Audacy Inc (AUD) 2018 Q1 法說會逐字稿

Good morning, and welcome to Entercom's First Quarter 2018 Earnings Release Conference Call. (Operator Instructions) This conference is being recorded.

I would like to introduce your first speaker for today's call, Mr. Rich Schmaeling, CFO and Executive Vice President. Sir, you may begin.

Thank you, Prima. Good morning, everyone. I'd like you to welcome to -- like welcome you to our first quarter earnings conference call. This call is being recorded, a replay will be available on our company website shortly after conclusion of today's call and available by telephone at the replay number noted in our release. Should the company make any forward-looking statements, such statements are based upon current expectations and involve risks and uncertainties. The company's actual results could differ materially from those projected. Additional information concerning factors that could cause actual results to differ materially are described in the company's SEC filings on Form 10-Q, 10-K and 8-K. We assume no obligation to update any forward-looking statements.

During this call, we may refer to certain non-GAAP financial measures. We refer you to our website at entercom.com for a reconciliation of such measures and other pro forma financial information.

I'll now turn the call over to David Field.

Thanks, Rich. Good morning, everyone. Welcome to our first quarter earnings call. Just short of 6 months have not elapsed since we closed on the merger. Entercom today is the country's #1 creator of live original local audio content. We're one of the country's 2 largest radio broadcasters with 112 million monthly listeners and a portfolio of 237 local radio stations, including many of the country's most prominent brands and have coverage of nearly 90% of persons 12-plus in the top 50 U.S. markets. We are the unrivaled leader in sports and news radio, and we also have a premier set of digital platforms and live events and are the #2 U.S. podcaster behind just NPR.

This merger has always been principally about our conviction that the combined entity would have the scale and the capabilities to drive meaningful revenue growth and value creation going forwards and compete more effectively with other media for a larger share of ad dollars. Since closing, we have been hard at work implementing our extensive plans to propel growth through a series of meaningful tangible action steps across each of our primary growth drivers. We're making good progress and are on or ahead of schedule in essentially every aspect of our plans. We have built a terrific leadership team and are driving strong ratings growth, improving our sales organization and capabilities and launching a number of powerful revenue initiatives that will help drive future success. In summary, we're happy with what we have accomplished to date.

And that said, our first quarter financial results paint a picture that really doesn't capture the underlying progress we're making towards our goals. Our plan was always to move quickly and boldly, driving transformational change, understanding that we would temporarily negatively impact revenues and incur some added expenses. As those of you who actively follow us know, we have consistently stated that we didn't expect to move the needle meaningfully on top line growth across the expanded company until the second half of the year. Unfortunately, our result in the quarter were also adversely impacted by soft general local advertising conditions and some temporary factors, most notably, the exclusion of $20 million in revenue due to financial issues at U.S. Traffic Network. USTN, as they are also known, is a firm which has contractually acquired a significant amount of our traffic report inventory across many of our stations and then resells that inventory to advertisers. You may recall that on our fourth quarter earnings call, we announced that we did not recognize $4 million of fourth quarter revenues due to significant financial issues at USTN. These issues now require us to not recognize any USTN revenues in the first quarter, reducing reported revenues and cash flow by $12 million.

As a result, our first quarter same-station revenues were down 7.5%. However, if you exclude the USTN adjustment, our revenues would have been down 4%. The news and USTN is improving as we have been working closely with their management team and to address their situation, and we're increasingly optimistic that they are on a path that will enable us to resume traffic related revenues going forward. And it is important to note that there should be no meaningful long-term impact from this unfortunate situation as the underlying value of this premium inventory is not affected. Rich will provide additional insights later in the call.

A few other notes on the first quarter. According to Miller Kaplan, our markets paced down just over 3% in first quarter. And national and digital both outperformed local. Our best-performing categories were financial services, lottery and casino and drug stores. Our best-performing markets were Philadelphia, Detroit and Charlotte.

Revenues were also reduced by 1% due to the impact of the 6 new formats which we have launched since closing the merger. It is typical for new formats to experience a significant reduction in initial revenues as advertisers wait until the brands establish a consistent ratings profile. We expect these stations to contribute to revenue growth during the second half of the year. Revenues were also reduced by another 1% as we significantly reduced the amount of business we are doing with low rate resellers, a bad business practice which we announced we'll be discontinuing in November because it undermines pricing and the integrity of our valuable inventory. While cutting this channel hurts revenue in the short run, taking back control of this inventory will enhance revenue growth in the future as we sell this inventory through emerging new higher-value sales channels that we are developing as we capitalize on our scale.

On the cost side, we're slightly ahead of schedule in capturing the $110 million in net cost synergies that we have previously announced. To date, we have captured $65 million of cost synergies on a run-rate basis or about 50% of our gross cost synergy target of greater than $130 million. However, our reported Q1 costs were significantly inflated by over $20 million in temporary and nonrecurring costs related to the integration program and other surge investments in the business, such as various transformational projects, marketing, research, higher expenses and other items which masked the success of our work in synergies. Excluding our investments in operational enhancements and other onetime expenses, our cost would have been down about 1% in the quarter. Further, we expect our cost to decline in the quarters ahead as the investment surge receives and the synergies continue to grow. Rich will provide some additional color on our expenses during his remarks.

It is unfortunate that the confluence of weak ad conditions, the USTN issues, format changes and our intense pace of transformational investment and retooling have combined to cause such a weak quarter financially and massed the underlying progress we are making across the organization. We still have lots of work to do, but our confidence and conviction in our strategies and our future potential is unwavering, and we remain on track in pursuit of our goals. As these temporary factors abate and our growth initiatives take hold, we look forward to driving meaningful, sustainable growth as we capitalize on the compelling brands, assets and capabilities of this exciting emerging company.

I'd like to now share a few highlights of the progress we're making. We're driving strong growth in brands and ratings. I mentioned earlier that we have launched 6 major new formats, including 3 in the top 5 markets. 104.3 Jams has emerged as the #1 rated station in Chicago, a true worst to first success story, and we're pleased with our progress across the other new brands as well. And just last week, we brought sports radio icon, Mike Francesa, back to WFAN in New York. We have made other notable additions to content over the past few weeks, including Ed Lover, joining Jams in Chicago to host mornings and Tony Gwynn Jr. joining The Fan in San Diego to host the afternoons.

It was also just announced that Entercom has received 23 Regional Edward R. Murrow Awards for excellence in radio news journalism, a reflection of our position as the unrivaled leader in local radio news. Our focused efforts on enhancing our radio brands are generating significant ratings growth. We now have 3 months of Nielsen PPM data post merger. In January, we achieved 4% ratings share growth across our station group, a very significant increase particularly across such a large number of stations. Then in February, we repeated that feat with another month of 4% ratings growth. And in March, we did it again. Ratings are a critical leading indicator of revenue growth and we expect our strong ratings to bolster revenues in the second half of the year and beyond.

We have made enormous progress on our integration efforts, have been completed or virtually completed all of the following over the past few months at the former CBS stations. We have transitioned to the salesforce CRM platform, a new traffic and billing system, a new automation system and a new set of digital marketing products and services. We have transitioned off of the CBS Network Systems and onto a new network platform. And we have exited the CBS local combined TV radio web portals and launched new independently branded websites for all of the former CBS stations. We also launched Entercom Analytics, a proprietary product that enables us to demonstrate to advertisers the tangible effectiveness of their campaigns. We're seeing great early results from this product which is providing powerful affirmation of radio and Entercom's effectiveness for customers. We will continue to innovate and invest in data, analytics and attribution, and believe this will be an important driver of growth going forward.

I'm also excited by our progress at radio.com, our primary digital content distribution platform. In March, we launched a major new release of radio.com, which included a redesign, new ad products and the full platform integration of all former Entercom, CBS Radio and Cadence13 podcasting assets. It is still early, but I'm pleased to report that our weekly downloads and total listening hours per user have been more than doubled. As the leading source of original live and local audio content in United States and the home of so many of America's leading and most iconic radio brands and the country's #2 podcaster, we think there's a great opportunity for radio.com to emerge as a powerful and valuable brand in the future. And in recent weeks, we have moved to bolster our digital leadership team adding additional executive talent, including the former head of digital strategy and operation -- operations at Times entertainment, travel and luxury brands, including people.com, to service the senior vice president and general manager of radio.com.

We are also getting closer to launching a new national business development effort. From the beginning, we have believed that one of our greatest scale-driven opportunities is to develop a strong national business development effort to capitalize on our powerful presence across the top 50 markets and our unique set of assets and marketing capabilities, which includes our unrivaled leadership position in sports radio with most of the country's leading sports stations and the home of 43 pro teams. As I mentioned on our last call, in March, we recruited the head of Major League Baseball's corporate partnership team to join us and lead our national planning development efforts. We're working to build this team and develop our capabilities to begin the impact of market in the months ahead. And to help enable our national sales development efforts, we have stepped up our radio advocacy efforts and will be launching our second major multipage ad in Ad Age and other publications later this month. We have often spoken of radio being the most undervalued medium, punching well beneath its weight class despite the fact that radio has recently emerged as the #1 reach medium in United States, with arguably the highest ROI of any medium.

As advertisers become increasingly frustrated with their other media options which are being highly disrupted, we believe many advertisers will consider shifting more dollars into radio to capitalize on radio's reach, ROI and other compelling characteristics. I am cautiously optimistic based on the conversations we are now having with senior decision makers across the significant number of marketers as the opportunity for radio to grow its share of total ad spending is real and significant.

I'm also excited to announce, this morning we launched the Entercom Audio Network. Our scale and reach now enable us to participate directly in the $1 billion network radio market. As I noted earlier on the call, we are in the process of discontinuing our sales of inventory to deep discount resellers which devalues our product and undermines our pricing power as we compete with that inventory in the market place. It is important to note that we will not be adding a single unit of additional inventory into the marketplace, just meaningfully enhancing our yield by transitioning out of a poor sales channels and shifting that inventory into higher value channels like our new network and national business development.

Looking ahead to second quarter, we are currently pacing in line with our Q1 performance, excluding the impact of USTN. We're encouraged by improvement in our national advertising which has turned positive and is pacing up for the second quarter. And we are also seeing some signs of improvement in number of key markets, including Los Angeles, San Francisco, Houston and Miami.

In summary, we are pleased with the progress we have made in positioning the company for meaningful growth and value creation. We always expected the first and second quarter to be the low order mark for the new company financially, knowing it would reflect the full brunt of change in disruption and investment, without the benefit of revenues from our investments and improvements in growth drivers. Unfortunately, the USTN situation and the soft ad market conditions took their toll as well.

I'm optimistic about where we're heading as we look ahead at the second half of 2018 and beyond. One, we will begin to capitalize on our growing ratings, our organizational enhancements and the numerous growth drivers that we've been actively working on. And while it is still a work in progress, we are cautiously optimistic about the USTN situation. In addition, we expect the general ad climate to improve, particularly as we enter the heat of hotly contested political cycle. Finally, the temporary expense surge in investments that drove up our first quarter cost will abate substantially while our synergies accelerate. In short, the temporary challenges will recede and the transformational improvements and progress will emerge enabling solid growth and value creation in the future.

And with that, I'll turn it over to Rich before we answer your questions.

Thank you, David. On a same-station basis, our first quarter net revenues were down 7.5% and were down about the same percentage ex political. As David mentioned, our 1Q revenues were negatively impacted as a result of us not recognizing post the $12 million of net revenues due to Entercom for United States Traffic Network or USTN, due to uncertainty about USTN's ability to pay. And this discrete issue accounts for 3.6% of the year-over-year decline in our same-station revenues. As you may recall, USTN provides Entercom with traffic advertising network sales services, and they have a commitment to pay Entercom specified payments in exchange for a large portion of our traffic and other short duration advertising inventory.

For advertisers, USTN offers significant national reach through its network of radio broadcast affiliates, primarily via sponsored traffic reports. The company had recently being acquired by an Australian company that executed an aggressive strategy to rapidly gain market share that failed and ultimately led to the buyout of the company by U.S. Management. The new management team is amidst of restructuring the company's business model, operations and its contractual relationships with its affiliates. Entercom has worked closely with management to assisting with this restructuring, and has negotiated new payment terms that gives USTN some pricing relief in exchange for a meaningful equity stake in the company and other valuable consideration.

USTN is working to consummate similar deals with other broadcasters and to complete its other restructuring actions, which are expected to allow the company to operate profitably and to be able to pay its obligations at Entercom and others on a timely basis. Under the new revenue recognition accounting standard that went into effect for Entercom at the beginning of this year, we are unable to recognize revenues from USTN even if they have paid us, unless we are able to conclude that is probable that we will be paid for substantially all of our inventory in future periods. And if things go as planned, as mentioned by David, we expect to be able to recognize revenues from USTN, including to what amounts to a catch up for amounts not recognized in the first quarter. And that for the full year, our traffic advertising revenues will fall about $15 million short of what we previously expected for 2018, which translates into about 1% reduction in our revenues year-over-year, although this shortfall could be greater if USTN is unable to successfully execute its restructuring plans, and we are unable to replace these revenues through our own sales efforts. Next year, we expect that we will be able to meaningfully close this $15 million gap.

Our same-station revenues for 1Q were also impacted by soft local advertising environment. As you likely know, growth in consumer spending during first quarter was an anemic 1.1%, and we believe this weak -- this translated into a weak local advertising environment. We believe it is likely that as we move past the numerous late winter storms across the country and people feel the benefit of the tax cut in their pocketbook that consumer spending will accelerate and as will local advertising demand. In addition, we look forward to a hotly contested political season that will drive added demand against our inventory and will also support stronger market pricing.

I think it's also important to note, as mentioned by David, that about one point of revenue decline can be attributed to our 6 formats flips, and that the remaining decline of about 3% is consistent with the reported 1Q decline in the size of the radio markets where Entercom is present. Although, we're not celebrating in anyway, this does mean that, taken as a whole, the legacy CBS Radio markets plus Entercom markets performed about consistent with the size of the 1Q market. We look forward to beating the market in future quarters as we began to fully realize the benefits of our added scale and our numerous sales growth initiatives with our national business development strategy.

Moving to expenses. Our total as reported operating expenses for the quarter came in at $294.9 million and include $12.6 million of integration, restructuring and M&A costs. Excluding of these costs, and adjusting out noncash items like D&A and miscellaneous income, our same-station total cash operating expenses came in at $270.5 million or up 2.5% from $263.9 million on a pro forma combined same-station basis in 2017. In this first quarter as new Entercom, we have realized about $9 million in net cost synergies and have surged a number of investments to speed change and also had a recorded number of accounting charges to conform the combined company's accounting to GAAP. Normalizing these expense items to what we expect to occur in future quarters, our same-station total cash operating expenses would have been down about 1% in the first quarter. Focusing more specifically on our integration program, we continue to run slightly ahead of our plan. Of our gross cost synergy target of greater than $130 million as of this point in time, we have realized cost synergies that will deliver about $65 million of annual savings on a run-rate basis. And as our synergies grow each quarter during the remainder of this year, we expect to significantly improve our year-over-year cost performance and comfortably achieve our 2018 target of $45 million of net cost synergies, that is realized cost energy savings after investments.

Turning to our financial position. We entered the quarter with approximately $1.82 billion of outstanding debt and our total net leverage on a compliance basis was 4.4x. Our senior secured leverage was 3.4x as compared to our covenant of 4x. As previously reported, since closing the merger on November 17, we repurchased close to 2.8 million shares of our Class A common stock for $30 million at an average price of $10.85 per share, and we haven't purchased added shares since the date of our fourth quarter earnings release on March 8.

We may resume repurchasing our stock at a later date, but as previously stated, job 1 is getting our total net leverage down to our target of 3.5x. In that regard, we expect to move forward during 2Q on our remaining divestitures of 8 stations in San Francisco and Sacramento that have been held separately in a divestiture trust, and are currently being operated by Bonneville under a time brokerage agreement. As previously stated, these divestitures are expected to generate after-tax proceeds of about $160 million, which we now plan to use to pay down debt. We're also working to sell redundant assets, including the Telus tower site, we discussed during our fourth quarter call near O'Hare Airport in Chicago, and now expect that full year after-tax proceeds from such sales will total about $50 million. Our 1Q capital expenditures were $7 million, and we expect that our CapEx will ramp up as this year progresses and that our full year expenditures, including integration-related expenditures will range between $50 million and $55 million.

Before I wrap up and return to your questions, I just want to cover off a few housekeeping items. You may have noticed in our earnings release that we have included in the tables comparable same-station net revenues and pro forma adjusted EBITDA as if the CBS Radio merger closed as of 1/1/2017. I also call your attention to our website where you'll find the reconciliation of such non-GAAP measures and including the detail of these measures for each quarter of last year.

Finally, I want to highlight to you that we've engaged JCIR to provide investor relations services for the company. JCIR has worked with many leading broadcasters, including Nexstar and Beasley, and you will find their contact information at the top of our earnings release.

With that, we'll now go to your questions. Prima? Can you take questions, please.

(Operator Instructions) Our first question comes from Marci Ryvicker of Wells Fargo.

This is Dave filling in for Marci. I have a couple questions. Can you parse out how your Entercom and CBS Radio stations have been pacing in Q2? Are there trends you're seeing in one and not the other? And how does your new USTN contract compared with the old one? And does it impact your financials any differently?

I'll take the first question and Rich can cover the later. We're not going to be breaking out CBS and Entercom or legacy CBS and legacy Entercom separately. We are one company. And we will proceed forward in that fashion. Rich?

Yes, on USTN that we have amended our contractual relationship as announced by them as part of this new contract. We do now have an equity stake in USTN, and are working with them in partnership to assist them with the restructuring efforts. We have taken a price concession in 2018. And we've told you that for full year '18, we do expect our traffic revenues to be about $15 million less than what we'd previously expected.

And let me just elaborate, just a moment on the comment I just made. I mean if you look overall at where we landed for the quarter, and you compare that to where our market is landing, I think you can see that we were pretty much in line with our markets, excluding the USTN. And I think you should think about that in terms of our overall performance and evolution across the legacy platforms.

Our next question comes from Aaron Watts of Deutsche Bank.

A couple for me. I'll start bigger picture. David, may -- I heard you gave a preliminary forecast for full year '18 revenue down 2% to 3%, which was certainly a break in trend for them. As you sit today and given the start to the year that you've talked about, do you feel like that's a good ballpark for where we should be thinking about Entercom revenues for the year? Or do you still have optimism that with the lift on political that you cited as well, that you can get closer to flat for the full year?

I absolutely have optimism. And it's based on what we're hearing and what we're seeing, right. And again, the problem is the Q1 results masked the underlying progress we're making across the company. And the growth engines, the enhancements we're making on many, many levels. So if you talk to our people, they're excited about where we're headed. And we're -- no question, we're in a much stronger position as a company today than we were not quite 6 months ago. So as we've said, we look for much stronger performance as we go forward into the back half of the year and then beyond into 2019.

And just to pick up, Aaron, on the environment. 1Q was really weak. And when you look across the consumer spending being up only 1.1% compared to 4% in the fourth quarter and close to 3% for full year 2017, it was a weak quarter. And I think there's -- we're starting to see some signs of strengthening particularly in national and are optimistic that this advertising environment is going to improve.

Is there a potential that even if the market doesn't grow as much as you think that there could be some share gains on your part to help drive a little bit of market out performance? Or are you not counting on that at this point?

Absolutely. And remember the shared gains we're talking about are not so much about within the industry, although, sure that's part of it. It's really more about our share of the overall ad pie. And as we're having conversations with major advertisers and we are talking about the relative value proposition of radio today, and how radio can enhance the value -- again, the value of their media buy. We believe there is a strong opportunity there and with our scale and with the vehicles we're developing, be it our national client development team, be it a new network which we announced this morning and so forth. We're in a position now to develop a substantial amount of business and grow outside of this industry which remains far and away the most undervalued medium in the United States, and it is -- and with our scale, and with again, the capabilities we're building, we're now in a position to capitalize on those opportunities, and we expect that to happen here as we get into the second half of the year.

But we should also say that we also do expect to gain share within the existing radio market. And that's why it's important that for the first quarter, our ratings were up 4% across the PPM markets which are our largest stations, our largest markets. And those sales teams are very excited about bringing that ratings momentum to market and using that to drive additional revenue share in those markets. So we think it's both, and both are important.

Okay, that's helpful. And then one last one, if I could sneak it in and put my cut ahead on for a moment. Rich, you've talked about your 3.5x leverage target. I think in the past you had mentioned trying to get there by the end of the year 2018. Given the softer start to the year and maybe balancing that with your intention to now use some of these non-strategic asset sale proceeds to pay down debt, do you still feel like you can get to that metric by the end of the year?

Yes, there's no doubt, Aaron, that1Q was softer than we expected. And we're sure did not anticipate the problems that we have had with USTN. Though, it's a nick that's going to take a little bit longer for us to get to our goal. But we're going to get to our goal. And as we've stated all long, that's job one from our perspective, and so we're focusing accordingly.

And our next question comes from Avi Steiner of JPMorgan.

You guys gave a lot of detail. So I may have missed some of this. So if it's repetitive, I apologize. Can I get auto in Q1 and how does that look relative to your placings in Q2?

We did not break out in the individual sector. We listed the 3 sectors that were the most positive. Auto was sort of more in line with the overall quarter. What was the second part of your question?

It's -- I was going to ask how it looks for the second quarter, but as you're not going to give it for Q1, that's fine.

Yes, we don't give forward-looking information on categories.

Not a problem. And I know you don't want to parse out CBS stations versus Entercom. But I assume all the reformats are in the CBS Group. And I think you talked about a 1% revenue hit you're upfront with those stations. I know reformates happen all the time within groups, but when do these stations begin to contribute again?

Yes, Avi, you broke out a little bit there, but I think I got the gist of the question. So format changes do happen, but I'd say it's fairly unprecedented that format changes of the magnitude that we have done. We're 6, including 3 of the top 5 markets. And that's why it had an aggregated impact of 1% in the first quarter. And that's fine. We knew you're going to take that as part of our retooling and growth initiatives. And as we've said, we expect those radio stations to contribute it positively and help us grow in the second half of the year.

I just want to say, in some of our top markets we're -- that performed well in the first quarter were CBS Radio markets. So it's interesting, you look at the performance across the country, there's quite a bit of variability and it's hard to discern a pattern. But when you look at performance, we've seen some nice lift in former CBS Radio markets. And we're one company now. And we see a lot of great work being done.

I appreciate that color. Very last one for me. Just a clarification. The $12 million from USTN in Q1, the $15 million you're talking about for the year. Is that 100% for the bottom line? Or is there some costs associated with that?

So that's essentially net revenue. And we do have costs associated with the production of traffic content, but we view it as fixed. So if we lose $12 million of that revenue, it falls straight through to EBITDA. And so it hurts a lot. And -- but we do think they are quickly righting their ship. We are working collaboratively with them and they have a lot of scale, they have a lot of reach, it's a valuable product proposition. Unfortunately, GTN, the company that owned them, previously, just got overly aggressive to meet some dates that got them in trouble. We're righting that ship fast.

Our next question comes from David Hebert of Wells Fargo.

Rich, if I could get a clarification on leverage. I think you said 4.4x. And if you could offer any unrealized synergies that are in that calculation? That would be great.

Yes, so it is 4.4x. And it was over $100 million of unrealized synergies that are part of that calculation on a compliance basis.

But less than, I guess, the $110 million, it's not the full $110 million, it's just similar in that $100 million to $110 million area?

Well, there are 2 different numbers. The $110 million is a net number after investments. The amount that we're permitted to use under our credit agreement for compliance purposes is gross synergies. So they're 2 different numbers.

Okay, okay. And then right now you're at net debt of $1.82 billion. And I know there are some moving parts with the asset sales, et cetera. And keeping in mind that you're trying to reach your leverage target. Do you have any sort of target debt balance whether that's net debt or gross debt by the end of the year?

Yes, we sure do. And of course, we don't provide forward guidance. But when I look at my internal projections, we do expect to be comfortably insight our senior secured leverage ratio at the end of this year.

Inside the covenant level or...

Yes.

Okay. And then on digital and events. How is digital going in terms of the integration? And then on the event side, I think you've historically had around 4,500 on a pro forma basis. Are you looking to do more or less events? Just kind of the trajectory there would be helpful.

Yes, so we're making great progress on the digital front. As I mentioned earlier, we've now weaned ourselves off of all the CBS portals ahead of schedule during the first quarter. We're making great strides on radio.com, which we're really excited about that app and where that is taking us and still feeling very good about that. And having solid improvement in our SmartReach Digital product line as well as other facets of our digital portfolio. So we feel very good about that portfolio of assets and where that's going. On the event side, we are going to be selectively looking to add events where it makes sense. But at the same time, we're also going to be pruning back on events which are not productive. It's a portfolio management approach as you might expect. We're excited about the events business. We think it is -- fits beautifully with our business model, and think it as nice growth characteristics going forward.

Okay. And then just one last one on housekeeping. And sorry if I missed this. Did you give cash tax guidance or expectation for the year?

We did say, previously, low-20s.

Low-20s, okay.

Our next question comes from Michael Kupinski of NOBLE Capital Markets.

I know that you didn't want to talk about specific ad categories but some radio operators indicated that there were some key advertisers namely McDonald's in the first quarter. They had only spent like 20% of their typical radio spend. I was wondering if there was any unusual categories like McDonald's that would have affected the first quarter in particular.

Yes, Michael. We -- of course, there are couple of accounts and others have cited that have reduced their spending and actually switched into network, I think, in a couple of cases. There are also new advertisers who've come in, in a big way. And it's all part of the game, right. And what we're excited about is that as we have conversations with some of the largest advertisers in the United States. Companies that spent a paltry sum in radio. We see them making moves to spend significantly more money in radio going forward, and we think that's a really important opportunity and something which we're excited about. And again with 2 companies in radio now having the scale to be able to address their needs in a profoundly effective way, we think that bodes well for the industry as well going forward.

And David, you've been a great advocate for radio and radio advertising. And I know that you wrap some marketing around that initiative. Can you talk about the success you might have had around marketing and promoting radio?

Yes, I mean, as I mentioned, we're dropping a new ad in Ad Age a 4 page ad insert that would be coming out this week or next week. We did a similar ad in across -- again, a number of periodicals in the fall. And we think that it is a really important message because advertisers are beginning to understand that radio can play a larger part of their media mix and enhance their key metrics and there is a value that they bring to their campaign. So we absolutely see traction in those conversations. You're not just hearing that from me, you're hearing that from others as well. That is not has works its way meaningfully or robustly into the pipeline yet, but we see progress going forward and are excited about that.

And how can we look at your marketing spend going forward, in particular, is sit a percent of revenues. How do you look at your spend on that front?

Well, we've never discussed that publicly. As we mentioned, we have spent more money on marketing during the first quarter than in prior year. I think you're going to see us have a moderate amount of marketing spending going forward, which we think fits the model, but we're not going to forecast what our strategic plans are in that area, as you might expect.

Yes. What was the pro forma political for 2014?

I don't have that number in front of me, in 2014. But the total political spend is in the 2% range in a nonpresidential year.

Got you. Do you guys -- are you -- do you have a target for political advertising this year?

I think that -- we think this year is a really interesting opportunity. There's some new capabilities that will bring in to market that enhance our service capabilities to provide better data to advertisers about target voters. So we think this cycle -- there has been some reporting that the expectations for radio this cycle is for radio to gain share of the advertising pie. And we think that's likely to be true, and we are gearing up to lean into that strongly. And hopefully, bring some innovation to market in terms of data that enhances our proposition. And we're looking forward to a robust political cycle.

And our next question comes from Brandon Osten of Venator.

Couple of questions. First of all, on the buyback, nice to see that the family sort of picked up or that corporation left off. I guess the corporation is going for a bit of a pause. The $50 million you're going to get from asset sales, at that point do we reinitiate the buyback? Or is that also targeted for debt pay down?

It's targeted for debt pay down.

Okay. Can you guys give us any commentary on the monthly cadence? I guess you guys said that you expect Q2 to be roughly like Q1. Is that -- first of all, is that roughly like Q1 overall or roughly like Q1 ex the USTN? And again, is there anything -- any color you can give us on monthly cadence?

Sure. As I said apples and apples, excluding USTN. So we announced that we are -- we were down 4 in first quarter, excluding USTN. We are trending – we are in line with that in the second quarter, excluding USTN.

Okay. And then in terms of USTN, it's a bit of a gray area, I guess, for The Street. Can you give us -- I mean, I understand they're a private company, but are there -- were there issues, cost issues, revenue issues or balance sheet structure issues. I'm just trying to get a sense of how fixable it is whether it's an operational or whether it's just a balance sheet issue?

So this company JGN came into United States, bought a company called Radiate within the company USTN, and then executed a very aggressive strategy to gain share through price. They paid up essentially for inventory to broadcasters and got out over their skis. Essentially, it's an arbitrage business, they buy and resell. And that creation was upside down for them in 2017. They are in the process of fully riding that ship. Entercom was by far their largest client, but others are also in negotiations with USTN right now to adjust their relationships. And we do think that they are on track to get to a much better position financially and that they will be profitable and able to pay their obligations when due on a timely basis. Can sign for that in blood, but that's where it looks like it's going. We're doing our best to assist with them with that process.

Brad, I'll just add one more comment, which is, there's nothing wrong with their core business. It's a good core business they're in. As Rich just said, they just had their (inaudible) out of whack.

Okay. So I mean it sounds fixable if you guys are collaborating with them on the -- with equity ownership rather than negotiating with them. But -- okay, so we'll look forward to that. And then in terms of the quarterly cadence and your expectations. Obviously, this quarter was, I guess, a little -- I'm not sure if it was disappointing relative to your plan or not, obviously the metrics -- and we know this was going to be the low watermark here. But at what point do you guys say, okay, we need to do more. We need to make adjustments, like do you have a target, geez by Q4, our revenue should be up year-over-year and our adjusted EBITDA should be north of, say, 25% of revenues. Like is there a point where you guys say we need to make further adjustments. I'm sure we're not at that point yet, because there's a lot of moving parts here. But where do you guys target revenue growth EBITDA north of 25% in terms of your plans?

There's only so much color I want to give on that, obviously, publicly. But I would say to you that again we feel good about our progress. We feel good about what we're building and where we're headed. And we feel that the various enhancements we're making and drivers we're building, we'll begin to make their presence felt here as we get into the second half of the year, as I mentioned earlier. So again we feel good about where we're headed. And absolutely have our eyes closely on the ball on the results we're getting from the various efforts we're making to enhance the organization.

And our last question is coming from Alan Mitrani of Sylvan Lake Asset Management.

As a new shareholder -- and I think you guys had a lot of new shareholders who aren't as familiar with the ins and outs of the radio business. They way you're talking about not giving details. Just as a FYI, it might be helpful since you have no public comps that trade in the equity markets if you size. May be to give a little bit more back and it's a bit more detail in the future as it relates to dollars and maybe comparables, if you can. I know there's a lot of puts and takes. So just an FYI, maybe some slides, I think, for that might be helpful in the future. Have you guys disclosed the equity stake in USTN?

We've disclosed the existence of the stake. We've said we've characterized it as meaningful, but we have not given the exact percentage.

Can you ballpark it for us in terms of what meaningful means? Meaningful to them or meaningful to the shareholders of ETM?

Meaningful percent of the company and not -- the terms of that agreement are confidential.

Meaningful percentage of the USTN, not a meaningful percentage for us, right.

Okay. And then you said what a typical political spend is 2% in a nonpolitical year. What is it in a political year?

No, no, I said in a nonpresidential year. It's more in a presidential year, that 1 point or so greater.

It's basically 0%. In a nonpolitical year is 2%. In a off cycle political year. And as Rich has said, is a little higher in a presidential year.

Okay, great. And then you talked about the leverage ratio. Obviously, we're going to pay down debt now just to make sure we stay in covenants. What's your comfortability with the closings of these divestitures, the San Francisco, Sacramento market as well as the piece of land? Is this definitely a second quarter event? What's holding it up with the mitigating factors?

Sure. So Bonneville has been operating the radio stations in Sacramento and San Francisco since we closed on the transaction and the merger in November. They had an internal issue, the passing of the leader of the church and succession issues around that. They have consistently indicated to us that they would like to acquire the radio stations, and are intending towards that. And we would hope to have an update for you in the not-so-distant future on that front.

Okay. And then, I realize you guys are pretty big evangelist of the radio business, which is probably what attracted me to the investment. But I want to understand, can you run the business if revenues are going to decline in the low single-digit rate and find enough cost cuts and enough add-ons to be able to make the deal profitable and a smart deal in your minds? If the business does not grow in radio over the couple year period?

That's not our expectation. So I understand your point. I don't think that one data point, a weak first quarter is indicative of the outlook for radio broadly. In fact, to the contrary, there are really positive indicators that lead people to believe it's likely radio is going to gain share of the ad pie in the next 18 to 24 months. And so don't buy the premise of your question, understand it, but don't (inaudible) suggest typically.

No, the premise of my question was just I don't have to worry about it if you guys can grow revenues because it's going to take care of itself. But if you somehow, for the next couple years decline in a low single-digit rate because of competition, whatever else, I want to know that you're going to be able to run the business and find other cost cuts enough to have made the deal worthwhile. That's why. I don't have to worry about the upside. The upside is going to take care of itself. Your stock is down 16% so far this morning. The downside leverage business is pretty large from these. So that's why I care about it. I'm not asking it from a back perspective. I'm asking it from a good perspective.

Short answer to your question is, yes. Again as Rich said, we don't believe that is what the trajectory is going forward for all the reasons we've discussed, but the short answer is, yes.

Okay, and one last one, if I can. Is there any improvement from the completive environment now that your 2 largest competitors are in bankruptcy and are working through that and potentially, may -- might be, positioned to come out of it by the end of the year and maybe be more rational players. Can you just talk about what the competitive environment has done to the CBS business and your business over the last 12 months? And what it might look like 12 months from now and some of those noises out?

You're spot on. I mean, you're talking about an industry which is the most undervalued medium in the United States. That as relative value proposition that is proving, as other media are being disrupted at a pretty rapid clip. And yet, when the industry's #1 and #3 players are to a large extent impacted by their financial situations and bankruptcies, that absolutely has negative implications on the (inaudible) ability to compete more effectively against others. And I do believe that a healthier industry is a more rational industry and an industry that does a better job of taking advantage of its opportunities to compete more effectively with others as we've talked about on this call and in previous calls and so forth. And so I do think it is a good thing for the industry and hope some better things to come.

Is there any identifiable improvement specifically that you might expect or examples that you might say where it's been tougher than expected because of their competitors? I'm just looking for a little more detail, if you can. I know conceptually, of course, it's better to have your 2 largest competitors healthy as opposed to bankrupt?

Yes, I mean -- look I think that it's -- I don't know if there's anything more tangible to give you other than the fact that when you look at the competitive situation in terms of how -- the competitive nature of the pricing battles in the industry, I think that has been exacerbated by the financial status of some of our competitors. And again, I think the healthier industry is a more rational industry going forward.

Thank you, we look forward to reporting back to everybody in 3 months. Thank you so much. Take care. Bye-bye.

That concludes today's conference. Thank you for participating. You may now disconnect.