Q2 2020 iHeartMedia Inc Earnings Call

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Ladies and gentlemen, thank you for standing by welcome to these high Horse Media Q2 2020 earnings call.

At this time off with reference ARNA listen only mode. After the speakers presentation, there will be a question answer session.

Who ask your question during the session you will need to press star one on your telephone.

Please be advised to today's conference is being recorded.

If you require any further assistance please press star zero.

I would not what's the hand the conference over to your Speaker today, Collegian Senior Vice President of Investor Relations.

Thank you. Please go ahead Sir.

Good morning, everyone. Thank you for taking the time to join US on her second quarter 2020 earnings call.

Joining me for today's discussion or Bob Pittman, our chairman CEO, and rich Bressler, President COO and CFO.

At the conclusion of our prepared remarks management will 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 before 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 Cobot 19 on the company's liquidity finance.

Will position and results of operations. These estimates are based on current expectations and assumptions that are subject to risks and uncertainties actual results could materially differ from these expectations and assumptions and these risks and uncertainties are discussed in more detail filings with the FCC.

In addition, as noted in our March 26, 2020 press release due to the uncertainty surrounding the impact of covert 19, we reiterate that the company will not be providing for your 2020 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 morning, everybody. Thank you for joining our second quarter 2020 earnings conference call the channel.

Just the we most of the world have faith since March two to cope with 19 were unprecedented and had a severe negative impact on our revenue through the sudden and dramatic decline in advertising demand in the quarter before Richard I get into a discussion the specifics of the second quarter and even into the just completed month of July therefore.

<unk> points, we want to highlight first broadcast radio remains the number one reach medium in the U.S. and our other audio platforms are also strong with consumers by consumer reach we're the number one audio company in America by a wide margin the consumer reach a broadcast radio during the pandemic locked down still exceeds both TV.

Digital the only direct measurement of our listing the listening on our digital platforms showed an overall increase year over year as well as an almost 20% increase the home CE devices, including Smart Tvs gaming platforms, and smart speakers and our podcasts listening was also up for the 62% increase in downloads euro.

Every year for Q2, we believe this resilience and radio listening is further proof that the consumer depends on radio and times of need for both information and the companionship. That's at the core of the radio experience and as the inherent strength the broadcast radio as a consumer media and we believe the strength of.

Our podcast listening is an indication that podcasting is providing a similar benefit and it's an extension of the radio listening experience. So it's no surprise that the two largest podcast publishers Iheart and NPR are both major broadcast radio companies and we both have a two to one lead over the next largest publisher.

Second our revenue suffered with a big drop in April, but it's been showing improvement in each successive months, including the just closed July it's still too early to predict the slope of the recovery with any certainty, but we're confident we have ample liquidity even at the recoveries a slow what extending through 2021.

Third it's worthwhile the note that our non broadcast consumer and revenue platforms networks Smart audio programmatic digital and podcasting the ones that have been the focus of our companys efforts investments have meaningfully better revenue performance, but our broadcast revenue. We believe this is strong validation of our multi platform strategy and Ben.

Smith and successes fourth and finally, we responded quickly to partially mitigate the impact of the sharp revenue declines demonstrating flexibility even in our fixed cost structure. We have made deep cuts before the pandemic deeper cuts at the beginning of the pandemic locked down and even more after became apparent this downturn.

What's going to last longer than originally expected. Many of these are permanent cuts and we're evaluating additional permanent cuts based on how we expect to operate for the remainder of the pandemic and for our new normal thereafter that includes an expected permanent reduction in real estate caused a substantial reduction of travel and entertainment expenses.

The elimination of the use of many outside consultants and the development of new technology, driven processes and operations to drive additional efficiencies, but before you get into more detail I want to take just a moment to slowed our employees. This is a tough time for everybody and our employees have risen to the occasion to keep the company.

Moving forward during this period, they've never worked harder they've never been more creative and innovative they've never had to adapt so quickly to a major disruption in this case moving from an office to working from home. Many of them have kids and have had to deal with issues like school and childcare and many other factors, but in spite of all that.

We continue to make progress of key initiatives to build out new ideas to serve our communities and service our clients. It's frustrating for them as is for Richard Me and all of you who are stakeholders in this company because they don't see this translate into financial success right. Now however, as we look to the future as we began to see an upturn.

And look past this period, we know all the work they're doing now is setting the stage for accelerated growth.

And with that I'd like to provide some real time color around what we're seeing in our business. The challenges we face from Cobot 19 resulted in a decline in total company revenue of approximately 47% and an adjusted EBITDA loss of 29.3 million in the second quarter as I said, we have seen sequential improvement and.

The rate of revenue declines in each month since April the low point all the way through July and Q3 pacing is showing meaningful improved over Q2, however, even as the revenue trajectory improves each month the speed of the return in advertising revenues still uncertain. So we're prepared for a wide range of possibilities, even including the more drawn out.

Recovery scenario and as rich will discuss in detail, we are proactively taken steps to fortify our balance sheet and our liquidity, we placed a premium on having a resilient capital structure with ample liquidity.

While this financial performance has been disappointing there are some bright spots as I mentioned earlier, our broadcast radio business was most hard hit with Covance with year over year revenue down 57% in the quarter. However, the other areas that we've chosen for strategic investments to drive growth diversify revenue base and give us a multi platform offering.

Networks Smart audio programmatic digital and podcasting are proving to be the right ones. In contrast to broadcast networks is down 38.4% smart audio down 28% and digital is up 2.4% driven by podcasting, which is up over 100%.

And our relationship with consumers is stronger than ever both because of our deep connection to the communities, we serve and because we have prioritized being everywhere consumers want to find us with the products and services. They expect today. In addition to our am FM platforms consumers can find us an over 2000 devices and 250 plus.

Forms from Pcs and smartphones to smart speakers like Alexa and Google home Smart TV, So notice roko gaming consoles EBIT Apple TV and we were the first streaming audio service on the Comcast Xfinity X one box our leadership position on devices has ensured that we have more touch.

Points than ever with the consumer since they shifted their lives more into the home in late March giving us a uniquely strong position to participate in this increased at home listening from a consumer engagement perspective since the pandemic began listening on the web is up 19% gaming console is up 25%.

And smart Tvs are up 13% even in July as things showed signs of returning closer to normal digital listening on home devices is still up and our hope and expectation is that after patterns go back to pre covert levels will continue to benefit in home from consumers, having learned the fine and use our products on the addition.

All in home devices.

Our strongest performing new business is podcasting and we have built iheart into the number one commercial podcast publisher with a goal of leadership in listeners revenue and earnings and that strengthen podcasting highlights how the decisions. We have made are paying off today I hardest number one commercial podcast company in America.

And our pie cast division, which is part of our digital business continues to grow at a rapid pace with revenue outstripping, even audience growth with almost 500 premium titles and 225 million downloads, Vermont, we partner with the very best creators and the world distribute their content to the largest audience possible.

Backed up by the massive marketing power of our broadcast radio assets, which give us a huge amplifier for every new podcast title. We release and then we monetize it in the hands are the largest and best audio sales team in America.

You are trying to understand the disparate podcasting models, let me explain our view of the current landscape there really two different approaches out there one pay walling exclusive content on a single app good for the App not good for thick listeners because they now have to pay for content that was previously free not good for creators because there.

Audience and impact will be small and not good for sponsors because there is insufficient scale and exclusive distribution ours is the opposite model and we think better model wide distribution. So listeners find the content they want where they want creators build the largest audience size possible and sponsors can.

Scale their messages across these large audiences.

Looking at the listening as measured by pod track and the associated revenue and earnings. The latter strategy is working and we have yet to see an example of success anyone has had with a pay wallick strategy implied casting as I mentioned earlier, our new platforms, we've built and invested in have performed better than our broadcast platform validating our.

Multi platform strategy, we even re imagined our events business, even though it's down dramatically overall, we've been able to build successful virtual events, including the Iheartradio living room concert for America on Fox hosted by Elton John Wednesday Night living room concerts with state farm and commencement speech is for the class of 2020.

Which were delivered double podcasting and over our 850 radio stations nationwide. This has allowed us to generate sponsorship revenue, even though we had four go the lower margin ticketing revenue from physical events.

As a company, we innovate and at times like this we can't forget that we must continue to follow the consumer and build products and services that keep us in the forefront of media to that point, we've not only made significant investments in our podcasting business, which has seen record growth. We've also seen the same with our iheartradio app and even developed.

An entirely new broadcast and digital network B. I am Black information network, which is the first and only 24 by seven national and local all news audio service dedicated to providing a trusted source of continual news coverage with a black voice and perspective and is focused on service to the black community.

Okay, and providing an information window for those outside the community tilt Foster communication accountability and a deeper understanding all of this is enabled by the fact that we have a reach larger than any other media company in America. We are the number one audio company in America by reach and we also have leading engagement as well.

In fact, our listeners spend 30 minutes, a day with us more than Google at 27 minutes per day, and Facebook at 18 minutes per day, we serve our communities first and foremost and from that we derive our power we track consumer sentiment on a continuing basis, which allows us to respond quickly to any sudden change for exam.

People during the protest in support of racial and social Justice and communities across America. We responded quickly as a company to foster understanding whether personalities, taking a leading role into discussions so critical to bring him country together over time being there for consumers communities and society make us even more.

Important to consumers going forward.

As we navigate the financial impact that the pandemic has had on our business. We're working hard to make sure I heart is positioned to capitalize on the ongoing recovery and the AD market, even though we're already taking 250 million out of operating expenses in 2020 with further savings from variable cost, we're taking a hard and fresh.

Look at our cost structure to understand what we've learned from this period that can have a positive and lasting impact on the cost structure of our company from the utilization of real estate to our adoption of technology to provide us with more efficiency and effectiveness in our operations. This will give us an even stronger operating margin profile as the economy recovers.

This crisis has challenged us to think Opportunistically about our operations and there will be more to come on this front as we develop new ideas and practices rich will take you through the details of our Q2 performance, but I wanted to leave you with these points.

We wish we have better news on the financial fraud, but we are encouraged the revenue is improving sequentially and expect that trend to continue into the fall and we ended the year. The downturn has been a little longer and the pandemic has been a little more persistent the most predicted and although it's been hard we are seeing a more normal advertising demand star.

Our to come back the current dislocation between our listening and revenue as a temporary state as we know eventually advertising reflects consumer usage and demand and we do have strong consumer demand. We continue to be very disciplined about spending and continuing to reduce cost to mitigate as much of the revenue impact this week.

Can.

And finally, we remain extremely focused on making sure that we have ample liquidity to not only write out this downturn, but to continue to fuel the higher growth parts of our business and with that I'll turn it over to rich. Thanks, Bob as you all aware our second quarter results reflected severe impact that cobot has had.

On advertising demand there pandemic caused a significant economic downturn, which in April resulted in the steepest year over year revenue declines we have witnessed with modest sequential improvement in each of them on to that followed as reopenings in certain markets were delayed due to resurgent koby cases, and protest ready to civil unrest in may.

He parts of the country.

As we look ahead, it's important to remember the Powerball audio before cobot began when we were in a healthy business environment that power translated to the strong financial results that we saw in our business. After we emerge from our restructuring in May of last year, all the way through February of this year before a momentum was interrupted.

And while we can't predict how fast are what shape. The economic return, we'll take we know that it will come back from this period of dislocation and we have to have the right set of products and services in place and the users of those services to take full advantage and benefit from it in ways that we were prepared to in the past.

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 and analytics capabilities to continuing strengthen our position as the number one Oreo company in the United States by which we.

We believe that the diversified offering we have today combined with our focused on cost and capital structure management and able to our business to be more resilient during this downturn and positions us favorably to capitalize on to continuing advertisement recovery.

Because of our second quarter results, you're turning to slide six of our investor deck on a reported basis, our consolidated revenue decreased by 46.6% over the prior year period direct operating expenses decreased 15.9% driven primarily by cost reductions associated with our partners Asian initiatives as well.

As those taken a response to covert 19. In addition variable operating expenses, including music license performs royalty fees decreased in relation to low revenue recognized during the period variable expenses related to events also decreased as a result at the postponement or cancellation or physical events.

Few nay expenses decreased 19% driven by cost reduction initiatives, along with lower sales commissions, which were impacted by the decrease in revenue trader barter expenses also decreased the decrease in asked you to expenses was partially offset by higher bad debt expense corporate expenses decreased 36.1% during.

The second quarter compared to the prior year quarter as result of lower employee compensation, including variable incentive expenses and employee benefits, resulting from expense reduction initiatives. Our GAAP operating loss of 159.1 billion for the second quarter compared to the GAAP operating income of 181.6 million.

In the prior year quarter as well as the year over year decline and adjusted EBITDA from 262.9 million to a loss of 29.3 million were driven by lower revenue turning to slide eight I'll provide additional color underperformance of our revenue streams.

Broadcast business revenue declined by 56.5% ought to reported basis, while networks declined by 38.4% year over year. Our digital revenue stream grew by 2.4% driven by continued growth in podcasting, which increased to 102.7% year over year.

Audio media services declined by 32.9% on reported basis I by 36.3%, you're showing the impact of political revenue sponsorship and event revenues decreased by 27.6 million compared to the prior year period, primarily as a result of the postponement or cancellation of physical events.

Turning back to our consolidated results and looking at the arms Global line interest expense increased 12.7 billion compared to the same period of 2019 as result of the interest incurred on our new debt issued upon our emergent from chapter 11 on May Onest 2019.

Slide 11, there's a summary of our balance sheet at quarter end, we had approximately $5.3 billion of net debt outstanding which include your cash balance of approximately 517.7 very.

Despite what has been the most challenging quarter, we could imagine our free cash flow used in continuing operations was only a negative 6.5 million.

As a reminder, we took early actions to focus on aggressive cost management and maximizing liquidity to be prepared for a potential protracted recovery and it a quarter like this the fact that we used only 6.5 million is one more proof point of our company's strong free cash flow characteristics as Bob noted, we continue to focus on.

Maximizing liquidity and strengthening our capital structure during this period of uncertainty.

July we completed an amendment to our credit facility tissue 450 million of incremental term loan. The proceeds were used to repay the remaining balance outstanding under our ABL facility at June 35 million with a balance going to cash on our balance sheet adjusted for that amendment, our cash balance as of June Thirtyth 2020.

Was approximately seven or 8 million and following the repayment of the balance on our ABL facility. We had total available liquidity of approximately 868 million.

As a reminder, that turns about debt structure include no material maintenance covenant and there are no material debt maturities prior to 2026, providing significant structural resilience in the current uncertain macro environment.

As we look forward to the rest of 2020, we expect that revenue will remain challenged given the impact that covert 19 continues to have under macro economic and advertising environment. However, we are cautiously optimistic.

I've seen improvement in the rate of year over year revenue declines in each month since the 50% decline in April with May June and July declining, 49%, 41% and 27% respectively. While we will not be providing pacing for Q3 your full year guidance, we could tell you that Q threes.

Yes, it could be materially better than Q2, I remind you that the bulk of political advertising is placed in Q3 in Q4.

I just want to provide an update on the bottom possession of cost saving initiatives that we announced earlier in the year together. These initiatives remain on track to deliver the expected $250 million of expense savings in 2020.

As we have said previously we expect our modernization initiatives to deliver 100 million of annualized run rate savings by mid 2021. In addition to those savings we're continuing to evaluate our cost structure to identify efficiencies of lasting benefits to the company I will drive stronger margin growth as the economy recovers.

Our areas of focus will include continue optimization of our real estate footprint and the adoption of technology solutions that will drive increased efficiency and effectiveness and our operations will provide more details on that about and timing of those savings later in the year.

Our full year capital expenditures guidance remains unchanged at approximately 75 to 95 million and we continue to expect minimal cash taxes as certain provisions of the cares action should partially offset the negative impact that called me 19 is having on our 2020 free cash flow as a reminder, the provision to be act.

Protect us result in our ability to deduct a 100% of our 2020 interest expense as well as a portion of interest from prior years that was disallowed and the deferral of perpetual avoidance. There's certain credits we may qualify for of 2020 payroll tax payment and wrapping up we believe that our previously.

Modernization initiatives and cost saving actions in combination with our resilient capital structure will provide us with financial flexibility and ample liquidity to operate effectively even an extended period of economic weakness, while we cannot predict the shape or timing of the recovery in advertising demand, we are confident or our ability to.

Drive shareholder value through operational discipline and continued investment in the areas of our businesses that will position us for growth as advertising demand continues to return.

And again, we would like to thank our employees, who have been committed to serving our listeners are communities and our business partners. During this challenging card. We appreciate you all joining our second quarter earnings call.

I'll now turn it over to the operator to take your questions. Thank you.

At this time I would like to remind everyone in order to ask your question Press Star then the number one on your telephone keypad.

Our first question comes from Stephen Curry Hall with Wells Fargo. Your line is.

Thanks, Rich a couple of for you and then Bob I've got a podcasting question rich maybe just how should we think about being EBITDA or free cash flow positive in the second half the year based on all the proactive cost reduction that you've taken which I think you probably didn't get a lot of the benefits of and the second quarter and maybe include.

It in that you can give us an indication as to what you think the cash interest it's kind of look like in the back half of the year.

Sure. Thanks, Stephen Good morning, everybody.

So just couple of I'm not going to make any specific comments about cash flow the second half of the year because.

I think that would be chatting about two to giving guidance quite frankly out there, but if you kind of think about and I think what's really great about this business and you don't want Bob articulated his opening remarks.

The business, what's happening on operating basis, and I don't think anybody should lose sight of the fact of the cash flow characteristics that this business has.

Q2.

And again, none of US are happy with these results, but the reality of operating the Pandemics why we declined 47% on revenue.

Our EBITDA was down a little over 260 or terms $70 million Q2, so significant restaurant revenue, but I think reports to the cash flow part of the business is we only use and I don't I don't ever want to use a dollar cash, but we all $6.77 million on free cash flow, which I think is.

Pretty good free cash flow performance considering headwinds we have on revenue. So I would just point to that.

Specific guidance for the rest of year and the fact that we're continuing to aggressively manage capital expenditures as we reiterated guidance of $75 million to $95 million odd to low working capital and again, the fact that.

In fact, if we have zero cash taxes. This year, the largest part of which is driven by the cash tax savings for interest deductions that would get you as a result at the cares Act as also.

Our ability to differ.

Taxes for.

Taxes also resulted a correct.

And cash interest.

Well look you know our weighted average.

Did that.

Yes.

Did you guys can compute this is about 5.3%.

Overall.

So I was just we've got about why our total debt I think if you go to page 11.

The investor deck, we break it down quite a piece by piece and I think you guys do that and computing number there.

Great and then on capital structure I mean, we've seen.

Some peers that have been impacted by cope it look it sort of strategic partners for preferred types of investments.

You guys had a lot of liquidity runway. So I'm just wondering how you think about the capital structure and whether you think this is an opportune time to sort of talk just strategic partners for anything like that or where do you just really like the liquidity runway that you have.

Well.

As part of your question first.

We've done a nice job.

In terms of the cap structure liquidity liquidity runway and I think.

Opening remarks, Bob and I pointed out that whatever your time period.

Recovery, whatever you're tired carried out of the acceleration of the return of advertising whether that.

This year or 2021, we've got to capital structure that's built.

During those periods of time, but again I won't repeat myself, but I think the second quarter is just very instructive in a positive way about the free cash flow and our ability to continue to weather any down turn here in the capital structure.

We bought myself the rest of the management team.

Our board of directors, we have one objective here, which which is to drive to value for state goals is to drive the equity value. This company. So we continue to evaluate it but again, we have the benefit.

And capital structure and liquidity position, Steve as you pointed out.

We don't need to do anything unless we think it's going to be value accretive for our stakeholders.

Yep. Thanks, and then maybe just Bob one on podcasting I feel like we be remiss not to.

Maybe just talk about the competitive dynamics that spot of five how do you think about that relationship would you sell them exclusive content at the right price. We continue to make your content available on all platforms and including Spotify, How do we just think about those competitive dynamics. Thanks, yes.

I mentioned in mind that really two models for podcasting.

Ours is a distributed content model, we want our content available anywhere consumer might be.

To make it easy for them to consume but.

We would not sell our our products exclusively we think it one it.

Limits the size of the audience and port creators most creators when it hit I want to create a hit podcast.

I guess, there's some amount of money at which they said they'd rather have the money then.

Then create a hit podcast, but I think that's the goal and I think what you and so therefore, you attract more creators the more the bigger the audience you can offer them and and I think the other out Avenue is that advertisers. If your advertising supported really demand the biggest artist audio it's possible.

You go behind to pay wall.

Certainly you can justified as you're going to help.

Build some other service, but we've yet to see success with that anywhere. So I think we like the strategy. We have we're really pleased with the growth we've had on podcasting. If you think about it.

We'll be back when we were about 5 million of unique users stopped media was about 5 million. We acquired them. So combined we have about 10 million we've more than double that so we've not bought our way to the audience size. We have we built most of it and I think that was our goal is to build this platform that.

And create hit podcast after hit podcasts and of course, one of our not so secret weapons is that we're able to use all of our broadcasting.

Bill podcasts, and we've had great success with that and and continue to use that it new and innovative ways. So we like the model. We think we're in the right place with the right model. We're certainly with the only model that's proven it can generate real profits and real growth. So we're we're sticking with it and then as you.

I can tell driving for with the quite aggressively.

Great. Thank you.

Your next question comes from Zacks Silver B. Riley Your line is open.

Alright, great. Thanks for your question. The first one I know you said that you.

We're not going to talk about forward guidance, but you did give.

Revenue for July how that was pacing and I just wanted to first ask if your point specifically to what's driving the recovery both in terms of revenue lines and the advertiser categories.

Well I look I will let I'll, let rich jump in on that but I think we're seeing.

There is some demand at some return in advertising demand I think is the primary driver of it I think when the pandemic began we saw advertisers that could just pulled all with the chips off the table and said, let's wait and see what's happening I think there.

Beginning to get a flavor of where it's going what's working what's not where they want them and asked how they want to build their business back one of I think the encouraging things is almost every business now has to think about reopening.

Or at least selling themselves again to the consumer and radio has historically been the place that people have used for any opening grand opening reopening.

Because we do get the word out quickly we have built the number one reach.

If you think about what radio is your companion, telling you what's going on in the world on a continuing basis, and obviously a business offering a new service curb pick up we've opened their doors again, we've got a new service for you.

The branch redefined is the perfect place to get that into the.

The consumers' minds. So we think that radio will be a beneficiary of this and we think that's probably behind.

The return and the advertising demand we've seen so far.

And and our expectations will continue now I think we've also build out capabilities that allow us to match, what the advertiser needs, we didn't get into it in the call, but we havent previous calls that we've really built out our data cap capabilities, our analytics capabilities. So that we begin to look more like.

The capabilities offered by the major.

And the digital Giants major digital players.

We think that allows us to even be attractive to people will say.

I'm looking for the analytical approach to advertise in the performance advertising.

And now we have those capabilities, we continue to build them out even during this this pandemic.

And we have been able to even push those kinds of capabilities over on to our podcasting as well, which I think puts us in a unique position.

Right.

Yes.

Bob just.

Thanks for the question getting just add onto that just for a minute overall.

Surprise you.

A couple of simple statements and then a couple give you a little might be chart in categories.

Placements are increasing quite frankly and cancellations are decreasing.

We've seen that since the start of the pandemic.

In the beginning to pad Dabic clearly national for US took a bigger hit and we've seen that start to reverse itself and I think this goes to bobs point.

As bigger advertisers bigger brands are coming.

Coming back into the marketplace.

It's been interesting I'm sure. We've all read the same things, but whether it was today over the last couple of days the number of articles your particularly in the Wall Street Journal that have talked about Ceos that just okay. We're going to be in this operating environment for awhile. So we need to learn how to run our companies.

In this operating environment.

And we're starting to see some of that come into the marketplace that you see that numbers and the trends that we just gave.

And if you look at specific categories.

Better than others is probably the right way to say it's.

Things I don't think any of these will surprise anybody on the call categories like CPG consumable product group home improvement.

Insurance financial services medical healthcare.

Those who clearly been categories that have done better than categories like entertainment.

He has been nice category for us over the years, although having said that we've done very well with the streaming services.

Whether it's the network staged matched the new MDC service out there.

And John along the way so again, we do out some bright spots out.

Out there and all of those take advantage of the new capabilities that Bob touched upon in terms of turns of our data refused offering and clearly podcasting as which touched upon also on the first question continue to leads the pack not just brought by quite frankly, I think it or medium.

All our media related businesses today.

Hey, guys can I have one more one more thing I also think that as you're analyzing what's going on in the advertising world, We see two trends.

That are that are merging one either the advertiser wants a big idea and we're doing a lot more brainstorming with CMO some marketing departments about new approaches new ideas, new things they need to do that are very specific to their situation sort of think about it is custom solutions and Fortunately we built out.

That kind of marketing.

Support and an IDH and capability in our company over the past four or five years and the other side of it is and they're looking for or they're looking for performance I'm going to spend the dollar I need to maximize the value of that dollar like I never had before clearly that smart audio capabilities, we have with the data analytics help.

Enormously there and also you know we hate to say it but it is an advantage for the advertiser is that if you think about radio and TV historically, they both deliver about the same impact at the same weight level. However, radios about a third the price of TV per person reach so if people looking for a fish.

I don't see again radio has a real advantage there and finally I think you should think about reach in the old days.

These five years ago TV was the big reach medium today radios to big reach medium and so anybody that's putting together a campaign that has gone quite or has been working segments. Instead of the mass realizes right now they got to tell everybody something and again that reach becomes probably more important now than it.

Has in recent times.

Got it that's helpful. And then one more if I could just around the strategy of crude clearly theres good demand for advertising on podcasts and what are the things that you guys have talked about before is using high cash to get more advertisers involved in broadcast radio.

Just wondering if you can talk about how are the current state of affairs may have impacted that that strategy and maybe what the attach rates on.

Advertisers using podcast, our author of coming and use broadcast buys and weather.

We haven't announced anything like that I don't want to get into that specific information, but I will tell you get that I think they continue that people are interested and podcasting. They certainly should be interested in radio because to watch it winds up being sort of the same thing I think it's no no.

Accident that NPR and I heart go back and forth does that it was number one overall and that we have a two to one lead over the next largest podcast here because it is to me the equivalent of radio on demand and it's very much the radio form we find that in successful podcast.

Yes, it's very host driven just like radio that people want that companionship, they sort of like somebody keeping a company. They like the conversation. Even this is Mike telling them a story they like hearing that voice. So we sort of treat podcasting radio as one experience expressed a slightly different way.

And and I think being able to not only do that creatively for the consumer but being able to do that for the advertiser is really unique advantage that our company provides and we are finding people.

They either directly want to say, okay, let's do a campaign thats all tied together we're doing this on broadcast this on podcast. This on digital we're using smart audio here in the using all of our capabilities or as you correctly pointed out for some people who sort of more interested in radio they are interested in podcasting and its toward for them to come.

And to the company once they come into the company, we expose them to the other.

Assets, we have which can help drive their ideas and we've had a number of.

Successes, there and really expect that to to continue.

Got it thank you Beth.

Thanks.

Your next question comes from Sebastiano Party of JP Morgan Your line is open.

Hi, Thanks.

Rich you touched upon the decline in EBITDA dollars base is coming in a little bit better than the revenue decline, which demonstrates this amount of the cost savings initiatives. They haven't place wanted to see if you could give us an update.

Towards the 200 million dollar run rate savings by the ended the year.

Are you on that today and should we expect the decline in EBITDA to continue to narrow relative to revenue as we go through the rest of the year just given I guess some of the initiatives are kind of launched in Twoq.

Sure. Thanks Sebastian.

Again, just going back I'm, not going to I think going to any detail on that.

Would be.

Turning now to giving guidance, so I'm not going to do that the likely I will comment is we are in continue to be on track.

After our cost savings initiatives I think a box opening remarks.

You talked about the 250 million dollar number which was $50 million just to remind everybody.

The modernization efforts that we announced in the first quarter of this year and just again as a reminder mentioned in the press release.

That is $100 million on annual basis by become you get to mid 2021, but $50 million this year and an additional $200 million that we articulated.

Two.

Everything happening as a result at virus and continued to be on track with that.

Having said that and I think Bob talked about this a little bit and touched upon in his opening remarks, we are taking a step back and Budweiser neutral like a lot of companies in America.

They do exactly what we're supposed to be doing is people running this company.

Looking at.

Looking at our organization looking at things like real estate, which is a significant cost me. This company that we already taking a hard look at real assays dropped or the modernization. We're obviously taking up much harder look at it right now just the realities of weight people are working whether its teams resumes or us all.

Looking to work more remotely.

DNA was not insignificant expense for this company, we never disclose exactly what it was you know clearly we never expect PD to come back anywhere near the levels that it was pretty no pandemic. So just looking at the way people are doing business differently that we've talked about look at the way that we do business differently.

Look at the size accompanied the support the.

The infrastructure size of the company to support the revenue size the company and how do we just become more efficient and what if we learn.

During this period of time pretty interesting when you've got a company that.

Thats across the United States or were not 150 offices and we've had this Bob and I. Both talked about just phenomenal employee base that is really going the extra mile. During this period or whatever what we all learned not just bothered me, but the entire accompany our entire employee base and how do we just operate more efficiently drive new revenue have proper.

Innovation like Black information network, which were so proud of that was innovated any submitted during this period of time.

And bring board out of the bottom line and improve our operating margins grew.

All operating.

You know efficiency and still deliver great experience to our advertisers and I would say on the one global specifics around the timing of savings there probably a little more weighted to the second half of this year as you think they'd be based on the Tom we implemented them and just a rhythm of our business than the first half the year.

Could I can I have one thing on that the rich just to put a a point on it too as managers.

To be a great manager I think it constantly have to experiment you constantly have to change and move and find new ways to do things.

This is awful has this been for our business, though the one thing it's done for us as managers, it's allowed us to look hard at some different ways of doing business and for example, there's no way we ever taken the chance of saying Hey, let's experiment by working from home for three months and put the whole.

The company there to see what the impact yes, but now that we've done it we've been able to examine productivity Mike each group like each employee we ask our employees what works better what works, what's worse and we've been able from that to figure out some new ways of working which I think will improve the company that.

We would have never known and never been able to reasonably test except through some disaster like this so rich and I are spending an enormous out of our time with our with our management team really examining everything we're learning about how we operate and how we can operate better going forward.

And I will tell you I was not a fan of a work from home company at all but I've realized that there are some people in our company, who can work as productively or more productively from home and it has very beneficial.

Financial impact impacts for us so we're examining everything and again, it's been one giant experiments to positive side of it and we have not wanted that to go without us really examining and learning a lot from it.

Which we have.

That's great one quick follow up on the digital.

Just if you can unpacked, perhaps some of the moving parts and the within within the digital bucket.

Obviously, podcasting up 103% year over year, but.

A sequential deceleration just overall in the digital category, So how should we be thinking about.

Total listening hours on the part on the App as well as maybe some of the other buckets within that.

Thank you.

For 200 starter you want me to one probably got.

Let's start with that.

Okay.

So we do about Bob articulated the strength of our our podcasting business no. We talked about this in the first quarter, we talked about now and it continues that revenues up over 100%.

We don't give a lot of details in terms of digital but you kind of unpack it a little bit and if you pulled podcasting out of that.

Overall digital would be down dramatically better.

Then the rest of our line, so I would say down.

High single digits about double digit similar overall in that 10%, but continue to improve significantly. So I think if you look at the overall digital one X podcasting.

And I don't think this will be any surprise, it's doing dramatically better.

Pretty much any or any other advertising business has done right now in the United States you can't put aside.

Facebook and their announced earnings and Google in some of the small players out there. So we feel very good about that and continue to see momentum.

Overall in that business.

Hey, good I also say that we have a wide range of digital services to for anyone followed the company.

We not only have streaming through the iheartradio, app and allowing the consumer to hear our.

Our radio stations on a digital platform and by the way when they're listening to it sort of crazy, but when they listen to it on the Iheartradio app, even if it's exactly the same programming as a him FM.

There are many people who will bias now for digital and we fall into a digital bucket that we hope the smart audio over time begins to blur that distinction as it should we also provide other digital services for our our clients and have a robust suite of services that we offer we have big digital sites.

If you look at Comscore, you see wanted more than one of the major players. There there has to do you want 100 dot com.

There are all sorts of other services, we provide from other vendors as well some we own some we don't so it's.

Got a pretty diverse offering there and and they all have disparate growth rates. During this this pandemic.

But at one.

Listen I, just want to reiterate what Bob talked about.

Front like in his opening remarks again, just not two factors, we answered financially Bob talked about product, but if you look at the in home listen a whether its web Rocco.

Lex Google all up and I think Bob went to number the percentages all up very significantly during this period. So again, a silver lining on as you look for so long as during the pandemic.

Is the consumer habit consumer habit in home listening and we and we don't have any reason to believe that that won't stay with us.

In some form as we exit the pandemic.

Yes, I go back to I'm right, one more thing go back to the basics. The more devices you can receive a service on.

More listening, you'll get and so for Ross the weakest place for Ross has been over the past 10 years has been the home because I think people have moved to more digital devices as opposed to a freestanding am FM radio and so for us what we've done rather than trying to get people to make more MF and radios and say partner.

Products not limited them FM.

We'll build the product and we were as you know one of the foundation services on a lexia when it launched we've worked with Amazon on the development of that and we tend to be there early whether it's with Comcast on their box whether it was Alexa is we've got a group that continues to work on those new location. So if we build out all these capabilities.

Yes.

For all these new devices, we know overtime as those devices grow it gives us more listening so very positive for us.

Your final question comes from Jim Goss of Barrington Research. Your line is open.

Thanks.

I hurt has tended to have a different mix of radio revenues than the industry, rather than 80, 515 or might be more 60 40.

In the split between national and local.

Or the other way around way instead of them.

If you consider that I mentioned that traditional strength might have hurt a little bit more in this these last several months and I wondered if you could go through those.

The 50%, 49%, 41% declines and talk about how that that mix of revenue.

Might have affected those like which categories might have impacted what you've already reported.

We don't do a lot of the tail on that we havent done the break out so I don't want to do it here what I think your point is correct that this company one of the strengths. We have is we're actually the only company that delivers broadcast radio that has a real national reach so they can't the advertisers can look at us not only.

Local but also as a national partner and you're correct I think as rich pointed out earlier that we did see big advertisers had the luxury of this big dollars just pull the chips off the table hold it until we until they figure out what their new strategy is that if any of you remember living through 911, which.

Do is every advertiser pulled their dollars because they couldn't figure out what message they should have in that new world and it took a little while figure it out I think the same happened here that courier forget media or saving the money. They just couldn't figure out what the creative message would be in this pandemic well I think at this point they have.

Okay, and I think of course, we had the double layer.

The tragic.

Yes, George Floyd and suddenly advertisers again pull back and said wait a minute what's your my message B and how should I communicate.

To the marketplace.

And so.

But the good news is once they figure it out and they can turn the spigot back on.

And as rich pointed out to you we are seeing that balance change a little bit initially national hit harder than local and beginning to see that more equalized.

Okay and the television broadcast as we follow have been pointing out that have been doing sequentially better as you have since bottoming in April I wonder if that could accelerate your gains as you recapture some of those things you have lost because at a reasonable conclusion.

I think we're at this point of this reduced declines.

We're reluctant to predict the slow in the recovery because what do we know in this world, but I.

I think the trend lines would suggest that.

Im just a little hesitant to.

To be so certain.

Rich I don't know.

No I, but yes directly I'd have to that Bob Jim is just the two things.

I would say on that is and again I'm sure.

The unemployment the employed employment numbers again today, I think looked a little better than most people's expectations.

So there are aspects of recovery, there, but as things start to recover they're going to recover on as we talked about earlier on this call they're going to recover on a neighborhood by neighborhood or city by city or state by state basis, However, they're going to recover Oh, sorry, I think we can all agree on one thing.

As an actor recover all the Sun snap your fingers on the whole country is going to recover.

At the same period of time, and if you think about just the ability to generate demand on a city by city basis or municipality by Mr. proud basis based on the facts and circumstances. There is no better company in America, that's built for that.

Our ability with our 850 plus radio stations at 150 markets to reach.

Local consumer with for advertisers that are messages tailored to them important them on the local basis, you can talk about TV broadcasters you could talk about the big digital players no. One else has that capability out there and to be clear we have that capability across the board not just in our broadcast area, but we.

We have the ability as Bob's talked about a couple times on the call we talk about data infuse solutions.

The ability to provide you know.

Real time solution to advertise we can do that on a local basis. Also these are just not national solutions, you talk about podcasting and we always talk about our big National podcast.

We can provide local part cash than we do which I don't think people focus on and not that hotel to that local community that local advertisers. So again, if you take a step back I think it objective we look at asset base objective, we will get the way the economy is going to continue to come back.

I don't think there's any company America, that's more prepared.

To see that advertising demand than we are.

And by the way I would have one last point on that which is that it's not only they want to reach one market and not another market, but they might have one message they want for one market and another message for another market and again, having and the numbers actually 160 markets were in that.

We have feet on the street in those markets, they're not affiliates. There are owned markets. So we have the capability to activate in the markets. We have an ability to do special creative for those markets. We've had some examples in the past where we've made hundreds of different commercials for one single advertiser because they want it's like.

We have different messaging in each market, we have the capability to do that so it puts us in a unique.

Position to be able to have both the national reach.

And the local capabilities as well and we can even blend the two ways in times like this that probably become more important than ever.

Okay and one other thing.

In terms of the analysis of your cost structure and expense structure.

Do you think your April through this too.

Effectively lowered or breakeven points, such that say a year ago. Your adjusted EBITDA margin was.

28.8% in the quarter as opposed to luxury created this quarter is that a number of the can go higher with the cost structure adjustments on the mix of revenue changes that are going on.

Well look again, we're not going to go back and I think that would be.

Tend to not be giving guidance, but one thing I should say you know clearly, Bob and I and the rest of team, Mike Mcginnis and everybody and cream.

We have the same frustration that we'd love to quite frankly give you we'd love to give you more information we love to give you more detailed information, but for all the reasons I think everybody knows and understand we haven't provided guidance. So too much of frustration our standpoint as we know you guys have to go back into your jobs and build models.

But so it has been painful but the one thing I would say without without making any specific comment is our objective here.

Again is to create shareholder value that's going to include improving our operating margins, it's going to absolutely go to include improving our operating leverage.

With the cost savings that we announced and Directionally the cost savings that Bob and I've talked about.

We get length on this call from a directional standpoint, but they're not going to go to the not today.

Yes, we have score I was talking longer term no I think there, but that's what I've done, but that's what I'm, saying longer term we absolutely.

Operating margin of this.

Company.

It's going to get better, but we're not going to give guidance and again I think you keep that focus which we wanted great track. Justins reminder, if you look at the track we are wrong when we emerge from the restructuring after the second quarter 2019.

I'm sorry, the second half of Q2, Q3, Q4 2019 to be any 2024, the pandemic hit I think thats very tangible evidence of the potential of this company and Bob and ice focus in terms of direction, we're going to take the capital structure and value creation.

And but let me put us specific point out that because I think your point is are these costs are the cost savings here, they're going to be permit the answer is yes.

And some of what we're discovering here, we're never going to put back I can't imagine or real estate coster ever going to be what they were.

No. Our TNT is not going to be what did it was I know, we're finding efficiencies in ways to do things. We haven't found before so yes, and mathematically you're absolutely correct.

If we lowered the cost basis, so the company and we returned to the revenue levels, we had before mathematically it will be a better margin.

All right well, thanks very much.

Great. Thank you.

That was a final question I will now return the call through our presenters.

Well, it's rich I, just want to on behalf of Bob them I show and quite frankly, the entire employee base of Iheart, which has been with US every step of the way really just thank everybody for your support thanks for taking the time.

Today, both the question Gentwo listen to the Iheart story and thank you in advance for your continued support.

Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.

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