Entercom Communications (ETM) Q1 2019 Earnings Call Transcript

Entercom Communications (ETM)
Q1 2019 Earnings Call
April 30, 2019 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Entercom's first-quarter 2019 earnings release conference call. [Operator instructions] This conference is being recorded. I would now like to introduce your first speaker for today's call, Mr. Rich Schmaeling, CFO and executive vice president.

Sir, you may begin. Thank you.

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Thank you, and good morning, and welcome to Entercom's first-quarter earnings conference call. This call is being recorded, and 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. 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 make reference 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, president and CEO of Entercom Communications.

David Field -- President and Chief Executive Officer

Thanks, Rich. Good morning, everyone. Thanks for joining us for our first-quarter earnings call. I am pleased to report that Entercom delivered another strong quarter of revenue and EBITDA growth in first quarter as our performance continues to accelerate.

Revenues increased 3%, while operating expenses declined 2%, driving a 42% increase in EBITDA. We are feeling good about our progress and believe we are on track for a strong year of growth in 2019. First quarter was our second straight quarter of solid revenue and EBITDA growth, and pacings look promising as the transformational changes and the hard work of our team are paying off, and we continue to drive improvements across the business. We are pursuing aggressive development plans across multiple key scale-driven growth initiatives and are excited about where we are added in these various areas.

Radio.com is thriving. The Entercom Audio Network continues to grow nicely. Our national client partnership team is elevating our dialogue with the nation's largest advertisers, and we are starting to roll out new analytics and attribution products for customers. In addition, our core radio business is showing signs of local improvement at the same time as our national ad sales remain strong.

And we clearly turned the corner several months ago with the legacy CBS radio stations, which have returned to growth after many years of decline prior to the merger. At the same time, we continue to stay on track with our synergies plan, which is scheduled to reach $110 million in net cost savings as planned, including $45 million or more in 2019. Last week we completed a very successful issuance of eight-year notes that will enable us to increase the fixed-rate composition of our borrowing to over 40% and extend our maturities and provide greater financial flexibility at a highly attractive interest rate. Rich will provide some additional color on this transaction in a few moments.

I'd like to share some additional color on our first-quarter results, along with a few updates and thoughts on our progress on other key fronts, before turning it over to Rich and then your questions. Our best-performing markets were New York; Houston; Atlanta; Washington, D.C.; Denver; and Sacramento. It's worth noting that the first four were all legacy CBS radio markets. While internally, we have long since moved past identifying markets based upon their legacy ownership, we understand some investors are curious about how we're doing in those legacy CBS markets.

The news is good, as we are growing revenues and cash flow in both legacy Entercom and CBS markets and have been doing so since Q4. And the relative performance gap between the two legacy groups has closed. In the second quarter, both groups are pacing about consistent with each other. Our Q1 revenue growth was led by national, digital and network, while events and local lagged.

Total spot business, which includes both local and national spot radio sales, was flat. Digital, which is now 10% of our overall business, was up significantly, led by very strong growth in digital audio sales as we're now beginning to participate in that market through our Radio.com platform. Events was down due to the discontinuation of a major Super Bowl concert event, which reduced revenues for the quarter by about 1%. Traffic added about 2% on added revenues due to the easy comp we were up against.

Turning to categories. Consumer product spending continued to surge. There was also strong growth in TV cable, insurance, gambling, department stores and discounters, and recruitment. Auto was off slightly.

And I also want to give a shout-out to our news division, which last week received 29 Edward R. Murrow Awards from Radio Television Digital News Association for outstanding achievements in electronic journalism in large market radio, far and away the most of any broadcaster. We closed on our merger almost 18 months ago. We noted that the combination of Entercom and CBS Radio would be transformational, establishing a new fully scaled broadcaster, the No.

1 creator of live original local audio content and the unrivaled leader in news and sports radio, reaching and engaging over 170 million people each month and with the scale to compete far more effectively against other media organizations. Since closing, we have moved aggressively to drive change in virtually every facet of the business to enhance our organizational effectiveness and capitalize on our opportunities. Our efforts are focused around several scale-enabled growth drivers, each of which I'd like to touch up on briefly. First, the rapidly growing digital audio advertising market, which is in excess of $3 billion and growing by over 30% annually.

This is a brand-new market for us, enabled by our scale and the establishment of Radio.com as a player in this space. Radio.com has been the fastest-growing digital audio app in the U.S., according to comScore, for the last 10 consecutive months. In addition, the Radio.com app has the highest household income scores among the various ad-supported apps in our category, running 20% above the peer group. We believe this is an important reflection of the quality of our proprietary premium local news and sports content and the audience which it attracts.

And I am pleased to report this morning that we're announcing an innovative first-of-its-kind multi-platform partnership with Waze. As part of this deal, the Radio.com app will be integrated into the Waze app for seamless connection to our best-in-class lineup of premium local Entercom and affiliate stations, and Waze-powered maps navigation and controls will be integrated into the Radio.com web and mobile platforms. The Waze agreement is a reflection of the competitive importance of Radio.com and the Entercom station group. It follows a number of other significant partnerships that we've launched with other leading digital brands and platforms.

We're also well-positioned to thrive in the small but rapidly growing podcasting market. We continue to be encouraged by the progress of Cadence13, one of the country's largest podcasters. We own a 45% stake in Cadence13 with an option to acquire the balance. While we don't consolidate their financials, it is worth noting that the company is thriving with downloads increasing 70%, 7-0 percent, year over year in the first quarter and being named one of Fast Company's most innovative companies of 2019.

The combined Entercom and Cadence13 podcasting businesses generate over 100 million monthly downloads. We're also very well-positioned to participate in the emerging sports gambling market. A recent Goldman Sachs study concluded that total sports betting will grow to $15 billion in 2022 and over $30 billion in the long run, and it is likely we will see a $2 billion ad market emerge. Entercom is the unrivaled leader in the sports radio business with over $30 million avid sports fan listeners and most of the country's leading sports radio stations and personalities as well as 80 pro and major colleges that call us home.

In addition, we have recently launched Radio.com Sports to provide additional unique sports content and opportunities for national advertisers. On our last call, we mentioned the successful launch of the Entercom Audio Network, our direct foray into the over $1 billion radio network market. Launched last July 1, we are off to a strong start as advertisers are drawn to Entercom Audio Network as a uniquely premium network that provides advertisers with access to our leading brands without the dilution of tertiary stations. New advertisers to the network include Amazon, Exxon, JCPenney, Progressive Insurance, Quicken Loans, Sprint, Target and Walmart.

Revenues are accelerating nicely, and the Entercom Audio Network has emerged as a solid contributor to our growth in 2019 and beyond. In addition, we're capitalizing on our scale through the national client partnership team, which we launched in 2018, to elevate our relationships with many of the country's largest blue-chip national advertisers. We have signed deals with a handful of major national accounts and expect these national client partnership development efforts to become an increasingly important part of our growth story. Radio and Entercom are highly undervalued and deserve a largest share of the ad pie, and we expect progress toward this goal in the years ahead.

Finally, we are making strong early progress with our various data analytics and attribution efforts. We have made a significant investment in these capabilities. We've had meaningful success with our Entercom analytics product, which has demonstrated strong attribution for radio and its impact on clients' website traffic. We now have over 6,000 advertisers connected to this analytics platform, including some of the largest brands in the country.

We are in the process of rolling out several new attribution products, including foot traffic, app downloads and more. We believe our enhanced data and attribution capabilities will make a significant impact on our work with both local and national customers. Turning to second-quarter performance. Revenues are currently pacing up more than 4%.

Second-quarter pacings are continuing to reflect strong growth in national digital and network. In addition, local is improving a bit as well. We are also anticipating that second quarter expenses will be down slightly, which should enable us to again deliver double-digit EBITDA growth. I want to take a moment to give a shout-out to our management team.

Transformation does not happen overnight. Our team has been working hard over the past 18 months to drive meaningful change and to capitalize on our abundant growth opportunities. I'm proud of the work of our team that is enabling us to drive strong progress across many fronts and to post our second straight quarter of significant growth with strong pacings as we look ahead. On a final note, as the No.1 reach medium in the United States with superior ROI and also arguably the least disruptive medium, we continue to believe radio should garner a larger share of customer ad spending.

And with audio hotter than it has been in decades due to explosive growth in smart speakers, podcasting and hearable devices, plus the increasing importance of audio search and the significant disruption to many of our competitors, we believe catalysts are emerging to accelerate radio's growth. We also believe with our scale and our premium local content and our emerging new capabilities, as noted above, Entercom is well-positioned to capitalize on these opportunities, and we are excited about what lies ahead. And with that, I'll turn it over to Rich.

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Thanks, David. Our first-quarter net revenues were up 3% and were up about 1% ex recovery of traffic revenues. Revenues for legacy Entercom and our legacy CBS radio stations were both up in the first quarter and both are pacing up in the second quarter. In addition, as David mentioned, the relative performance gap between the two groups has closed, and the legacy CBS radio group is pacing about consistent with the legacy Entercom group in the second quarter.

As David noted, we are pacing up over 4% in the second quarter, and we're about 80% booked at this point in time to our estimated finish. Our 2Q pacing stat reflects about two points from the year-over-year benefit from selling our own traffic inventory. In addition, in 2Q, we are bumping up against tougher political comps in this odd year and the decline in political year over year in the quarter is pacing to cost us about one-half point. So ex traffic and political, we're pacing up more than 2.5%.

This pace represents a nice acceleration from the first quarter and is being driven largely by strengthening spot performance. We can't parse this apart with precision until we get the data, whether this is due to the market getting stronger or if we are gaining share, but we suspect it's the combination of both. In addition, our digital product line, while still fairly small, is gaining steam and is pacing up mid-20s in the second quarter. Our total as-reported operating expenses for the quarter came in at $278.6 million and include $2.1 million of integration and restructuring costs.

For the first quarter, excluding onetime costs and adjusting out noncash items like D&A and miscellaneous income, our total cash operating expenses came in at $266.3 million or down 2% versus $270.5 million in the first quarter of 2018. In the first quarter, we realized approximately $10 million of incremental net cost synergies, and our total cash expenses for the quarter came in about two points or close to $6 million greater than what we expected. Half of this amount is due to added expense to mark-to-market our deferred compensation liability due to the strong 1Q performance of the financial markets. The other half is due to a timing difference in when we will realize net cost synergies associated with our integration program.

We continue to expect to realize in P&L during 2019 $45 million or more of incremental net cost synergies. Thus, for the full year, after factoring in two points of normal cost escalation, we expect our total cash expenses will be down year over year by around 2%, and we now expect our savings to be more ratably throughout the remainder of this year. Turning to our financial position. During the quarter, as disclosed during our fourth quarter call, we closed on a sale of surplus land buildings and towers for $25 million and used this cash, plus cash on hand, to fully pay off our revolver, which had $180 million outstanding at the end of last year.

During the remainder of this year, we don't currently anticipate any further significant redundant asset sales. At the end of the first quarter, we had $68 million of cash on hand, and all of the restrictions that existed at the end of last year had lapsed. Our net debt at quarter end was about $1.6 billion. And calculated in accordance with our credit agreement, our total net leverage was 4.4 times and our senior secured leverage was 3.3 times.

Later today, we expect to issue $325 million of second-lien eight non-call three secured notes at 6.5%. We're also amending our maintenance covenant to make it a first-lien test. The covenant itself will remain four times. This transaction is scheduled to close today, and we plan to use the proceeds from this offering, cash on hand, that are drawn against our revolver to pay down $425 million of our Term Loan B, bringing that outstanding balance down to about $867 million.

Pro forma for this transaction, our first-lien leverage at March 31, declines from 3.3 times to 2.5 times. Our covenant EBITDA cushion more than doubles to over $140 million. Our percent floating-rate debt drops by 20 points to mid-50s. Our projected annual cash interest at current LIBOR rates and holding our debt balances constant increases slightly to $99 million, and our weighted average cost of debt at March 31 goes up by about 20 basis points to 6%.

The ratings on our first-lien debt were notched up by both Moody's and S&P, and our term loan has traded up slightly above par. This offering was well received by the credit investor community and we believe bolstered perception of both radio and Entercom. In the first quarter, our capital expenditures were $20.5 million, up from $7 million in the first quarter of 2018, largely as a result of a number of integration program facilities projects. For 2019, we continue to expect that our capital expenditures net of tenant installation allowances of about $10 million will range between $55 million and $60 million, and we do expect that in 2020 for our capital expenditures to fall back more to low-40s.

Before I hand it back to the operator for questions, I want to make mention that we adopted the lease accounting standard -- the new lease accounting standard in the first quarter, and you will see that our balance sheet as a result is grossed up by about $300 million. You will find more detail on the adoption of this standard in our 10-Q, which we plan to file before the end of this week. With that, we'll now go to your questions. Operator? 

Questions and Answers:

Operator

[Operator instructions] Our first question will come from Marci Ryvicker from Wolfe Research.

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you. I just want to drill down a little bit on expenses for the rest of the year. I think I understand it, but I just want to clarify. Rich, you said that after factoring in core opex's two points, that you're going to be down 2% in the process.

And then can you give us also a run rate for corporate?

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Yes. So when you think about last year, our total cash operating expenses were $1.153 billion, plus about 2% normal cost escalation. That's about $23 million less 45, gets you down to a ZIP code of $1.130 billion for the full year 2019 or down about 2% year over year. That's what we're expecting.

Our first-quarter corporate expenses were elevated somewhat as a result of deferred comp adjustment I mentioned just because the markets roared and also because of an accrual for franchise taxes. I do think that for the full year, our total corporate expenses will be inside $65 million.

Marci Ryvicker -- Wolfe Research -- Analyst

OK. And then, David, you mentioned double-digit EBITDA growth. I mean, we saw 40% -- a little over 40% in Q1. I assume for Q2 that we're going to see a little bit less than the 40%.

I don't think it would accelerate from there, correct?

David Field -- President and Chief Executive Officer

I think that's right. I think that as much as anything reflects sort of the nature of -- the seasonal nature of first quarter and the heightened leverage you get as a result of that.

Marci Ryvicker -- Wolfe Research -- Analyst

OK. And then when you talk about the or more in $44 million of synergies or more, where would the or more come from?

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

So we're in the midst of completing a number of our integration program initiatives that we have been working on for over a year and then also working to execute the procurement project, etc., etc. It was a lot of things still in flight associated with our integration program. That's due to wrap up by the end of the second quarter. And so we're going to stick with $45 million or more.

And as we progress, we'll give you a further update for how we expect the full year to evolve. But right now, we feel pretty comfortable saying we expect our total cash expenses to be down about 2% year over year in that ZIP code of $1.130 billion.

Marci Ryvicker -- Wolfe Research -- Analyst

OK. And last question. David, you mentioned gambling being strong. Is that new money coming from legalized gambling?

David Field -- President and Chief Executive Officer

Yes. The category includes casinos and lottery and sports gambling. That's how it's reported to us by Miller Kaplan. We're seeking to have that split out because we think it would be more illustrative to see it separated, but it is lopped together.

That said, we know that the driver behind that has principally been an increase in sports gambling in those markets where sports gambling has been legalized.

Marci Ryvicker -- Wolfe Research -- Analyst

Thank you so much.

David Field -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Curry Baker from Guggenheim Securities. Your line is now open.

Curry Baker -- Guggenheim Securities -- Analyst

Good morning, guys. Thanks for the question. I guess maybe just following up on sports gambling, the last question, and I have one more. How quickly do you see the sports betting market ramping? I think about eight states have legalized now.

Another 30 have legislation in the works at some point or another. I mean, given your strong sports footprint, how quickly do you see this ramping? And ultimately, what you see that the pie over the next five years being coming from sports betting? And what do you see your share -- your fair share being of that?

David Field -- President and Chief Executive Officer

Right. Well, there's a lot in that question. We look at the legislative calendar across the country and think there will be a fairly rapid adoption across the United States that will impact us in various markets, particularly those where we have sports stations. As we mentioned, we've seen estimates at the sports gambling advertising market could be in the neighborhood of $2 billion.

If you think about radio getting a chunk of that, a reasonable chunk of it, and Entercom's prowess in the sports market, we think this could become a $100 million category for Entercom over time. That is certainly a reasonable aspirational goal.

Curry Baker -- Guggenheim Securities -- Analyst

OK. Thanks. And then maybe shifting to analytics. I think Entercom analytics, you said, now you have over 6,000 clients.

I think that number was 5,000 when you reported for the fourth quarter. Can you maybe give us the share of revenue currently that represents in terms of your overall client base? And then maybe any sort of timetable for those additional analytics tools you plan on rolling out this year? I think you called out the traffic and app downloads among others. And then maybe just touch upon just the overall importance of having these analytic tools for advertisers going forward.

David Field -- President and Chief Executive Officer

Yes. I mean, look, it is, we think, a really important part of our strategy going forward, giving ourselves better ammunition to be able to talk to advertisers at a campaign level on the efficacy of their advertising and give them additional analytics information to be able to determine how best to deploy their numbers between which stations, which dayparts, which commercial copy, etc., etc. Even with 6,000 clients, it is becoming a somewhat significant, albeit relatively small, percentage of our advertisers at this point in time. And we do think that, that -- the new attribution products we'll roll out, some of them are rolling out now, others over the course of the year.

And we're making a nice investment there and expect that to continue to be sort of a robust development pipeline as we go forward.

Curry Baker -- Guggenheim Securities -- Analyst

Great. Thanks for the questions, guys.

Operator

Our next question will come from Aaron Watts with Deutsche Bank. Your line is now open.

Aaron Watts -- Deutsche Bank -- Analyst

Hey, guys. Thanks for taking the question. David, you've spoken to the positive rating traction you had had through 2018 and early 2019. Can you talk a little bit about more about what you're seeing here at the midpoint of the year and maybe any -- call out any places of strength or softness where you'd like to improve? And maybe also if you could specifically touch on what you're seeing in sports, that would be helpful.

David Field -- President and Chief Executive Officer

Yes. Our ratings are running about 3% ahead of where they were at the time of the merger. They've leveled off a bit since we have -- we went up -- we were 11 and one in our first year and did not expect to go 11 and one again in our second year. But we're seeing a number of really strong situations across the country where we have focused brands that are making great headway and inroads against their goals.

So we feel very good about the strength of our brands and our competitive position and continuing to make the investments in marketing and research and great content to continue to drive that forward.

Aaron Watts -- Deutsche Bank -- Analyst

And are you seeing stability in the sports ratings? Or any ups or downs there?

David Field -- President and Chief Executive Officer

Yes. I think sports has been sort of par for the course in terms of the overall picture.

Aaron Watts -- Deutsche Bank -- Analyst

All right. And then just in terms of visibility, obviously, fairly strong pacings for Q2. And I think, Rich, you mentioned 80% booked. Are you seeing any shifting on booking patterns this year versus even last year?

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

It's probably somewhat later placing, to a modest extent, but generally consistent with the past best practice or past performance.

Operator

Our next question will come from Zack Silver with B. Riley FBR. Your line is now open.

Zack Silver -- B. Riley FBR -- Analyst

First, on the Entercom Audio Network, you guys, I think, last year said that you had around 3% share of that market and expected that to double over the next couple of years. Is there any change to that outlook? And do you -- in terms of the overall market, do you still see that kind of growing in the mid-single-digit range?

David Field -- President and Chief Executive Officer

Yes. I mean, the network business, as you just touched on, has been growing nicely. I think that we have discussed the fact that because of the premium nature of our brands and the fact that we don't sort of muddy it up with a bunch of sort of tertiary stations, we think it gives us a competitive edge with our clientele. But we also don't want to utilize too much of our inventory against the network market.

We want to limit that and maintain a fairly disciplined approach to it. And so the numbers that you cited, I think, sound sort of good, in the ballpark.

Zack Silver -- B. Riley FBR -- Analyst

Got it. And then one on political. I mean you guys under index relative to TV in terms of political dollars, but I think your reach trends are holding up maybe better than the TV peers. So can you talk about maybe your feeling around 2020 election cycle and whether there's any opportunity to capture more political dollars in what looks to be a pretty heavy election cycle in 2020?

David Field -- President and Chief Executive Officer

Yes. I mean, look, it's -- I think it certainly appears as though we will see a robust amount of ad spending. We think that radio -- and we have data to support the fact that radio represents a terrific value to candidates, not just from an ROI standpoint, but also from a share of voice standpoint. You think about how crowded some of the media get in terms of the number of messages you're bombarded with.

And therefore, we think that we have a strong competitive offering. This will be our first presidential election cycle where we have the benefit of our scale. And so we're hopeful that we'll be able to see some incremental lift there. But it is -- we'll see how it all plays out.

Operator

Our next question will come from Craig Huber from Huber Research Partners.

Craig Huber -- Huber Research Partners -- Analyst

I have a few questions. In the quarter, can you maybe break out national versus local, what the percent each is of revenue and how did each perform? If you can be more specific on that, please?

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Historically, radio has been about 80% local, 20% national, if you exclude sort of the events in digital and the other parts of our business. National was stronger than local during the first quarter, and we've seen that pattern continuing for some time. Although, as I noted earlier on the call, we have seen some improvement in local recently, which we're encouraged by.

Craig Huber -- Huber Research Partners -- Analyst

Is it possible to put some numbers around that? I'm just curious how much better national tracked for you year over year versus local?

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Yes. So we're looking at, in the first quarter, national plus local, as David said, was about flat. Then local was down a little bit and national was up mid-single digits.

Craig Huber -- Huber Research Partners -- Analyst

Great. I believe on your last two conference calls, you guys talked about Procter & Gamble. You singled them out, that they were doing -- spending a lot more money on your radio stations. So I was just curious if you can touch upon that.

They're obviously a major advertiser. Out there, there's a lot of smaller advertisers who look to their trends, how they're spending their marketing and advertising dollars. Can you touch on that, please?

David Field -- President and Chief Executive Officer

Sure. The trend continues. We spend a lot of time talking about that in the last call. Nothing has really changed.

They continue to make public statements about the effectiveness that they are seeing in radio, and they continue to spend robustly and growing rapidly in radio. And as we know, there is perhaps no other company that is more rigorous in their deep analytical work of their spending. So it is a great reflection of the fact that they are seeing terrific value in their investments in radio. And we do think it's a bellwether account, which will -- that is certainly not lost upon other advertisers as they look at their -- what they consider to be one of the smarter players out there.

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

If you look back at that, there's an article published by Media Post that Procter & Gamble jumped from 39th place in 2017 in terms of its rank among radio advertisers, from 39th to fifth place in 2018. So they really have ramped up their spend quite a bit. You're right, they are a bellwether. Other people see that and ask us questions why, which is a great conversation for us to have.

And we're working, of course, to broaden that into other categories.

Craig Huber -- Huber Research Partners -- Analyst

And then also if we can just switch a little bit here, if you'd add up your stations that focus on news, opinion and sports, what percent roughly in, say, this latest quarter, of your ad revenues came from those stations?

David Field -- President and Chief Executive Officer

Yes. I mean, if you look at spoken word collectively, which is, I think, what your point here is it's roughly about 40% of our revenue mix across our stations.

Operator

Our next question comes from Patrick Clavin [Sp] from Shay Capital.

Unknown Speaker

I really wanted to just circle back with you on the internal capital allocation policy. Coming post the RMT closure, you came out pretty aggressively and repurchased around 50 million shares at a price nearly 70% above where it's currently trading and then halted the buyback. You continued a very high dividend policy, paying out about $50 million a year to shareholders, rather than continuing with the buyback at share prices that were materially lower that -- where you thought was prudent to put that money to work early on. Could you explain the logic behind that? How does that make sense to buy back all that stock at $10 and then cancel it and then continue to pay out such a large dividend and not be buying back stock at these levels and really kind of what your thoughts are on a go-forward basis in terms of repurchasing stock and these new movements on the balance sheet that you just recently did?

David Field -- President and Chief Executive Officer

Sure. So first and foremost, let's start off with noting that we do have a strong conviction that our stock is highly undervalued. It is trading at a high-teens free cash flow yield. We like where we are in the business.

We like where we are headed. That said, we also have a fiduciary responsibility, and we're running the business strategically. And so our first priority is to continue to drive toward the level of leverage, which we have said is in the 3.5 times zone. We do pay a very attractive dividend, which represents less than 30% of our free cash flow.

And in addition to that, we have been very selective in looking at acquisition opportunities and have done a handful of one-off deals where we were able to we think add great value, add value from a shareholder standpoint and also not touch our leverage. Obviously, our board of directors looks at all of these of potentially levers and navigates as we think makes the absolute most sense for our shareholders as we'll continue to do.

Unknown Speaker

Got it. So I just -- to kind of clarify within all of that, that there was something that made sense to buy back stock at $10 but not at $6.

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Well, our stock was undervalued at $10 we believe. We believe our stock is also undervalued where it is today, but we have multiple responsibilities and priorities. And again, we have to make those choices as we think are in the best interest of our shareholders.

Unknown Speaker

Understood. So going forward, with these new balance sheet maneuvers, does this put you in a window to be able to be more active and aggressive with repurchasing shares? Or has nothing changed on that front?

David Field -- President and Chief Executive Officer

Well, that is, of course, a board-level decision. Clearly, this financing we think is a good thing for the organization on a number of levels that Rich and I have both already touched on. And yes, our stock is attractive at these prices, but it's also important that we maintain a discipline and consider all of our strategic options. And we have lots of really good strategic opportunities here, which is a luxury and something that we continue to navigate.

Operator

[Operator instructions] Our next question will come from Avi Steiner from JP Morgan.

Avi Steiner -- J.P. Morgan -- Analyst

Couple of questions here. One, maybe dovetailing on the recent M&A comments you made. I want to get your thoughts on radio deregulation or the potential for it. I think the NAV filed comments the other day with the FCC.

Where does Entercom stand? And if it came to pass, would you pursue further end-market consolidation? Would it be geographic expansion or more of the kind of one-off transactions you've been doing of late? And then I have one more.

David Field -- President and Chief Executive Officer

Sure. So we are optimistic that there will be some deregulation coming out of the FCC. We are in favor of that change, and we believe that the current rules are antiquated and no longer make sense, vis-à-vis, the current competitive landscape. We also note that the Department of Justice plays an important role here, of course, in regulating the industry, and we remain hopeful that they too will seek forward to a mindset and a perspective on the market that reflects the realities of today's current climate.

As to what we will do, we have been -- as I noted on the prior question, we have made a handful of trades and small deals where we saw great value. We believe that with the scale we have and the great strength of our positions across the larger markets in the United States, we are under no pressure to have to add any other stations, for strategic reasons, so we can have the luxury of being entirely opportunistic. Should there be wholesale deregulation? Obviously, that would change the landscape a bit and put us in a position where we would think perhaps differently about the daring options we might have at that time. But of course, that's not on the table today.

Avi Steiner -- J.P. Morgan -- Analyst

Great. I said I had one, but I actually have two. Just a quick modeling one. Rich, how should we think about cash taxes?

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

We expect our cash taxes to be in the low-20s percent. Relative to book PBT, around $50 million.

Avi Steiner -- J.P. Morgan -- Analyst

Great. And then last one for me and a bigger-picture level. You had mentioned a partnership with Waze and it sounds interesting, as it potentially marries mobile device or an app in a mobile device that we all use in cars or many us do with kind of a traditional over-the-air medium. I'm wondering if you can just elaborate on that more.

I know it's early days. Is that something exclusive to Entercom and its markets? How do we think about maybe the long-term opportunity for you economically there?

David Field -- President and Chief Executive Officer

Sure. Waze has partnerships with other audio companies. There are elements of our deal with them, the integration of which are unique to our partnership. And we just think it makes a tremendous amount of sense for both parties and are really excited about it.

And as I mentioned before, it is a great reflection of the strategic importance of our platform and not just these tremendous brands like the 1010 Wins of the world, but in addition, the Radio.com ecosystem and the opportunities we see there working in collaboration with some of the country's largest and most important digital organizations.

Operator

At this time, I have no additional questions.

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

Great. Well, thank you, everyone. Talk to you in 90 days.

David Field -- President and Chief Executive Officer

Thanks, all.

Operator

[Operator signoff]

Duration: 47 minutes

Call Participants:

Rich Schmaeling -- Chief Financial Officer and Executive Vice President

David Field -- President and Chief Executive Officer

Marci Ryvicker -- Wolfe Research -- Analyst

Curry Baker -- Guggenheim Securities -- Analyst

Aaron Watts -- Deutsche Bank -- Analyst

Zack Silver -- B. Riley FBR -- Analyst

Craig Huber -- Huber Research Partners -- Analyst

Avi Steiner -- J.P. Morgan -- Analyst

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