have been good I think we've picked up slightly visa.
Some of our peers.
The other thing that is a consideration for us is that we.
And I don't want to go into the rabbit hole here, but we have a.
A number of our radio stations, where we are still bifurcated our ratings.
And digitally having digitally addressable as opposed to total line reporting and that I think has also been a a.
A factor in in our numbers, but all of that said.
The general trend has been good vis vis our overall ratings.
And I guess my last question what is your you touched on this a little bit but what is your take of why your national advertising is significantly worse than local in just a little bit further about why you don't think the local advertisers are going to catch up on the downside versus what nationalists raw working obviously, the same economy herein and so forth. What's your take there. Please.
Well I don't think worldwide I would say that what we're experiencing is consistent with what we've heard from peers in radio and also outside I think it's a phenomenon that has more global and certainly not unique to Odyssey.
As to why I think that are local.
Our local customers are sort of more focused on what's actually going on in their day to day businesses, whereas national brands.
Tend to be a little more removed from the <unk>.
From the.
<unk>.
The day to day of the business and so if anything I would think that local it may be a better barometer of actual business conditions in national.
Okay. That's it thank you very much.
Thank you Craig.
We have reached the end of the question and answer session I would now like to turn the call back to David field for closing comments.
Thank you Ed.
Everyone for attending today's call, we look forward to reporting back to you.
For our second for our first quarter call.
This coming may appreciate it.
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