Audacy To Continue Slashing Costs

After another quarter of declining revenue and soft advertising demand, top executives at audio content provider Audacy faced some tough questions from analysts Wednesday, according to The Philadelphia Business Journal.

Philadelphia-based Audacy experienced a revenue decline of 5.7% in the first quarter, with an operating loss of $12.2 million compared to operating income of $8.5 million during the same quarter last year. It reported adjusted EBITDA of $3.5 million and a net loss of $35.9 million in 1Q compared to $26 million in adjusted EBITDA and an $11 million net loss during the first three months of 2022.

The company also said the soft advertising demand that has been in place for the past year could get worse before getting better.

David Field

With that in mind, analyst Craig Huber of Huber Research directed pointed questions at CEO David Field and Chief Financial Officer Richard Schmaeling during the question-and-answer portion of Audacy’s first quarter earnings call.

“Why are costs not down a lot more?” Huber asked. “I know you are trying to preserve the company for the long term, but I’m worried you are not going to get to the medium term let alone the long term. Why are costs not down honestly by 10% right now?”

Schmaeling noted that in the first quarter, the company provided guidance that indicated costs would be down “slightly” for the year. It has now updated that guidance to say that costs will be down 4%, or by over $35 million. He said it is important to recognize that macroeconomic forces have changed since the pandemic year of 2020. He said the company was able to save on salaries and reduced sports broadcasting rights fees during that time because of canceled games. Now the employment market has become tighter and Audacy is “fiercely competing for talent, as are other companies,” Schmaeling said. He noted that costs have been cut by over $60 million since 2019.

“I wish I had a magic wand,” Schmaeling said, noting that the company is doing “everything we think is practical to mitigate persistent ad weakness.” He said there will be a few difficult quarters ahead but that the company is “doing everything appropriate and practical” to cut costs.

Huber said while the company might have cut costs by $60 million, it also experienced a $300 million decline in revenue since 2019. The analyst said he thinks with rising interest rates and inflation hampering advertising spend, the company is between a rock and a hard place.

Richard Schmaeling

Under questioning from Huber, Schmaeling said that, in addition to the $17 million gained from the sale of some radio towers and the pending $15.5 million sale of two radio stations that should close in the second or third quarter, Audacy is working on selling other assets that could net the company somewhere in the range of $20 million in savings.

Costing cutting, Field said, could include reduction in office space requirements, enhanced technology, and terminating certain sports broadcasting rights agreements. For example, Audacy recently chose not to renew its broadcasting rights for Chicago Bears games. In Philadelphia, Audacy-owned SportsRadio 94 WIP-FM broadcasts both Eagles and Phillies games.

Schmaeling also noted that Audacy might not be able to sustain compliance with its first lien covenant debt over the next 12 months. This led the company to include a disclosure about its ability to continue as a going concern in the footnotes to its financial statements in its first quarter 10-Q, which will be filed late Wednesday. Schmaeling said this will not impact day-to-day operations and is merely based on current projections of future operating results. He added that the company is meeting with lenders about moving forward with financing to manage its liabilities.

Audacy has more than 220 radio stations across the country, including six in Philadelphia.