iHeartMedia, Inc. (NASDAQ:IHRT) Q1 2024 Earnings Call Transcript

iHeartMedia, Inc. (NASDAQ:IHRT) Q1 2024 Earnings Call Transcript May 9, 2024

iHeartMedia, Inc. beats earnings expectations. Reported EPS is $495266.67, expectations were $-0.55. IHRT isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello. Thank you for standing by. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the iHeartMedia Q1 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Mike McGuinness, Head of Investor Relations. You may begin.

Mike McGuinness: Good morning, everyone. And thank you for taking the time to join us for our first quarter 2024 earnings call. Joining me for today’s discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President, COO and CFO. At the conclusion of our prepared remarks, management will take your questions. In addition to our press release, we have an earnings presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our financial performance and operating results. These statements are based on management’s current expectations and actual results could differ from what is stated as a result of certain factors identified on today’s call and in the company’s SEC filings.

Additionally, during this call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, earnings presentation and our SEC filings, which are available in the Investor Relations section of our website. And now I’ll turn the call over to Bob.

Bob Pittman: Thanks, Mike, and good morning, everyone. We’re pleased to report that our first quarter 2024 results were in line with our previously provided adjusted EBITDA and revenue guidance ranges. As expected, we saw February and March improve over the January pace of business. Although the marketplace continues to be dynamic with a changing outlook on interest rates, inflation trends and global and domestic uncertainty, we remain confident that this is a recovery year, highlighted by the strong momentum in our podcast business and the sequential improvement of our Multiplatform Groups’ year-over-year adjusted EBITDA performance. We also see material upside from political advertising in the back half of the year and the benefit of our ongoing focus on cost efficiencies as well.

Now let me take you through some of the key financial results of the quarter. In the first quarter, we generated adjusted EBITDA of $105 million. In the middle of the guidance range, we provided of $100 million to $110 million. Our consolidated revenues for the quarter were down 1.5% compared to the prior year quarter, within the guidance range of flat to down 2%. Our Q1 free cash flow was negative $81 million, a significant improvement, compared to the negative $133 million in the prior year. As a reminder, Q1 is our seasonal low point for free cash flow in the year and we will generate positive free cash flow in each of the remaining quarters in 2024, with each quarter increasing sequentially. We anticipate our full year free cash flow to be significantly higher than last year.

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Q&A Session

Turning now to our individual operating segments, the Digital Audio Group generated first quarter revenues of $239 million, up 7% versus prior year and represented 30% of the company’s total revenue. For the quarter, the Digital Audio Group generated adjusted EBITDA of $68 million, up 26% versus prior year. The Digital Audio Group’s adjusted EBITDA margins were 29%, up from 24% in Q1 2023, marking the Digital Audio Group segment’s highest Q1 EBITDA margin ever. Within the Digital Audio Group, our podcast revenues grew 18% versus prior year. Podcasting continues to be the hottest new consumer medium, and we are the leader in that medium in every key metric, audience, revenue and earnings. Podcasting remains a strong growth engine for the company and our financial discipline and podcasting expenses continues to pay off, as our podcasting EBITDA margins remain accretive to our total company adjusted EBITDA margins.

In March, iHeart was once again ranked the number one podcast publisher in the U.S., with more monthly downloads than the next two largest podcast publishers combined, according to PodTrack. Our leadership position in podcasting is, in part, the result of the power of our broadcast radio assets. As a reminder, we’ve used those assets to build not only the podcast business, but also the iHeartRadio app, which is the number one digital radio service and our marquee live events business, which includes the recent iHeartRadio Music Awards and the iHeartCountry Festival. In addition to our industry-leading podcast business and our digital radio streaming service, which has 5 times the listening of our closest competitor, we also have the largest social footprint of any audio service by a factor of seven and we operate 3,000 national and local websites that reach more than 110 million people in the United States each month, all of which represent additional opportunities for our advertising partners to interact with our highly engaged consumer base and provide additional revenue growth for the company.

Turning now to the Multiplatform Group, which includes our broadcast radio, networks and events business. In the first quarter, revenues were $493 million, down 6.7% versus prior year, and down 7.6%, excluding the impact of political advertising. Adjusted EBITDA was $77 million, down 11.3% versus prior year and this represents a substantial sequential quarterly adjusted EBITDA improvement from down 38% year-over-year in Q4 2023. iHeart continues to be ranked number one in radio audience and more markets than the next two largest radio companies combined and our events business continues its strong momentum. For example, the iHeartRadio Music Awards generated 84 billion social impressions, 3 times more than the Super Bowl and 2.3 times more than the Grammys, and we’ve continued to make meaningful progress in the development of our programmatic platforms that enable the automated buying, selling and planning of our broadcast radio inventory, which give our broadcast radio inventory exposure to the digital TAM.

Looking at the business as a whole, we had our first quarter of year-over-year adjusted EBITDA growth in five quarters, driven by the substantial sequential year-over-year improvement in the performance of all of our segments, the Multiplatform Group, the Digital Audio Group and the Audio and Media Services Group, positive indicators of a recovery year. In addition to continuing to build out our business and develop new consumer and revenue opportunities, our management team remains focused on expense management, driving efficiencies and structuring our business using technology, including AI, for long-term profitability and the maximized shareholder value. And now I’ll turn it over to Rich.

Rich Bressler: Thank you, Bob. As I take you through our results, you’ll notice that, as Bob mentioned, our first quarter 2024 results were in line with our previously provided revenue and adjusted EBITDA guidance ranges. Our Q1 2024 consolidated revenues were down 1.5% year-over-year, in line with the guidance we provided of flat to down 2%. Our consolidated direct operating expenses decreased 0.9% for the quarter. This decrease was primarily driven by lower variable content costs, lower event costs related to the timing of the 2024 iHeartRadio Music Awards, which were on April 1st this year and March 27th last year, partially offset by higher third-party digital costs related to the increase in digital revenues. Our consolidated SG&A expenses decreased 4.4% for the quarter.

This decrease was driven by lower marketing expense due to the timing of the 2024 iHeartRadio Music Awards and lower variable bonus expense, partially offset by an increase in certain costs incurred in connection with the execution of our cost savings initiatives. We generated a first quarter GAAP operating loss of $34.7 million, compared to a GAAP operating loss of $48.9 million in the prior year quarter. Our first quarter adjusted EBITDA was $105 million, up 12%, compared to $93 million in the prior year quarter and within the guidance range we provided of $100 million to $110 million. Turning now to the performance of our operating segments, and as a reminder, there are slides in the earnings presentation on our segment performances. In the first quarter, the Digital Audio Group’s revenues were $239 million, up 7% year-over-year and they comprised 30% of our first quarter consolidated revenues.

The Digital Audio Group’s adjusted EBITDA was $68 million, up 25.9% year-over-year and our Q1 margins were 28.5%, a year-over-year increase of 428 basis points. This was the highest Q1 EBITDA margin for the Digital Audio Group in our company’s history. Within the Digital Audio Group are our podcasting revenues, which grew 18% year-over-year and our non-podcasting digital revenues, which grew 1.2% year-over-year. The Multiplatform Group revenues were $493 million, down 6.7% year-over-year or down 7.6%, excluding the impact of political. Adjusted EBITDA was $77 million, down 11.3% year-over-year and this represents a substantial sequential improvement from down 38% year-over-year in Q4 2023. The Multiplatform Group’s adjusted EBITDA margins were 15.6%.

Turning to the Audio and Media Services Group, revenues were $69 million, up 12.7% year-over-year and adjusted EBITDA was $24 million, up 54% from $15 million in the prior year. Excluding the impact of political, the Audio and Media Service Group revenues were up 6.1%. At quarter end, we had approximately $4.86 billion of net debt outstanding, which was the lowest net debt position in the history of our company. Our total liquidity was $788 million at quarter end, which includes a cash balance of $361 million. Our quarter ending net debt to adjusted EBITDA ratio was 6.9 times. In 2024, we expect to make progress towards our goal of a net debt to adjusted EBITDA ratio of approximately 4 times. As highlighted on past calls, we have no material maintenance covenants and no debt maturities until May 2026.