Audacy

Good morning and welcome to Odyssey's first quarter 2023 earnings release conference call. At this time, all participants are on a listen-only mode. A brief 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. This conference is being recorded. I would now like to introduce your first speaker for today's call, Mr. Richard Schmeling, CFO and Executive Vice President. Sir, you may begin.

Thanks, Rob. Welcome to Odyssey's first 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 will 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 of different material are described in the risk factor section of the company's annual report on Form 10-K. As such, risks can certainly be updated from time to time in the company's SEC filings. We assume no obligation to update any follow-up 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 CEO.

Thank you, Rich. Welcome all to Odyssey's first quarter earnings call. Thanks for joining us today. This morning, in addition to sharing our first quarter results and our second quarter outlook, we will share some additional color on our progress as we continue our work to navigate the storm and drive our recovery. This is, of course, a challenging time for our company as we battle through the difficult ad market headwind impacting companies all across the media landscape. As a reminder, over the past few years, Odyssey achieved scale through our acquisition of CBS Radio, roughly tripling our size and establishing a strong, differentiated position with our exclusive premium content, leading positions across the country's largest markets, and unrivaled leadership in sports and news radios. In addition, we have been pursuing a broad-based digital and ad tech transformation to capitalize on our scale and establish the company as 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, have built an emerging, high-potential, innovative audio streaming platform, and are working to build competitive ad tech and data capabilities. It is unfortunate, but of course, the unanticipated reality that we have pursued our transformative work in the midst of a global pandemic, sustained supply chain disruption, and an extended adverse session. This has obviously placed stress on the company's finances, exacerbated by the business's high degree of operating leverage. And yet, notwithstanding the financial challenges, the fundamental inherent value proposition of Odyssey and our ability to serve listeners and customers remains intact and distinctive, and we continue to play offense, investing in people, platforms, technology, content, capabilities, and growth initiatives to better serve listeners and customers and enable a brighter future. First quarter results were impacted by the ongoing challenges across the ad market. Revenues declined 5.7% in line with our forecasted decline of mid-single digits. Core spot radio revenues were down 9%. Local revenues held up considerably stronger than national, including local digital up 19%. Total digital revenues were down 2%. Excluding podcasting, digital revenues were up 3%, led by a strong quarter for our digital marketing solutions business. Total podcasting revenues were down in the quarter, although podcasting advertising revenues were actually up 14%, excluding the departure of our largest podcast network publishing partner, which moved off of our platform last May. I'm pleased to report that we continue to make solid progress on a number of fronts as our team continues to execute our strategic plans. During the first quarter, we completed the sale of broadcast towers for $17 million. We also expect to close on a $15.5 million sale of two radio stations in either second or third quarter and have a number of other real estate sales working their way forward. We also continue to take additional actions to reduce expenses significantly, while at the same time making sure that we continue to drive investment in critical transformational growth initiatives and capabilities, which will provide further color on all this in a few moments. We also continue to see significant opportunities for reduced expenses over time as we work to reduce our physical space requirements significantly, capitalize on new technologies, and reduce our exposure to select sports and podcast content deals that are meaningfully underwater. Turning to our emerging Odyssey streaming platform, we are seeing some organic acceleration in our digital platform usage metrics as listeners discover the innovative enhancements we are making to the listening experience. We meet monthly listeners on our digital platform grew by 8% year over year. Organic app installations growth accelerated to 59%. Total listening hours to our O and O stations and exclusive content grew by 4% for the quarter, accelerating to 7% in March and 9% in April, led by a surge in TLH to rewind. Our technology-enabling on-demand DVR functionality now enhanced with our exclusive chaptered content descriptions on the Odyssey app. We believe that planned further enhancements to the streaming listener experience through the Odyssey app, together with our unique and proprietary content, will continue to power our streaming listener growth. Turning to podcasting, we moved our primary podcasting studios under common leadership last month, placing Jenna Weiss Berman in charge of our podcast content and partnership efforts, including our C-13 and Pineapple Street studios. The move should enable us to drive significant synergies and enhance business practices that we expect to yield meaningfully higher future profitability. We operate one of the country's largest and most award-winning podcasting businesses with 44 million listeners. Last year, we began to shift our strategic focus to more profitable areas of the business, and we are now starting to realize the benefits of that transition. For example, in first quarter, we grew the number of listeners to our locally produced podcast, the most profitable part of our business, by 26%. We expanded our partnership work with HBO, adding the Last of Us companion podcast, which was number one on the Apple charts, along with our Succession companion podcast. We also announced new projects with Amy Poehler, the WNBA, and Flea of the Red Hot Chili Peppers. And we continue to lean into our leadership in sports with our 2400 Sports Studio, which we launched last year, and it's experiencing very rapid growth. I also want to share a couple thoughts on our developing ad tech. A year and a half ago, we acquired the audio ad tech business of WideOrbit and rebranded it as AmpliWave. Since then, we have been pursuing an aggressive roadmap to develop our own proprietary tech stack and ad product capabilities. We recognize that we are playing catch-up with some of our leading peers in the audio space and are working hard and at considerable expense to drive this transformation. Like any company launching emerging tech capacity, there have been some bumps along the way, but it is great to see the progress our tech team is making. We expect to deliver a number of important ad products later this year that should enable us to deliver meaningfully higher levels of streaming audio sales performance, tapping into demand pools and data opportunities that we are currently unable to access. This work does come at a cost, but notwithstanding market challenges, we continue to build capacity across our tech and engineering teams, as well as our RevOps team. Turning to second quarter pacings. As you have heard from others, ad market conditions remain quite challenging. Local is held steady and actually slightly better than Q1, but there has been no improvement in national conditions, which remain quite weak. We are currently pacing down 7% and expect revenues to decline by mid to high single digits for the quarter. We do note that our comps will get easier as we continue through the year. We are beginning to see some improvement in our largest ad category, automotive. After a modestly positive first quarter, second quarter auto pacings are currently up 13%. And we note that a handful of major national and local customers who have been dark since the start of the pandemic have recently placed business with us. To be clear, the auto business remains way behind pre-pandemic levels, but the signs are at least encouraging. In closing, notwithstanding the market challenges we are enduring, The opportunities to capitalize on our key growth drivers and deliver significantly higher future levels of EBITDA remain intact. We fully recognize that in these uncertain times, it is hard to look beyond current circumstances. But we remain excited about numerous growth opportunities across the company, notably including our various digital businesses, the impact of our enhanced national enterprise sales team, and our deepening customer and agency engagement. potentially accelerated audience growth from our streaming audio platform, new pools of ad demand that will be unlocked with the upcoming completion of various ad tech, ad product, and data enhancements, and planned business model and margin improvements. Furthermore, we know that as economic conditions ultimately normalize, roughly 90% of any future recovery in radio revenues would flow through to EBITDA. We know, as we have before, that we can achieve a healthy level of EBITDA recovery at substantially lower levels of radio ad spend than before. Finally, before turning it over to Rich, I want to acknowledge the outstanding team at Odyssey and express my deep appreciation for their excellent work and dedication as we continue to execute our plans and drive our business forward through the current economic challenges.