There’s no easy way to say it: Audacy Corp., the company formerly known as Entercom Communications and led by President/CEO David Field, had a difficult third quarter. “Advertising headwinds impacted company performance,” Field said in prepared remarks ahead of a conference call for analysts and investors on Tuesday morning.
How challenging was Q3 for Audacy? The audio content creator and distributor that owns former CBS Radio stations and owns the Cadence13 and Pineapple Street podcast firms was just shy on quarterly revenue, but missed the earnings per share estimate in a significant way. A big impairment charge played a role in the results.
The Q3 earnings forecast from the four analysts that track Audacy Corp. was $323.8 million. The lowest prediction: $317.8 million in revenue for the quarter would be seen.
That didn’t happen, as Audacy reported Q3 ’22 revenue of $316.97 million, dipping from $329.44 million.
At the same time, the four analysts who presently cover Audacy Corp. offered a consensus earnings per share of -$0.02, improving from -$0.04. The high EPS estimate was for net income of $0.01 per share.
That didn’t happen either, with Audacy Corp. widening its net loss to $140.98 million (-$1.01 per share) from $4.76 million ($0.04) one year ago.
What happened? “Needless to say this is a challenging time for our company,” Field said as he opened the company’s Q3 2022, noting the “substantial deterioration” of the advertising marketplace.
What is the earnings capacity and value proposition of Audacy Corp. as conditions materialize? That was one of the questions Field predicted would be asked by analysts, and in response he touted Audacy Corp.’s “unrivaled” spoken word radio properties and its multiplatform offerings, namely podcasts and its streaming platform, rebuilt from the former Radio.com obtained in the tax-free merger with CBS Radio.
To be fair, the biggest reason the net loss widened so much is a $176,784,000 impairment loss. Station expenses actually declined, moving to $259.2 million from $260.04 million.
Crunch all the numbers, and adjusted Free Cash Flow moved to -$16.39 million from $8.04 million. Adjusted EBITDA was $36.34 million, moving from $49.25 million.
PODCASTING REVENUE DIPS
Field shared on the earnings call that radio revenue in Q3 was down 6%, with total spot revenue down 7%; as is the case with its peers in the audio content business, Local outperformed National at its radio stations.
But, the bigger concern for some may be the fact that in Q3, podcasting revenue declined 23%. Field cited the May 2022 departure of Crooked Media from the Audacy family, along with the timing of licensing compared to Q3 2021. On a positive note, Field noted that 2,400 sports podcasts are bringing added listening. Now, the ad activity needs to match that growth.
Meanwhile, Field cited Miller Kaplan data showing that, overall, growth in markets No. 50 and higher was 8% faster than in markets 1-25, where Audacy Corp. has an outsized presence thanks to its CBS Radio merger. This caused a big relative growth challenge, Field said.
Emerging from the storm that has enveloped Audacy is a key focus, and Field and CFO Rich Schmaeling are confident sailing through extremely choppy waters can be accomplished. Field and Schmaeling were encouraged by a “significant improvement” in Automotive. The category was up 6% in the quarter. But, it remains down 39% from the third quarter of 2019. Hospitals and Clinics was up 22% in the quarter; it was Q3’s second-largest category, Schmaeling said. Banks and Mortgage Lenders, however, was down 40% year-over-year in a reflection of housing market challenges; it was Audacy’s fourth-largest category.
Political dollars in Q3 2022 moved to $6.9 in Q3 2022, from $2.4 million in Q3 2021, as shown in the table below. The columns at right show dollars for the first nine months of 2022, compared to the first three quarters of 2021.
What’s the outlook for Q4? Field said that Audacy is expected to see “small sequential improvement,” with flat-to-down low single digit pacing by year’s end. Network advertising is “a bit worse” for the company, he added.
LAND SALES OFFSET SALES SLUMP
During the third quarter, Audacy completed the sale of land and property in Houston for $15.6 million in cash.
Then, in November, Audacy closed on the sale of land and property in Las Vegas for $40 million in cash. This will positively impact the P&L in the fourth quarter earnings report for the company.
INVESTORS REACT TO EARNINGS MISS
With Steven Cahall of Wells Fargo Securities, who put a target price of $0.00 on Audacy Corp. shares earlier this year, asking about debt maturities on the Q3 2022 earnings call, shareholders responded to the company’s EPS and revenue miss by selling their shares.
Audacy Corp. stock finished Tuesday’s trading down 6.7%, to $0.2958. With a NYSE delisting warning hanging over the company, and a reverse stock split growing ever-more likely to prevent such action, Audacy shares are at an all-time low, surpassing the October 2008 declines precipitated by the “Great Recession.”
Now, it is up to Audacy to determine how to best overcome the “macroeconomic headwinds” that continue to impact the Philadelphia-headquartered operation.
