“While many ad categories remain highly impacted as a result of the pandemic, it is great to see an increasing number of categories back above 2019 spending levels,” said David Field, President/CEO of Audacy Inc., the audio content creation and distribution company founded as Entercom by his father, Joseph Field.
Alas, while more categories have invested more in advertising with Audacy’s on-demand audio offerings and its broadcast radio stations, the struggle is real for the Philadelphia-based company.
The company still registered a net loss in Q3, although a smaller one than one year ago. The problem? Analysts expected earnings per share of $0.09. Audacy missed the mark by 13 cents per share.
Bob Philips’ Successor As Audacy CRO Selected
For Field and his team, the big takeaway is that Audacy “continues to rebound from the pandemic.”
Furthermore, Field said in prepared remarks ahead of Audacy’s 10am Eastern earnings conference call for analysts and investors, the company continues to “rapidly evolve and fundamentally elevate the organization through a series of strategic acquisitions, organic growth initiatives, structural improvements, talent additions and premium content development.” Field also believes Audacy is “well positioned to accelerate our growth and capitalize on the exciting opportunities in the dynamically growing audio marketplace.”
Field repeated the quote to open Audacy’s Q3 earnings call, in which he provided much insight into why the company’s quarterly profits didn’t meet Wall Street analysts’ expectations.
First, Field shared that automotive, the No. 1 ad category for Audacy, was down 40%. Other categories that were down, interesting, are Furniture, Gyms and workout facilities, and casual dining. Auto’s share of Audacy’s business? Field said it was in the mid-teens to a Goldman Sachs analyst in the Q&A session in the last half of the company’s earnings call.
On the flip side, pet supplies, sports betting and auto repair centers are among the categories with a full covery to 2019 levels.
But, are those categories’ growth enough to offset the automotive dollar decrease at Audacy? That’s a question investors may be asking, as Field noted a third of the company’s Q3 revenue decrease is due to automotive.
It is a differentiation point against its broadcast media peers.
Furthermore, Audacy’s revenue was impacted from event cancellations as the Delta variant of the COVID-19 virus make large-scale events nearly impossible to stage in many parts of the U.S. This encompassed both Audacy’s wholly owned events, as well as third-party events.
Lastly, there is an uneven recovery being seen at Audacy, as smaller markets are back to 86% of 2019 revenue. Furthermore, markets ranked No. 50 and higher in the South and Midwest are back to 91% of 2019 revenue.
Unfortunately, Audacy has big exposure in the nation’s biggest markets, and that’s largely thanks to its tax-free merger with CBS Radio. As such, stations in New York, Los Angeles, San Francisco, Chicago and Miami, among other large markets, need to catch up and “level the scales.”
Responding to Steven Cahall of Wells Fargo Securities, “it is somewhat of a mixed bag,” and depends on category in each of the company’s top markets.
BEHIND THE NUMBERS
What happened to Audacy in Q3?
That’s what many may be asking, as CFO Rich Schmaeling shared Audacy’s net revenue increased to $329.44 million from $268.51 million in the third quarter of 2020.
Yes, revenue was up, but Wall Street analysts expected a 23.3%% increase, to $331.08 million.
“Continued evidence of ongoing disruption in the supply chain” was finger-pointed by Schmaeling as a problem point for Audacy.
On a positive note, there was operating income, coming in at $29.25 million compared to a year-ago operating loss of $259,000.
And, income before taxes came in at $6.48 million, swinging from a Q3 2020 loss before taxes of $21.1 million.
It appears that higher taxes for Audacy Inc. in Q3 2021 are another chief culprit for the big Wall Street EPS miss.
Some $11.24 million in taxes are on the P&L sheet for the third quarter of 2021, compared to a $4.22 million income tax benefit seen in Q3 2020.
As such, Audacy lowered its net loss in Q3 to $4.76 million (-0.04 per share) from $16.88 million (-$0.13).
On a positive note, Adjusted EBITDA rose to $49.25 million, from $31.33 million as Adjusted Free Cash Flow moved ahead to $8.04 million, from $1.97 million.
SEEKING MOMENTUM
The biggest takeaway from Audacy’s Q3 is that improvement in every revenue-generating segment was seen.
There’s just a whole lot more improvement that the company needs to realize as its biggest peer, iHeartMedia, shared with its investors that it anticipates a return to full-year 2019 EBITDA levels by year’s end.
For Wall Street, this presents some potential questions as to why Audacy’s recovery is a bit more bumpy than for iHeartMedia, especially given their structural similarities.
And, to be clear, a year-over-year political dollar dip was hardly an impact point for Audacy’s total revenue.
With Q3 2021 financial results in the left column, here’s a glance at the overall revenue picture for Audacy:
Audacy also broke out its revenue by the overall format categories of its radio stations.
Here’s how that looked in Q3, with 2021 data in the left column.
With higher net capital expenditures of $19.67 million compared to $5.81 million in Q3 2020, Audacy can pride itself in sharing that it had $62.84 million in cash and cash equivalents at the end of Q3 2021, compared to $30.96 million a year earlier.
Still, total shareholder equity for the company at the end of Q3 stood at $627.19 million, down from $644.74 million.
With Tuesday’s Opening Bell on the NYSE, AUD was down 1.4% to $3.60.
Looking ahead to Q4, Schmaeling says ad pacing is in the low-teens, ex-political.
