Q1 2020 Earnings Call
Ladies and gentlemen, just be operator, today's call is scheduled to begin momentarily.
King Your line forgive me placement of musical Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Iheartmedia Q1 2020 earnings call.
All participant lines, you know listen only right. After the speakers presentation, there will be a question and answer session.
To ask a question. During this time you will need to press Star then the number one on your telephone keypad.
Please be advised that today's conference is being recorded if your require further assistance. Please press star Zero I would now like to give the conference to your moderator Corinne Kid Senior Vice President Investor Relations.
Good afternoon, everyone. Thank you for taking the time to join US for our first quarter 2020 earnings call. Joining me for today's discussion or Bob Pittman, our chairman and CEO and rich Bressler, our president COO and CFO.
The conclusion of our prepared remarks management will be glad to take your questions. Please note that in addition to our press release, we have an accompanying investor presentation that you can follow along with our remarks.
We begin let me quickly cover the Safe Harbor language on slide two during this call we will make forward looking statements, including the current and expected impact of code 19 on the company's liquidity financial position and results of operations. These estimates are based on current expectations and assumptions that are subject to risks and uncertainties actual results.
It's could materially different from these expectations and assumptions and these risks and uncertainties are discussed in more detail you know filings with the FCC.
Addition, as noted in our March 26, 2020 press release due to the uncertainty surrounding the impact of Koeppen 19, we reiterate that the company will not be providing full year 2020 financial guidance on this call.
During this call we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures can be found in our earnings release or in the presentation available on our website and now I'll turn the call over to Bob.
Thanks Scream and good afternoon, everybody. Thank you for joining our first quarter 2020 earnings conference call before Richard I get into our performance for the first quarter and some real time color around what we're seeing and the business environment today I'd like to take this opportunity. Thank all of my Hearts employees for their inspiring response to the cobot 19 pandemic as we look.
Q1, we began the quarter with continued momentum from 2019 January February were very strong in terms of both usage and revenue across all our platforms. However revenue began to fall off in March as it did for most AD supported companies and that trend became even more pronounced in April but the sharp decline in AD revenue across.
Almost all of our revenue segments as we move past Q1 and examine our performance today, we're seeing two distinctly different stories, one for the consumer and the other for advertising. So I'd like to talk about one what we're seeing with our consumers to what we're seeing with advertising three how we mitigate.
Some of that downturn in revenue and for how we're positioned for the upturn in advertising when it comes let me start with the consumer we know advertising is driven by consumer engagement and engaged audiences are the key to strong sustainable revenue I know that's not the case right now given this temporary downturn in advertising, but it will be when it returns.
And I'd like to take you through the current landscape and discuss how we're well positioned for that recovery.
Radio, which is at the heart of what we do is all about companionship, we inform we entertain we discussed we cure rate, but most of all we keep our listeners company and real times of need like this when they need us more than ever we've seen a time and time again with hurricanes or earthquakes tornadoes shooting spots a more we've all.
We spend there for our listeners and the same is true now has more consumers shifted their lives into the home in late March and April we saw the listening follow not only on am FM, but listening on home devices exploded, we've had a strategy for the past decade to be where listeners are the products and services they expect from us.
As a result, we're now on 250 additional listening platforms are in a uniquely strong position to participate in this increased at home listening. Let me give me a few numbers web is up 43% smart Tvs are up 35% up 28% on gaming console set up 18% Siri even devices that they consume.
There is already using a lot in the home like Alexa were also up others that measured that same impact Nielsen did a survey in late March showing 28% of consumers listening to the radio more during the pandemic versus just 17% who are listening less Abbas group one of the large advertising agency groups released the study from April that 30.
4% of respondents were doing more radio listening than pre cobot and a mindshare studies showed the same.
In addition to our am FM and digital platforms. We're also seeing real growth in our podcast platform. We continue to maintain our lead US number one commercial podcast publisher with about a two to one lead over the next largest commercial pie caster. That's according to pod track the industry standard for podcast measurement and we are one of only two major.
I guess publishers, who grew in terms of unique audience from February March another side of our strong momentum. We also grew usage by 35% year over year based on unique audience and more importantly, our podcast revenue in Q1 grew 80% year over year and is currently pacing at over 100 per se.
Year over year for Q2. In addition, as those of you who follow this closely no. The revenue was generated by podcast publishers not distributors, but as further evidence of the power apply casting we did see usage for podcasting on her own iheartradio app increase over 100% year over year and 20.
9% month over month, making us one of the largest podcast distributors as well, we constantly track consumer sentiment and behavior and even publish a daily report that are program is used to make their programming more relevant every single day and that ability to update constantly is what sets us apart from other media.
Sample this understanding up and responsiveness to the consumer is the reason most of our morning shows added an hour and now in the 11 am instead of the traditional tennis, our listeners have shifted their days and as we began to reopen America that kind of finger on the POLT and the ability of our live and local programming to respond immediately.
Is critical to both our listeners and to our advertisers who are searching for ways to be relevant in the moment and in tune with this massive consumer shift. We've also created unique programming on all our platforms to respond to the realities of this temporary environment. The Iheartradio living room concert for America on Fox was the first major.
Virtual concert and gain record ratings on TV huge listening on the radio and more importantly raised over $15 million, we amplified it all using our position is number one audio player and social and owner radio stations. We quickly added hourly cobot 19 reports and daily Cobot 19, new.
Newsletters, and podcast, which dilutive business is doing good and supported efforts of others brightens pay afford campaign to the global citizen concert, we alluded health care professionals and those in the front line every night with Empire State of mind by Alicia Keys featured on C. 100 in New York hosted by Elvis ran with the Empire.
Stake building, providing a synchronize light show to a company and we also built out Wednesday night living room concert to state farm and first responder Friday's with personnel they'll buy a TNT and finally, we're continually looking for new ways to build a holds in the lives of our audiences. We built out a virtual prom for high school seniors.
String sets from DJ Marshmallow, Diplo and more especial performance from Louis coupled the and hosted by dual Lipa and are on air personality, Joe Joe right and more significantly we're filling the void for graduates with commencement speech is for the class of 2020, which will be delivered as both pie cast and over.
Our 850 radio stations nationwide speakers include John Legend, Eli Manning melody Hobson, Katie Couric, Bobbi Brown, David Solomon Haulsey pit Bull and over 30 more I also want to point out that while we are the number one audio company America were also a major player and not audio digital.
Well and through this crisis that digital audience has reached a new all time high our internal numbers for March show US, reaching 117 million uniques on our digital properties, that's including station and personality sites Interwrap, that's an increase of 32% year over year. Those digital users are in addition to the.
216 million social fans and followers for our products now turning to advertisers we have built their company our platforms enter products to serve our communities and create trust and engagement across multiple platforms with the greatest reach at any other audio company or even any other media company in the U.S. indoor.
Well times were able to monetize that with advertisers to generate growing revenue for the strong margin and great free cash flow characteristics, we fundamentally believe and I've always seen that advertising revenue follows consumers just not at this moment of dislocation advertising overall and most of our advertising streams have seen a major drop.
And the reasons are obvious many businesses or shutdown businesses and brands need time to rebuild their messages to be relevant and a completely changed world and companies needed to save money and many did so by reducing or eliminating AD spend we've seen the most significant declines in our broadcast radio advertising revenue. However.
Over revenue from our smart audio data and analytics that product, which also includes a programmatic platform for broadcast radio has proven to be more resilient than our traditional offerings that part of our broadcast advertising revenue has declined by only half the decline of the rest of our traditional broadcast revenue, which bodes well for our future as smart.
Audio increases as a part of the total AD revenue for our company.
Digital continues to grow driven in large part by podcasting, which as I mentioned before is one area of our business. We're advertising is following listening even in this challenging environment, we're not only monetizing that usage growth, but right now our podcast revenue growth rate is pacing three acts are pie guess listening growth rate, we believe that's due to our.
Position as the number one commercial pie gassner as measured by pod track coupled with the diversity, we haven't content categories on the pod track category Rancor. No publisher is featured a more categories are genres. Then I heart were featured in 16 of the 19 categories and the tight integration of our pie guest with our broadcast radio gives us unique.
Okay and powerful capabilities to create his podcast again and again.
As we reported earlier on sponsorships, we have postponed or canceled a number of events large and small which will impact the revenue line.
Fortunately, it's our smallest revenue segment, representing about 4% of total revenue in Q1, and it has our lowest margins of all.
Richard I and others that are management group have lived through downturns before at different companies and a different times as is required at times like this we responded quickly with major cost reductions to mitigate some of the revenue loss and preserve liquidity.
We will save cost from commissions as revenue declined but our high operating leverage structure meant we had to reduce fix cost as well we announced in February pre Cove and that we've taken steps to modernize the operations of the company to make it function more like a company operating in 2020 and to be more cost efficient through these steps we reduced exposure.
This is by a $100 million annual run rate with $50 million and savings expected in 2020 as a result of the downturn related to covert 19, we found another 200 million an expected cost savings on top of that 50 million for a total of 250 million expense reductions in addition to the substantial sale.
Those cost savings in 2020, we've also reduced our capital expenditures by 80 million and we found another 100 million and cash tax savings ritual explain how we have also focused on liquidity as well, although we can't predict the future. We feel that these significant actions combined with our liquidity lalas to weather the storm.
Even under Conservative recovery scenarios. We also believe that four key strategic actions. We've made in the last decade, and which I'm going to discuss have put us in a much better position as the world returns to normal and well prepared to capture the business demand as it returns.
Let me start with our first strategic decision almost 10 years ago, We launched our digital radio platform Iheartradio to allow our stations to be heard no matter, where the consumer is and on devices other than broadcast radio as I mentioned earlier, our strategy was and is to be where our listeners are with the products and services they expect from us.
I heard radio is now one over 250 platforms from smartphones. The video game console Smart Tvs and smart speakers. This gives additional horsepower in the home and as a key point of differentiation between us and other audio players are massive reach comes from am FM devices, where we have a two to one audience lead.
Over the next largest broadcast radio company, but on digital radio that lead is magnified we have a fivex audience lead over the next largest broadcast radio company. So our company is now agnostic as to the listening platforms, which gives us the flexibility to meet the needs of consumers and of advertisers on whatever platforms. They choose.
Our second strategic decision was podcasting.
After studying and testing here a few years ago, we had seen enough evidence to make the decision that podcasting could truly become our fourth audio platform and we made a strategic decision to prioritize it and the best behind it today in the U.S. podcasting reaches more people in a month than the streaming music collection services like Spotify and it's great.
At a much faster clip it is consistent with our strong audio positioning and it's not only a way to increase our engagement with users. It's all to its own powerful rather you platform plus it is a game play to iheart to bring new advertisers to our other audio platforms. This podcast platform will be an ever.
Thanks to our company for boat usage and revenue and third seven or eight years ago, we realized that the reach our potential and not be completely at the mercy of what happens with a defined pool of radio revenue at the AD agencies, we began to build out our capabilities to interface directly with clients and deal with more than just media. In addition to.
Hi, great relationship to our agency partners, our marketing solutions teams now bill and execute marketing ideas for our clients as well as our valuable agency partners and that puts us in the middle of revenue discussions well before budgets are built are allocated to the different media today approximately half our revenue in one form or another has.
As a direct client relationship and we believe this marketing solutions capability makes us a more valuable partner to our clients and our agencies.
Finally, our smart audio data and analytics suite of products and services built on jelly. The technology company. We purchase at the end of 2018 is taking the best of the target ability and attribution of digital and moving it to our high reach broadcast inventory that sets us apart from traditional media companies and provides a foundation for more robot.
Revenue growth than our traditional broadcast revenue and begins to tap into the digital pool of AD revenue in essence, we're making our broadcast radio inventory like digital.
Richard will take you through our Q1 performance, but I wanted to leave you with these points, we hate to be in this environment with this kind of impact on a revenue. However, we recognize the quickly and we responded by reducing cost and increasing liquidity and we monitor the business environment every single day, and we're working with advertisers on their plans to reenter the mark.
Yes, we know the reopening of businesses and brands depends on consumer demand and advertising has always been the fuel that drives that demand importantly, we're now focused on recovery, we're well positioned to capture AD demand. This it returns whether national or local and across all of our platforms and we believe the strip.
TG decisions, we've made in the past put us in a unique position versus other media companies to benefit from the upturn no matter when it comes and whatever speed at arrives and with that I'll turn it over to rich. Thanks, Bob as you are all aware our first quarter results reflect both the strong performance. We saw in January February followed by the.
Sharp declines we started to see in March.
As we all know dependent of course, a significant economic downturn.
We saw these declines accelerate into April and as Green said at the outset, we have withdrawn our full year gardens and will not be providing updated guidance until we have more clarity on how and when normalized levels of advertising demand will return.
As Bob mentioned, our strategy over the last several years has been focused on developing and investing it on multiple platforms sales infrastructure and data analytics capabilities to strengthen our position as the number 140, who company in the United States. We believed that the diversified offering we have today has helped our business to be more.
Resilient during this downturn and positions us favorably to capitalize on an eventual recovery.
In terms of the first quarter results. If you turn to slide seven of our investor deck on reported basis, our consolidated revenue decreased by 1.9% over the prior year period.
Moving the impact of political revenue in the prior year quarter revenues decreased by 4.8%.
Direct operating expenses increased by 6.6% in the quarter, driven primarily by onetime costs related to our modernization initiatives, which are primarily incurred in January February as well as higher content costs from higher podcasting and digital revenue and higher music license fees and digital royalties.
The increase in direct operating expenses was partially offset by lower event production course as result of the postponement of events in response to cope with 19.
She in expenses increased 5.9% driven by one time costs related to our modernization initiatives trader barter expenses related to Iheartradio podcast Awards, which had in January 2020, and higher bad debt expense.
Corporate expenses increased 800000 during the quarter as a result to cost incurred in relation to our modernization initiatives and higher share based compensation related to our new equity compensation plan. This increase was partially offset by lower employee expenses, including lower variable incentive compensation expenses, resulting.
From proactive initiatives taken to mitigate the potential financial impact of Cobot 90.
Adjusted EBITDA declined by 10.6% compared to the prior year quarter, driven by the revenue declines related to corporate 19.
Our GAAP operating loss of 1.73 billion was driven by a noncash intangible impairment charge. If you recall when we emerged from bankruptcy in May of 2019, when the macroeconomic environment was drastically different than today, we applied fresh start accounting, which result in significant write off of our intangible asset.
And now with the downturn associated with Carbonite team, we have to readjust the book value of those intangible assets.
Turning to slide eight I will provide additional color on the performance of our revenue streams.
Our traditional radio business broadcast revenue declined by 5.2% on a reported basis, while networks declined 2.6% year over year.
Those declines were driven by the economic slowdown that began in March related to covert 19, our digital revenue stream grew 22.2% primarily driven by the continued growth in podcasting as well as other digital revenue.
What are your media services, which is heavily impacted by political spending grew 17.2% on a reported basis and increased by 3.2 per said, excluding the impact of political revenue sponsorship and events revenue decreased by 10.4 million compared to the prior year, primarily as a result, the postponement or cancellation of it.
And the response to covert 90, turning back to our consolidated results and looking at the items, while the one interest expense increased 90.2 million compared to the same period of 2019 as a result of the interest incurred on our new debt issued upon our emergence from chapter 11, I may 1st.
As you May recall, we did not record any interest expense on our pre petition debt, while we were bankruptcy.
On slide 11, there was a summary of our balance sheet at quarter end, we had approximately 5.3 billion of net debt outstanding and which includes a cash balance of approximately 646.8 million.
In February we made 150 million dollar prepayment and amended our term loan facility to reduce the interest rate and to modify certain covenants and in March we drew down 350 billion under our $450 million ABL facility hazard precautionary measure to preserve financial flexibility light of the current economic.
Certainty as a reminder, that turns of our debt structure with no material maintenance covenant and there are no material debt maturities, probably 2023, and 90%, but that does not mature until at least 2026, providing significant structural resilience in the current uncertain macro environment cash.
Taxes in the quarter were immaterial and we generated approximately 70 million free cash flow from operations. As we look ahead to the rest of 2020, we expect that revenue will continue to be challenge given the impact that cobot 19 continues to have on the macro economic and advertising environment. The response to the currently weak economic environment as.
Bob mentioned, we announce key operating expense savings initiatives last month, the partially offset these expected revenue headwinds. These savings are expected to generate approximately 200 million in operating cost savings for 2020, driven by reductions and compensation for senior management and other employees furloughing of certain employees.
Our non essential at this time suspension of new employee hired travel and entertainment expenses and for a one k. matching program and major reduction of consulting fees and other discretionary expenses. Importantly, these actions are incremental to the barterization initiatives, we announced in February which will join.
Generate 100 million of annual run rate savings of which we expect to see 50 million about savings in 2020. Therefore in total we expect to deliver approximately $250 million of cost savings in 2020 from these combined initiatives and also expect decrease variable sales expense and commission.
Yes associated with low revenue, which will be incremental to the operating expense savings that I just discussed.
In addition to our operating expense savings initiatives. We've also taken actions to reduce our capital expenditures in 2020 by approximately $80 million compared to the guidance given on our previous earnings call. This will reduce our total capex for 2020 to range between 75 million and 95 right.
We expect certain provisions of the carriers act the partially offset the negative impact their kobin 19 is having on our 2020 free cash.
Servers and try and break through the caught our offer you all be in home activity that Bob articulated that we're seeing.
Okay and then.
Clean you can make a comparison to this.
Carrier, which is something we've never seen but any comparison to the oh, one recession or l. eight or nine you know what's different in your product X. now that you know, maybe we'll help you whether it a little bit better.
Well you know this company as it is today wasn't around for either one of those but but rich and I, both war and saw them and we sort of examine this company against it the predecessor company clear channel was really basically just outdoor and radio during the Oh, eight or nine and I think having these multi platform says been has been very bad.
Evil to us as we pointed out that you know we made some strategic bets as a company. We bet on we made a bad on on Smart audio we made a battle podcasting, we made a bad on digital and it's encouraging to see that those three areas are not down nearly as much as.
Our traditional revenue streams. So is even before this happened to suits are projected okay, where we really going to get her growth from what are those growth revenue streams, what are going to focus the company on doing to see those perform like this has been very encouraging Oh wait till nine we basically had we just sold radio advertising. The truth is we did not have.
Many relationships with clients, we didn't have many relationships at the agency's except with the buyers and so we were completely dependent upon how much money somebody allocated to radio and as you know 108 or nine is really when social took off and we found that every time there is a big recession.
When people start taking chances on new stuff, you know and Oh wait till nine or before that if you business was doing well and somebody said you should have social people go yeah, I don't think I want to rock the boat too much I, you know sounds great, but things are going well I'm gonna stick with what I've got when things turn down so we say, okay I'll try that now and.
And I think you know the fact that podcast is still growing right through this downturn is evidence of how those things happen. We also think there was a real growing interest and audio before the downturn and our hope and our expectation is that audio will benefit during this downturn for people, saying, okay, I'm gonna I'm going to focus on on.
You know what I really haven't spent enough time with the war in the case of companies like P. and G. proved that they have moved too far away from it went back to it it had record growth before this this happen. So we're going to see that and and you know look I think it if you go back to the the early you know a one or two you were looking at the emergence absurd.
<unk> got the benefit of somebody trying something new 87 was the cable networks. Okay. I've always been on broadcast but I'll try these new fangled things called cable networks 90, 798, it'll downturn. There was we'll try online is when A.O.L. got that big surge in an AD revenue so.
Again, nobody likes these things, but we're cognizant of the fact that advertisers will re evaluate things and take more chances of moments like this even with much smaller dollars and so we're spending a lot of our efforts with our with our sellers and with our partners trying to push that through.
Great. Thank you.
And your next question comes from Steven K., how good the Wells Fargo.
Thanks, just went into a follow up on some of the podcasting discussion. So we think about being up like 80, do 100% I imagine that listening isn't up quite that much or or maybe it is but can you just help us think about you know how much of that is just volume because my guess is a lot more this is as you.
Talk about a lot of advertisers converting into podcasting and it's still pretty early measurement, but maybe you can talk a little bit about what effective C.G.M.'s are starting to look like and how advertisers feel about that medium versus traditional radio and related to that what do you think is driving such strong growth on the I heart <unk>.
Terms of a distribution platform for for podcasting.
Sure well, let me, let me start with the podcast I think that we're seeing about three times the revenue growth that we're seeing and usage grow them to use it grows a very strong and and I think that probably indicates that we're not only growing with the growth of the category, but we're also probably growing.
Our share as another vector within that you know, it's very clear with the the size. We've got now we've got not only the biggest podcast of all time, but by are pretty good margin or the largest commercial podcaster and and we've sort of got up why will affect going now because we've got such a large broadcast radio audience that we can contain.
Due to promote these podcast the way others can't I think we ran the numbers, we give it something like $100 million a broadcast Abby broadcast radio advertising cost us nothing because it was advertising we didn't sell but <unk> using that to promote podcasts. It gives us a machine to continue to crank out these hit Tai Chi.
We've also develops the strong relationships with clients and it agencies really the strategy and investment level and they are looking for new ways for their advertisers to reach their consumers new marketing vehicles, what they find with pie casting is that there's a tremendous engagement.
People listen to the whole things they talk about it and we're getting cpms that look like online video T.T., which were released the premium.
Cpms, so as opposed to radio which sells you know overall it about a third the C.P.M. of T.V., even though the impact is about the same as T.D. at the same white level. In this case, we're getting premium pricing and not seeing a whole lot of resistance to it.
And I think on terms. So your other question was on.
Steve remind me, yeah, well, yeah, well, what's driving the the big increase in and I heard <unk> distribution of bike at yeah, well I think the it you know we've got the all these platforms, we built out and we've been building them out for 10 years. Our strategy you know advice or said what was your digital strategy we didn't have.
They have a digital strategy, we had a product strategy, which is if our listeners are listening or are available on the phone we ought to have I heard on the phone we ought to have our stations. There. So we built out this platform called I heart radio to carry all of our radio stations and what we find is that people want to listen in all these different places if they're on the video game.
They want to do some listening we're finding a lot of listening now coming on smart T.V. now the bulk of the listening even when you add spot if I I heard everybody that's doing any sort of audio streaming together, that's only about 15% of listening most of us still A.M.F.M., but a few years ago that was 95%. So it continues to grow.
And I think by having a service that can be there in any of those places it's been very important for us and the ability now take our podcast there as well is is significant as well, but on our podcasting. Unlike our radio stations, we have a distributed content model, which means.
We're we let everybody carried you can get on Apple Pie cast you can get it on <unk> you can get it anywhere you get podcast not just the I hurt radio out and and that we think has given us the best distribution possible for our podcast.
Hey, Hey, Hey, Barbara for just Stephen if I could just one thing on on podcasting. We're just a couple of eggs that you know because you're opening question just to reiterate what we just announced today is that are used to use up 35% over your v. or no revenues pacing up more about 100.
<unk> and I think there was a perception to your question because as being the last couple of weeks you know kind of been betrayed press the poverty G. podcast and was down I think is Bob pointed out and is open box. It made me down for the industry, but if you look at ourselves and Doctor I think New York Times would doubts yesterday.
We are significantly up with the numbers that that we talked about the second peas, and we talked about this even prior to coded 19, and just continues extension remember from a podcasting revenue stream, we always talked about to remind us all we always talked about true doctors in terms of where we're going to make money on podcasting.
And why you know when people say Gee you know what was your pets to make money when you think or make money. We've been making you know a significant money you're ready and those two pass war and while we're so optimistic about the future podcasting continue to be one was just the whole podcasting rubbing your pie going up and we continue to see that you know I think.
Somewhere in the last day or two won't forgetting is for all of us and he's running together there was some estimates out there about the podcasting pool of dollars going to like a billion dollars. In 2021 is we look forward and there's probably was about $400 million or sell in 19 and on the which can be six $700 million the whole pool of U.S. advertising dollars. So.
We always have we participate in macros and then the other vector we've participated is getting our fair share and historically and to this point, even with all our success or because of the Nate would could be historical nature of people that were advertising podcast, there's which historical used to be more D.R. direct response advertising.
Yeah, and now what you think about it is more mainstream advertisers come in so we're both helping rode a pie and we're moving more towards them was still not there yet, but we're starting to get progress to getting off their share. So that's why our revenue numbers or continue to be so strong and well overindex against our usage numbers.
That's great and if I could squeeze one more in I really appreciate it does three scenarios that she laid out in the release in in the slides maybe just a question about your confidence in in being a free cash flow positive in those scenarios. If he could comment on that and related to that a couple of your radio appears they're sort of trading line.
They they may not survive this downturn if that happens how does that change your outlook for the industry in that environment. Thanks.
Well, let me let me start on the last part and I'll, let rich talk on the on the free cash flow.
I think we are and it eight eight different company, then really anybody else in the audio space.
We have both a.
Digital platform, we have the all the social platform, we have an ability to grow when others can't grow and I think that gives US you know a completely different characteristics. We also have national reach which really no. One in radio has as well as having you know so.
<unk> leadership position, even on all the markets were in just market by market. So I I don't sort of <unk>, we don't spend a lot of time, saying how are we looking versus other people and radio we're spending a lot of time, saying how are we looking at versus a lot of other people in media and indeed, we built the smart audio because we saw what facebooking.
Well, we're doing and said we need to be able to offer those same kind of capabilities. If that's a billion dollars. If that's $100 billion a revenue we need to be looking there for what we do next rich you want to hit the free cash flow and yeah sure.
Sure.
You know <unk>, one thing I would say, yes, even if you think about this and and when just asked her question. She talked about these unprecedent times and Bob pointed out that the two of US you don't have been through lots of challenging difficult times and and I've been through you know pretty much. All these recessions I will say the one thing that is consistent web.
In a recession period of time during the <unk> pandemic period of time, which is obviously awful or whatever period. Upon your red is a management philosophy and our philosophy.
By the way, even when we came out of the restructuring and for the three quarters or record because we had quite entering into this pandemic is the way you manage your company's <unk> I'm not gonna make a prediction about free cash flow going forward because that would be effect, giving guidance, but I think was you know there's you know even when we came out of the restructuring.
We were razor focus on the generation of foreign cash even with a bunch improved balance sheet and we were making great progress toward stated goals in terms of what we wanted to pay down dead and or leverage ratio and give it some financial flexibility and we were you know cutting costs you don't even before again, we went to.
<unk> and talked about on margin experience or in which I dropped during the restructuring period and again, we're making great progress on that during that period of time, so that operating philosophy, which obviously you have to step up to a different level as Bob and I. Both articulating give you some numbers around it that doesn't change it just probably it.
Gets more intense but you have the habit even during the even during good times and the great thing about this company.
If we we always talked about this we have lots of <unk> you know Bob Yeah, we talked about whether it's capital expenditures, we've talked about whether it's the better the <unk> the taxes, but just as round. There also this is also great company in terms of working capital, which I can assure you about we're aggressive we're mad and drink. So you know it.
In in in good times and by the way even with a fixed costs days you know we've got more elaborate pulled and probably most companies in America I got to continue to generate cash.
Great. Thank you.
And your next question comes from.
<unk>, Oh I be Riley F.B.R.
Okay, Great Big triggering the question. The first one for me is given that you guys have stations pretty much everywhere in the country can you give us a rough sense of how.
Advertising is trending directional and markets that or you know a little more open have been a little more or better starting to open up versus ones that are you know being hit, particularly hard by the pen Dominican still remain completely closed.
Yeah, Let me, let me hit that and rich can add we obviously she would imagine that's exactly what we're spending a lot of time looking at Oklahoma and Georgia with the first two we looked at.
We have it it's a little early just see the sales come through on any activity, but we monitor activity of sales you know contacts with the advertisers proposals form et cetera, and the sales activity has gone up dramatically in the markets that are opening up now whether that turns to sales and whether it comes back at the same dollar volumes, we do on each side.
L. et cetera, we don't know yet and and if I gave you anything I'd be guessing, but I can tell you. We are seeing differentials there enough. So that it really causes us to say okay. The minute one opens up so there's going to be a flood of demand we're going to have to be ready for it and we're building out our capabilities and our sales plans based on that.
Yeah.
The one last thing whether it's national logo, just as reminders and Bob always sizes, you know advertising's that fuel that's going to create consumer demand you know that's just the facts and say well you know thing for all of US that are in some states that opening apart reopening you know like how do you know like restaurants opens doors open.
Or hours or you know, what's the appropriate shopping engagement in those locations and it just really hit you forget about being executive helping on this company just kind of living my day to day like you know how do you know tout their people have to advertise tell consumers about you know their current state.
And I and I think to add to richest point you know radio which is you know where we started as a company one of the things that everybody says radio does better than anyone else is an opening a grand opening reopening and in essence, almost every business locally it's going to have to have a grand reopening and you know logic would tell.
Oh, you that we would benefit from that you know, whether we do remotes or whether we just you know pile on the advertising Ford push traffic were very good at building traffic and every business is going to have to build back it's traffic and it's going to have to reintroduce itself. Two it's consumers. So we we we are hopeful that you know.
Continues to play out as it has in the past.
God that's helpful. And then one more if I could I just on the incremental 200 million and a outback savings that you call about a lot of that it a lot of the characterization of that seems like you know when things hopefully get back to normal it will be coming back, but longerterm you know with with that same with the change.
Is that you've made and some of your operations just.
Based on things like social doesn't take work from home and that do you see any longer term potential structural changes to your operating expenses coming from us.
Yes, we do I think probably every business you've talked to would stay the same thing I can't imagine <unk>, we're going to travel and travel and entertainment T. and he's going to come back anywhere near the levels that it was I think everyone is learned that I can do a lot over teams resume or or whatever and I think also will think about real estate.
Cost much differently, which is a big costs for us because I think there are some jobs that were finding are better off done or or can be done just as well or better out at the office, especially if we can monitor productivity a monitor work carefully and so this is.
Causing us to rethink structurally what we'll do and I think they were expenses we had in the company that we realize we don't need going forward that there were probably legacy we were afraid to get rid of it.
You know this forced us to as we talk about it in recession. So this is when you say, okay, who cares if there's a risk we got to try it and and some of those sub worked out well. So it's certainly on our mind and certainly in our plants and Richard I'm senior managers are already talking about it.
Got it thank you both.
Injured out if question comes from Jim Gosh Barrington Research.
Things.
You mentioned early in the call that a you've been adding an an extra hour drive time to your really early morning programs I'm wondering if.
That's yeah, the the incremental amount of position, that's either and incremental purely or at least offset some of the hit you might might have taken because of the softer AD rates and do you think any of that would continue beyond the covered crisis in the listeners might be getting used to that or.
Or there might be more work at home in the future.
I'm not sure a lot of our personalities want to keep going that extra hour a long day. We we we did it in response to listener demand they shifted their days and one of the things. We're doing every day is we'd get actually report on fun sentiment consumer scent of of what they're feeling what they're looking for how moods are changing.
The M. is fascinating to watch it we use it for our programming. That's of course were picked up that they really were shifting back a day and we need an hour more in the morning shows I wish we had been able to monetize it but I think you know we characterize April is probably the worst modernization month I've ever seen.
And and and hopefully as we say, we're seeing signs it gets better after this but I think you know probably more than anything else, though if you look at radio and there was always in the audio sanctioned there's radio and there's the music collection is companionship and escaped the world and there was always a question about what people thought was more important.
I think it's pretty clear what they think of any of you you know.
Well publicized that the streaming music services. The music collection dropped during this period of time and that people were looking through the radio more than ever because they really needed that that human companionship I need to trust. The voice that was so much stuff being said they didn't know what to believe in the beginning they wanted all our radio stations to talk about coven now.
Some of our rigorous they send it wants to talk about much at all they need time away from Cove. It we're finding like 75% of the people say I need time away from covert information. So we're adjusting what we do but they're looking for that human connection. So I think again in the advertising community is probably pretty pretty stark proof of the <unk>.
Hour of radio and that strength of that unique relationship we have with the consumer I think as things come back again that a cruise to our benefit and having all these multi platforms. We've you know we put I heart on the smart T.V.'s on all these devices, but a lotta people didn't use that they used to lex that had pretty good usage.
Used to you know some of the the other smart speakers, but now they're using the smart T.V., they're using the the row cool so knows and they're going to these other home devices and we think that usage will stay there even after people Oh come back to a more normalized life.
Okay couple of other things podcast creation during the crisis is it less impacted because it's something craps, it's going to be somewhat easier to to do with a big production.
So give you more variety.
And the other one would be have you learned anything.
During this that you think real further change your business and more sustained basis similar to what are we talking about earlier on.
Yeah, we we have.
<unk>.
Continued it would say <unk> leave accelerated our place of launching new podcast, if you watch or slate, you'll see those popping on we've also done it with bigger and more important people and I think it's sort of a recognition that look I hearts, the leader and podcast if I want to get a hit podcast my best chances with <unk>.
So I think it's safe to say, we get many more first looks probably than anybody else in conversations were able to build our own I'm really proud of our folks were doing this commencement speeches for the class of 2020 in which you know you've got these kids seniors that are missing the graduation, I mean, what a moment to miss so we.
Gotten these fantastic important people to do commencement speeches, which we're delivering as podcast and now in a true I heart fashion were also able to take them and put them on the radio as well so for US we look at moments in time like the commencement speeches, we look at the big players and do that we look at building.
<unk> I guess like what would be a good idea and who'd be the best people to do it and let's go after it and I think we've gotten hitting the <unk> hit a very good rhythm with that in terms of our other creation in terms of radio and everywhere else. We've got enormous number of our shows being done at home and I must tell you. If you look at the T.V. news.
People doing their shows from home and you listen to the radio folks doing their show from home I think the radio shows from home sound a lot more normal we haven't lost much in some cases, we've gain things by doing it. So it's I think allowing us to think a little more creatively about how we put these shows together how we did.
Over them, how they're much more relevant and and and of the moment and yes. We're learning a lot about how we can work differently.
You know whether engineers, where they're located how they're working together I think we're learning that we can be a lot more efficient we don't need as many steps and a process anymore, because it's forced us to pick up on you know or call somebody pick them up on teams call them on the phone and say give me an answer right now it's made things more immediate it's cut out.
<unk> and I think that's lowered frustration allowed us to do bigger ideas faster and we've done a number of big ideas for advertisers during this period of time.
What we hate us the loss and AD revenue, but during this time. We've also had some big winds of big programs with advertisers that have come in and and we've been able to deliver it and they again in some ways, we'd been able to deliver because we've improved moves so quickly.
Through this new way of doing business.
<unk>.
No no I wouldn't know much about I just you know I think what we've said you know I think somebody asked a question before about you know some of our courts diminishing in which you know where you look at him like every company to America, we just becoming more efficient I mean, you're only thing I was going to his work of what we're doing here today and then I don't know the how the rest of or your company.
In terms of earnings, but I'm sitting you know I'm sure you know, which my my the other colleagues are which I'm sitting in the kitchen on an iPhone looking you know with my pad.
And that's how we got ready to do this call you know over the last couple of days you know we.
Or you know, making you get us as a team you know they they closed the books everybody was doing a remote we got ready I can't believe that could be any less expensive more efficiently everybody for a call I mean, I'd rather be sitting next to Bob obviously doing this call, but but yeah. We're we're we're able to communicate in addition to all the advertising things talked about.
I think it also causes us to organize our information differently and those places we were still probably using legacy too much appears that book I printed it out here I'm handing this to you on your desk with five people around this table all looking at St piece of paper and now moving everything electronically and really the systems were they.
We probably weren't using them nearly as much as we should have we weren't using teams we weren't using zoom Ah. It was sort of rare to do somebody to teleconference into a meeting and I think we're gonna find that that's going to add a lot of efficiency and snap to the operation.
Sounds good appreciated.
I think we have time for probably one more question invaders.
Okay near final question kind of fairness, Jay Brown language, now and Creek capital.
Hi, guys.
Landlords in several major market <unk> <unk> pretty <unk> recording generally on revenues segmentation.
When you tell us for from right or what operating incoming class, where we're for terrestrial radio.
And your other major revenue turtles that comprise <unk> <unk>.
Sometimes for Krivanek with written energetic that yeah, I mean j., probably the best thing is you to you know follow up with that you know with Karim We've got well you don't we don't give we only get one if it in number out there you know because again just to remind everybody we have.
<unk>, we have one costs structure that that drives a multi platform approach for all of our revenue streams.
And so everything's been out there in terms of the following of the 10 K. and we'll for this quarter beyond the 10 Q. and if you have any additional questions. Yeah, you should feel free to reach out to query and then he'll grab my mcguinness.
Also got on.
Okay.
<unk>.
Thank you.
Thank you.
Well I just want to I think just want to add.
Ah, Bob and I and I'm sure a Bible also just our thanks, most important everybody be healthy we very much appreciate the support Ah by the way we wish we could give you more details on guidance more details on looking forward you know during this time I'm, starting but believe me were incredibly sympathetic like.
That and we can't wait till we get back to the time, where we are giving a more detailed guidance about the future of our business.
Yeah, and I I just want to have my thanks, as well and I have little add to what rich says other than this is an interesting moment for us we we rich and I have approached this as well.
We've got it we didn't cause it were here we need to make this a real learning experience for us and learn and take some lessons away take some chances on the business approve the business because what this is really about sort of phase one was okay, let's protect their workforce, let's get them out of the office, let's get them into working let's get our system set up.
Let's do all that let's try and get through the worst of cancellations and and our our advertisers adjusting to this moment, let's build the products make product adjustments, we need to do and now I think we're in the the the mode of Okay. Let's look ahead <unk> the <unk>, there's going to be a recovery don't know how.
Fast on the when it's coming don't know, how big but there's going to be a recovery and how do we make sure that we maximize our impact there how do we get the most out of that demand when it returns and so we spend an enormous amount of time. So this space to on recovery.
And making sure our organization is built for making sure we're not missing anything and also as we you know some of these questions came about is how do we adjust organization and how we do business to take advantage of lessons. We've learned from this process no. One would want a process like this but since we got it we need those learning experiences and we are spending.
A great deal of time looking at that and and hopefully what we will find this that coming out of this will be a more important and better company that we're we're going into it.
Great Bank. Thank you everybody.
Thanks.
<unk>.
That Guy's conclude today's calling me now disconnect.