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spk00: Good morning and welcome to the Odyssey Inc. fourth quarter 2021 earnings 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 Schmaling, CFO and Executive Vice President. Sir, you may begin.
spk06: Thank you, Stacey. This call is being recorded. 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 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. I'll now turn the call over to David Field, our president and CEO.
spk08: Thank you, Rich, and good morning, everyone. Thanks for joining Odyssey's fourth quarter earnings call. I'm pleased to report that 2021 ended on a very solid note as we completed a year of strategic transformation across the organization and positioned ourselves for strong growth in 2022 and beyond. Through the course of the year, we made great progress across all of our emerging and evolving businesses to enhance our competitive position our organizational capabilities, and our growth opportunities. We made a very important addition to our lineup in Q4 with the addition of AmpliWave, formerly Wide Orbit's audio streaming and ad tech business, which will meaningfully accelerate and secure our digital roadmap. And operationally, we ended the year with solid revenue growth, and we are off to a very good start in 2022 with strong performances across our business lines. Odyssey ended 2021 in a significantly enhanced position, versus the start of the pandemic or even at the start of last year. We have purposefully reimagined Odyssey as a scaled, multi-platform audio content and entertainment company with outstanding leadership positions across the full spectrum of audio, including the fastest growing areas of the business. We believe we have a meaningful competitive advantage as the number one creator of original premium audio content to our unrivaled leadership position in local radio news and sports, augmented by our position as the most critically acclaimed creator of original podcast content. We are working to build upon this position by continuing to build additional exclusive content offerings across our radio, podcasting, and digital platforms, and working to develop significant listener experience enhancements on our Odyssey distribution platforms. In 2021, we accelerated our organizational evolution through a number of important strategic acquisitions organic growth initiatives, structural improvements, and senior talent additions. And we are well positioned to take advantage of the exciting growth opportunities within the dynamic and increasingly important audio market as we capitalize on our evolution from a leading radio broadcaster to a scaled first-tier multi-platform audio leader with deep digital marketing capabilities to meaningfully expand our customer relationships. Turning to fourth quarter results, revenue grew 8% over the prior year quarter, and 13% ex-political, led by double-digit growth in both digital and spot radio. Local spot revenues continued to recover, up 13%, while digital revenues grew 16%. We are back to live events, but with a much lighter schedule than before the pandemic, as we ran at about 30% of our pre-COVID level of events. For the full year, revenues grew 15%, and were up 18% ex-political, with adjusted EBITDA up 48%. We also had a terrific year in sports betting as our ad revenues in that category grew 130% to $45 million, exceeding our expectations and rapidly pushing towards our $100 million target for this category. With several large states like New York recently legalizing mobile sports betting, we expect continued strong growth in this category during 2022. We continue to see an interesting evolution in the recovery of certain key advertising categories. During fourth quarter, Otto remained highly impacted by supply chain issues, as did a handful of other categories. At the same time, we experienced significant recoveries in several categories that have been hindered by the pandemic. And in addition, a number of categories have eclipsed 2019 sales levels, as Rich will share during his remarks. The post-pandemic recovery is also manifesting itself in rebounding ad rates on spot radio. While total revenues have yet to recover to pre-pandemic 2019 levels, it is useful to note that excluding political, as well as what we believe is the transient impact of lower auto advertising and our curtailed event schedule, fourth quarter revenues were within 5% of pre-pandemic levels. 2021 was a busy transformational year for Odyssey. We rebranded the company at the end of March to reflect our evolution into a scaled multi-platform content and entertainment company, establishing a consumer-facing brand identity. Our 2021 acquisitions of Podcorn and AmpliWave, plus BetQL just prior to the start of the year, are important additions to our capabilities that will fuel accelerated growth and enhance how we serve our listeners and customers. We are very excited about each of these fast-growing new components of Odyssey. Both BetQL and Podcorn are growing at triple-digit rates And while starting from a small base, we foresee meaningful contributions to our future growth as we continue to build on these exciting emerging platforms in the sports betting and podcast marketplaces. Podcorn has now surged to 60,000 podcast creators on its platform. No other influencer marketing platform for podcasters approaches that scale and breadth. AmpliWave was Wide Orbit's digital audio streaming and ad tech business that we recently acquired in October and relaunched under its new name. This important acquisition will give us control of our end-to-end product roadmap and accelerate a number of growth opportunities while also enabling us to provide streaming and ad tech products to customers. We are off to a great start with AmpliWave, both in terms of product development and in growing their customer base. We believe 2022 is setting up to be a strong year for Odyssey as we are able to capitalize on the many meaningful organizational enhancements that we've made across the organization in the form of acquisitions, innovation, and new talent and capabilities. As we increasingly benefit from these enhancements and integrate the various pieces across the company, they will contribute to an acceleration of our top and bottom line growth. At the same time, we are optimistic about the continued recovery and normalization of our radio business as the disruptive impact of the pandemic and ultimately supply chain issues wane. And on a broader note, we are very optimistic about the future of the audio business, which continues to gain momentum with advertisers as other primary forms of advertising suffer substantial disruption. Audio in general, and radio in particular, remain highly undervalued, with audio attracting just 9% of ad dollars, despite garnering 31% of people's time with media, according to a 2021 work study. Odyssey is well positioned to get a healthy, larger share of the growing audio market as we continue to elevate our presence in the national advertising community around our scaled, enhanced, increasingly digital premium quality platforms. In 2022, we are focused on five key performance drivers that are integral to our success. Number one, expanding our offering of differentiated premium audio content to accelerate audience growth across all platforms. Number two, bolstering our customer marketing partnerships around our holistic multi-platform data-enhanced product line. Number three, elevating our digital distribution platforms to provide an enhanced listening experience. Number four, driving meaningful innovation across our business. And number five, continuously building audio's talent and culture to ensure a best-in-class team. We are feeling very good about the state of our digital business across all three primary areas, including podcasting, streaming audio, and digital marketing solutions. Streaming audio had a strong 2021 with revenues growing over 35% for the year, and we continue to see strong underlying fundamentals with TLH up double digits in Q4 and RPMs at an all-time high. With significant improvements on tap for our Odyssey digital platform later in 2022 and the addition of our exclusive representation of Major League Baseball's digital audio inventory this season, including both podcasting and streaming, we expect strong growth in this important market segment over the next couple years and beyond. And our podcast business had a solid 2021 and is well positioned for a terrific 2022 and beyond. As one of the three largest podcast publishers, reaching over 40 million monthly listeners, according to Triton, we have scale. But what truly differentiates us in the marketplace is the premium quality of our work, which is second to none. Odyssey's podcasts were featured in nearly every year-end best-of list, including several number ones or best podcast of the year honors that we are incredibly proud of the team's work. Our work figured prominently on best of lists from the likes of the New York Times, Apple, Fortune, The Atlantic, Amazon, Entertainment Weekly, Vogue, Esquire, The New Yorker, Time, The Financial Times, and more. Our new original show, 9-12, was the year's number one most critically acclaimed show. While our partner, Glennon Doyle's We Can Do Hard Things, was Apple's number one top news show of the year. We rolled out our first two C-13 feature podcast movies, Ghostwriter and Treat, and created several other big hits, including Gone South and Fallen Angels from Cadence 13, and the official Succession podcast from Pineapple Street Studios in partnership with HBO. All in, six of our shows cracked the Apple top ten during the fourth quarter. In addition, we are continuing to progress on our plans to drive higher margins from our podcasting business by adding more local podcasts to the product mix and driving more audience-based addressable campaigns for brand advertisers. We are off to a great start with our podcast business in 22, led by a string of new releases, including the new hit podcast, Fly on the Wall, with its rich storytelling on Saturday Night Live, hosted by David Spade and Dana Carvey, featuring guests the likes of Chris Rock, Tom Hanks, Tina Fey, Conan O'Brien, and many more. Turning to business conditions, we are off to a very good start in 2022. We are experiencing strong growth in essentially every segment of our business with signs of some acceleration in spot radio across both local and national. This despite the fact that we are still experiencing significant challenges with auto advertising due to the lingering impact of supply chain issues. Overall, based on current pacings, we are expecting first quarter revenue growth in the mid-teens versus prior year. And as we look at the remainder of the year, we are cautiously optimistic as we anticipate strong growth across digital, podcasting events, and political, and the near normalization of our radio business as the pandemic wanes and supply chain issues are hopefully resolved by Q3. This all presumes, of course, that we don't see a significant macroeconomic or pandemic disruption, but right now we are on a solid trajectory. As such, we continue to expect 2022 EBITDA to be at about the same level as our 2019 pre-pandemic results. In sum, we are excited about where the company is today and all the enhancements and additions we have made to elevate and transform Odyssey to capitalize on the emerging opportunities in audio, better serve listeners and customers than ever before, and deliver strong results for our shareholders. And with that, I'll turn it over to Rich.
spk06: Thanks, David. Our total net revenues for the fourth quarter came in at $344.7 million, up 8% year-over-year and up 13% ex-political. Our core spot revenues were up 10% in the fourth quarter, driven by local, which accounts for about 70% of our total core and was up 13%. Core spot revenues were up a strong 24% in the second half of 2021 versus the first half, Reflecting the ongoing recovery and the improving performance of many of our top advertising categories including hospitals and clinics casual dining recruitment sports sporting events and furniture The auto category as David mentioned our largest remains disrupted and there are still a number of other important advertising categories that like concerts, fast food, and travel that are getting meaningfully better, but still have a ways to go to get back to pre-pandemic levels. And I think it's also important to note, as mentioned by David, is that there's an increasing growing number of categories that are now ahead of pre-pandemic levels, including mortgage lenders, tourism, casinos, software, HVAC and other home improvement categories like plumbers. We are excited to see an increasing number of states lifting their COVID restrictions and we believe this bodes well for the accelerated strengthening of our spot revenues this year. Our digital revenues in the fourth quarter were up 16% year over year and as expected were somewhat negatively impacted by the now resolved technology issues we encountered in migrating to a new third-party ad server. Our sponsorship and event revenues were up 111% year over year in the fourth quarter, due significantly to the restart of our live events business. Our event revenues came in at about $9 million in the fourth quarter as compared to $27 million in the fourth quarter of 2019. For the full year, our event revenues totaled about 11 million. We expect that our event revenues will more than double during 2022, but we don't expect them to fully recover to pre-pandemic levels this year. Turning to the outlook for the first quarter, based on our current pacing, we project that our total revenues will be up mid-teens year over year, driven by the accelerating core spot growth and improving digital performance. Our total operating expenses for the fourth quarter came in at $296.6 million and excluding one time and unusual costs and adjusting out non-cash items, our total operating expenses were $278.5 million or up 10% year over year. Our adjusted EBITDA margin for the fourth quarter was 19%, up four points from the third quarter. For 2022, We continue to expect that we are on track to get back to about 2019 levels of adjusted EBITDA this year, and we project that our cash expenses will increase at about one-half the rate of our revenue growth driven by variable expenses tied to revenue growth, investments in our key strategic initiatives, including our new streaming platform, which we expect to launch during the latter half of this year, and as a result of the impact of accelerated inflation on wages and other operating costs like power, which we estimate will account for close to one point of our expense growth this year. Turning to our financial position, our first lien net leverage was 3.7 at the end of the fourth quarter, computed on a compliance basis in accordance with our credit agreement and as compared to our covenant of four times. The benefit of our COVID related credit agreement amendment on our compliance based leverage calculation concluded as of September 30th and in accordance with its terms, the amendment provisions subsequently sunsetted. As a result, the margin of our revolver has decreased by 25 basis points and all other amended terms reverted back to what they were prior to the pandemic. Moving forward, we expect to rapidly build first lien covenant cushion during the course of this year and to cut our total net leverage by about one half by the end of this year. Our net capital expenditures for the fourth quarter were $37.3 million and totaled $76.6 million for the full year. Our CapEx for the quarter was somewhat greater than we expected. because our software engineering team, now combined with the team we acquired from Wide Orbit, got more work done on our new platform than we expected. This platform is now in alpha testing, and we expect to move to beta during the first half of this year. We expected our 2022 capital expenditures will be about $75 million. With that, we'll now go to your questions. Operator?
spk00: 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. Our first question comes from Stephen Cahal with Wells Fargo.
spk03: Thanks. Good morning. Thanks for that commentary on the first quarter and getting back to 2019 EBITDA this year. Last year, you couched that with, I think, an 85% level of spot revenue. Just wondering if you could update us on how your current outlook kind of compares to that 85% number.
spk06: Yep. So when we gave our guidance scenario for 2022 last year, We explained that that scenario assumed that our spot revenues would still be down about mid-teens compared to 2019. And that really was based on the assumption and our continued belief that the automotive category is not likely to fully recover to pre-pandemic levels this year. we see signs of life. We see things getting better, but we think the supply chain issues are likely to persist until the latter part of this year, and we do expect to see sequential improvement, but we think when we think about the full year, at least our scenario was that, you know, our spot revenues could be down mid-teens versus 2019, yet we could still get back to 2019 levels of EBITDA given the significant growth since then of our digital business, our cost reductions, etc. So, you know, right now our spot, as David mentioned, our spot revenues in the first quarter are somewhat accelerating versus where we were in 4Q. We think that The relaxation of COVID restrictions across the country is a great sign and hopefully leads to accelerated consumer spending and just more economic activity. But for now, we'll wait and see. And we think that the guidance scenario we gave previously is still a pretty good view of what likely happens this year.
spk03: Great. And then maybe just second, Rich was wondering if you could update us on what your free cash flow outlook is for the year. You gave us those comments on cash expenses. There's a few things that fall below the line. So as we just think about deleveraging, how do we think about converting adjusted EBITDA to free cash flow?
spk06: Right. So I think that you look at it and you think, okay, you know, our, our interest expense, our cash interest payments will be, you know, a little bit over $90 million. I've just given you CapEx guidance of about 75. You know, our cash taxes this year will be inside $10 million. We're still waiting patiently for our federal government to return to us our NOL refund claim that we made at the end of, I guess, early in the second quarter of 2020. We hope to receive that this year. That's $15 million. And we have no further mandatory term loan B amortization. That was satisfied as part of our capital markets transactions last year. So, you know, if you look at that, that math suggests that our free cash flow, if we get back to about 2019 levels of EBITDA, our free cash flow will be north of $100 million. We intend to use that primarily to pay down debt. And if you look at where our total net leverage was at the end of 2021 and 2020, look at that projection given that commentary on free cash flow and paying down debt, we do expect to cut our total net leverage in half, about in half, by the end of 2022, and for our first lean leverage to be, you know, inside two times.
spk03: That's helpful. And then maybe just lastly, the streaming product, I mean, it sounds like you believe there's a big market and you're willing to kind of take the, the EBITDA and the cost pain to invest in that. How have you thought about sizing that market? You know, audio both paid and free is pretty crowded. There's a lot of options out there. So what made you decide that the best use of your assets was to have your own service and compete head to head with, with others, you know, as opposed to maybe putting your content into other people's services?
spk08: Yeah, Steven, I look, it's, um, We believe and I think the facts support that we are as good as anybody at generating and developing outstanding premium differentiated content. And it manifests itself in everything from the fact that we have far and away the strongest position in local sports and rabid fans all across the country to our leadership in local news and local personalities. So we have that differentiated content under our control. And we've also cultivated a strong differentiated position in the podcast space, as noted from everything from the awards that I cited in my remarks and a lot of the other things that we've been doing as well, in addition to the exclusive stations and other things that we've developed. So we're natural competitors in that space. And as we look at the audio market writ large, We are a scale player with over 200 million folks engaging with our brands and our products each month. And we don't look at the distribution business as a winner-take-all situation. We think that as audio continues to elevate in the importance in our business ecosystem, our advertising ecosystem, we think that having the ability to create a cultivated, differentiated, Listener experience to engage with all of our unique content as well as the other pieces that we will bring to bear gives us a position to be a meaningful player in that space. We don't need to be the only player. We don't need to be the number one player. But we can create a very attractive business with great value based on all the competitive aspects. elements that we already bring to the table. And so it's natural for us to continue to play this out. And we're excited about where we're headed.
spk06: And look, I think it's important to note that our capex relative to revenue has been high over the last several years compared to historical standards. We see our capex relative to revenue falling over time as revenues fully recover and grow past where they were in 2019 prior to the pandemic. And we think our CapEx may be a point or so in excess relative to revenue of what it's been historically. But we've always been a significant investor in technology. Now we're just pivoting to investing more in a different technology, digital technology. And so, yeah, we're investing a lot now. We do expect to get to the general release of our new platform the latter half of this year.
spk09: Thank you. Thank you.
spk00: Next question comes from Jason Kim with Goldman Sachs.
spk01: Thank you, and good morning. Great to hear the momentum you're seeing in the business right now. And as we think about the EBITDA goal of getting back to 2019 levels, has your confidence levels increased today relative to last quarter? And if so, what's giving you that increased confidence despite what we read about the inflation picture?
spk08: Well, it's what we're seeing in the business, right, Jason? It's, you know, we're seeing it in our... not only, uh, the business we're writing, we're hearing it and seeing it in the conversations we're having with advertisers. Um, so, you know, it's, um, yeah, it's, um, it's, it's, it's, it's what we're experiencing right now, which is giving us that, uh, growing confidence. And again, you know, we do live in an uncertain world and, you know, we won't read the headlines from Eastern Europe and, uh, We're cognizant of the fact that there can be shocks into the system, so it ain't over until it's over. But as I said earlier, we feel good about the trajectory we're in.
spk01: In the past, you talked about the performance divergence between your large markets and small. Has it continued, or are you seeing more of a reversal of the trend between your large markets and small markets?
spk08: So there still remains a – the larger markets are still growing smaller than the smaller markets, but the divergence has narrowed in the fourth quarter. And so we expect that over time you'll see some degree of catching up in the larger markets to play out. And we haven't seen that yet in the data, but we're encouraged by the fact that those lines are narrow – the gap is narrowing.
spk06: And I think it's important to note when you think about the recent – the actions by governors to reduce their COVID restrictions in many of the top urban areas of our country, New York, Illinois, California. I mean, these are where our top markets are, New York, Chicago, LA. I mean, that is our big three. And so, you know, those restrictions, no doubt, had a somewhat negative impact on the economic activity, on just the environment. We're very pleased to see those starting to fall away, and we think that bodes well for the spring.
spk01: Thank you. Final question for me is, how are you feeling about your technology platform and product offerings? Do you see opportunities to add through some M&A in the future, or are you satisfied in terms of your current asset base?
spk08: Let me start, and then Rich will have some other thoughts as well. As we've talked about, we have been investing in our own technology organically, and we thought that the AmpliWave acquisition was a perfect fit in terms of giving us essential technology to complement the roadmap that we are embarked upon. That said, we feel very good about the composition of our technology and continue to work extensively with third-party partners in a number of areas where we see diverse, competitive, market-based solutions. And so at the moment, we don't see any real need for us to augment through acquisitions our technology platform and feel really good about the perfect fit that Amber Wave is proving to be to our model.
spk06: I do think that when we think about our CapEx investment over time, we just gave guidance of about $75 million this year. I don't expect that number to fall back much in 2023 or 2024. We'll continue to invest at that level or more. It will fall as a percentage of revenue over time. And there's work to be done. I mean, the Apple Wave platform is both streaming and on demand. And there's some capabilities that are being enhanced to better enable our on-demand offering, for example, and we'll continue to make investments in that technology. But we have all of the fundamental components we need to complete our tech stack. We just have some more work to do to fully develop it. And so, you know, we have what we need.
spk07: It's just a question of execution. Thanks for your thoughts. Thank you.
spk00: Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Dan Day with B Riley. Please go ahead.
spk05: Yeah, morning, guys. Appreciate you taking my questions. Just quickly on the network revenue line item here. You know, seasonally stronger 4Q, that was slightly down quarter over quarter. Just wondering if there's anything in there that's sort of one-timey or Maybe it's just how you're bucketing the spot national versus network or something like that.
spk07: Is this my network?
spk06: Yeah. No. So, you know, if you look at the network line, it is down sequentially in terms of it is down year over year and the growth and off the growth trajectory. And, you know, we see that picking up. as we progress through 2022. And so there's just no more color to add to that, Dan, except we do see growth resuming this year and for the network and actually our expanding network offering to be an important component of growth over time.
spk05: Great. Thanks. One other one I wanted to ask just on sort of hiring and your Salesforce moving forward. I mean, obviously the digital podcasts and all that sort of stuff is where the growth is. Do you, is your approach here to sort of hire more say digital only salespeople or primarily digital focused sales, or do you see the better approaches, you know, equipping your traditional radio Salesforce to sell everything?
spk08: Well, I don't think you can be in sales today, certainly in our company, and let alone any media, without having a certain degree of digital acumen, right? And so it's probably a combination of both, Dan, where we obviously want to continue to train and develop our talent. And believe me, a lot of our traditional radio folks are outstanding at digital sales. And, of course, we're also bringing in lots of talent at the most senior levels, you know, and I think the addition of Brian Benedict as our Chief Revenue Officer with his former position as a CRO at Spotify, I think, also speaks directionally to how we're evolving. But, you know, I'd also tell you that very much our product line evolves, too, right? And if you think about what we deliver to customers, it is now about a holistic, multi-platform system. proposition where we're making impressions on tens of millions of listeners, whether they're engaging with our products digitally or over broadcast or through podcasts or events or what have you. And so it really is a convergence of all those elements. And every seller needs to be capable of delivering on that with good data. And we continue to develop that as well.
spk05: Awesome. And then just one more for me. I mean, you guys have talked about auto enough. So if we put that aside for a second, and kind of think about some of the other categories that were really impacted, you know, in the back half of 2021, you know, restaurants with labor issues and all those sorts of things are, are you starting to see some of that subside in the early goings of 2022? And you know, any sort of cadence that's better or worse than you had expected since the last call?
spk06: Yeah, look, I think so. When we talked about where we're seeing improving performance of our top categories, we mentioned hospital and clinics, which is our number two category. And you can imagine hospitals and clinics were significantly disrupted as a result of COVID-19. We see that performed significantly better in the fourth quarter. We think it's going to get stronger. We see a lot of order flow from hospitals and clinics in the first quarter. We mentioned casual dining has gotten significantly better. Categories like recruiting, you could imagine, is really strong and is punching above where it was And we also may point that there's a number and growing number of categories that are above pre-pandemic levels. Tourism, interestingly, casinos, software, and a bunch of home improvement categories like HVAC, like plumbers. So, I don't know, we see, you know, we may point on the call that about 70% of our core spot revenues are local. And we are seeing local strengthening. In fact, local grew more strongly in the fourth quarter than national. It was up 13% while our core spot was up 10%. And we're seeing, as we mentioned, some sequential improvement, 1Q versus 4Q. So, look, the signs are good that... Local is strengthening. In fact, if you go back and look at, when we go back and look at the 2021, local improved every quarter sequentially in 2021. We think there's a lot of headroom for local to recover and some categories still disrupted by the pandemic, like auto, we suspect gets meaningfully better during the course of 2022.
spk05: Great. Appreciate you guys taking my questions and I'll turn it over.
spk07: Thank you, Dan.
spk00: Next question, Aaron Watts, Deutsche Bank.
spk04: Hi, thanks for having me on. David, I'm just curious how CPMs have been, have recovered and are trending and relatedly with linear television audiences continue to be under pressure and under decline, really. Do you see that
spk08: accruing to radio's benefit as we move through this year and going forward so to your first question aaron cpms have been moving up nicely and we're also seeing nice progress with yield per minute as the recovery continues and as demand increases um you're seeing this what you might expect in terms of uh supply demand curves and their impact on pricing which is great Not to say we're back yet where we were, but we're making good progress. And, yes, I do believe, and we talk about this a lot internally, that with the disruption in television advertising and other traditional media, audio and radio are highly undervalued in the ecosystem, and we are seeing more and more advertisers interested in shifting media their media mix to optimize it in a world in which we can offer much better ROIs. And we certainly are hopeful and certainly working hard at that. And, you know, things don't change immediately as much as we would like the economics to drive those decisions, you know, on a dime. But we are making progress there and do think that's an important and fundamental trend going forward that plays to our advantage.
spk06: And I think, Aaron, it's one of those really interesting things that you think about. You know, radio has been extremely resilient compared to other so-called legacy media. And the growing scarcity of local rating points and the breadth of radio's audience compared to linear television, and much stronger in younger demos, for example, than television, is one of those key drivers that give me confidence that radio remains resilient over time. And as David mentioned earlier, one of the important things that we can see happening over time and as you're watching happen in the video ecosystem is that we're increasingly packaging our audience across platform and providing ways for advertisers to target a given audience across linear radio, our digital platform, and podcasting, and to give them greater, you know, scale for their buy. And that's an interesting thing, and we're wrapping data around it increasingly that, you know, gives us some confidence about the future and the ongoing resilience of radio.
spk04: That's helpful. Thanks, Rich. Appreciate the time. Thanks, Aaron.
spk00: Next question, Craig Huber with Huber Research.
spk02: Hi there. Thank you. I've got a few questions if I could. Can we talk a little bit in more detail about the auto category? How much was that down in the fourth quarter year over year? And more importantly, what percent of your revenue is there right now?
spk06: Yeah, Craig, so we gave the exact number in the third quarter It was down in the fourth quarter. When you look at it in total, you look at the three tiers of auto, you know, advertising by the brands themselves, the dealer associations plus the dealers themselves, in the aggregate, it remains our largest category. And it still is our largest category. And we see it improving. in the first quarter, local dealers I'll say in particular. And we do think over time it's going to recover. And one of the things that we see and one of the things that is highlighted to us by auto executives is that they expect over the next three plus years a very significant stream of introduction of new models by the largest manufacturers a lot of new ev models coming to market over that horizon and we think that bodes well for the category to recover and for advertising in the space to be quite favorable maybe ask differently do you have a sense how much is your auto advertising down versus the pre-pandemic levels Yeah, I'll refer you back to what we said in the third quarter. And we said in our prepared remarks that in the fourth quarter, auto remained disruptive. It is getting better in the first quarter, and we'll be curious to see how it shakes out for the full quarter.
spk02: Okay, my other question, if I could ask you guys. The baseball strike or lockout, whatever you want to call it, a note here in your press release, you had $251 million of sports-related revenues. Roughly, how much of that is baseball? And more importantly, if these guys don't have the games postponed, what have you, how big of an impact is that if you have to fill in that time with other content? What do you think it does to your advertising during that time period if we come to that stage?
spk08: Well, certainly we hope that doesn't happen, and we have reason to be encouraged that the parties will resolve this in due course here. But that said, we have all of our – essentially all of our baseball deals are protected so that to the extent that games are canceled, we receive pro rata refunds on our fees. And so – If there was an extended delay in the Major League Baseball season that were to lead to a reduction in games played, we would see some reduction in revenue, but we'd see an offsetting decrease in expense, and it would have no negative impact on our EBITDA.
spk02: Okay, that's good to hear. And then the gaming category, you guys touched on that. You said $45 million of revenue for the year. Long-term outlook there, get into $100 million category. Maybe just talk a little bit further about that. I mean, I'm curious, like in the markets where you have sports betting has been legal for, say, six-plus months, how significant of a category is it in those markets for you guys? Is it a top five, top three advertising category? Let me just talk about that long-term, please.
spk06: Yeah, so when we look at the markets that have legalized, it is in the top tier of our advertising categories. And we see continued robust growth. And as we said, New York has just legalized mobile sports betting. other states Illinois Illinois coming online here yeah Illinois coming online Chicago's a very important market for us so but we think that it's it's progressing as we thought in a and that over the next several years we'll get to and hopefully eclipse 100 million dollars and that's just advertising revenue and does not account for other separate growth in for example for bet QL
spk02: And my last question, guys, with these much higher inflation rates out there, it looks like much higher interest rates are coming down the pike. How do you view that in terms of the overall impact to your advertising revenues, positive, negative, or about neutral if these trends continue? What are you hearing from your advertisers on that front? I'm curious.
spk08: Not much right now. I don't think it's really permeated the – you know, the psyche of advertisers right now, and obviously it would be very much dependent upon which category, right, and their ability to pass through higher costs, et cetera, et cetera. But at the end of the day, candidly, I don't really see that having any, being a significant issue for us because, you know, should there be significant ramps up in inflation, I would expect that we would, you know, follow in due course.
spk02: That's all I had. Thank you, guys. Thank you, Craig.
spk00: We've come to the end of our Q&A session. I would like to turn the floor over to David for closing remarks.
spk08: Well, thanks so much. We appreciate everybody's time here this morning and look forward to reporting back to you all at the end of Q1. Thanks so much. Bye-bye.
spk00: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
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