Audacy

Good morning and welcome to Odyssey's third quarter 2021 earnings release conference call. All participants will be in a listen-only mode. This conference is being recorded. I would like to introduce your first speaker for today's call, Mr. Richard Schmeling, CFO and Executive Vice President. Sir, you may begin.

Thank you so much. Good morning. This call is being recorded. A replay link 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 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 factor section of the company's annual report on Form 10-K, as such risk 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 reference certain non-GAAP financial measures. We refer you to the Investors page of our website at odysseyinc.com for reconciliations of such measures and other pro forma financial information. And I'll turn the call over to David Field, our president and CEO.

Thank you, Rich. Good morning, everybody, and thanks for joining Odyssey's third quarter earnings call. I am pleased to report another strong quarter of progress at Odyssey as we continue to recover from the pandemic and drive forward with our strategic transformation as a scaled multi-platform audio content and entertainment company with important leadership positions across the full spectrum of audio, including broadcasting, podcasting, digital audio, network, live events, music, news, and sports. We continue to rapidly evolve and fundamentally elevate the organization through a series of strategic acquisitions, organic growth initiatives, structural improvements, talent additions, and premium content development. As a result, we feel great about where the company is today and are well positioned to accelerate our growth and capitalize on the exciting opportunities across the dynamically growing audio market. We have a lot to cover on the call today, including our recent announcement of our acquisition of Wide Orbit's digital audio streaming and ad tech business, which will meaningfully accelerate our digital product roadmap and enhance our growth opportunities. But first, let's start with our financial highlights. Revenues grew 23% over the prior year in the third quarter. Our growth was led by a 30% increase in digital revenues and a 21% increase in spot radio. Sequentially, our revenues grew 8% over the second quarter, with our spot revenues up 9%. EBITDA grew 58% over prior year in the third quarter on higher revenues and improved margins. While the recovery continues, third quarter revenues were negatively impacted by the Delta variant and supply chain and staffing issues, which continue to impact many of our local customers in businesses such as Otto. Probing deeper into the results reveals some interesting insights into the state of the recovery. As you might expect, a number of categories that have been hit hard by supply chain, staffing, or COVID issues are down substantially, including Otto, which is our number one category, down about 40%. Concerts are improving, but still down substantially, as are theme parks, mattresses, furniture stores, casual dining, gyms, fairs and festivals, etc. However, at the same time, it is great to see that a significant number of categories are back above 2019, including banks, mortgage lending, beer, medical, HVAC, weight control plans, tourism, auto service and repair, e-commerce, DTC, software, consumer products, electronics, real estate, pet supplies, OTT, and of course, sports betting, plus many more. The full recovery in so many categories reaffirms the power and appeal of broadcast radio, which offers advertisers unparalleled reach, engagement, brand safety, and most of all, ROI. Radio and audio remain highly undervalued, and at a time of deep disruption to other ad platforms, radio and audio are becoming increasingly compelling for larger shares of ad spending. As auto and other businesses return to normal, we expect to see their spending revert to 2019 levels as well. One final point on the category data, the decline in auto ad spending accounted for a third of our third quarter revenue decrease versus 2019. Another third was due to the combined impact of the cancellation of our Odyssey events, plus the decline in advertising from third-party concerts, theme parks, and festivals. It is also revealing to look at the significant difference in the rate of recovery between larger and smaller markets. Our radio revenues are back to 78% of their 2019 levels X events. However, our smaller markets, those ranked 50 and higher, are back to 86% of 2019, and our markets 50 and higher in the South and Midwest are back to 91%. This sharp contrast in market recovery reflects how larger markets were slower to reopen and faced more disruption to their local economies and work practices and commuting. For Odyssey, this differential has a meaningful impact on our performance as our portfolio is far and away the most concentrated in the largest markets versus any of our peers, all of whom have substantially greater exposure to small and middle market radio. As the world continues to normalize, we are confident larger markets will catch up and level the scales. During October, we announced and completed the acquisition of Wide Orbit's digital audio streaming and ad tech business and relaunched it as Amper Wave. This is an important acquisition as it will give us control of our end-to-end product roadmap and accelerate our growth opportunities while enabling us to deliver a robust portfolio of audio and digital marketing solutions to our partners and clients. Rich will share some additional thoughts in AmpliWave in a few minutes, but I want to take a moment to share some context on how AmpliWave fits into our broader strategic agenda. Over the past couple of years, we have now made a number of important strategic acquisitions, including Cadence 13, Pineapple Street Studios, and Podcorn, to establish a leadership position in the podcasting business. that QL to accelerate our participation in the exploding sports betting space, and now AmpliWave to accelerate and enhance our technology, enabling us to better serve our listeners, customers, and partners. We have been quite deliberate and disciplined across all of our acquisitions, focusing strictly on highly strategic, early-stage, modestly-sized companies with excellent content, technology, and capabilities that will accelerate our transformation and enable us to build leadership positions in the fastest-growing areas of audio. We believe our disciplined approach has positioned us very well for the future. Because these businesses are all fairly early stage, their value is not readily evident in the context of our quarterly profits. But as we look ahead, we are excited about how the pieces are coming together across the businesses, including the number of organic growth initiatives that these acquisitions are enabling. In a nutshell, Odyssey today is a fundamentally enhanced and stronger company than ever, repositioned to capitalize on the emergence of audio advertising with an augmented product line, to better serve our listeners and customers. Now to that very point, this morning we were very pleased to announce that Brian Benedict, formerly the Global Chief Revenue Officer at Spotify, is joining Odyssey in that same capacity. Brian's move is a telling reflection of Odyssey's emergence as a leading player in the space, with an outsized opportunity to leapfrog forward and drive outstanding top and bottom line performance. As audio continues to emerge as one of the hottest growth areas in advertising, Brian will help accelerate our revenue development as we become an increasingly attractive partner for customers large and small. It should also be noted that Brian follows a number of other outstanding, talented leaders who have recently joined our growing team to help spearhead our growth and evolution. I want to take a couple minutes to share some thoughts in a few of our key business areas, first digital. We delivered strong increases in all three primary areas of our digital business, including podcasting, digital audio, and digital marketing solutions. As noted earlier, Total digital revenues grew 30% and is now 19% of our total revenues, double what it delivered in 2019. We are very excited about the progress we continue to make with our content platform and customer development. At the end of June, we launched over 350 exclusive new digital stations on our Odyssey platform, a first for us. Notably, many of these stations are hand curated by our leading personalities and programmers, as well as A-list stars including Chris Martin, Pink, Imagine Dragons, and many more. During the third quarter, we added another 150 exclusive stations and content from artists including Billie Eilish, Ed Sheeran, Shakira, and Dixie D'Amelio. This new content is an important differentiating element on our platform, and we have more in the works to enhance the user experience and drive our growth. We also welcome new affiliate partners to the Odyssey platform with Cumulus, Urban One, and Entrevision adding their radio stations to our content mix. The underlying digital metrics remain very healthy. Our digital audio listeners were up 22% during the quarter over prior year, and streaming RPMs increased 27%. Smart speaker growth was 25%. Importantly, I also want to add that we have increased our product development and engineering teams over the past several months to bolster and accelerate our work in enhancing the Odyssey digital platforms. We are excited about our product roadmap and look forward to an exciting year of platform improvements in 2022. Before leaving digital, a quick word on our digital marketing solutions business, which continues to thrive, growing rapidly as we continue to expand the number of customers we serve with our compelling set of digital marketing products. We have high expectations for the continued growth of this business in the future. Turning to our podcasting business, we had another strong quarter of growth and development. During the quarter, we launched our new three-year strategic partnership with American Public Media, the creators of Marketplace, and other prestigious podcast programming. We also recently became the official podcasting and digital audio partner of Major League Baseball, although the economic impact of that partnership doesn't meaningfully begin until 2022. We also recently launched 2400 Sports, which joins Pineapple Street and Cadence 13 as our third major podcasting studio and aims to be the number one creator of sports-related podcasts in the country, building off of our strong leadership position in audio sports. 2400 Sports recently launched the first original series of our MLB partnership, The Run, chronicling the historic 2016 championship season of the Chicago Cubs. This morning, we were pleased to announce a multi-year extension of our partnership with Glennon Doyle, who launched her podcast, We Can Do Hard Things, with us earlier this year. Her podcast debuted at number one on the Apple charts and has quickly developed a strong, deeply engaged fan base. In addition to our large existing slate of top shows, Other notable new releases during the quarter included new content from Carmela Anthony, Ellen Pompeo, John Meacham, and new seasons of hit podcasts like Up and Vanished with our partners at Tenderfoot. We also released our first C-13 feature podcast, Films for the Ears, through our partnership with Endeavor Content. Treat launched just before Halloween, starring Kiernan Shipka, and immediately jumped to the number one fiction title on the Apple charts. Our second podcast film for the year, Ghostwriter, featuring Kate Mara and Adam Scott, will be released next month. As we have noted on prior earnings calls, our podcast business is differentiated by the premium quality of the work we create based on the extraordinary talent of the outstanding team of senior creators, producers, journalists, and writers on our team. The quality of work is reflected in our expanding preferred relationships with Apple, Amazon, HBO Max, Nike, Hulu, and others. We continue to be the preferred companion podcast partner for these companies, creating and producing a number of titles, most recently partnering with HBO Max on their succession companion podcast hosted by Kara Swisher. During the quarter, we also sold first-run windows of new original series from Pineapple Street to both Amazon and Apple. We continue to drive very strong growth across all facets of our podcasting business and are rapidly expanding our original content development work. According to Triton Podcast Metrics, Odyssey's podcast network now reaches over 46 million monthly listeners globally and over 32 million monthly listeners in the U.S., making us one of the leading podcast publishers in the country. We do look forward to the day when there is a single source providing good industry-wide data on the podcasting business, and we no longer have people quoting services like PodTrack that don't include Odyssey, Spotify, Stitcher, and others in their data. I also don't want to neglect to mention Podcorn, which we acquired in the spring. Podcorn is the country's leading double-sided marketplace for native podcast advertising. The business is doing well and recently surpassed 50,000 creators on its platform with growing listener and advertiser metrics. We were pleased to learn that Podcorn was nominated for a Digiday Tech Award for the best native advertising platform. While Podcorn is fairly small today, we are very enthusiastic about where this business is headed as we further integrate it into our organization. Let's spend a moment talking about our sports business. As a reminder, Odyssey is far and away the leading player in radio sports and audio sports, reaching three times as many people as the number two competitor, with an unparalleled lineup of leading sports stations in the largest markets, including WFAN in New York, The Score in Chicago, WIP in Philadelphia, The Fan in D.C., and dozens more. Plus, we also operate the CBS Sports Network across the country. We are the flagship play-by-play home for an unrivaled 47 pro teams and dozens of college teams. Our sports betting advertising continues to grow rapidly. We previously had indicated that our sports betting ad revenue would grow 50% in 2021. I'm pleased to report that we can now project that our growth will exceed 100% in 2021. We also continue to expect sports betting to grow into a $100 million category for us in a few years as legalized sports betting continues to spread across the country. Over the past year, we have made a number of significant innovative moves to build on our powerful sports foundation, and create new multi-platform growth opportunities. In addition to our recent launch of 2400 Sports, we entered the sports betting information business late last year with our acquisition of BetQL, and then launched the BetQL network earlier this year, providing 24-7 audio and video sports betting content distributed on multiple platforms across the country. One of our shows, You Better You Bet, is now the number one sports betting podcast in the United States. We are excited by the opportunities in this dynamic space in 22 and beyond. I want to share a couple other quick updates before I turn it over to Rich. Our live events, an important pillar of our business, returned to life on September 11th with our Stars and String event in New York, featuring some of country's most notable stars, including Zac Brown, Darius Rucker, and Chris Young. Last month, we returned to the iconic Hollywood Bowl for our annual We Can Survive show, which featured Coldplay, Shawn Mendes, Maroon 5, Doja Cat, the Black Eyed Peas, and more. We deliberately planned a light calendar this year due to COVID uncertainty, but look forward to a more active calendar in 22. And after hitting a bit of a lull over the summer, Nielsen Radio ratings grew nicely in October, reaching their highest point since March of 2020 when the pandemic started. Most notably, morning drive time surged in October, reflecting the trend toward normalization of our lives as the Delta wave abates and an increasing number of Americans return to their workplaces. Morning ratings for adults 25-54 grew 6% over the prior month and 8% over the prior year, while women 25-54 grew 7% and 20% respectively over the same periods. Turning to current business conditions, we are continuing to make progress with the recovery in fourth quarter and are currently expecting revenue growth of mid-single digits versus prior year. Ex-political, we are expecting low teens revenue growth. As we look ahead to next year, we continue to believe we are on a path back to a full return to our pre-pandemic 2019 EBITDA and calendar 22, assuming, of course, the recovery continues as expected. In sum, it was a strong quarter of strategic progress and recovery across our company. We are excited about what lies ahead. I want to close with a thanks to the Odyssey team. We are deeply fortunate to have such an extraordinary, talented, and dedicated group of leaders who have done such outstanding work leading our transformation through the unique challenges of the past 18 months. They're a truly special group, and I want to express my deepest appreciation. And with that, I'll turn it over to Rich. Thanks, David.