Audacy lost money in its latest fiscal quarter and said it is worried that advertising demand is going to get worse before it gets better.
The big media company remains heavy with debt, and as we’ve reported, it is hoping to do a reverse stock split to avoid delisting from the New York Stock Exchange.
In its latest financial report, Audacy said that its operations, which include 230 radio stations in 46 markets, brought in $260 million in net revenue in the first quarter of 2023. That is a drop of 5.7% measured against the same period a year ago. Of that total, spot revenue for radio was $159 million, down 9%, while digital revenues were $56.9 million, down 2%. Audacy reported a net loss of $35.9 million for the quarter.
Local advertising continues to significantly outperform national at the company. While local ad sales were down about 5% in Q1, national billing is down dramatically YoY in the mid to upper teens.
Audacy Chairman/CEO David Field spoke of “difficult ad market headwinds impacting companies all across the media landscape” during Wednesday’s quarterly call with financial analysts.
The company, which has seen the recent departure of several key executives in addition to ongoing layoffs, completed the sale of towers for $17 million in Q1. It expects to close on additional real estate sales soon, Field says. “We also see significant opportunities to reduce expenses over time as we work to reduce our physical space requirements significantly, capitalize on new technology and reduce our exposure to select sports and podcast deals that are meaningfully under water.”
Audacy says “advertising demand since the first quarter continues to soften and the company worries it might become worse before it gets better.” Its second quarter pacing is down 7%, Field says, though the company is seeing an improvement in automotive, the company’s largest ad category.
[Related: “BIA: Commercial Radio Revenue Increased by 7.4% in 2022“]
The Philadelphia-based company is facing delisting from the New York Stock Exchange because of its low stock price and continues to face some big debt hurdles. Audacy has about $2 billion in debt on the books, according to its filing with the U.S. Securities and Exchange Commission. It paid $32 million in interest expense alone in the first quarter.
Several financial analysts on the investor call noted the company likely needs to restructure its debt or face defaulting on loans later this year. Craig Huber, an analyst with Huber Research Partners, openly questioned Audacy’s strategy when it comes to cost-cutting. “Why are costs not down a lot more? I know you are trying to preserve the company for the long term, but I’m worried you won’t make it to the medium term let alone the long term,” Huber said. Audacy said it plans to trim expenses by about $35 million over the rest of 2023.
The company is the second largest in the United States based on billing. It had three stations − WFAN(AM/FM) New York, WINS New York, and WBBM(AM) Chicago − in BIA’s Top 10 list for radio stations in billing in 2022.
CFO Rich Schmaeling further addressed the issue of solvency by making this statement: “The current (ad market) outlook increases the risk that we may not be able to sustain compliance with maintenance covenants over the next 12 months and this uncertainty led the company to include a disclosure about its ability to continue as a going concern in the footnotes to its financial statements in our first quarter 10Q that will be filed later today.”
Audacy is prepared to commence discussions with lenders to explore refinancing and strategy to manage its liabilities, Schmaeling said. He concluded: “Our relationship banks have historically been willing to amend covenants to provide relief during recessionary periods, but there can be no assurance that they will be willing to provide such relief in the future.”