Audacy

Good morning and welcome to Audacity's fourth quarter 2022 earnings release conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to introduce your first speaker for today's call, Mr. Richard Smaling, CFO, and Executive Vice President. Sir, you may begin.

Thank you, Rob. Good morning, and welcome to Odyssey's fourth quarter earnings conference call. A replay will be available shortly after the conclusion of today's call at the replay link or number noted in our release. During this call, the company made 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 or differ materially are described in the risk factor section of the company's annual report on Form 10-K. As such, risks and uncertainties may be updated from time to time in the company's SEC filings. We assume no obligation to update any forward-looking statements except as may be required by law. During this call, we may make reference to certain non-GAAP financial measures. We refer you to the investor's 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 Heald. David?

Thanks, Rich. Welcome all to Odyssey's fourth quarter earnings call. Well, 2022 was certainly not the year we expected. We exited in 2021 with strong revenue acceleration and got off to a great start in 22 with first quarter revenues up 14% and EBITDA up 152%. But as we are all painfully aware, macroeconomic and particularly advertising conditions began to deteriorate due primarily to the impact of the war in Ukraine, inflation, and the Fed. And so even though we were still able to grow our revenues by 3% for the year, our expenses were up 6%. taking our 2022 EBITDA down to $138 million, a far cry from what we had anticipated. In the fourth quarter, our revenues were down 0.8 percent, in line with our flat to down low single digits guidance. However, our expenses were elevated. Rich will elaborate on our costs, but I want to note that we anticipate that expenses will be up low single digits in first quarter and be below 2022 levels for the remainder of the year. In my comments this morning, I'd like to start with a brief overview of our position as we work to navigate the storm and drive our recovery. The situation is challenging, but we are addressing it with eyes wide open and vigorously executing our action plan, taking a number of concrete measures and making headway. Before I share an update on our progress, I think it might be helpful to look beyond the numbers and add some broader context. Over the past few years, we have made two strategically key decisions. First, to achieve scale through our acquisition of CBS Radio, tripling our size and establishing a strong, differentiated, premium content position with leading positions across the country's largest markets and unrivaled leadership in sports and news radio. And second, to capitalize on our scale and transform into a true multi-platform audio company through a number of acquisitions, investments, and initiatives. As a result, today we are one of the country's leading podcasters, with an emerging high-potential audio streaming platform and building competitive ad tech and data capabilities, all essentially from scratch. At the time of these decisions, of course, we never expected to be hit with three hugely adverse extended events, the global pandemic, sustained supply chain disruption, and now an ad recession along with difficult macroeconomic conditions. Enduring all three events while in the midst of a comprehensive strategic transformation has been hard. All of that said, we have made good progress in our work to weather the storm and to position the company for recovery when macro conditions improve. Earlier this month, we completed the sale of a set of towers for $17 million, bringing our total non-strategic asset sales since the summer to $73 million, providing meaningful added liquidity. And we have a number of other non-strategic asset sales working their way forward. In addition, we continue to take significant actions to reduce expenses, and as a result, we expect our 2023 expenses to be flat to down slightly versus 2022 actual. We have made good progress in reducing costs, even though we now have significant expenses in a number of key areas of the business that were essentially nonexistent before, such as podcasting, ad tech, and our audio streaming platform. I would note that all of the expense actions we have taken have been carefully managed so that we continue to fund our transformational initiatives and invest selectively in critical areas of the business while ensuring that we are still serving our listeners and customers with excellence. I would also add that we are cautiously encouraged by a number of green shoots as we work our way forward. We achieved record-breaking performance with our annual local upfront sales program for 2023. This has helped our local business get off to a relatively good start for the year. Auto, our largest category, continues to show positive signs of emergence from hibernation. In Q4, our auto business was up 8%. We are having constructive conversations with our auto customers across the country that lead us to believe that we will likely see acceleration in auto spend as we work our way through the year. And since relaunching the reinvented Odyssey streaming platform in late summer, we have seen some early signs of progress in our organic consumption. During fourth quarter, mobile app installs increased by 23% over the prior year, and our monthly active audio users were up 11%, despite adding a registration wall in the app to drive our collection of first-party data. In addition, the fundamental metrics within our podcasting business remained solid, with a 9% increase in Q4 downloads and a 15% increase in U.S. listeners. We reached 43 million unique listeners across our podcast network in fourth quarter, including 29 million in the U.S., We are driving particularly strong growth across our 2400 sports podcast studio, which launched 93 new titles in 22, and is currently generating over seven times the number of downloads versus prior year, albeit from a small base. As we look ahead, the opportunities to capitalize on our key growth drivers, as noted on our prior calls, remain very much intact. Those drivers include our various digital businesses, our national enterprise sales team, and accelerated audience growth from our streaming audio platform. We also are making headway on building our ad tech and ad products to open important pools of demand and accelerate future performance by increasing our sell-through rates and improving yields. In addition, as economic conditions ultimately normalize, we expect to see a meaningful degree of recovery of radio revenues, which remain substantially lower than pre-pandemic levels, And note that roughly 90% of those revenues flowed through to EBITDA. Some additional color on Q4. Spot radio revenues were down 4%, with local narrowly outperforming national. Network radio was up 4%, and digital was up 2%, or up 5% ex-podcasting. Podcasting was down 8%. Note that our podcasting numbers continue to be impacted by the departure of our largest podcast network publishing partner, which moved off of our platform in May. Excluding that partner, Q4 podcast revenues were up 14%. For the full year, digital revenues were up 9%, podcasting up 1%, 19% excluding the departed partner. One other note on the quarter is that large markets continue to underperform smaller market growth. Specifically, according to Miller Kaplan market data, radio revenues in our markets 26 and over, or smaller, I should say, were 6 percent stronger than in our top 25 markets. Note that this is total market revenue and not just Odyssey. Since our company is significantly more concentrated in the largest markets relative to our peers, this continues to cause a meaningful relative performance issue for us. Turning to pacings, as reported by a host of other media companies, Ad market conditions remain challenging, particularly with regard to national and network business. We are currently pacing down 5% and expect revenues to decline by mid-single digits for the quarter. A number of national advertisers remain sidelined or have dampened ad spending due to market uncertainty. Notwithstanding the challenges we face as we confront ad market headwinds at a time of deep organizational transformation, We believe we are making solid progress in executing our action plans in order to emerge healthy on the other side of the storm. I want to close by underlining three key points. First, Odyssey has a strong and differentiated, scaled competitive position in the dynamic and growing audio space. At a time when music is highly competitive, Odyssey has unrivaled leadership in sports and news radio, plus a deep lineup of compelling local personalities and award-winning podcasts, along with many of the country's most popular radio brands. We believe we are the number one creator of original premium audio content and think that will be a meaningful driver of the growth and development of our Odyssey digital platform. Second, over the past few years through our transformational acquisitions, investments, and initiatives, Odyssey has been fundamentally enhanced and today is a much stronger multi-platform company with substantially elevated products and capabilities. We are working hard to capitalize on our unique assets and further enhance our offerings with a vision of making Odyssey the audio brand of choice for listeners and customers. And third, in these turbulent times, we recognize it is difficult for many to look beyond the current challenges. While we have much work in front of us and are subject to external factors beyond our control, we believe the earnings potential for today's enhanced Odyssey in a normalized economy should exceed where we were in 2019. We have no shortage of growth drivers and opportunities across the business. And as noted earlier, while we expect a significant improvement in radio revenues as the economy recovers and auto and other disruptive categories increase their spending, we can achieve a healthy EBITDA recovery at substantially lower levels of radio ad spend than before. Finally, before turning it over to Rich, I want to thank the outstanding team at Odyssey for their dedication and tenacity and all the great work they are doing to enable us to navigate the storm and capitalize on our opportunities. We are very fortunate to have such a talented group of individuals on the team. Rich?