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Good morning, and welcome to Audacy’s Second Quarter 2021 Earnings Release Conference Call. All participants will be in a listen-only mode. This conference is being recorded.
I would now like to introduce your first speaker for today’s call, Mr. Richard Schmaeling, CFO and Executive Vice President. Sir, you may begin.
Thank you, Rob. Welcome to Audacy’s second quarter earnings conference call. This call is being recorded. A replay will be available shortly after the conclusion of today’s call at the replay link or 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 to certain non-GAAP financials. We refer you to the Investors page of our website at audacyinc.com for reconciliations of such measures and other pro forma financial information.
With that, I’ll turn it over to David Field, President and CEO.
Thank you, Rich. Good morning, everybody. And thanks for joining Audacy’s second quarter earnings call. I’m pleased to report a very strong and successful quarter of progress at Audacy as we significantly accelerated our recovery from the pandemic and at the same time, continued to implement important transformational changes across the organization to enhance our future growth and opportunities.
Starting with the financial highlights, revenues grew 73% over the prior year. Our growth was led by a new doubling of our spot radio advertising in second quarter, posting a 98% increase over the prior year. At the same time, we generated a 41% increase in digital advertising and a 23% increase in network radio advertising over prior year. We are in the midst of another strong quarter of sequential progress in Q3. We expect third quarter revenues to grow about 10% from second quarter 2021 levels and by about 25% over prior year.
July 2021 finished 27% above July 2020. Rich will provide some additional color on current business conditions and our expectations for third quarter. As we look ahead to next year, we believe we are on our way back to a full recovery of our pre-pandemic 2019 EBITDA in calendar 2022, as we noted on our last earnings call. And with the expanded breadth of growth opportunities that we have seeded through our various acquisitions and growth initiatives, we believe we are well positioned to compete and accelerate our top line and bottom line performance across our various businesses in the years ahead.
We are fundamentally enhanced and stronger company today versus who we were just a couple of years ago. Our acquisitions of Cadence13, Pineapple Street Studios, the QL Gaming and Podcorn and our development of the Audacy’s streaming platform along with our numerous growth investments and partnerships have greatly enhanced our ability to capitalize on broader advertising trends, augment our product line and better serve our listeners and customers.
Reflecting that transformation, we began the quarter with a total rebranding of the company, leaving behind the old brands and re-introducing ourselves as Audacy, a new name that better reflects the company we have built and where we are headed. Today, we are a leading multi-platform audio content and entertainment company with scaled audience reach and an important leadership position across the full spectrum of the dynamic and growing audio market, including broadcasting, podcasting, digital, network, events, music, news and sports.
During the quarter, we made important strides forward in elevating our podcasting, sports betting, digital audio and radio businesses while planning the resumption of our events business. I’d like to share a number of recent developments and highlights along with some additional color on these recent achievements. First, we are encouraged by the current pace at which we are writing business. To a great extent, earnings reports are a trailing indicator, reflecting the aggregation of sales over the course of the past few quarters, including the darker days of late 2020 and early 2021. Business written, in some ways is more of a leading indicator.
During the month of July, we wrote 7% more business for third and fourth quarter than we wrote for the same periods in July 2019. While it is just one month, this is the first month since the pandemic in which that is occurred and a positive harbinger for the future. We’ve also seen improvement in a number of categories that were severely disrupted by the pandemic.
On the other hand, the recovery is being constrained by the widely reported disruptions in supply chains and labor shortages that have impacted a number of our customers, including auto, our largest category. We expect these disruptions to resolve themselves later in the year, which should generate a meaningful lift in revenues as dormant clients ramp up their advertising, although, we remain wary of the rising tide of Delta variant infections and their potential impact on the recovery.
We are also encouraged by the acceleration in our digital revenues during the second quarter, as we posted strong increases in all three primary areas of our digital business, including podcasting, digital audio and digital marketing solutions. You may recall that our podcasting business had a softer Q1 due to our parting ways with one of our two largest partners, Pushkin Industries at the end of 2020 and a lighter calendar of new show offerings. That dragged our overall Q1 digital growth down. But we noted on our previous call that we expected podcasting to rebound in Q2, despite the loss of Pushkin based upon the strong underlying growth in our podcasting business at both Cadence13 and Pineapple Street Studios. And in fact, we exceeded our own expectations and our guidance with digital revenues growing 41% year-over-year and 17% sequentially from Q1. Digital represented 20% of our revenues during the first half of the year, double its contribution in 2019.
And we are posting very healthy growth in our various digital performance drivers. Streaming MAUs jumped 24% versus last year. Our overall streaming TLH was up 9% versus last year led by smart speaker growth up 31%. Streaming RPMs were up 67% over prior year and podcast RPMs were even stronger up 93%.
And looking ahead, we are very excited by the latest enhancement to our Audacy digital platforms as we continue to drive increases in audience and total listening hours. At the end of June, we launched over 350 exclusive new digital stations on our Audacy platform. Most of these stations, unlike many of our competitors who focus on algorithmically driven playlists are curated by our top programmers, personalities and a number of A-list stars such as Chris Martin, Tiesto, Jake Owen, Sofia Carson and more to come.
We are also pleased to have Coca-Cola, Macy’s and Geico sign-on as our launch partners on this important enhancement to our Audacy digital platform. Our sports betting business is also growing at a very rapid pace. We previously said that our sports betting revenue would grow 50% in 2021 and now we expect to exceed that number as we continue to expect sports betting to grow into a $100 million category for us in a few years, as legalized sports betting continues to spread across the country.
We made a handful of important strategic moves during the quarter to bolster our opportunities. We announced a partnership with Major League Baseball, making Audacy their official podcasting and digital audio partner. The deal includes a number of elements, including the exclusive sales rights to MLB’s digital audio and exclusive use of both live and archived MLB games and other audio. In addition, we continue to expand our betting platform. During the quarter we announced the launch of the BetQL network featuring live sports betting content throughout the day and evening distributed across the country on select radio affiliates, as well as universally on the Audacy digital platform.
It was also a strong quarter for development at our podcast studios. We announced a multi-year strategic partnership with American Public Media, the creators of Marketplace and other prestigious podcast programming. Under the agreement, which launched on July 1, Audacy will be the exclusive podcast sales representative for APM. And in addition, we will jointly develop future on-demand programming initiatives, co-productions and collaborative new revenue opportunities.
We also launched Shining City Audio, a new podcast studio joint venture with Pulitzer Prize-winning author and historian Jon Meacham. Other major releases and announcements include One Click narrated by Elle Fanning, Gangster Capitalism Season 3, focusing on Jerry Falwell Jr. and Liberty University, a second season of the blockbuster To Live And Die In LA in partnership with Tenderfoot, 70 Over 70, the highly acclaimed new series created and hosted by Max Linsky, What’s In Your Glass? with Carmelo Anthony, the 11th new Monthly Magazine show and Tell Me with Ellen Pompeo among numerous others. We now reach one in four podcasts listeners in the U.S. according to the Edison Infinite Dial projected number of monthly podcasts listeners.
And just this week, HBO Max announced an expansion of our existing Audacy podcasting partnership to include additional HBO Max and HBO documentary titles. Also last week, we launched Podsauce, our new audio/video podcast discovery show with Macy’s as our launch partner. And I want to mention that our newest acquisition Podcorn, the podcast influencer marketplace had a strong first quarter as part of the Audacy group, and is now closing in on 50,000 podcasters on its platform.
One last podcasting note, we announced the launch of 2400Sports, our new dedicated sports podcast studio building on our leadership position in sports audio. Our new strategic partnership with MLB making us their official podcast partner will obviously be an important cornerstone of the new studios properties. And we announced a related development deal with award-winning podcast producer Jody Avirgan, whose prior credits include ESPN’s 30 for 30 and podcast projects with WNYC, Apple and Audible.
Turning to events. We are announcing the resumption of a select number of our primary events beginning in September next month, while we will not be back to 2019 levels this year, it is great to be back with live shows and live audiences, featuring a number of the country’s top artists. And finally, radio ratings continue to recover as social mobility has accelerated and should receive a further boost as a greater portion of the population returns to their workplaces after Labor Day.
The latest Nielsen data shows radio audience reach back to 98% of its March 2020 levels. In addition, it is interesting to note that radio now has a 76% share of all ad supported audio in – audio listening in the U.S. led by an 87% share of ad supported listening in cars. This data from the spring 2021 Edison Research Share of Ear study, once again, demonstrates the resilience strength of broadcast radio in reaching and engaging the American public at scale.
As disruption accelerates across other media platforms, radio and audio stand to benefit and Audacy is well positioned to participate with our scaled premium multi-platform content. In some, it was a strong quarter of strategic progress and pandemic recovery across our company, as we continue to build, transform and meaningfully enhance the organization. Audacy is rapidly emerging as a leading competitor in virtually all areas of the dynamic audio business distinguished by the premium nature of our exclusive content and well-positioned for the future. We continue to drive improvements in our business model while investing in new content, products, data, technology, and talented leadership. We are emerging from the pandemic as a meaningfully stronger and better positioned company with enhanced growth potential building on our core strengths and capabilities and our unique asset mix. We are excited by what lies ahead.
And with that, I’ll turn it over to Rich.
Thanks, David. Good morning, everyone. For the second quarter, our total net revenues came in at $304.5 million and we’re up 73% year-over-year. We saw a broad improvement across our revenue lines. Our spot revenues, local plus national we’re up 98% year-over-year. Our digital revenues were up 41%, our net revenues were up 23% and our sponsorship revenues were up by 49%.
Looking at our revenues by format. Sports is recovering strongly, up 157% year-over-year driven by the return of live sports and growth in sports betting advertising. And we continue to see encouraging signs of sequential improvement in our revenue performance. Comparing the month of June to the month of March, we saw that number of active spot advertisers on air was up by over 1,000 or by about 19%. Normal seasonality would typically add under 200 advertisers in June versus March.
And our spot advertising revenues increased by 16% in June versus March. We also saw a significant improvement in a number of key local advertising categories. For example, the concerts category was up over 300% in the month of June versus the month of March. This increase was more than three times the normal seasonal increase. The casual dine-in category was up by 65%. We normally don’t see much change in this category between March and June.
These key local categories that require people to get out and go somewhere amongst other people are springing back to life. Not surprisingly as mentioned by David, our top local advertising category, automotive dealers is still suffering from supply chain related issues. And we suspect that this category will be a key driver of growth in 2022. Looking forward to the third quarter, we are excited to start reactivating our live events business with a few shows in September. This business line historically contributed about 3% of our third quarter revenues, and this year will be less than 1%. But it is a start and it is one more step back towards normal and in the fourth quarter, we are planning a somewhat larger slate of shows.
For the third quarter, based on our current pacing, we project our total net revenues will come in at about $335 million or up by 25% year-over-year. This guidance implies that sequentially, we expect to narrow the GAAP versus 2019 revenues by 7 points to 13% in 3Q versus a GAAP of 20% in 2Q. The GAAP to 2019 was 22% in the first quarter. Our total operating expenses for the second quarter came in at $286.5 million and excluding onetime and unusual costs and adjusting out non-cash items like D&A.
Our total cash operating expenses came in at $264.6 million or up $68.7 million or 35% versus prior year or increased by less than half the rate of our revenue growth. For the first half of this year, our cash operating expenses were down by $91 million or 15.5% versus our 2019 pro forma expense base. Looking at the third quarter, we expect that our EBITDA margin will expand by three to four points compared to the second quarter. We expect that our cash expenses will increase year-over-year by upper teens.
Turning to our financial position and liquidity. Our first-lien net leverage was 2.8 times as of June 30, computed on a compliance basis in accordance with our credit agreement, and as compared to our covenant of 4 times. Subsequent to June 30, we entered into a new three year $75 million receivables securitization facility with DZ Bank to provide additional liquidity to reduce our cost of funds and to repay outstanding indebtedness under our credit agreement. This is a non-recourse facility and the pricing is commercial paper plus 200 basis points.
We fully drew this facility upon closing on July 15, and have used the proceeds to pay down our revolver. Pro forma for this new facility, our first-lien leverage as of June 30 was 2.5 times. At the end of the second quarter, our liquidity was $194 million, up from $160 million at year end. Pro forma for our new receivables facilities, our liquidity was $269 million as of June 30. In April, we filed a claim for a $15 million federal income tax refund, and we expect to receive this refund during the fourth quarter. Our net capital expenditures for the quarter totaled $12.3 million and our full year guidance remains $75 million. About two-thirds of this spend is in support of our key growth initiatives.
With that, we’ll now go to your questions. Operator?
Thank you. We’ll be conducting a question-and-answer session. [Operator Instructions] Our first question is from the line of Steven Cahall from Wells Fargo. Please proceed with your question.
Thanks. I’ve got three. So maybe I’ll just go one at a time. Maybe first excluding auto, would you say you’re seeing sequential improvement with kind of each month this year? And wondering if you’ve got any conservatism for the delta variant baked into that third quarter revenue outlook that you gave?
So we are seeing sequential improvement as we go from quarter two to quarter three. And as we noted there is a – we’re expecting about a 10% sequential growth there overall. So far we’ve not seen any financial impact that we’re aware of from the delta variant, it is something we keep our eye on. Obviously, we’re a fair ways through the quarter at this point in time. So I think it’s probably more of an issue as we look towards fourth quarter albeit at the margin, of course, you never say never.
Great. And then you talked about being to fully recovered EBITDA on next year. I know last year you took a lot of fixed cost or long-term cost out of the business. So for next year, is there incremental investments that we should be aware of, or are you just staying conservative on some of the revenue, like, again, auto and that’s why EBITDA is sort of back to, but not above prior levels?
Well, look, we don’t preclude that to beat 2019. That depends on the recovery, the rate of recovery. And categories that are disrupted today, like, auto dealers getting significantly better, which we reasonably expect will occur, but it hasn’t happened yet. That’s for sure. And if you look at from an expense perspective, Steve, we said that through the first six months, we’re down about $91 million versus our 2019 pro forma expense base of $1.19 billion. And we had previously got it that we thought we’d be about $140 million below that on a full year basis, and that’s still about right.
In 2022, as revenues recover more fully, there are variable costs attached to that revenue growth. And yes, we are continuing to make investments in accelerating our digital growth. So as we mentioned on the last call, we’ll give more guidance about the outlook for 2022 as part of our third quarter earnings call, including more guidance about the outlook for our cost base.
And Steven, let me just add one more comment on 2022. And what we’re looking at is, because of what Rich just said, and the fact that we have made great progress in our cost side of our business, notwithstanding the significant growth investments we’re also making to bolster our opportunities as we go forward. And the fact that our digital business has been growing so rapidly, we’re able to get back to 2019 levels of EBITDA without getting back fully to 2019 levels of radio revenues that begs the question of where we land next year in revenues. And obviously, we’re pretty optimistic about where things are headed, but it’s just to say that from a modeling standpoint the opportunity is there to do well here as we go forward.
Thanks. And then, maybe just lastly, with sports and sports betting, you’ve made a ton of investments. Maybe you can just help us frame what percentage of the business on a go-forward basis is kind of combined sports and sports betting? There is just all those pieces between BetQL and the marketing agreement with FanDuel, as well as the sports radio content, and advertising. So we just want to think about that, it’s kind of a piece of the pie of Audacy. What piece of the pie broadly speaking is sports and sports betting? Thanks.
Yes. I don’t know if we – Rich, go ahead. You take it.
So if you look at the supplemental breakdown of our revenues by format, in the second quarter, sports represented 21% of our total revenues and that’s up 7 points versus last year, which was highly disrupted of course. Then – but, we do expect that over time the sports revenues to become a somewhat larger percentage of our total revenues, and that sports line and our supplemental disclosure by format includes the revenues associated with BetQL, et cetera. So that’s – the intent is for that sports line to be all of our sports dedicated assets.
Great. Thank you.
[Operator Instructions] The next question is from the line of Dan Day with B. Riley Securities. Please proceed with your question.
Yes. Good morning guys. Appreciate you taking my questions. When I think about kind of the EBITDA margin profile here, so I look at 2018 and 2019, you were kind of in the low-20s, you’ve obviously got into some fixed cost reductions. I think going forward, the mix between broadcast radio and digital is obviously going to be different. So can you just kind of put that all together and provide some guidepost around where the margin profile you think should shake out relative to kind of where it was in 2018 and 2019?
Yes. So when we think about the scenario of getting back to as a, I’ll say a starting position, 2019 levels of EBITDA, which was $341 million, we see that the EBITDA margin being low-to-mid-20s. So we do think that – we’ll be able to expand our EBITDA margin over time. We think that in 2022, we get back to where we were in 2019, perhaps a little bit better, and then we’re going to build from there.
Great, thanks. Appreciate it. Just one more on this. I’ve been looking at a lot of the adoption of sort of programmatic solutions within podcasting and digital audio broadly seems to be basically non-existent for podcasting today, really only a small portion of kind of digital audio. So if you could just kind of frame the upside there for digital audio as kind of these ad tech pieces start to get built out, advertisers thinking this more along the lines of digital display, mobile video, these things that they’re buying self-serve programmatically, that they haven’t had the opportunity to do for audio, like, is that what’s driving your digital growth? Are you seeing that and kind of how should we be thinking about that moving forward?
Yes. So the – a lot of the podcasting buys are audience-based buys. So they may not be being bought programmatically, but they’re targeted buys based on audience. So not demographics, but auto intenders, soccer moms, et cetera. And programmatic is an important component of our streaming and podcast revenues today. We expect that to be a much more significant percentage over time. I do think that there is a lot of interest from the leading DSPs, an access to audio supply. We’d like to think over time that audio supply will include our data infused OTA inventory.
And so, we think there is a significant opportunity to expand the exposure of our inventory to digital demand pools, that don’t typically buy OTA inventory today. But I think, we have a few efforts underway with a number of advertisers who are focused on performance, and they’re buying our OTA inventory in companion with our streaming inventory. And we think that’s likely to become a much bigger thing over time. And we see a lot of opportunity for the company.
Great. Appreciate it guys. Best of luck. Thanks for taking my questions. I’ll turn it over.
Thanks.
Thank you. [Operator Instructions] The next question is from the line of Avi Steiner with JPMorgan. Please proceed with your question.
Thank you and good morning. Just want to go back to the expense side if I can, for a minute. And maybe understand some of the drivers of what that second quarter – with loss of Pushkin, maybe a higher margin loss that it didn’t appreciate. Is there something on the – and I apologize if you’ve touched on some of this in your opening script, is it something on the sports side that’s driving up costs where there’s some acquisitions maybe that contributed more expenses, which I’d love to get a little bit more color as we kind of think through the year and move forward? Thank you.
Avi, our expense growth in 2Q was better than our guidance. So we had given revenue guidance of $300 million to $310 million, up 71% to 76%. So we’re kind of right in the middle of that range. And what we said was we expected our expenses to increase at about 50% of our revenue growth. It actually came in at 48%. So I’m not sure, if there’s if people didn’t hear that or just didn’t believe us, but that’s what we said. And the expense growth is being driven by the recovery of revenue. And so we talked about podcasting is growing rapidly. There is a variable expense associated with the podcasts that we represent. There’s – we have a pretty significant digital marketing services business. That’s growing quite rapidly.
There’s costs – variable costs associated with that. So we actually did better than our expense guidance. And if you didn’t hear it, we did say that for the third quarter, we expect our revenues to be up about 25% year-over-year, and our expense growth to be upper teens.
Did I hear – thank you for that clarification. Did I hear margin expansion talked about 3% to 4% that did I miss that or miss hear that?
That’s right. That’s right. We expect so – our margin here in the second quarter was 13%. We expect our margin in the third quarter to be three to four points greater. And we expect to build from there. So the outlook for 4Q, which obviously seasonally is the largest quarter of year, it gets better.
I appreciate that clarification. If I could turn over to auto for a second. And again, if this was addressed, I apologize, but just in terms of visibility, where you sit today, do you see any real bounce back, maybe in the fourth quarter, as you kind of listened to the auto guys talk about chip shortages getting better and dealer inventories improving. Is there a real signs of visibility and where do you think that could come back to relative to historical levels?
I think it varies a little bit by, of course, which manufacturer we’re talking about, some are in better shape than others now. What I will tell you is that we maintain close working relationships, as you might imagine, with dealer groups all across the country. And just anecdotally in one of our largest markets, two of our four largest customers are currently off the air. They happen to be auto dealers. We’re very close to them, as I mentioned, and they’re telling us, they expect to be back to normal here advertising with us and with their businesses sometime later in this year.
And I’d say that is probably fairly par for the course. On the outliers you are talking more Q1 next year. But I’d say more often than not. It’s more of a fourth quarter recovery that we’re hearing anecdotally.
And that’s why we said, Avi, in our remarks that we do expect auto to be a key driver of recovery in 2022 because clearly, it looks to us like through the third quarter, at least, auto dealers demand is going to remain fairly quite suppressed. And it’s not because they don’t want to be on the air. They’d like to have more inventory. And just to add a little bit more color to what David said, when we think about, talking to our auto dealer that the larger guys with multiple brands, they tell us are at like inventory levels that are 10% to 15% of normal. So they have significant inventory issues right now. And hopefully that does get resolved toward the latter part of this year. But right now, they’re still at inventory levels, there are dramatically less than what is quiet normal for them.
That is a great point. And maybe just one more on auto before I get to the last one on the balance sheet, when auto comes back. And again, from what you’re hearing anecdotally in talking to your dealer groups, because it come back to the traditional broadcast channels in your view or is spend maybe spread out more on digital and other platforms.
Well, I think – I think a very healthy portion of it comes back to radio and that is what we’re hearing from them. Now that said, we obviously are dealing with global trends and auto dealers are going to continue to look to digital as a significant portion of their advertising. As our product lineup has continued to evolve, we’re there to meet their needs across that spectrum of their advertising needs as well. And so the level of business we can do with auto dealers going forward, even as the composition evolves, we think remains very robust. But again, I do want to underline we’re not hearing any talk of defecting from radio. It really is just a question of what that media mix looks going forward.
And we also think there’s a lot of opportunity with other traditional media that are being disrupted at a pretty fast clip, seeing where those dollars are going to fall, audio has long since been underrepresented in those buys. And there’s again, some upside there as well.
Great. Thank you. Last one for me just on the ARR commentary Rich, is that meant to be additive to the revolver or ultimately replacing it. And can you just give us the availability on both facilities? And thank you all for the time.
Thanks Avi.
Yes. So the $75 million receivable facility is additive. So at the end of the second quarter, our liquidity was $194 million. And we had – I don’t know, $46 million of cash, $45 million of cash. We have like 90 something, $97 million outstanding against our revolver. That’s $250 million in total. And so the $75 million we drew upon closing and we paid down our revolver. And so it boosts our liquidity from that 194 pro forma to 269. So significant boost to our liquidity, it’s a lower cost of capital. It’s 50 bps cheaper than our revolver. And of course, it’s non-recourse. So this debt – receivable facility debt is not capital indebtedness under our credit agreement.
You answered my next question. Thank you very much for the time.
Thank you.
Our next question is from the line of Aaron Watts with Deutsche Bank. Please proceed with your question.
Hi guys. Thanks for having me on. Just two for me. First one, Rich, just to make sure I’m thinking about kind of the margin commentary correctly, you were at around 13% margin in the second quarter, sounds like that’s bumping up to 16% to 17% in the third quarter, maybe a little bit more margin expansion in the fourth quarter. As you head towards getting to that low 20s context, is that being driven by just your expansion of your revenue growth faster than expenses? Is there any other kind of pushes and pulls as to think about getting from where you kind of end 2021 and where you’re saying you’d like to be kind of back on that 2019 type level margins?
Exactly. So you think about here in the second quarter, we grew 74% - sorry, 73% year-over-year. And our expenses were up 48% of that revenue growth, up 35%. And we expect to see in the third quarter, that gap not be as significant. We’re looking at 25% revenue growth, upper teens expense growth, but we do expect to see that spread sustained until we get back to load at the mid-20s to low to mid-20s EBITDA margin. And there’s a lot of work going on to, as we’ve discussed in the past, particularly in digital where the rep business that we acquired from C13 is not as profitable as we’d like it to be and where we expect it will be.
And we see that being a meaningful driver of margin expansion over time for the company, as we continue to optimize the profitability of digital and grow that portfolio more rapidly. Some of our expense base, of course, in our digital business is fixed and semi variable. So we do expect in the third quarter to give a little more color about the outlook for 2022, then I do think that over time, you’ll see our EBITDA margin continue to expand.
Okay. That’s great. And then one for David, just with your enhanced liquidity now, post the AR facility, can you just update us on how you’re thinking about use of capital in terms of investments in things you’ve already purchased inorganically, versus what opportunities you might see out there to further boost your digital business or even your station business?
Sure. I think our first and foremost goal is to continue to deploy free cash flow to reducing debt, and that doesn’t change. That said, as Rich has alluded to, we are clearly running the business to accelerate our growth. And you see that in our capital expenditures and you see that to some extent in operating expenses as well. We are continuing to bolster and enhance our holistic multi-platform line up, and we’re excited about where that’s taking us. At the same time, we’re being measured and disciplined about that. And balancing that, again, against the desire to continue to be prudent and apply free cash flow towards debt reduction.
If you look at the acquisitions that we have done recently, they’ve been relatively small in size, and we think we’ve found great value in what is a frothy market. Podcorn is a – is the leading podcasts influencer marketplace, we think is going to be a big winner for us. It’s at a very, very early stage, but we see great opportunity there. We’ll continue to keep our eyes open for disciplines, select purchases, where we can meaningfully enhance our future opportunities, but at the same time do so again, in a very measured fashion.
Okay. Great. Thank you.
[Operator Instructions] Next question is from the line of Craig Huber with Huber Research. Please proceed with your question.
Great. Thank you. Your spot revenue, obviously are up nearly double off the lows of a year ago in the second quarter. Can you maybe just break apart for us local versus national? I apologize if you covered this as overlapping conference call earlier.
We haven’t given that detail, Craig. But national is performing, continues to perform somewhat better than local. And we are starting to see in the third quarter local narrow the gap. National is implied in our guidance that national continues to get better sequentially from 2Q to 3Q, I’ll say versus 2019 as a “normal measuring stick”. But we’re seeing local pickup and narrow the gap more fully versus 2019 in 3Q as implied by our guidance. So hopefully that helps.
That is helpful. And then also what we’re talking about, given the pandemic and the issues in the economy, the ramifications on the smaller advertisers out there, is there any updated metrics you can give us on what percent of your ad revenue or percent of your clients is no longer advertising with your company on the traditional radio side? You’ve given that sort of in the past. Is there an update?
Yes. It’s hard to do that now because there’s a lot of normal attrition in the business. The one thing we did talk about Craig, and I don’t know if you heard it was that when we look at the month of June compared to the month of March, the number of advertisers on air was up by over 1,000. Typical seasonality the increase from March to June in terms of the advertiser account is under 200. So we’ve seen a very significant increase about 19% in a number of advertisers on air and that trends, we expect to continue. So it’s hard to know, but I think we talked about our bad debt experience, number of bankruptcies we saw last year, we have not seen a lot of our local advertisers go out of business and disappear.
We talked about it probably during the fourth quarter call, we were presently surprised. We were worried going into – if we were talking back in April of 2020, we were worried that it was going to be worse than seemingly where it’s ending up. We have not seen a lot of our local advertisers go bankrupt. We’re seeing a lot of them come back on the air. And we think there’s a – our sales force is talking to all of these people and there’s a lot of good signs that as things continued to get better. So if they’re not back, they’re going to be back.
And then can you also talk about your network advertising, obviously at the change with Westwood One earlier. And you brought that inventory in-house. I mean, you obviously had a good quarter, I thought in the network advertising here in the second quarter. Maybe talk about how you thinking that’s going to go out for the rest of the year.
Yes. look, I think – sorry, David.
Well, I just can make one comment and then Rich, you can add to it. I think it’s worth noting that we talked about the fact that our network radio advertising was up 23% in the quarter. That’s a net figure. Within that our audio network was up significantly more, but that reflects the whole category. So to some extent you see the diminished amount of inventory that we are providing with third-party partners. Rich, do you want to expand upon that.
No. So I think that right now, Craig, we’re going to see continued strong growth in network and frankly, and we’re doing some – we’ve launched a couple of new products that help us drive sellout higher, help us sell inventory at higher cost per points before inventory spoils. So there’s a lot being done to optimize the inventory utilization. So we do see a pretty good runway for growth in network. I don’t think we’ll continue to fuel that growth by adding more inventory to the pot, because frankly as local demand is returning and national spot demand strengthens, we can sell that inventory at a higher rate in other categories. So we’re going to see continued strong growth in network. I don’t expect this kind of substantively accelerate that from the pace we’re at today, just given that there’s higher and better uses for that inventory and other sales channels.
And then also Rich, given the focus on the debt load here, I guess, it’s up $27 million, $28 million in the first six months here. Where do you expect your net debt to be at the end of the year versus where you started a year?
Right. So look, end of this year, we expect our total net leverage to be down several turns from where it is currently. And we expect – if you play out the scenario that David discussed of getting back to 2019 levels of EBITDA in 2022. And we put that out there as a base scenario, our aspiration of course is to do better than that. But if you just assume we get back to 3.41%, we expect, if that’s true, we’ll pay down over $100 million of debt in 2022 and our total net leverage by the end of 2022 will be nicely inside 5x. So, I think Craig, you’re going to see our leverage fall pretty rapidly as this recovery continues to unfold and we are focused like a laser beam on getting our leverage down to inside 5 by the end of next year. And not so long thereafter getting inside 4.
The nitpick question, Rich, your corporate expenses, just excluding the one-time items, it’s running at about obviously $22 million this second quarter here running on an annualized basis $88 million. Why is it up so much? I mean, you’ve talked about the last quarter, it was a lot of extra branding advertising that was – company that was running to that one. What should we expect the remaining part of the year? And maybe you’ll go forward number as well. What’s the normalized number? Thank you.
Yes. I don’t have that handy. I’ll look for that. But what’s interesting is and maybe this is something we need to think about presentation because we are growing, I’ll say a central digital team. So we have digital resources at the market level. They’re part of station operating costs, but there’s also a growing and increasingly significant digital team that’s not housed at the market level. And that is the most significant driver of our so-called corporate expense growth.
I’ll take the wrestle offline. Thank you very much, guys. Appreciate that.
Thank you, Craig.
Thanks, Craig.
Thank you. We’ve reached the end of the question-and-answer session. I’ll turn the call over to David Field for closing remarks.
Well, thank you so much. Thank you everybody for joining the call. We’re looking forward to reporting back to you after the summer. Everybody take care. Bye now.
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.