Audacy Inc (AUD) 2020 Q3 法說會逐字稿

Good morning and welcome to Entercom's Third Quarter 2020 Earnings Release Conference Call. (Operator Instructions) This conference is being recorded.

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

Thank you, Courtney. Welcome to Entercom's third quarter earnings conference call. This call is being recorded. A replay will be available on our company website shortly after the conclusion of today's call and available by telephone at the replay number noted in our release.

During this call, the company may make forward-looking statements, which are based upon the company's current expectations and involve risks and uncertainties. The company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially are described in the Risk Factors section of the company's annual report on Form 10-K as such risks and uncertainties may be updated from time to time in the company's SEC filings. We assume no obligation to update any forward-looking statements except as may be required by law.

During this call, we may make reference concerning -- reference to certain non-GAAP financial measures. We refer you to the Investor page of our website at entercom.com for reconciliations of such measures and other pro forma financial information.

I'll now hand the call over to David Field, Entercom's Chief Executive Officer. David?

Yes. Thanks, Rich. Good morning, everybody, and thanks for joining Entercom's third quarter earnings call. We are now roughly 8 months into the pandemic and its unprecedented impact on our nation. While this has been a very difficult chapter in our country's history, I am pleased to report that Entercom has continued to make great progress in our work to drive significant organizational improvements to bolster our strategic position and capabilities, accelerate our growth potential and enhance our business model. In fact, our work has meaningfully accelerated over the past several months, and we are confident that we will emerge from the pandemic as a meaningfully stronger and better positioned company.

Entercom is transforming into a leading multi-platform audio content and entertainment company with scaled audience reach, strong data analytics and attribution capabilities and a leadership position in virtually every segment of the dynamic and growing audio market, including broadcasting, podcasting, digital, events, network, music, sports and news.

Today, Entercom is the #1 creator of original premium audio content and strategically well positioned with the scale and enhanced capabilities to expand our customer relationships and accelerate growth.

Third quarter net revenues were up 53% from second quarter, while our continuing work on enhancing our business model yielded an 18% reduction in operating expenses versus prior year, enabling us to deliver adjusted EBITDA of $31 million.

Ad sales continue to suffer from the deep impact of the pandemic, which has caused many of our advertisers in businesses such as concerts and live events, tourism, gyms, nightclubs, museums, movies, theme parks, public transportation, airlines, restaurants and others, to temporarily cease or significantly curtail their operations and advertising. We look forward to welcoming them back once the country emerges from the pandemic. Rich will add some interesting additional color on what we are finding with regards to which industries and customers remain on the sidelines.

You may also have noted that we have enhanced our reporting on revenue composition in our earnings release to provide additional detail of revenue by type and by format. Digital and podcasting led the way for us in second quarter, growing 41% over prior year.

We announced a landmark partnership with FanDuel this past week. Before speaking to that, I want to first briefly review Entercom's unique and unrivaled leadership position in sports audio. Entercom owns and operates most of the nation's leading sports radio stations, including WFAN in New York, The Score in Chicago, WIP in Philadelphia, The Fan in D.C., The Game in San Francisco, The Fan in Dallas and many more. We are also the radio home of 41 pro teams and dozens of D1 collegiate programs and of most of the country's leading local sports talk hosts on our various stations. There is no more deeply engaged audience than local sports radio listeners, and that is great appeal to advertisers and sports gambling providers in particular. As you are all aware, sports gambling is an exploding new advertising category, and Entercom is uniquely well positioned to participate in that growth.

We are very excited about our new partnership with FanDuel, the number one sportsbook in the U.S. We believe the Entercom FanDuel partnership is the largest advertising deal in the history of the radio broadcasting industry. Under the terms of the agreement, FanDuel will become our official sportsbook and capitalize on the power of our uniquely deep local fan relationships while collaborating with us on in-depth integrations and co-produced content. To be clear, the deal is nonexclusive, and we will continue to do significant business with other sportsbooks. In fact, we expect to see robust growth in this category as additional states legalize sports gambling in the years ahead.

One thing to consider, FanDuel made this long-term commitment after 2 years of advertising with us and deeply evaluating their data to evaluate the effectiveness and ROI of their investments. This is a wonderful reaffirmation of the power of radio and the power of Entercom's uniquely influential personality-driven platform.

We also had a highly successful quarter with our various content offerings. In our broadcasting business, our leading brands continue to perform well with a healthy number of top-rated stations in the largest markets. For example, we currently have the number one rated station among adults 25 to 54 in Los Angeles and 3 of the top 5. We also have seen a big rebound in ratings across our sports stations, reflecting the reemergence of live sports, with a 33% increase in ratings at WFAN in New York, a 24% increase at both WIP in Philadelphia and The Fan in Dallas, among many others.

I also want to comment briefly on overall industry listening levels. The initial disruption of the early lockdowns and deeply reduced mobility in March and April caused some initial decline in radio listening levels, albeit somewhat offset by a significant increase in radio consumption over digital platforms in the home, such as mobile and smart speakers. Since then, radio listening rapidly -- has rapidly recovered and has now returned to essentially pre-COVID levels. Nielsen just reported this month that average quarter-hour consumption of radio is now back to 95% and reaches back to 97% of their previous levels. In addition, Nielsen reports that time driving has rebounded across the country with the average adult now spending 1 hour and 5 minutes daily in their cars and heavy listeners spending 2 hours and 11 minutes daily, a full hour more than they spent in May.

One other contributor, as reported by Nielsen, is that 20% to 27% of Americans are using less public transportation and shifting to cars. We also continue to post excellent growth at Radio.com with our digital and streaming offerings. During third quarter, our monthly average uniques jumped 36% over prior year, led by double-digit growth in mobile and connected devices, including smart speakers and connected TVs. Radio.com total listening hours grew by 14%, marking our 14th straight month of double-digit TLH growth, the only digital publisher to do so according to Triton webcast metrics.

It is worth adding that our music station TLH increased by 22%, while smart speaker TLH was up 90% as we continue to experience explosive growth on that platform.

We also had a great quarter on our podcasting business with downloads up 27% year-over-year. We now have over 26 million monthly average users. During the third quarter, through our Cadence13 and Pineapple Street Studio subsidiaries, we launched or announced a number of new podcasts, including projects with LeBron James, Kevin Durant, Will Arnett, El Fanning, Jon Meacham, J.J. Redick and TikTok stars Charli and Dixie, plus 3 new titles in association with our partnership with HBO and 2 new titles in partnership with Netflix, among many others. We also launched Sofia With an F featuring the former cohost of Barstools' Call Her Daddy, which debuted at number one on the Apple podcast charts. We announced a new partnership with Unsolved Mysteries launching in 2021 and have a significant number of other original series under production.

During the third quarter, 6 of our shows reached the top 10 rated podcasts on the Apple charts. And in addition, we very frequently hold more spots on the Triton top 100 chart than any other podcaster. Our Live Events business has, of course, been shut down by the pandemic, but we still hosted a number of exclusive virtual live events, exclusive events, I should say, on Radio.com with artists including Rascal Flats, Selena Gomez, John Bon Jovi and BTS. In fact, the BTS show was seen by over 2.5 million fans across our digital and social platforms.

Yesterday, we also announced a station trade with Urban One. In the transaction, we will be acquiring additional stations to enhance our existing positions in Washington, D.C., Philadelphia and St. Louis, in exchange for our position in Charlotte. This was an even trade with no cash changing hands. The deal is accretive in year one. It makes us stronger in 3 important markets while we exit a market where our position was weaker, and we were not well positioned for long-term success. Specifically, we acquired the team in Washington, adding the sports station to our local lineup, which includes The Fan, D.C.'s number one sports station, Hot 104.1 and the IP from The Lou in St. Louis, adding the market's 2 leading stations with African Americans, and WPHI FM in Philadelphia, which will become the FM sister station of our KYW. And we are also continuing to make meaningful permanent improvements to our business model, capitalizing on technology and unchanging consumer behavior to enhance how we serve our listeners and advertisers, while at the same time, making our operations more efficient. For example, we are planning to reduce the size of our studio locations significantly to reflect expected post-pandemic work structures and anticipate significantly reducing the 70, 7-0, million dollars we currently spend in studio leases over the next several years.

In addition, we have significantly reduced the staffing and scope of our promotions departments and have discontinued some of the legacy practices, which have diminishing value given the rapid adoption of our digital, social and other technologies. And while it is quite challenging to forecast in these unprecedented times, I can tell you that we continue to expect to continue to improve sequentially and have done so in every month since April. We expect further improvement in both revenues, and in particular EBITDA, in the fourth quarter. Our fourth quarter business that is currently on the books already exceeds the $269 million total revenues we booked in all of Q3. Political came in a bit stronger than we expected. National continues to improve, digital and podcasting remains strong, local is improving, and of course, our events business remains dormant. All of that said, we note with considerable concern the rising level of COVID-19 across the country, and worry about its implications on near-term conditions. So far, we have not noted any deceleration from the recovery we have been experiencing, but we are keeping a close eye on things.

So in summary, we grew third quarter revenues by over 50% versus second quarter, announced what we believe is the largest ad partnership in the history of radio broadcasting, continued to thoughtfully improve our business model while enhancing our listener and customer experience, extended Radio.com's streak as the fastest-growing digital audio platform and accelerated the growth of our podcasting business with an exciting slate of new products. We are evolving and enhancing the company through the pandemic and will emerge as an even stronger organization and are excited about the opportunities ahead. And with that, I'll turn it over to Rich.

Thank you, David, and good morning, everyone. For the third quarter, our total net revenues were up 53% versus the second quarter and were down 30% year-over-year. Ex-political, our total net revenues were down 31% year-over-year. Although we have seen 5 months of sequential improvement since April, an examination of our advertiser base makes clear that many of our local and national spot advertising clients remain highly disrupted by COVID-19.

Focusing on local, which accounts for close to 70% of our total spot advertising revenues, we see that 44% of our top prior year accounts were still off the air in September versus about 55% of such accounts in the month of June. Looking first at where we saw improvement in local spot advertising in the month of September as compared to the month of June, our top advertising category, auto dealers, was up 62%. Auto dealer associations, our sixth largest category, was up 255%. Gambling and casinos, our seventh largest category, was up 144%. Fast foods, our ninth largest category, was up 108%. And auto insurance, our 14th largest category, was up 215% in the month of September versus the month of June.

Now focusing on where we still see continuing significant disruption in our local advertising base. And this time, we will look at the month of September versus prior year. Concerts, historically our fifth largest local advertising category, was down 98%. TV stations, which last year was a top 10 category absent a new primetime fall lineup, was down 88%. And looking at other categories that are usually in our top 30, the sports events advertising category was down 57%. Casual dining was down 56%, amusement parks down 84%, and the fairs and festivals category was down 91% in the month of September versus the prior year. Even categories that have recovered significantly due to the impact of COVID-related disruption are still seeing -- are still struggling. For example, auto dealers, which make up our top local advertising category, continue to have a limited supply of new car inventory on their lots due to COVID related supply chain issues. The auto dealer local spot advertising category was down 34% in the month of September versus the prior year. Although we are actively on the lookout for evidence of advertisers shifting our mix away from spot radio given the constant drumbeat in the tech-focused press, we don't hear such reports from advertisers. The story remains COVID disruption and we are optimistic as the impact of the virus subsides that our spot advertising revenues will continue to recover.

Focusing on political, revenues came in at $5 million for the third quarter, up from $1.7 million in the third quarter of last year. Although political came in weaker than we expected in the third quarter, political pacing picked up significantly in October. And now that we are past election day, we can say that our political revenues will total about $16.5 million for the fourth quarter, which is up slightly on a same-station basis from 2016 pro forma and up more than 10% versus 2018. For the full year, political revenues are now expected to come in at about $30 million versus $29 million in 2016 and $25 million in 2018.

Turning to digital. Our revenues were up 41% year-over-year in the third quarter to $47.3 million, driven largely by growth in podcast and streaming's advertising revenues. You will see that we have provided a further supplemental breakdown of our revenues by type and by format in the financial data tables included in our third quarter earnings release. We have also posted historical data for these breakdowns for the last 8 quarters under the Investor Relations tab on our website. You will see that our sponsorships and event revenues continue to be significantly disrupted as a result of COVID, and our event revenues were down 97% year-over-year for the third quarter.

Looking at the fourth quarter, the continued absence of live events will cause our revenues to be down 7% versus the prior year, and our remaining revenues are currently pacing down mid-teens year-over-year. I want to reiterate David's earlier comment that we are concerned about the recent uptick in COVID cases and how that may impact advertising over the remainder of this year. So our current pacing may not be indicative of how the quarter ultimately closes.

Our total operating expenses for the third quarter came in at $268.8 million and include an $11.8 million noncash impairment charge and $1.2 million of restructuring costs. We also recorded a charge of $3.2 million for costs related to COVID-19. Excluding these onetime and unusual costs and adjusting out noncash items like D&A, our total cash operating expenses came in at $237.4 million or down $50.8 million or 18% on an as-reported basis versus prior year and were down $63.6 million or 21%, pro forma for our second half 2019 podcasting acquisitions.

For the fourth quarter, we continue to project that our costs will be down high teens to low 20s, and the company continues to work on enhancements to its business model that will generate permanent savings while enhancing how we serve our listeners and customers. Many of these enhancements have already been implemented. And looking forward to 2021, we expect that we will deliver $100 million or more of fixed expense savings versus 2019 pro forma for our podcasting acquisitions. Our total 2019 cash operating expenses on a pro forma basis were $1.19 billion, and 21% of these costs were variable. In 2021, we expect that variable costs will account for 24% to 25% of our cost base.

Turning to our financial position and liquidity. We used cash on hand during the quarter to pay down $166 million of our revolver to an outstanding balance of $77.7 million at the end of the quarter. Our net debt at September 30 was $1.63 billion, down $66 million from the end of 2019. Our liquidity at September 30th remained strong and was $198 million, comprised of $165.6 million available under our revolver and $32.4 million of cash on hand.

Our net capital expenditures totaled $5.8 million in the third quarter and are expected to total about $30 million for the full year. As discussed on our second quarter call, the company executed an amendment to its first-lien maintenance covenant on July 20. This amendment, among other things, provides for a covenant holiday for the quarters ended September 30, 2020, and December 31, 2020. It replaces actual 2020 EBITDA with prior year amounts for 2Q through 3Q in calculating LTM EBITDA. It increases the interest rate applicable to our revolver by 25 basis points and adds a new minimum liquidity covenant for our combined, for our combined cash on hand and undrawn revolver of $75 million. These amendment provisions fall away at the end of 2021.

With that, we'll now go to your questions. Operator?

(Operator Instructions) Our first question comes from Craig Huber from Huber Research Partners.

First, I just want to say thank you for the added revenue breakdown by type. It's very helpful. appreciate that. Can you go over one more time -- I missed part of it. You were saying something about the 2021 cost base versus 2019, Rich, I guess on a pro forma basis, just go through that one more time for me.

Sure. What I said was that our 2019 cost base on a pro forma basis, including our podcasting acquisitions, was $1.19 billion, and that 21% of those costs were variable. And in 2021, we expect that our variable costs will be about 24% to 25% of our cost base.

Okay. And then my other bigger question here is, once we get through this COVID-19 environment, what is your preliminary thought about what sort of the rebound in radio station advertising, for the industry but also for your company, will look like? I mean do we think you're going to get back to your 2019 level on a pro forma basis? Or will it be a material step-down function at some point and then work off that going forward, slightly up or slightly down? How do you sort of see the rebound playing out here for the industry and for your company for revenue? Sort of the $64,000 question.

Yes. No, it is the $64,000 question, Craig. And obviously, nobody has a perfect crystal ball, but we're very optimistic that we will get to a full recovery once we get past the pandemic. And the reasoning for that, and let me take you through because I think it's really interesting, how we look at the current situation and contrast that to 2008/2009 which I know some people look at and wonder, are we going to see that again? And let me start by saying, we're a very different company today, and we're also in a very different situation in a very different industry. And I think if you look at the components of that, it's kind of interesting. So first, at the time, digital was really just exploding. And while it's still growing today, there's less share shift going on from traditional into digital. And even to the extent that there is shift, we now have an enhanced product line, right, that is, that includes deep digital platforms that can meet customer needs. And whether that's addressable inventory or Radio.com streaming Solutions, our network, our Events business, leading podcasts, digital marketing services. So we came to the table in 2008/2009 with nothing. And today, we're obviously much better equipped as a multi-platform company.

Secondly is scale. Radio and Entercom, Entercom too, we didn't have the relationships and the depth and the scale to really be deeply engaged at senior levels with our customers and with their key agencies. And we were much more of a vendor back then, and that's changed. It's changing. I shouldn't -- I don't suggest that it's not a work in progress, but I think we're much better positioned today to be at the table, which is helpful.

Third, we had no data analytics or attribution information at the time to be able to defend ourselves when advertisers were making tough decisions about where to place their money. And today, we have many thousands of our advertisers that are linked into our Entercom advanced audio platforms. We have deep data analytics and attribution information, and advertisers have a much better sense of what works and what doesn't. And I think what people see is that audio and radio get a disproportionately low share of the media mix. And the argument is that they should be spending more rather than less. So we're much better positioned for that conversation.

Fourth, competitive vulnerabilities. Radio is the least disrupted medium today in terms of the changing world we live in. That was not true in '08 and '09. Today, we think competitors are vulnerable, and with our low-cost advantages we think there's an opportunity again to do a better job of having dollars shift towards us as opposed to away from us.

Fifth, as Rich outlined on the call, I think the situation is different in the sense that much of the erosion in our advertising this year is because of the specific impact of the pandemic on our customer base. And so whether it's, again, local gyms or live events or other categories that both Rich and I listed, those businesses aren't going away. And when the pandemic is over and they can ramp up again, they need to get their customers back. And so we expect to fully participate in that recovery. But for now, obviously, that puts a damper on our numbers.

And sixth and finally, is the fundamental strength of listenership. And I know there was some concern about radio listenership in March and April and what was happening, but we've seen now that we're back essentially to exactly where we were before. And you heard the Nielsen numbers. And so again, I think that puts the industry on a really strong competitive platform. And then the last thing I'll say, and I apologize for the long answer, but it is such an important question, is that we are -- our product line now with sports gambling, with our podcasting business and digital, again, I think we're positioned to grow faster with those accelerating elements within our product line. So hopefully, that's helpful.

I appreciate that. If I could just quickly ask, the rate of decline in your ad revenue this quarter year-over-year pro forma, how much of that was volume versus price?

We don't have a specific breakout of that to share with you, but I would say that the bulk of it was volume. But also, there's no question, we took a hit on pricing, and we did a lot of things to support some of our local advertisers at a time when they were really hurting. And so if you factor that into our pricing, obviously, that would exacerbate it. What we've seen is inventory has tightened up. And as the political season emerged, we've seen improvement in pricing, but it's a mix of the 2.

Our next question comes from Steven Cahall from Wells Fargo.

And I joined a little late, so apologies if you've already been over some of this stuff. First, I was just wondering if you could talk to us about the covenant holiday. And just based on the pace of where EBITDA is today, how you feel about the time line between here and when sort of the normal covenants kick back in, in early 2021? And then somewhat related to that, I was wondering if you could speak about podcasting. It seems like we might be on the cusp of a content war here between Apple and Spotify and SiriusXM. So how do you kind of maximize the value of your content against those players? And if acquisition multiples go high enough for podcast studios, would you ever consider being a seller? And then lastly, just on FanDuel, I was wondering if some of that functionality is going to be integrated into Radio.com. Do you see yourself as a potential transaction point in the future? Or is the relationship right now more that you're sort of part of the funnel to help bring sort of users into their ecosystem? And is there any sort of like performance revenue basis for doing so? I know there's a lot there.

Let's take your question is in reverse order, Steven, if we can remember them all. I'll start with FanDuel and talk about podcasting, and then Rich can speak to your first question. So as far as FanDuel is concerned, it is an advertising relationship but with deep custom integration in terms of our content and our personalities and working together to co-create cool elements that will be great for our listeners that will tap into FanDuel's content and insights and data to enrich our unique listener experience. And in turn, we'll be doing creating content and programming that will also serve to drive their business as well. And again, as you can tell, we're really excited about this. It is a landmark deal. And I'm sure, over time, as great partners, we'll come up with more creative applications that will be great for their business and great for ours.

To your second question on podcasting, so first, just for those who don't know our background in the industry, we were able to enter the podcasting space at an attractive price point of all-in $48 million. And it's worth noting that the SiriusXM purchase of Stitcher and Midroll from Scripps came at a price that is about 5x that. And that business is really comparable to what we have in terms of its basic model and size and so forth. And so -- and we are not sellers in the space. We think it's integral to what we do and adds value and symbiotic opportunities in both directions. And what makes us confident and excited about the competitive landscape is that we, perhaps better than anybody, can leverage our platform which has the deepest and richest lineup of spoken word content. The nation's best local news stations, the nation's leading lineup of sports stations. And those are the perfect platforms, as well as, by the way, lots of local personalities, perfect platforms to co-promote our product offerings.

And so therefore, we offer a very attractive platform for content providers to work with us, knowing that they'll be featured on the WFANs and the 1010 Wins of the world, not to mention so many others across the country. And then on top of that, of course, our other platforms to speak of. So we think that puts us in a really nice competitive position and don't believe that, and certainly have not experienced to date, that we're being pushed to do any deals which we don't believe are economic, that aren't economically sound. Rich?

Yes. Just to add to that comment. If you look at the breakdown we provided, revenue by format, in our earnings release, you'll see that 40% of our revenue is tied to our own proprietary audio content. It's actually greater because in the non-format-specific line, that includes our podcasting revenues. So we have over 40% of our revenues tied to our own proprietary spoken word content. I think Spotify would kill for that. Going into your question about the amendment, we have a covenant holiday for 3Q and 4Q. We commence testing at the end of the first quarter of 2021. At that point, the LTM EBITDA for compliance purposes will be based on 3 months of actual for 2019 in the first quarter of 2021. Then of course, as the year progresses through 2021, we dropped a 2019 quarter and pick up a 2021 quarter. So by the end of 2021, the LTM is made up of the four quarters of 2021. And we are focused like a laser beam on recovering our profitability and becoming comfortably compliant with our covenant by the end of 2021.

I don't know if you heard it, Steve, but we did give specific color about the outlook for our cost structure in 2021, and guided that our fixed cost base will be down by $100 million or more versus 2019 pro forma. So we are positioning ourselves to be comfortably compliant by the end of 2021. We've taken very aggressive actions to improve our business model, while also enhancing the experience for our listeners. And there's more work to be done, but the company is focused on it like a laser beam.

Our next question comes from [Monia Chao from Arland].

Congratulations on a solid quarter. I have 2 questions, one on the top line and one on the cost saves, if that's okay. First one is you've described in a lot of detail some of your important categories that are still struggling through recovery and still basically showing a steep decline in September. But at the same time, you've been able to demonstrate a recovery of 50% in Q3 versus 2Q. Could you please provide a little bit more detail on how you're covering that gap? And then on the cost saves, I've estimated that your costs increased about $40 million in the quarter. Would you be able to provide a little bit more color on the drivers of that? Is it fully variable and reflecting increase of revenue? Or is there anything else that we should be thinking of?

Let me take your first question first. And if you could clarify it, because we I think did give a lot of color, Rich in particular, on so many categories that were demonstrably higher in September versus June in terms of coming back to the market. And obviously, some businesses have come back robustly and many others remained dormant. And I -- what were you looking for in your question beyond that?

I think I was looking for maybe confirmation that some sectors that weren't top category before are now presenting a larger share of revenues. I think you mentioned the flight, auto insurance and other things like that. And then maybe some other categories or drivers of revenue that you're seeing now that were less prevalent before COVID?

Yes. Look, I would please like go back and look at our remarks because we detailed those categories. And I think it's a really important point that you're asking us to speak to, because when you look at the radio local advertiser base, we are broader and deeper than many other media. Particularly, I'll say in contrast to local television. And radio is fantastic at bringing people out to events, to the museum, to all sorts of community activities. And those things, as we all imagine, are highly disrupted still. And that's different, I think, than the advertising base of other media companies. But as David said earlier, these businesses are going to recover. Live Nation is going to make it. And next year, hopefully, we're all going to be going to have great summer concerts, going back to the fair, participating in our community, and local radio will be an important medium to get people to drive awareness of those events and get people out. And so I think we look different now because of the nature of our advertising base, but we think it recovers, and we hopefully can get back to 2019 or more. Your cost question, I wasn't crystal clear on what your question was. Can you just talk about that again real quick, please?

Yes, of course. Looking at the P&L, it seems like costs increased over the quarter. That makes sense that revenue increased as well. I was just wondering if it was, the full increase was variable costs or if there was maybe some temporary savings linked to COVID that were coming back or anything else?

Definitely. I get it. Thank you very much. No, absolutely that is a mix of variable and fixed. In particular, during the second quarter with the complete absence of live sports, we were permitted under our agreements with teams to take a pro rata adjustment to our sports right fee obligations, and we did not incur any sports right fee costs in 2Q. We have incurred quite a bit in the third quarter with the NBA and the NHL finishing up their seasons, baseball playing and then the start of the NFL season. So that's significant. And yes, we did have temporary actions that we enacted in the second quarter that have reverted back in the third quarter. So that's -- it's both fixed and variable.

Our next question comes from Gates Garcia from Pinehill Capital.

Hi, David and Rich. First of all, David, as a long-term shareholder in your company, specifically my family, your purchases of and personal conviction in the stock is very impressive, and your alignment with shareholders doesn't go unnoticed. So thank you for that. As to my question, can you elaborate on the FanDuel partnership? What exactly does being "the official sportsbook" mean? You also called it potentially the largest advertising deal in radio ever. But I haven't seen any numbers associated with that comment. Can you provide some color there? Otherwise, congrats on what appears to be just some great trends in your business. I'll hop off and listen.

Thanks. So I'm sure everybody would love to know the numbers, and unfortunately, we're not at liberty to share those because they're confidential under the agreement. What I can tell you is that they will be one of our largest advertisers and that the amount of their advertising will grow nicely. In fact, more than nicely, will grow substantially over the 6 years of the deal as we see more states opening to legalize mobile gambling. Beyond that, again, I think this speaks to having this unrivaled platform. And there's -- as FanDuel came to realize in their work with us, there's really no better way to reach engaged sports fans than through sports radio. And of course, I shouldn't say of course, beyond that, they'll be tapping into other stations of ours as well, but clearly our sports platform is what drives this. I think you're going to see as well, we do deals -- we do work with other sports gambling advertisers, and you're going to see that continue to accelerate, too.

And so we're really bullish on the category and think that we have an opportunity to add a lot of value here over the next few years. When you think about the fact that right now 9 states have legalized mobile gambling, you have 6 more teed up to do so in the next 6 years, New York, Maryland, Massachusetts, Louisiana, Ohio and Oregon. Every one of those markets, we have sports stations ready to go. And we also think that coming out of the pandemic, the need for revenues across our states is going to drive a quicker adoption of legalized sports gambling. So we're, again, really optimistic. And I would add that you should expect to see more from us in the future as we continue to build and capitalize on this platform and look for other ways to grow and monetize around the sports gambling business.

Our next question comes from John Ellis from Palmer Square Capital Management.

Congrats on what seems to be a good recovery. So I'm going to ask the previous question a little bit different way. You guys have kind of an understanding of the revenue contribution that the FanDuel deal is going to basically give to Entercom over the near-term versus the long term. Are you thinking more of the long-term story here? Or are you going to see a significant boost in 2021 revenue from this partnership?

FanDuel will be a significant advertiser for us next year. As I mentioned, they will be one of our largest advertisers. And in addition to that, you'll see it grow considerably over the years ahead as you see more and more states opening up, and therefore, they can spread their wings further on their campaign.

Yes, just add to that, just to follow up on what David said earlier, at this point there's only 9 states that have legalized mobile sports betting. And that's the key driver. That's been the big boom, for example, in New Jersey, mobile. And as David mentioned, there are 6 states teed up that we think will legalize in the next 2 years. We have 10 markets that are proximate to those 6 states and I suspect we do better than just 6 over the next couple of years. So we think this is going to be a key growth driver for us for the next 5-plus years at least.

I'm showing no further questions at this time.

Okay. Well, again, we appreciate everybody joining us here today and look forward to reporting back 3 months from now. Thanks all. Take care. Bye.

That concludes today's conference. Thank you for participating. You may disconnect at this time.