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spk01: 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.
spk04: 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.
spk05: 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.
spk04: Good morning. Our total net revenues for the third quarter came in at $329.4 million, up 23% year-over-year and up 8% sequentially versus the second quarter. Our core spot revenues were strong, up 21% year-over-year and up 9% sequentially. As discussed by David, we are seeing strength in a growing number of our advertising categories and continued evidence of ongoing disruption due to the pandemic and others, including our top advertising category, automotive. Our digital revenues were up 30% year over year, despite some speed bumps associated with migrating to a new third-party advertising server that nicked our expected revenue growth for the quarter by about six points. Although these technology issues are now closer to being resolved, This issue will also dampen our fourth quarter digital revenue growth. During the third quarter, we saw continued strength and recovery across a number of our other revenue lines and categories. Our network revenues were up 24%. Our sponsorship and event revenues were up 38%. And our sports betting advertising revenues were up by over 100% year over year. And although the rapidity of the rate of recovery ebbed somewhat deeper into the third quarter as Delta COVID cases peaked, we continue to see encouraging signs of ongoing recovery. In the fourth quarter, we are excited to be continuing to reactivate our live events business. This business line historically has been strongest in the fourth quarter given holiday shows and contributed close to 7% of our fourth quarter revenues historically versus only about 4% on an annual basis. We expect that this fourth quarter that our events revenues will only be about one third of normal, but that's in comparison to about 0% in the fourth quarter of last year and about 20% of normal in the third quarter. We expect that live events will be an important contributor to our growth in 2022. Based on our current pacing, we expect that our fourth quarter total revenues will be up mid-single digits and up low teens ex-political. Our total operating expenses for the third quarter came in at $300.2 million, and excluding one-time and unusual costs and adjusting out non-cash items like DNA, our total cash operating expenses came in at $280.2 million, or up 18% year-over-year. Adjusted EBITDA for the third quarter was $49.3 million, up 58% year-over-year, and our EBITDA margin was 15%, up about two points from the second quarter. Looking at the fourth quarter, we expect that our cash expenses will increase year-over-year by high single digits to low double digits, and that our EBITDA margin will continue to improve sequentially by three to four points. Turning to our financial position and liquidity, our first lien net leverage was three times as of September 30th, computed on a compliance basis in accordance with our credit agreement, and as compared to our covenant of four times. Excluding the benefit of our 2020 COVID-related credit agreement amendment and using actual LTM EBITDA, our first lien net leverage on a compliance basis at September 30th was 3.5%. 72 times. We continue to expect to be compliant with our first lien maintenance covenant at year end, and we continue to expect to significantly further reduce our leverage during the course of next year. At the end of the third quarter, our liquidity was $264 million up from $160 million at the end of last year. Our net capital expenditures for the third quarter were $19 and we now expect to fall slightly below the low end of our full year guidance range of $70 million due to the timing of payments. Our CapEx initiatives are proceeding as expected, and as David mentioned, we look forward to bringing to market innovative new capabilities that we believe will significantly enhance the consumer listening experience on the Odyssey platform and enable us to accelerate the growth of monthly active users during the course of 2022. To that end, subsequent to September 30th, we acquired for about $40 million an exclusive worldwide perpetual license to Wide Orbit's cloud-based live and on-demand digital audio streaming and advertising technology, plus the related assets and operations of WO Streaming, which we have renamed AmperWave. WideObert retains the ownership of and the use of this technology for video streaming. The existing revenue base of the WO streaming business is less than $10 million and the business historically lost a little money. Given our defined cost synergies, we expect the business will be profitable during our first full year of ownership. More importantly, This technology, which we believe would have cost us more to build ourselves, gives us much greater control over the consumer listening experience on the Odyssey platform than was possible using a third-party streaming service. It enables our engineers to focus on developing innovative features and functionality, and it significantly speeds our time to market. This acquisition also gives us more direct control over the technology necessary to monetize our streaming advertising inventory and allows us to more rapidly bring advertising innovations to market. We are thrilled to get this deal done and look forward to leveraging many of the investments we are making for ourselves for the benefit of our Emperor Wave clients. With that, we'll now go to your questions. Operator?
spk01: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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. Thank you. Our first question comes from the line of Jason Kim with Goldman Sachs. Please proceed with your question.
spk08: Thank you, and good morning. Regarding the 2022 EBITDA outlook, I know you've talked about this before, but I think it would be good to get any updates on what is embedded in spot revenue assumptions versus 2019 levels to reach your 2022 target. And then how much does auto represent as percentage of your revenue, maybe give what percentage was, Otto's was relative to 2019 to get a picture of pre-COVID levels.
spk05: Sure. Well, thanks, Jason. First, let's go in reverse order on Otto. You know, it's about sort of mid-teens as a share of our business. And as you mentioned, it was down about 40% against 2019. So you can see the significant impact it had. And as I mentioned earlier, it's about a third of the gap between where we are today and where we were in 2019. As to the question of recovery back to 2022 EBITDA levels next year, we're very specific in that that assumes, right? The math on that is pretty simple. We have to get back to about 85% of 2019 spot levels to achieve that goal. And that's because of a couple things. One, the continued strong growth that we are experiencing and expect to continue to experience across all of our digital businesses. And also the substantial amount of permanent business model enhancements we've made to take expenses out of the business that will, of course, pay off for us continually as we go forward.
spk04: And I'd like to add to that, Jason, that You know, we think spots going to be down about mid-teens, as David said, versus 2019. And that's not where we expect the landing spot is. We do expect the auto category is going to take quite a bit of time further to recover. You know, many of our dealers are telling us they don't expect their stocks to normalize until sometime in 2023. So, you know, that's an important category. It's going to take time and likely doesn't fully recover
spk05: until uh 23 but yet you know we expect still to be able to recover to about 2019 EBITDA levels next year even with spot down about mid-teens and to that point i think it's worth underlining the data we shared earlier which we're pretty excited about where we cited quite a few categories that are now ahead of 2019 and i think it speaks to that inherent robust appeal of radio and audio to advertisers today when they look at their choices. And the opportunity for us to garner a larger share of that media mix, and you're hearing this from other audio companies as well, of course, we think is meaningful. And so, again, to Rich's point, we don't think 85% is the endgame. We just think from a modeling standpoint, that gives us greater confidence as we look into next year's numbers.
spk08: Thanks for that. And David, a longer-term question Talk about how the advertising market is changing as we come out of the pandemic. What's more important to advertisers now than before? What capabilities does Odyssey have to meet those needs? And what do you currently lack to make your value proposition even stronger?
spk05: Look, I think advertisers today, like always, are looking for results. And fortunately, we deliver great results. And more and more, of course, advertisers want to see that. holistically and they want to see good data and attribution to drive that. And fortunately, we are building, I think, really good tools and really good data to support that work. And we think that positions us very well here going forward as we continue to be able to present advertisers a complete spectrum of digital and broadcast solutions, capitalizing on our reach, the premium quality of the product to to achieve their goals we need to continue to do to work to catch up in terms of our ability to deliver a strong data enhanced and attribution tools we have those but we need to continue to get better because obviously there are a lot of companies out there today that are you know excellent at delivering
spk04: really strong technology-driven advertising. I'd like to add, Jason, one thing that is different today versus prior to the pandemic is a growing recognition that other local media like linear television, its ratings have declined quite significantly over the last number of years. And if you're looking for broad, unduplicated reach, and managing your frequency of your messaging to a given audience target, it's now increasingly more important to buy radio in companion with your television campaign. And we're hearing that increasingly from the largest media buyers and a recognition of the growing importance of audio in the marketing mix.
spk03: Thank you very much.
spk01: As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Stephen Cahill with Wells Fargo. Please proceed with your question.
spk07: Thank you, and thanks for some of that commentary on the outlook. It looks like digital sequential growth slowed a little bit, and Rich, you talked about the ERP problem. Just wondering if that's all situated or if we should expect a sort of similar level of sequential digital growth in the fourth quarter as you fix some of those issues and if maybe that's part of what's dragging down your Q4 guide a little bit.
spk04: Yes, Steven. So, you know, we said in the third quarter that these technology issues cost us about six points. versus what we expected going into the quarter to achieve. And it's going to also dampen our digital revenue growth in the fourth quarter similarly. And we'll see how it shakes out in the end. Things are getting better, but we're not out of the woods.
spk07: Great. And then you talked about the largest markets as something that differentiates you all from some of your peers. Just this morning, one of the out-of-home advertisers said they're seeing some big cities like LA and Miami, New York, pretty much above 2019 levels. And then they talked about a couple of big cities that were still down, like San Francisco. I'm just wondering how your larger markets currently compare to 2019, and if you're seeing any of the biggest cities getting back to par.
spk05: If you aggregate the top 50 markets, you know, they are substantially behind 2019, as you heard from our data. Trend lines are good, right? Third quarter was definitely better than second quarter. Fourth quarter, definitely better than third quarter. And the tone and tenor of what we hear from our largest markets is quite good. And within that pool of top 50 markets, some are actually doing quite well. So it is somewhat of a mixed bag, which may allude back to your comment about out of home, where a San Francisco might be weaker and a New York might be stronger. You know, we're seeing some of those, I'd say, relative patterns as well.
spk07: And then... David Ulrich, just curious if the sports betting licenses just announced in New York, if that's a meaningful contributor to what you're expecting for 2022 revenue?
spk05: I think it's part of an aggregate package, right? We're expecting more states to legalize here over the next couple of years. New York will be helpful for sure. We'll participate in that in New York City as well as in Rochester and Buffalo going forward. So, yes, it's another step forward.
spk04: And then, you know, when we think about the slate of other states coming behind New York, we're hopeful that over the next months, years, that California legalizes mobile sports betting, Texas, and Florida. So you think about New York, California, Texas, and Florida, you know, those four states really represent a significant portion of the U.S. population. They're not yet in the mobile sports betting game. I think it's coming soon.
spk07: Yeah. And then maybe just last one for me. Congrats on bringing Brian on board. How should we think about any changes that might make to your strategy or revenue outlook as he sort of brings some new capabilities or new strategy into the fold? Thanks.
spk05: Well, thank you for that, Stephen. I think Brian joining us, I think, makes a big statement, right? Brian sized up the portfolio a that we bring to the table and the composition of our scaled multi-platform premium content and the work we're doing around data and analytics. And, you know, as we keep saying, we see where the puck is going. We see how the pieces are coming together, and we're excited about that. And Brian shares that confidence, and that's why he's chosen to jump on the team here. And I think that we're just excited about adding his leadership to so many other great leaders and people doing such important work around the company.
spk01: Our next question comes from the line of Dan Day with B Reilly. Please proceed with your question.
spk06: Yeah. Morning, guys. Appreciate you taking my questions. I just wanted to, while we're on the topic of the digital side, so, you know, notwithstanding sort of the technology issues you flagged in the near term here, you know, you're set to grow 30% or so year over year. I mean, with all the investments you've made into kind of new content on the digital side, should we be modeling kind of a sharp inflection in 2022 in terms of that digital growth rate, so something materially higher than you've had the last couple quarters?
spk04: Yeah, look, I think that's exactly what we're working toward, Dan, and I don't know if I would use an adjective like sharp, but we do believe accelerated, and that's a key reason why Brian's joining us, frankly, is that we're poised over the next months to bring new capabilities to market that we hope is going to meaningfully drive monthly active user growth and increase consumption of our digital content. So we've been working hard to get to this point, and we're now poised to move into the next phase.
spk03: and we're all very excited about how it's likely to unfold. Yeah, great, thanks.
spk06: And then one other for me, just, you know, we're halfway through NFL, college football, just an update on maybe the BetQL app as far as, you know, anything compared to what you had thought, you know, just as far as the affiliate fees, the subscriptions, all that sort of stuff.
spk05: No, I mean, look, we love the thesis of what attracted us to BetQL in the first place and think it is a very nice enhancement of our overall offering. We're seeing nice growth in subscribers and nice growth in affiliate fees. It is still a small business, and we've also done some innovative things around it. As we mentioned, launching the BetQL network, which is available not just across radio stations and digitally, but also the videos available on Twitch. So we continue to see really great opportunities in that business going forward.
spk03: And it is such a nice fit with all the other things we're doing around sports. Great.
spk06: And then last one for me, just how you're thinking about continued acquisitions or anything on the M&A front moving forward versus that reduction in and any updated timeline on when you sort of expect to get down to that four times net that the EBITDA target you talked about?
spk05: Let me start to answer your question, Dan, and then Rich will add to that. Net reduction slash, you know, leverage target getting back to four times is first and foremost in terms of our priorities here going forward. We're really happy with the fact that we've been able to accomplish so much with the acquisitions we've made so far by being very disciplined and making sure that everything we've touched is strategically focused earlier stage and really important to our roadmap going forward. The good news is we do not see anything, any other holes in our arsenal where we feel we need to acquire anything else looking ahead. You know, we'll always keep our eye open if there's something there that's really strategic and modest, but we do not see anything else on the horizon at this point in time that would warrant further acquisition. Rich, I don't know if you want to add to that.
spk04: Yeah, look, I think, you know, we've given a scenario of the outlook for 2022 that gets EBITDA back to about 2019 levels. That scenario leads to us getting our total net leverage down to five or less by the end of next year, and we expect to be at our target by the end of 2023.
spk03: All right, guys. I should take my questions. I'll turn it over.
spk01: Once again, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Craig Huber with Huber Research Partners. Please proceed with your question.
spk02: Hi. Thank you. First question. Aside from auto, is there any other supply chain issues that's materially impacting your advertising on your platform?
spk05: Yes, from the standpoint that there are other categories like furniture, mattresses, and so forth that are probably equally affected. know from the standpoint that none of them are in categories that are close to the size of auto. It's really more the aggregation of those categories in so many different various and sundry areas that cumulatively have a significant impact on our business.
spk02: You touched on this a little bit earlier. The ratings for your radio stations year over year, well, let's do it this way, versus 2019 levels. What was that number again on average, the ratings change?
spk05: Well, what I mentioned, it wasn't, just to be clear, Craig, it was not our stations. This was Nielsen aggregate rating information. And what they revealed in October, which we think is really interesting and important, is that there was a really meaningful step up where total ratings, I'm looking for the data now, but the total amount of ratings in morning drive were up 6% over the prior month, and 8% over the prior year. That's a really meaningful number across the whole aggregation of the United States, women even steeper. And the fact that it occurred in morning drive may reveal a beginning to normalize traffic and commuting patterns as folks start returning more to work, more to the office, I should say, because obviously large segments of the population have been working and commuting in the mornings. But it appears as though there's something going on there. which augurs well for our business.
spk02: You touched on this earlier a little bit. Your core advertising, including network advertising, looked like it was down about 22% from three Q19 levels. When we look at the public companies, I'm not trying to be derogatory. I just want to hear your opinion on this. with the public TV companies, local television down five, 6% versus two years ago on an organic basis for their core ad revenues, the Delta between those two you're trying to suggest is that the mix of your, of your, of your local advertisers that still hasn't come back to the levels that you're expecting over time. I think that's right. Not a ratings play or anything like that.
spk05: I don't think so. I mean, look, tell us, Television ratings and radio ratings have both been somewhat disrupted by COVID. Television ratings have been more disrupted than radios over the last few years, and so I don't think it's a ratings issue. It's a longer conversation as to what might be underlying that, but I do think ultimately it's about the mix of advertisers. And radio, as we've talked about before, tends to be more about advertising uh advertisers who want people to get up and go places and do things and a lot of that has been sidelined over the last year and then the supply chain affects a lot of local businesses and we lean more into local businesses than television does and i think that is at the heart of why you see a gap in those in those two numbers and you see in the data craig when you look at the categories that david listed that are back to 2019 levels and the categories that are still quite disrupted when you look at those categories
spk04: that are just still quite disrupted, it makes sense. It's pretty clear it's the pandemic. And I don't think local television is as exposed to a number of those categories as we are. Their advertiser base is larger, more national customers compared to radio.
spk02: And it leads to my next question, guys. For your radio stations, local versus national, the core ad revenues, what was that percent change year over year, please? In other words, was there a material difference with the national part of it?
spk03: Yeah, so national has performed somewhat better than local.
spk04: I'd say, though, Craig, look over time. Local is consistently getting better quarter over quarter, where national, when Delta cases spike, I'll call this what we would call kind of national RFP business, it ebbed a little bit. So, you know, the national business gets throttled faster than local, and local, which is broader, lots of advertisers participating, it has been getting better consistently quarter over quarter, and we see that trend continuing in the fourth quarter. So lots of evidence from where we sit that local is, you know, continuing to recover. And when we look at the outlook for 2022, we see significant headroom for further recovery.
spk02: And my last question, guys, I think your podcast revenues for the first two quarters this year was like 15 to 16 million each. Was it similar in the third quarter?
spk03: Yeah, on the high end of that range. Great. That is all I have. Thanks.
spk01: We have reached the end of the question and answer session. Mr. Field, I would now like to turn the floor back over to you for closing remarks.
spk05: Thanks so much. We appreciate everybody tuning in today for our call. We very much look forward to our next call in three months. Thanks so much.
spk01: Bye. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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