Audacy, Inc. (AUD) CEO David Field on Q4 2021 Results – Earnings Call Transcript



Audacy, Inc. (NYSE:AUD) Q4 2021 Earnings Conference Call February 23, 2022 8:30 AM ET

Company Participants

Richard Schmaeling – Executive Vice President & Chief Financial Officer

David Field – Chairman, Chief Executive Officer & President

Conference Call Participants

Steven Cahall – Wells Fargo

Jason Kim – Goldman Sachs

Daniel Day – B. Riley

Aaron Watts – Deutsche Bank

Craig Huber – Huber Research

Operator

Good morning, and welcome to Audacy, Inc.’s 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 Schmaeling, CFO and Executive Vice President. Sir, you may begin.

Richard Schmaeling

Thank you, Stacy. 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, and 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 reference certain non-GAAP financial measures. We refer you to the Investors page of our website at audacyinc.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.

David Field

Thank you, Rich and good morning, everyone. Thanks for joining Audacy’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 AmperWave, formerly WideOrbit’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.

Audacy ended 2021 in a significantly enhanced position versus the start of the pandemic or even at the start of last year. We have purposefully re-imagined Audacy 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 [Technical Difficulty] 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 Audacy 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 year multi-platform audio leader with deep digital marketing capabilities to meaningfully expand our customer relationships.

Turning to fourth quarter results, revenues 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 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 we’re 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, auto 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 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 events scheduled, fourth quarter revenues were within 5% of pre-pandemic levels.

2021 was a busy transformational year for Audacy. 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 AmperWave, 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 Audacy. 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.

AmperWave was WideOrbit’s digital audio streaming and ad tech business that we recently acquired in October and re-launched 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 AmperWave both in terms of product development and in growing their customer base.

We believe 2022 is setting up to be a strong year for Audacy as we’re 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’re 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.

Audacy 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 Audacy digital platform later in 2022 and the addition of our exclusive representation of major league baseball 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 it’s 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. Audacy’s podcasts were featured in nearly every year end best of list, including several number ones for 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 C13 featured podcast movies, Ghostwriter and Treat and created several other big hits including Gone South and Fallen Angel from Cadence13 and the official succession podcast from Pineapple Street Studios, in partnership with HBO. All in, six of our shows cracked the Apple Top 10 during the fourth quarter.

In addition, we are continuing to progress in our plans to drive higher margins for 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 to 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 were 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 pacing, 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 elevate and transform Audacy 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 Richard.

Richard Schmaeling

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 that 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 like concerts, fast food, and travel that are getting meaningfully better, but still have 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 29.6 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 4 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 projected 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 amendments on our compliance-based leverage calculation concluded, as of September 30, and in accordance with its terms, the amendment provisions subsequently sun-setted. As a result, the margin at our revolver has decreased by 25 basis points, and of all other amended terms reverted back to what they were prior to the pandemic. Moving forward, we expect to rapidly build firstly 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 WideOrbit 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 will now go to your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Steven Cahall with Wells Fargo.

Steven Cahall

Thanks. Good morning. Thanks for that commentary on the first quarter and getting back to 2019 EBITDA this year. Last year, you’d 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.

Richard Schmaeling

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 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, 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 company — across the country is a great sign and, hopefully, leads to accelerate it 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, there is still a pretty good view of what likely happens this year.

Steven Cahall

Right. And then maybe just second, Rich, I 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?

Richard Schmaeling

Right. So I think that you look at it and you think, okay, our interest expense, our cash interest payments will be a little bit over $90 million, I just given you CapEx guidance of about 75. 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, well, I guess, early in the second quarter of 2021. We hope to receive that this year, that’s $15 million. And we have no further mandatory term loan de-amortization that was satisfied as part of our capital markets transactions last year.

So, 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 we — our total net leverage was at the end of 2021 and 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 lien leverage to be inside two times.

Steven Cahall

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 EBITDA and the cost pain to invest in that. How have you thought about sizing that market? 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 with have your own service and compete head-to-head with others, as opposed to maybe putting your content into other people’s services?

David Field

Yeah, Steven, look, it is — 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 personality, so we have that differentiated content under control. And we’ve also cultivated a strong differentiated position in the podcast space, as noted, from everything from our — the awards that we’ve — 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 scaled 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 win or take all situation, we think 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 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 in.

Richard Schmaeling

And look, I think it’s important to note that — so 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 maybe 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, it’s 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.

Steven Cahall

Thank you.

David Field

Thank you.

Operator

Next question comes from Jason Kim – Goldman Sachs.

Jason Kim

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 getting you that increased confidence, despite what we read about the inflation picture?

David Field

Well, it is what we’re seeing in the business, right, Jason. It’s — we’re seeing it in our in — not only the business we’re writing, we’re hearing it and seeing it in the conversations we’re having with advertisers. So, it’s — yeah, it’s what we’re experiencing right now, which is giving us that growing confidence. And again, we do live in an uncertain world and we will read the headlines from Eastern Europe and we’re cognizant of the fact that there can be shocks into the system. So it ain’t over till it’s over but, as I said earlier, we will feel good about the trajectory we are in.

Jason Kim

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?

David Field

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.

Richard Schmaeling

And I think it’s important to note when you think about the recent actions by governors to reduce their COVID restrictions in many of the top urban areas of our country, New York, Illinois, California and these are where our top markets are; New York, Chicago, LA, I mean that that is our big three. And so, those restrictions, no doubt, had a somewhat negative impact on the economic activity on just the environment. And also, we’re very pleased to see those starting to fall away and we think that that bodes well for the spring.

Jason Kim

Thank you. And then 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?

David Field

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 AmperWave acquisition was a perfect fit in terms of giving us a central technology to complement the roadmap that we are embarked upon. Now 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 AmperWave is proving to be to our model.

Richard Schmaeling

And I do think that when we think about our CapEx investment over time, that we just gave guidance of about $75 million this year, I don’t expect that number to fall back much in 2023, year 2024. We will 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. In the AmperWave platform, it 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, we have what we need, it’s just a question of execution.

Jason Kim

Thanks for your thoughts.

David Field

Thank you.

Operator

[Operator Instructions] Our next question comes from Dan Day with B. Riley. Please go ahead.

Daniel Day

Yes, good morning, guys. Appreciate you taking my questions. Just quickly on the network revenue line item here, seasonally stronger 4Q that was slightly down quarter-over-quarter just wondering if there’s anything in there that sort of one-time here or maybe it’s just a higher bucketing of the spot national versus network or something like that?

Richard Schmaeling

No, so, if you look at this, 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, 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 are actually expanding network offerings to be an important component of growth over time.

Daniel Day

Great, thanks. One other one, I wanted to ask, just on sort of hiring in your sales force moving forward, I mean, obviously, the digital podcast 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 sales people or primarily digital-focused sales or do you see the better approach is equipping your traditional radio sales force to sell everything?

David Field

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 and I think the addition of Brian Benedik 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 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 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 podcast 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, we need good data and we continue to develop that as well.

Daniel Day

Awesome and then just one more for me. And 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 in the back half of 2021, restaurants with the labor issues and all those sorts of things, are you starting to see some of that subside in the early goings of 2022? And any sort of cadence that’s better or worse than you had expected since the last call?

Richard Schmaeling

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. Then you could imagine hospitals and clinics were significantly disrupted as a result of COVID. 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 can imagine, is really strong, and is punching above where it was previously. And we also made point that there’s a number and growing number of categories that are above pre-pandemic levels.

Now tourism, interestingly, casinos, software, and a bunch of home improving categories, like HVAC, like plumbers, so I don’t know, we see — we made point on the call that got about 70% of our core spot revenues are local and we are seeing the local strengthening, in fact, local grew more strongly in the fourth quarter than national, like 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 that local is strengthening. In fact, if you go back and look at — if 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.

Daniel Day

Great. Appreciate you guys taking my questions, and I’ll turn it over.

Richard Schmaeling

Thank you, Dan.

Operator

Next question, Aaron Watts, Deutsche Bank.

Aaron Watts

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 accruing to radio’s benefits, as we move through this year and going forward?

David Field

So to your first question, Aaron, our CPMs are moving up nicely and we’re also seeing nice progress with yield per minute, as the recovery continues and as demand increases. You’re seeing — this is what you might expect in terms of supply and demand curves and their impact on pricing, which is great. Not to say we are back yet what we were but we’re making good progress.

And yes, I do believe and we talk about this a lot internally that with 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 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 things don’t change immediately, as much as we would like the economics to drive those decisions on a dime, but we are making progress there and do you think that’s an important and fundamental trend going forward to place to our advantage.

Richard Schmaeling

And I think, Aaron, it’s one of those really interesting things, if you think about, radio has been extremely resilient compared to other so-called legacy media and the growing scarcity of local waiting points, and other breadth of radio’s audience compared to linear television, they’re 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 scale for their volume [phonetic]. And that’s an interesting thing and we’re wrapping data around it increasingly that gives us some confidence about the future and the ongoing resilience of radio.

Aaron Watts

That’s helpful. Thanks, Rich. Appreciate the time.

David Field

Thank you, Aaron.

Operator

Next question, Craig Huber with Huber Research.

Craig Huber

Hi, there. Thank you. Got a few questions, if I could. Can we talk a little bit in more detail of the auto category, how much was that down in the fourth quarter year-over-year? And more importantly, what percentage of revenues is it right now?

Richard Schmaeling

Yeah, Craig. So we gave the exact number in the third quarter. It was down in the fourth quarter. Auto, when you look at it in total, when you look at the three tiers of auto, advertising by the brands themselves, but 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 will 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 of 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.

Craig Huber

Maybe ask differently, do you have a sense how much is your auto advertising down versus the pre-pandemic levels? [Multiple Speakers].

Richard Schmaeling

I will 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 shapes out for the full quarter.

Craig Huber

Okay. My other question if I could ask you guys, depending on the baseball strike or lockout, whatever you want to call it, I note here in your press release, you have $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?

David Field

We certainly 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 that would have no negative impact on our EBITDA.

Craig Huber

Okay. That’s good to hear. And then the gaming category, you guys touched on that, I think you said 45 million in revenue for the year, long term outlook, they’re getting to $100 million category. Maybe just talk a little bit further about that. I mean, I’m curious like in the markets where you have the sports, betting has been legal for, say, six plus months, how significant of a category is it in those markets for you guys? Is that top five, top three advertising category? Can you just talked about that long term, please?

Richard Schmaeling

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 –

David Field

Illinois is coming online here.

Richard Schmaeling

Yeah, Illinois coming online and Chicago is a very important market for us. So — but we think that it’s progressing as we thought and then over the next couple years, we’ll get to and hopefully, eclipse $100 million and that’s just advertising revenue and does not account for other separate growth in, for example, [indiscernible].

Craig Huber

And my last question, guys, with these much higher inflation rates out there, it looks like much higher interest rates here 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 advertisers on that front? I’m curious.

David Field

Not much right now. I think — I don’t think it’s really permeated 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, should there be significant ramped up in inflation, I would expect that we would follow in due course.

Craig Huber

That’s all I had. Thank you, guys.

David Field

Thank you, Craig.

Operator

We’ve come to the end of our Q&A session. I would like to turn the floor over to David for closing remarks.

David Field

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.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.



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