Q2 2021 iHeartMedia Inc Earnings Call

Good day and thank you for standing by welcome to the IHOP Media Q2, 2021 earnings call at the.

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<unk> presentation, there will be a question and that the sector.

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The hand, the call conference over to your Speaker today, Michael <unk> head of Investor Relations. Please go ahead.

Good afternoon, everyone of thank you for taking the time to join US for our second quarter 2021 earnings call. Joining me for today's discussion of Bob Pittman, Our chairman and CEO and rich Bressler, our president of CLO 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 investor presentation that you can use to follow along with our remarks.

Before we begin let me quickly cover the safe Harbor statements on slide 2 during this call we will make forward looking statements, including the current and expected impact of COVID-19 on the company's liquidity financial position of results of operations the.

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 in our filings with the SEC.

During this call we will refer to certain non-GAAP financial measures reconciliations between our GAAP and non-GAAP financial measures can be found in our earnings release or in the investor presentation available on our website and now I will turn the call over to Bob Thanks, Mike and good afternoon, everyone. Thanks for joining our second quarter 2021earnings conference call the second.

Order continues the positive trends, we've seen in our business and highlights the value of our multiplatform strategy for consumers and advertisers plus the value of our focus on and investment in AD Tech and data that strength, the synthroid or multiplatform group at our digital audio group, including the continued strong momentum of our successful per.

<unk> gas business.

Our employees for at the heart of our success Rich and I are fortunate to lead the special organization from folks with decades of experience of broadcast radio to a relatively new podcast team the core of which has been working together in the space for over a decade as well as our teams across the company who are building out the technologies that are the foundation for the for.

Future of the company their innovation creativity and commitment are behind the momentum and strong results, we're announcing today and they've set the stage for what we believe is a full recovery. The 2019 levels by the end of 2021 I. Thank them for the hard work and their dedication which has enabled us to turn the positive trends we've seen in the <unk>.

Macro environment in the financial success for IHOP.

Also I want to take a moment to highlight an important facet of our company that sets us apart from companies in the digital only audio space. Unlike others in the audio sector broadcast radio is licensed by the government to operate in the communities, which we serve and at IHOP, We take service to our communities and our society very seriously our commitment to.

The environmental social and governance or ESG initiatives stems from our strong and enduring ties to the communities in which we all live and work and deepens, our connection and engagement with our listeners which is at the heart of our core promise of companionship. Our ESG report available on our website details of our accomplishments on this front <unk>.

<unk> initiatives and policies regarding the environment diversity and inclusion social justice, helping our communities navigate the pandemic, our corporate values and our high ethical and governance standards. Our ESG report is a living document that is continually updated to reflect our most recent ESG efforts and initiatives and we'll be publishing the latest.

The update to this report in the coming weeks. In addition to this document every year, we publish our community impact report, which highlights of broad spectrum of the philanthropic efforts and initiatives of IHOP teams across America, and how we as an organization use our position as America's number 1 audio company help make the world better and.

A few moments I'll take you through the overall podcast ecosystem, which is of new and powerful growth engine for us, but first I want to review the highlights of our second quarter financial performance. Our business continues its sequential revenue and profit growth improving since the low point of Q2 'twenty 'twenty in Q2, 2021the IHOP multiple.

Platform group grew revenue by 70% and grew adjusted EBITDA from negative 14 million in Q2, 'twenty $20 million to $181 million in Q2, 2021while the IHOP digital audio group grew revenue by 112% and adjusted EBITDA by 188% in Q2, 2021 or more.

<unk> also improved year over year and quarter over quarter as both of our largest segments benefit from high operating leverage the multiplatform group margins were 30% up from 21% in the first quarter and up from negative 4% in the second quarter of last year and the digital audio group margins were 27% up from 25 per cent.

In the first quarter and up from 20 per cent and the second quarter of last year, we were able to generate this margin improvement even with the investments we continue to make in our important new growth areas like podcasting AD Tech data and the continued expansion of broadcast radio on digital devices rich.

Rich and I and the rest of the management team are monitoring the recent increase in Covid cases across the country. So our outlook for the back half of 2021 is not without uncertainty, but based on what we've seen so far we remain confident that we will be back the 2019 adjusted EBITDA levels by the end of 2021 setting ourselves up for continued.

The growth.

And with that I'll turn to how our business has performed in the quarter were encouraged by the strong results. We delivered in the second quarter. Despite lingering headwinds from the COVID-19 pandemic reported revenues were up 77% compared to the guidance. We provided in our Q1 earnings call of up approximately 65% and this outperformance.

Was driven by the strong results in all 3 of our operating segments Multiplatform digital audio and audio and media services, excluding the impact of political our trend of year over year sequential quarterly revenue improvement continued from down 47% in Q2, 'twenty 'twenty the down 25% in Q3 'twenty 'twenty.

The down 17% in Q4, 'twenty 'twenty the down 7% in Q1, 2021 and now up 78% in Q2, 2021 and recognition of the fact that Q2 'twenty 'twenty was the quarter most impacted by Covid, we want to highlight that our revenues grew sequentially when compared to 2019.

As well with Q2.2021 revenue was down 6% against Q2, 'twenty 19, compared to Q1, 2021 which was down 11% against Q1 'twenty <unk> 19 in the second quarter, we generated adjusted EBITDA of 185 million of free cash flow of negative $3 million and its.

According to point out that our Q2 free cash flow reflects the impact of increased capital expenditures, resulting from the continued optimization of our real estate footprint. This program also resulted in 12 million of proceeds from real estate asset sales, which when included would result in 9 million of positive cash flow for the <unk>.

Our current quarter rich will provide more details on this in his remarks now let me provide more specifics the I Heart media Multiplatform group includes our markets group the largest radio company in America with its more than 860 radio stations and over 160 markets. It also includes our national sales organization, our events business our net.

Works business and our V I N Black information network business. The IHOP Multiplatform group reaches more people every month than any other media company in America with its broadcast radio assets alone. Our broadcast radio stations continue to lead the industry and we're the number 1 radio group with almost double the broadcast audio.

As of the next largest radio company and according to Nielsen for the 18 to 49 demographic. We're ranked number 1 in 96 markets overall, that's more number 1 markets than the next 2 largest radio companies combined and we see that same level of performance in the top 50 markets as well Multiplatform group revenues were up 70% year O.

For year on Q2, continuing its improvement as of recovers from the impact of the COVID-19 pandemic. We're also pleased that when compared to 2019 revenues improved 500 basis points sequentially with Q2 revenue is down 21% versus Q2, 2019, compared to Q1 revenues, which were down 26% versus.

<unk> Q1, 'twenty 19, looking at the individual revenue streams within the multi platform group. Our broadcast revenues were up 85% year over year and have continued to recover as the macroeconomic environment improves within the broadcast line is smart audio or data infused programmatic platform. Although it uses the same inventories the raw.

The broadcast radio Smart audio was up 95% in the second quarter, highlighting the value of data and AD Tech and as we continue to add new technologies and data capabilities. We expect that our multiplatform group in broadcast stations will be able to play in the fast growing digital Tam as well as the radio Tam our networks Rev.

He was up 28 per cent compared to prior year. Our networks business includes our premier networks, which was up 13% compared to prior year as well as T. T. W. N. The total traffic and weather network, which was up 53 per cent compared to prior year, our sponsorship and events revenue continues to be impacted by the pandemic. However, we have begun to bring.

[noise] back live and in person events in accordance with local guidelines, including the 2021 I Heart Radio Music Awards, which was attended by of Vaccinated live audience and broadcast live on Fox and was the number 1 network television show for the 18 to 30 for audience. During its time period. This quarter also included I Heart radio Wangled Tanga.

So in our can't cancel pride of N and which we partner with PNG for the second consecutive year and both were virtual events in combination with the return of smaller local events hosted by our radio stations. This resulted in Q2 sponsorship and event revenue being up 93% year over year as mentioned before we intend to make.

Some of our virtual events permanent as they are both profitable and drive high engagement across all social media and other relevant platforms.

We're also very excited to continue bringing back live in person events consumer demand is strong and we currently expect the Las Vegas I Heart Radio Music Festival in September the IHOP Country Festival, and the IHOP Radio Fiesta Latina in October as well as the 11 date I Heart radio Jingle Ball tour in December to all be live and in person.

This year now lets move to our eye Heart media Digital audio group, which includes our high profile and high growth podcast business and the IHOP Radio digital service the industry's number 1 digital radio service with a 5 ex lead in digital usage over the next largest commercial broadcast radio company as measured by Triton. It also.

Our websites of newsletters with their monthly audience of over 140 million unique users. According the Omniture, our digital services and programs for our national and local partners and our digital AD Tech companies are I Heart Radio service has a leading position on over 250 platforms and thousands of devices, including smart speakers.

Smart Tvs gaming consoles and mobile devices as well as the social footprint that includes 237 million fans and followers, which is approximately 7 times larger than the next largest audio player as we've talked about on these calls before our digital businesses have continued their excellent record of growth across all.

Products. Despite COVID-19, and we continue to add innovative new digital products and features the digital audio group delivered another strong quarter and we expect the momentum to continue for the full year. The digital audio groups revenues were up 112% year over year for the quarter and included in these results of our podcasts revenues which were.

152% and our non Pi casting digital revenues, which were up 101%. The digital audio group's adjusted EBITDA was up 188% year over year before rich takes you through the finer points of our second quarter results I wanted to take a moment to speak to you about the podcast ecosystem and our position in it.

Within the podcast ecosystem their 3 primary stakeholders listeners advertisers and creators each stakeholder comes to the table with unique needs. For example, listeners want to find the show on their favorite topic advertisers want to connect with an audience, they're trying to reach and creators want to enjoy the creative freedom and support.

Short to tell their story to the largest possible audience and each stakeholder is dependent on the other 2 for success underlying it all is the tech stack from publishing platforms to the monetization tools supported by our Triton. The box next acquisitions that help connect each stakeholder to the other and ensure critical and.

The financial success I heart is the only podcast publisher that has success with all 3 stakeholders and we have the only unified AD Tech stack for digital audio we continue to have success, attracting talent and creating partnerships with creators of all shapes and sizes for major brands.

Bloomberg Sports illustrated the NFL and the M. B a to celebrity creators like will Farrell Shonda Rhimes, Jason Bloom and Jada Pinkett Smith, and we continue our commitment to develop new talent in the major players in the space as well like how the money missing in Alaska and almost 30 shows that are now part of our black.

Podcast network. We also think we have the most valuable library of podcast Ing a bedrock of established podcast hits many of them being published for over a decade with audiences. They continue to grow year. After year like stuff you should know the first podcast ever to pass more than 1 billion downloads no matter of their size or <unk>.

<unk>, we have the tools and support the podcast creators need for success and our best indication of that success is the audiences. We generate we are the number 1 podcast publisher in the world and according the pod track the industry standard for third party podcast measurement, we're the number 1 podcast publisher with $252 million global mud.

The downloads and streams and 32 million of U S unique monthly listeners not only did we generate in the audience 1.5 times larger than the second largest publisher in the space. It was 3 times larger than the next largest commercial podcast or across the 19 categories. The pod track ranks I heart has 137.

Ranked shows and 51 shows ranked in the top 10, both of which are at least 3 times more than the next largest podcast network and we have the most shows with over a million listens more than doubling our nearest competitor. This underlies the diverse nature of our content and we're beginning to feel the flywheel effect.

Of the success with the audiences the more successful podcast, we have with large audiences. The more effectively we were able to promote new podcasts and new episodes, helping to drive engagement and success for creators and advertisers.

For advertisers, we continue to build out the tools and data they need the best leveraged the pie casting space, which continues to be the highest growth area and all of advertising advertisers know that they can come to us and find almost any target audience. They need in the podcast arena.

Moreover, with our smart audio products, they know that they can extend those audiences into our other digital offerings and even in the broadcast radio as well. This is something that no. Other company is capable of and we do all of this while ensuring that our podcast. The EBIT margin is accretive to our company margin we have both the.

Intent and discipline to make sure our exceptional revenue growth is coupled with healthy margins.

This is help frame the podcast ecosystem and explain why we're able to deliver unparalleled financial performance in the podcasting space Rich and I on the rest of the IHOP management team are excited about the tangible results. We're seeing in the transformation of <unk> into a true multi platform media company, we have both a high growth digital audio.

This as well as the resilient and stable multi platform group, which also has growth potential as we continue to build out our data and AD tech capabilities, which we expect will unleash more growth as we expand into the digital town critical to the growth of our digital audio group as well as the successful entry of the multiplatform group into the digital Tam has been or AD tech.

<unk> stack and as we've mentioned before not only can this tech stack unlock value for our assets directly. We believe it also has value unto itself as the platform and this past week, we announced deals with tune in and with an R. J of major French broadcaster that will use our Triton platform. These are some examples of our expansion into other.

That forms our growing relationships with international partners and the success of our strategic acquisitions like Triton, which continues to increase revenues and signed new advertising of publishing clients as a company. We continue to identify new opportunities across the audio advertising and data analytics sectors and using our unique scale.

And 1 of the kind platforms, we innovate and develop new products and services for our consumers and for our advertising partners that will drive <unk> growth for the rest of 'twenty, 'twenty, 1 and beyond and with that I'd like to turn it over to rich. Thanks, Bob we continuously improving trends in the macroeconomic environment and our financial results.

The continued their sequential improvement.

The reflecting both the general improvement in economic trends as well as the strong performance of our businesses our.

Our consolidated revenues were up 77% over the prior year period and continued their sequential improvement against our 2019 results. So while we recognize there is still more hard work to be done and the ongoing uncertainty as a result of the increasing COVID-19 case of across the country. We continue to remain confident that we are firmly on the path to be back to 2.

<unk> thousand 19, adjusted EBITDA levels by the end of 2021, setting ourselves up for adjusted EBITDA and free cash flow growth in 2022 and beyond.

In terms of our second quarter results. If you turn to slide 11 of our investor deck on a reported basis, our consolidated revenues increased by 77% over the prior year period, which was above the guidance. We provided on our first quarter call of approximately of 65%.

Direct operating expenses increased 31% driven primarily by the significant increase in revenue, which drives higher talent and profit share expenses third party digital course music license fees and performance royalty fees.

Variable expenses related to events also increased as a result of the return of certain live events. The increase in direct operating expenses was partially offset by lower employee compensation expenses, resulting from our modernization initiatives and cost reduction initiatives. We began in 2020 and continued into 2021.

SG&A expenses increased 27% driven by increased employee compensation expenses due to higher variable compensation, resulting primarily from higher bonus expenses based on financial performance and higher sales Commission expenses as a result of higher revenue as a reminder, last year of the vast majority of our <unk>.

Employees did not get paid a bonus as a result, you'll see our corporate expenses increase.

In addition increased head count from the investments in our digital businesses contributed to the increases in SG&A trade expenses also increased primarily as a result of the return of live events. These increases were partially offset by the impact of cost reduction initiatives taken in response to the COVID-19, pandemic and lower bad debt expense.

Our second quarter GAAP operating income was $28.1 million compared to an operating loss of $159.1 million in the prior year quarter, and our second quarter. Adjusted EBITDA was $184.5 million compared to a negative $29.3 million in the prior year quarter.

If you turn back to slide for I'll provide additional color on the performance of our operating segments.

The platform group revenues were up 70% in Q2 with 30% adjusted EBITDA margins of significant improvement after posting negative EBITDA in Q2 of 2020 on a sequential basis margins improved 890 basis points from Q1.2021, showing the operating leverage on multi platform.

The group has as revenue recovers within the multi platform group are all broadcast radio revenues, which were up 85% year over year and our networks revenues, which were of 28% and includes premier which was up 13% our sponsorship and event revenues were up 93% year over year, reflecting the return.

Of in person events and the continued success of our virtual events the.

The digital audio group revenues were up 112% year over year, and adjusted EBITDA was up 188% year over year and importantly, these results were achieved while expanding second quarter margins for over 700 basis points year over year within the digital audio globe is our podcast the business, whose revenues grew 152% year over year.

Our non power casting digital revenues continued their strong performance growing 101% year over year the.

The audio of media services grew revenue increased 56% on a reported basis, excluding the impact of political revenues in this segment of up 64% year over year on slide 17, there is a summary of our debt at quarter end, we had approximately $5.4 billion of net debt outstanding which includes a cash balance of $583 million.

These figures do not include the voluntary prepayment of $250 million of our term loan or the concurrent repricing, which will have a positive impact on our interest expense on a go forward basis, we provided debt schedule adjusted to reflect this prepayment on slide 18.

As a reminder, the terms of our debt structure include no material maintenance covenants and there are no material debt maturities prior to 2026.

We also remain committed to achieving our previously announced leverage target of 4 times. After just ending the second quarter with a net leverage of 7.6 times a significant improvement from 10.9 times at the end of Q1.2021, you can see why we are confident that we are on the path towards achieving.

In that target of 4 times in the second quarter, we generated negative $3 million of free cash flow as Bob mentioned previously capital expenditures will be elevated this year and we were higher in Q2, primarily due to the proactive streamlining of our real estate footprint part of our previously announced cost savings initiatives.

This program has succeeded in making certain real estate assets redundant, enabling the company of sales such assets in order to partially offset the initiatives gross capital expenditures.

Taking those proceeds into account our cash flows for the second quarter would have been approximately $9 million. The real estate program is a company wide effort to leverage new technologies and adopt new best practices to make our office spaces more efficient and help our employees deliver better results at the conclusion of this project we expect.

Spectra reduce our occupied square footage as well as our rent and related expenses by approximately 50% we.

We continue to successfully execute against out of previously announced savings initiatives are pre COVID-19 monetization initiatives achieved $100 million run rate by mid 2021, and we remain on track to replicate the majority of the previously announced $200 million post Covid savings in 2021 the Pan.

Demick forced us to transform the way, we do business more rapidly than we could have imagined and we continue to benefit from our experience in adapting quickly to these changes the actions we have taken leave us well positioned for margin expansion as advertising activity continues to recover and we saw this occur in the second quarter.

<unk> margins were 21% up from 14% of Q1.2021 and on.

2007 hundred of 40 basis points from a negative 6% in Q2.2020 multi.

Multiplatform group margins were 30% up from 21% in Q1, 2021 and of 3390 basis points from the negative 4% in Q2.2020.

Digital audio group margins were 27% up from 25% in Q1, 2021, and up 720 basis points from 20% in Q2.2020.

As we look ahead to the rest of 2021 I want to provide you with the following.

Our July revenues are up approximately 26% compared to the prior year and for the third quarter. We expect consolidated revenue to be up approximately 20% year over year, we're actively monitoring the impact of increasing COVID-19 cases to each of our markets and while we haven't seen anything yet in our Q2 results or our Q3 pacing that would indicate of D. A.

The Asian for our current trajectory. We believe it is still too early to forecast longer term trends given this uncertainty that being said, we believe we'll get back to 2019 adjusted EBITDA levels by the end of 2021 and a few things to note on our expectations for free cash flow in 2021, we will not be of cash tax.

Payer due to the NOL carryforwards debt, we will utilize to offset taxable income interest expense, we approximately 335 to 3 of 45 million and it turns of capital expenditures due to the significant real estate reductions we are working on to drive meaningful operating savings or Capex in 2021 will be 165 to 100.

$85 million and then returned to normal levels in 2022, we continue to make steady progress on my recovery benefiting from our strict cost discipline, the resiliency of our high growth areas and the gradual improvement to the macro economic environment. We look forward to continuing our businesses recovery with the expectation that we backed it too.

19 of adjusted EBIT of levels by the end of 2021, and a continuation of the significant deleveraging activities weird so far as evidenced by the fact, we improved our leverage by 3 point the returns since the end of the first quarter of 2021.

And again, we'd like to thank our employees, who remain committed to serving our listeners our communities and our business partners. During this challenging time. We appreciate you joining our second quarter earnings call and now we will turn it over to the operator to take your questions. Thank you.

As a reminder to ask a question you will need to press star 1 on your telephone keypad to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question is from Jessica Reif Ehrlich.

With <unk> Securities.

3 questions.

I guess, Bob you want to sell.

Fast so audio is a really hot advertising category of new kind of winter yet.

Suite of services and strength, but you.

You may have sort of touched on the 7 I apologize in advance, but you know.

Now that you have you've made some acquisitions.

There are still opportunities from here for and your revenue is great.

Okay.

It was great are there still opportunities for better monetization with Triton can you can you kind of walk us through.

Our suite of services and how your product suite differs from competition.

What the opportunities are from here. So that's kind of that and then second on that.

Question just on the quarter.

I mean, the numbers really are phenomenal. So can you kind of parse out like pricing versus sell out local versus national on.

Whatever you can say about outlook and then on the you know rich you gave guidance for revenue, which thank you, but on operating expenses. Obviously you have to go up as everything starts to open up can you give us any comments on the operating expenses trajectory from here. Thank you.

Sure let me start Jessica.

I think in terms of.

And I assume you're talking digital.

With the with the Triton and exits of Fox test as well on the.

The other.

But jelly radio of jar. The other pieces, we have of the AD Tech stack. When we look at podcast thing for example in digital we really leaned heavily on the Bigs sales force. We have we have the biggest sales force and in digital audio why a lot the biggest sales force an audiobook.

I, a lot and and that's been at but the other side think of that sort of as part.

A barbell that side of it is high touch probably bigger more known advertisers that are sort of looking for big marketing idea that involve these assets. The area that we think we have a lot of growth potential on an opportunity from 1 of the reasons. We've invested heavily in the tech stack is that of probably a third of the inventory.

<unk>.

We'll go unsold.

In some fashion.

Because it's a little bit here, a little bit there it's on smaller pie cash that's on reruns et cetera.

But with that group, we are building out the marketplace. So people can buy audiences and can buy impressions and then for us.

It becomes even better for us is once they find the of audience. They want we can let them extend that same audience from pod casting to digital audio and of course Nirvana is into broadcast radio where they can get this phenomenal reach and we also have.

Always some unsold inventory and allows us to fill that inventory and if you think about sort of per month.

Sales point, it's about the barbell of big marketing ideas versus I'm looking for media I'm looking for impressions, adding the price and piece of it allows us to focus more on that second part, but what it also does in terms of managing inventory the way things have been setup on sort of a manual marketplace and the way media.

<unk> has traditionally been what is people buy a station or time periods.

Or a podcast.

If you could just kind of parse out of pricing versus sell out local versus national in the quarter and whatever you can say about outlook. I mean, you you did give the 20 per cent of revenue guidance. So I'm not sure of there's more of you can take on an outlook, but just how you know kind of of what you're seeing in the market today.

You know we have avoided you know those and and by the way, we don't think there, particularly the best metrics because for US all of you know if I've got unsold inventories well us if I if I can put it wherever I want it well we sell at a lower CPM you betcha on the other hand, if I've got a great program.

That everybody wants she'll be driving up the brakes on it absolutely. So it has so many different pieces is not sort of a broad average use I think don't tell the story of that which is why we built parade those out as.

The important metrics for us and also understand that some of the distinctions between national and local you've heard of those wines.

Blow and some of the definitions on those loans blur and now they're trying to kind of add on that rich 1 we didn't talk about on the in the earnings. This time, but we often do just want to remind you of that 1 of the big innovations. We've had is the ability and you've seen us build that build the out the infrastructure, though so that any seller anywhere can sell anything.

Hope you get to this business and the.

The casually the nature of the business and the percentage of the bottom line and I think you'll see evidence of that quite frankly in this quarter, whether it's our consolidated margins of the 21% from 14% in Q1 of this year or the multi platform margins getting back to 30% from 21% of.

The digital group margins getting the 27 per cent of it again all of that we covered already but I think it helps you think about projecting on a bit of numbers.

And our next question is from.

[noise]. Thanks, maybe first on the Q3 guidance I think it implies the third quarter I'll be down about 6% below the third quarter of 2019. Your cue to revenue was also down about 6 per cent on 19 and hours of nice improvement.

On Q1, which I think was down about 11. So it seems like you've got the sequential trend behind you and the pacing you gave for July seems pretty good. So just curious of kind of suggest the things get worse in August and September is that because you're seeing anything getting worse or you just want to be cautious at this point.

Given the the Delta variants, you know it et cetera.

I think it's more cops than than anything else on that and the the rich I don't know if you're 1 of them no no I I figure. It's just more you know concert I wouldn't abuse. The word you know on so I wouldn't of used the word getting worse I mean, I think we gave kind of factually the numbers out there just the view.

Look at our results and look at all we talk on the results for the year and you look at the approach we gave everything in terms of.

What we look forward in terms of of of leverage ratios and guidance and every other data points. So I wouldn't say, we're so I would just say conurbation, where we see the business for the third quarter of at this point in time.

Yep Yep.

And then as we just think about you know you got that guidance out there of returning to EBITDA levels by the end of the year you mentioned, the 200 million you've taken out I know of course that is I know you're not guiding the next year at this point, but for those of us that assume you'll be back to you know previous level of of run right next year.

It is the EBITDA as simple as you know $200 million better than your your previous level of of EBITDA at the same revenue or is there anything like a mixture of what's going on in there like more digital being a little lower margin what else should we think about is those building blocks.

We haven't announced anything yet and I don't want to get too much into it.

Clearly there always are different mixes the results. So what are we invested in to build the company and.

And what do we choose to invest in.

Think we proved during the pandemic that we have a lot of control over the even though the fixed costs business. We I do have a lot of control over it but I think is good times, we continue to build for the future and I think you've seen the benefit of it in these numbers of from what we've done in the past and will continue that.

Yeah, and then the only thing I might add Steve is just you know a little bit like yes to all of you above question right yes.

I think you know we've.

The vintage of course, those are just articulated the I have to go over and get them I don't think I need to go over them again.

Yes, you see your space of real progress progress on margins and yes audio I think as Bob said right upfront in the beginning of all remarks audio is hot and you look of just both the growth of our digital businesses and all of the component and you look at the strong recovery of our multiple.

A lot for business and you just look at all of the consumer habits.

Better happening out there in terms of us for the following the consumer on the ability to monetize of.

So no predictions about what we're gonna get in 2022, but I and yes, we have product mix like every business always has proud of mix evolving and changing but just to go back. The 1 thing what we're focused on his head of you create the most value how do we know is I would say we're not confused.

How do you create the right value to drive.

The the stakeholder value of this company.

Maybe 1 more question for your ex you pay down a little bit of debt in the quarter. It seems like a signal of confidence now to to do that should we expect more of that in the quarter of that.

Well I'm not going to commit to anything in terms of what we're going to pay down but again I think in terms of our debt. It as a side of of confidence that we pay pay the $250 million of the term loan which are not in the numbers you see as we reported.

As of this end of the second quarter and I think you know the.

The significant progress we made of net leverage like just the reminder, and we covenant in the remarks, you know we were like close to 11.10 9 times at the end of the queue..1 man at the end of the queue to number 7.6 times so 3.3.

Turn improvement out there so.

It doesn't mean, we don't have a long.

Long way to go.

And getting to our target leveraged but at the same thing look at all of the progress. We made during Q2 and we are committed to get into the Forex leverage ratio.

Yep. Thank you.

The next question is from the best Yano, Patty with J P. Morgan.

Hey, guys. Thanks for taking the question just wanted to drill into the digital segment of little bit here obviously.

A lot of time discussing just the addressability and how that's a huge driver, particularly and pod casting of the huge revenue growth of you're seeing the obviously continues to accelerate just wanted to see if.

First you could break down what you're seeing and pod casting is it higher C. P. M is it just more engagement.

What are you hearing from the bigger brands in terms of adoption and then separately regarding digital.

The digital ex podcast thing has just been phenomenal growth.

How durable are these trends can you can you unpack some of the underlying drivers of that digital ex pod casting.

1 of them beyond Iheart path and.

The the drivers thanks guys.

The man looked the biggest driver in the world is that the digital Tam as 1 of 160 billion announced.

So there's a lot of money chasing digital advertising, that's really good for us. It's good for us of several levels..1 pod casting is the hottest.

Category within digital advertising. So is the hottest of the hot and we have a great and with the number 1 by quite a lead.

And pod casting.

2 we built out the AD Tech staff, the stack, which allows us to we think more efficiently go after that and the third area, which really is an important area of of growth for us as we've invested in making our broadcast radio look like digital for the advertiser and heard of for.

For people said Oh, you don't have it's great you built out these cohorts you built out the saudi's, but you've got this last piece of 1 the 1 but 1 of the ones going away with the mobile I D issues and the cookies, even Google has said, they're going to cohorts as well so that's becoming the new standard and we can play.

In that world and play quite well and when you look at the unique reach we haven't broadcast radio the ability to make that digital and put it in the digital by improves the performance of every digital bike, which you can add fresh reach.

To that to the buy in to those campaigns at a very efficient price. So we think we benefit from it you on 3 levels, yes, pod casting and by the way that's the tip of the spear people often come talk to us about that first as they talk more and more about the marketing they realize I can I can do some other did.

<unk> with you as well and then of course, they realized wait a minute if I can do your broadcast like digital smart audio than it takes me to another level. So I think the investments we've made in the years, we've taken in building ounce of our data camp abilities, and our tech capabilities are really beginning to bear fruit and where b.

Getting to see the benefit of it and we could we expect that the continue.

Especially when the interest or what day.

Not to go through repeat all go through it again, but with everybody on the phone get the chance to clean yourself take a look at on Investor deck, we have some of the same slides.

In terms of audio tech stock in terms of the rich in depth news of the audio touch stack of Mothers' day, we are the only ones that have that type of audio Tech Scott.

Full stop period, but we also added some other slides.

Quite frankly in response to discussion like this in terms of the you know, including like the history of how we got here and pod casting so again to give people confidence about the sustainability of it there's a sly which I think is particularly interesting the wheelchair slide 9.

Which shows how deeply are and pod casting.

Ranking in terms of of you on the most shows and pod track. The most top 10 shows on track. The most shows for 1.1 plus million listeners again I think we've got proves out is getting to your question G. How sustainable is this in terms of of the growth well, it's deepened widespread so that helps on the sustainability.

Point and the last thing I might say is I know when we came off of Q1, where we had of 70% of.

Revenue growth over on the digital line 1 of the often ask questions that Bob and I might God from investors was G is just an aberration or are you going to be able to continue to.

Trends, we do have reach and as Tvs reach goes down substantially AD supported TV.

We become even more important there.

And just a quick follow up.

Not getting on for anything that could perhaps be.

Confidential or.

In a sense competitively sensitive, but obviously announcing podcasts and deals with very well.

World Class brands the Mb.

NFL sports illustrated.

Do the economics of these in terms of the content.

Rev sharing et cetera are they vastly different than perhaps.

What's currently embedded within the numbers.

And then go forward kind of thought 1 of the beauties of Big number 1 is most people that come to us.

For the podcast that we're doing in partnerships 1 of the successful podcast and our size advantage and our success with making hit podcast gives us a tremendous advantage and I would say that's the number 1 reason they come to us it allows us to be pretty picky about which ones we will do.

The success there is plenty of money for everybody and I think people realize they've got their biggest chance of success with us.

And we have enormous discipline on the economics of our deals were not interested in profitless prosperity, we don't need to we don't need the buyer way in the anything.

We are number 1 and we've been widening that GAAP. So so we're going to continue to run our business that way.

You see the earnings coming out of our digital group.

We put a great emphasis on converting revenue to earnings and I know thats, a little different than some some digital players.

But it's the way of which we run the business and we think ultimately going back the richest point earlier is the best way to assure that we create shareholder value.

Thanks again.

Your next question is from Jim Goss with Barrington.

Thank you.

I'm wondering about if you could identify the value of the radio AD spot sales.

Dedicated to podcast promotion.

And the.

And I was wondering how are you the same the transfer prices to your own inventory for the on behalf of those.

Of those podcasts promotions.

I don't think that's sort of not the way, we really look at it the.

We look at it is we are we have plenty of people who are doing both radio and podcasting take the breakfast club for example, 1 of our biggest podcast also 1 of our biggest morning shows on our hip hop radio stations.

Naturally the.

There is enormous synergy there and we look for that synergy at every step, but I think.

The pod casting.

The cast radio.

Okay. We've got that thank you.

Our next question is from Ben Swinburne with Morgan Stanley.

Hey, good afternoon guys.

1 question 1 just for clarification on the guidance of Bob as you've mentioned the the number of times, there's tremendous advertiser interest in.

[noise] on your numbers are really impressive, but you talked about a third of the inventory of isn't so and I'm just the data surprises me a little bit given the demand maybe you could just talk about you know how you close that gap and drive sell out because it would seem like of the these numbers could be even higher.

What the drivers are there go ahead, sorry, sure give me 1 depends upon time of the year too.

For a certain months of the year, we don't have as much they're sort of months of the year of like January we got a lot.

A lot of it appears in small podcast small shows small radio stations.

It is overnight day parts on radio that the way radio has been bought people on morning driver afternoon drive nobody wants overnight for no. Good reason I might add because of the cpm's actually cheaper than the engagements probably even higher of the overnight audience.

But if we in the traditional way of buying advertising people have decided these are good times the by and these are not the great times, Dubai or by the way I don't want the little station dealing with the big stations are on the big markets of little market once somebody which is the beauty of digital the sides I'm looking for.

X number of impressions of this group and by the way, we can now do cohorts of auto and tenders.

The people who knew mother's we can find.

Groups other than just the demo Nielsen demographic groups and once we can find debt and serve impressions now we're free to use all of our inventory. So these.

In the magazine business or newspaper you always look at your written the inventory smutty volume 3 cause of 3 quarters of of page works. The other quarter going we now have the ability to fill that in and that was really what's behind building out. This AD tech platform all the way from jelly, which allows us to take our broadcast radio and make it.

Look like digital.

And we by the way of servers and all of the radio stations. So we can control it centrally to box nest and and Triton and even to a radio jar of acquisition, which really help us put the pieces together so putting that together allows us to have on electronic.

Marketplace for this product.

And allows us to fill the holes and we feel confident that this was been 1 of good investment and that will see the returns from it by the way men of just 1 thing the type of things. It goes back to gestures first question in terms of getting value out of the tech start to just the kind of tired of those 2 together put aside what the percentages for a second having that.

Tech stock just allows you to more efficiently monetize all of your inventory.

Alright.

Yep and then just on the guidance for its just to clarify the the July guidance, but also of the third quarter of 20% is that of reported number or is that excluding political I think by the time you get to the end of the quarter you probably coughing some political revenue for no. That's the recorded number of.

Got it thank you both.

Thank you back.

Your next question is from Steven.

Goldman Sachs.

Hey, great. Thanks to if I could just the follow up on the MBA in Si I was wondering if you could talk maybe more broadly about your your sports content strategy. What are the white spaces that you on the leaves are going after 1 of those types of content in the sports Arena are you looking for.

And then sort of of what opportunities on the advertising for on do you think these types of content will open up for Ya.

Yeah.

Great question of clear.

Clearly, we're a major player in sports and broadcast radio pod casting in in digital we carry team sports we play by play on a lot of our stations.

And across all of the leagues and.

And we have sports only stations, we have we have the gambler, we have some of the day specialize in sort of the sports betting.

And.

And we have now we also have sports new segments, which run even on music radio stations. So we're able to aggregate these huge audiences.

For specific content and we think it's a nice growth area for us and given our size and scale, we find that folks who are big in that area of on.

Casters, calling coward damn Patrick et cetera are part of our ecosystem and part of our family.

And we were able to monetize that I think in ways, others can and we're able to attract players because of the uniqueness of of what.

Got it and then just 1 more if I could on tuna and I was wondering if you could maybe expand a little bit more on your decision to partner with them and I'm curious what benefits are you seen from distributing your digital stations of them then on the net sales representation piece of the agreement how big the platform type of business.

Get for Ya get for you guys.

I think you've hit it as a platform play and.

Tuna, and it's got a nice product of.

We hope it provides additional opportunities for listening as you know we have a strategy of distributed listening we're not just our <unk> radio stations for them over 250 other platforms.

In the case of pod casting we make our podcast available to Apple's Spotify everyone else we.

We distributed for the maximum audience I think tune into an extension of that strategy and I think for a tune in there looking at being able to use the kind of resource we have in terms of AD sales and monetization and and for US. Both I think we both can benefit from the use of the technology platform.

We've said early on when we did the Triton acquisition, we talked about how this tech stack not only has value for our properties, but it has value unto itself as a platform there is no.

An audio no 1 has done the play as they've done on display advertising and other forms of digital advertising in terms of of Platt.

Platform, everyone can use and we set out to build that and I think this is another step along that way.

I just want the it's been.

Really Steven I'm, sorry, it's really a great question, because if you think about it just kind of like hopefully everything else, we announced on do and when you hear it and listen to is that okay. This is their strategy. This is just how that fits in just like the context.

Bob put this in compared the pod casting or or the.

And you said the right word of how do we partner with them well.

And that's what we're about and look how we just also I would think of of.

The macro view of things at the.

The companies either partner, well or don't partner, well and I think I would I would like to thank the 1 of the hallmarks of Iheart as we partner extraordinarily well that we don't think we have to own everything every time, we look at something should be make by her partner and often partner turns out to be the best way to do it, especially if we find deals where it is.

Beneficial to both parties equally.

And those are the kind of deals we try and build on those are the kind of partnerships we look for it.

Great. Thank thank you very much.

And our final question is from San day with the.

To that level, we're pretty single minded on our focus.

Got it got it. Thank you guys appreciate it.

A follow up any any commentary on AD categories that are specifically affected by things like for like.

Supply chain constraints for example, auto dealers right.

Labor shortages like restaurants, and bars, I'm, assuming they've lagged a bit if you could just provide what youre seeing out there for those and then any of the categories that have the.

Outperformed your expectations sort of as we know.

We cover here for you.

We don't talk about the sectors because we're so diversified.

No single sector has a big impact on us, but in no single Advertiser is the big impact on us but.

Yes.

The good news is right now I think even in sectors like auto where there are clear.

Clearly shortages in the.

The chip shortages affecting him I think many of those auto companies, even dealers have decided look I still got to keep the demand there because we want to do have supply I want pent up demand that go I don't want to at the start all over from marketing and I think of lot of advertisers that cut back during the pandemic are looking now for almost having the <unk>.

Start at a higher price so even the ones that are still know they've got growth ahead of them and they are not able to fulfill their demand. Yet also we're continuing to advertise so that they continue to hold on to that brand relationship and that.

Relationship overall relationship purchase relationship with the consumer.

Got it thanks, guys appreciate it best of luck.

Great.

Thank you everybody really really appreciate we all appreciate it Bob myself, Mike and the team.

Everybody tuning for the IHOP story and.

And Mike and the team at all of those should be accessible and available after for any follow up questions, but thank you very much. Thank you.

Thank you again for joining US today. This does conclude today's presentation you may now disconnect.

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Yes.

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