Q1 2023 iHeartMedia, Inc. Earnings Call

Speaker 1: The.

Speaker 2: After the speaker's remarks, there will be a question and answer session, and instructions will be provided at that time. I will now turn the conference over to Mike McGinnis, head of investor relations. Please go ahead.

Speaker 3: Good morning everyone and thank you for taking the time to join us for our first quarter 2023 earnings call. Joining me for today's discussion of Bob Pittman, our chairman and CEO and Rich Bressler, our president, COO and CFO . At the conclusion of our prepared remarks

Speaker 3: Management will take your questions. In addition to our press release, we have an earnings presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward looking statements regarding our financial performance and operating results. These statements are based on management's current expectations.

Speaker 3: And actual results could differ from what is stated as a result of certain factors identified on today's call and in the companies as you see filings. Additionally, during this call we will refer to certain non- GAAP financial measures. Reconciliation between gap and non- GAAP financial measures are included in our earnings release. Earnings presentation.

Speaker 3: and our SEC filings, which are available in the Investor Relations section of our website. And now I'll turn the call over to Bob. Thanks Mike and good morning everyone. We're pleased to report that our first quarter 2023 results were a little above the high end of our adjusted EBITDA and revenue guidance ranges. More importantly, while both the macroeconomic climate and the advertising marketplace and interest? vielleicht are qualified. Okay.

Speaker 3: relative to guidance gives us confidence that our adjusted EBIT results will continue to improve throughout 2023 and if this advertising market recovery trend continues in 2024 we expect to resume our growth trajectory that was interrupted by this period of advertising softness.

Speaker 3: Our consolidated revenues for the quarter were down 3.8% compared to the prior year quarter, a little better than the guidance we provided down in the mid-single digits. Our free cash flow for the quarter was negative 133 million. As a reminder, Q1 is seasonally our lowest free cash flow quarter of the year, and we will generate positive free cash flow in each of the remaining quarters in 2023. Finally, operating expenses remain a strong focus of hours, and we continue to adjust our operating structure to drive additional efficiencies, and you'll see even more of that in Q2. And we're also continuing to explore using AI.

Speaker 3: to substantially transform our operating structure and cost space over time. Turning now to our individual operating segments, in the first quarter our digital audio group revenues were 223 million up 4.3 percent versus the prior year quarter, adjusted to about 54 million up 3.1 percent versus prior year.

Speaker 3: Those changes were reversed at the end of 2022, and while we saw some of those negative effects continuing to our first quarter results, as we anticipated on our last earnings call, we are confident that our second quarter flow through will be back on track.

Speaker 3: Within the digital audio group, our podcast revenues, even in the slow-ab market, grew 12% versus prior year, and our digital X-Pigcast revenues grew approximately 1% versus prior year. In terms of audience reach, in March, I Heart was again ranked the number one podcast publisher in the U.S. with more monthly downloads in the next two largest podcast publishers that's being s?aken from

Speaker 3: members every month in the biggest streaming music service. And third, there are now more weekly podcast listeners in the US than Netflix subscribers. In the investor deck, we've included some new slides that show the growth in daily reach and time spent among podcast users since 2015. Additionally, you'll see a slide that shows where podcasting is drawing its listening from.

Speaker 3: Spoiler alert of those surveyed 70% said they replaced time spent with social media platforms 50% said they replaced time spent with YouTube and 46% said they replaced time spent with streaming music services and most important not much podcast listening was drawn from broadcast radio listening illustrating the truly complimentary nature of broadcast radio and podcast

Speaker 3: advertisers.

Speaker 3: Also, as we mentioned last quarter, we continue to see positive changes in the podcasting industry, specifically as it relates to content cost. While some podcast publishers had chased on economic deals that drove up content cost across the podcasting marketplace, we're now seeing a reversal of this trend.

Speaker 3: We think this return to rational economic behavior across the marketplace is good news for IHART and good news for the podcasting industry as a whole. And finally I remind you that at its core, podcasting is an adjacent and truly complimentary business, the IHART's broadcast radio assets, which gives us a natural advantage in podcast content creation, promotion, marketing, and advertising.

Speaker 3: radio and podcasting or complimentary and mutually additive businesses in terms of consumer usage. In addition to our industry leading podcast business, we also have the number one streaming radio service, which is five times larger than our closest competitor. We have the largest social footprint of any audio service by a factor of seven.

Speaker 3: and we operate 3,000 national and local websites that reach almost 150 million people in the United States alone, all of which represent additional opportunities for our marketing partners to interact with our highly engaged consumer base.

Speaker 3: Let's turn now to our multi-platform group, which includes our broadcast radio, networks, and events businesses.

Speaker 3: In the first quarter revenues were 529 million, down 7.4% versus prior year, adjusted it even to 87 million, down 35% versus prior year, and our multi-platform group adjusted even in margins were 16.5%. The multi-platform group was impacted more than the digital audio group by some of the advertising softness.

Speaker 3: to the performance of the large digital companies has been significantly better than it was during the 2020 advertising downturn. We think that is validation of our technology and data investments to make our broadcast radio assets more like digital for our advertisers leading to stronger revenue growth potential.

Speaker 3: And as we look at overall advertising revenue potential, today our broadcast radio assets reach over 90% of Americans every month and actually reach more people than Facebook and Google in the United States. That strength with consumers also supports our conviction that broadcast radio will continue to have long-term sustainable revenue growth.

Speaker 3: Remember, advertising follows the consumer. And consumers are on the radio and are staying on radio, unlike the substantial consumer declines experienced by newspapers, magazines, and linear TV. For example, the CBS Television Network, which is currently the largest linear TV network, according to the latest Nielsen ratings, has seen its consumer reach cut in half since the early 2000s.

Speaker 3: While over that same 20-year time period, I-Hards broadcast radio consumer reach has actually grown slightly and now reaches more than twice as many people as CBS . Before I turn it over to Rich, I want to leave you with this final thought. Rich and I and our entire management team remain laser focused on identifying and targeting revenue growth opportunities.

Speaker 3: while aggressively managing our expense base. And with the actions we've taken over the past few months and a presidential election year ahead, we believe we'll see a ramp up in our performance throughout 2023 leading to a strong 2024 and beyond for I-HART in terms of revenue growth, profitability, and free cash flow generation. And now I'll turn it over to Rich. Thanks, Bob.

Speaker 4: As I take it through our results, you'll notice that as Bob mentioned, we slightly exceeded our previously provided guidance for the quarter. Our Q1 2023 Consolidate revenues were down 3.8% year over year, compared to the guidance range we provided down in the mid-single digits. Our Consolidate Direct Operating Spenses increased 4.3% for the quarter.

Speaker 4: we made in Q1. To look ahead for a moment, we expect our second quarter direct operating cost to be down slightly over year, excluding the impact of restructuring costs. Our consolidated SGNA expenses increased 4.8% for the quarter, primarily driven by investments in key growth areas like specialty broadcasting.

Speaker 4: certain credits which benefited the prior year quarter, as well as additional cost incurred in connection with the execution of some additional cost reductions we made in Q1. We generated a first quarter gap operating loss of $49 million compared to operating from a $12 million in the prior year quarter.

Speaker 4: Our first quarter just at Ibit.DA was 93 million compared to 145 million in the prior year quarter and a little above the high end of the guidance range we provided of 80 to 90 million. Turning out the performance of our operating segments, as we remind that there are slides in the earnings presentation on our segment performances. In the first quarter, Digital Audio Group revenues were 223 million dollars.

Speaker 4: of 4.3% year-over-year and they comprised approximately 28% of our first court of consolidated revenues. Digital Lodio Group Adjusted Ividier was 54 million dollars of 3.1% year-over-year and our Q1 margins were 24.2%. Within the Digital Lodio Group our high-casting revenues grew 12% year-over-year.

Speaker 4: on our digital-adjusted Ivitamargins in Q4.

Speaker 4: We have corrected the issue, and although there are some lingering impacts on Q1 margins, it will not be an issue by the second quarter. We expect our digital business to get back to our normal Ibit.DA flow through starting in Q2, and we continue to believe our digital audio group will be a 35% adjusted Ibit.DA margin business. Multi-platform group revenues will 529 million.

Speaker 4: down 7.4% year over year, adjusted EBITDA was 87 million, down 35% year over year, and adjusted EBITDA margins were 16.5%. These margins reflect a high operating leverage nature of the multi-platform group revenues, with the vast majority of the revenue declines dropping directly to EBITDA.

Speaker 4: We expect our normal flow through to Resurbing Q2. Audio and Media Services Group revenues were 61 million up approximately 1% year-of-year and adjusted the EBITDA was 15 million down from 16 million in prior year. At quarter-round we had approximately 5.2 billion of net debt outstanding and our total liquidity was 601 million which includes a cash balance of 188 million. Our quarter-ending net debt to adjusted EBITDA ratio was 5.8 times. Although we can't predict when the advertising marketplace will fully recover from this period of softness, we remain committed to our long-term goal.

Speaker 4: of net debt to adjusted IBTA ratio of approximately four times. As highlighted on past calls, we have no material maintenance covenants and no debt maturities until 2026. In the current macro environment, this type of debt profile positions us to be both resilient and opportunistic in responding to debt market developments.

Speaker 4: In Q1, we proactively repurchase $20 million of the principal balance of our 8-3A's Senior Unsecured Notes, which brings our repurchase total to $350 million and results in an aggregate annualized interest savings of approximately $30 million.

Speaker 4: We were able to repurchase these notes in the market at a meaningful discount to their par value generating both earnings and free cash flow accretion.

Speaker 4: We will continually monitor market conditions and will look to further improve and optimize our capital structure as opportunities arise.

Speaker 4: In the first quarter, we generated negative $133 million of free cash flow.

Speaker 4: As we remind the first court is always our lowest free cash flow quarter, and populous the first quarter is our smallest revenue and adjusted Ibbit-D.A. quarter for the year, as is for most media companies. As Bob mentioned earlier, we expected generate positive free cash flow for each subsequent quarter in 2023.

Speaker 4: I want to turn now to our outlook for Q2 as well some thoughts on the full year. We expect our Q2 2020-23 revenues to be down mid-single-digit year over year and down low single digits, excluding the impact of political revenue. Looking at our segment revenues individually, we expect the multi-platform group to be down high single digits, the digital audience.

Speaker 4: 2023, we expected generated adjusted EBITDA in the range of 180 to 200 million dollars. Let me provide to updated assumptions regarding cash. While we initially expected to be a full cash taxpayer in 2023, we have since implemented tax planning initiatives that we expect to reduce our 2023 annual cash tax payments and now expect the pay between 20 million dollars.

Speaker 4: million dollars in 2022. We expect our cash restructuring expenses to be down dramatically year over year. We continue to be impacted by the current interest rate environment as approximately 40% of our debt is floating but we may commit it to further opportunistically improving our capital structure and reducing our interest expense.

Speaker 4: to grow throughout 2023. This second quarter outlook in combination with our first quarter performance relative to guidance gives us confidence that our adjusted IBITDA results will continue to improve throughout 2023 and if this advertising market recovery continues in 2024 we expect to resume our growth trajectory.

opportunities, utilizing new technologies to expand our product offerings, and improving our operational efficiency. And finally, on behalf of our entire senior management team, Bob and I want to thank our team members who work to deliver for their communities and for IHART every day. They're the engine that drives our company.

Now we will turn it over to the operator to take your questions. Thank you.

Thank you. We will now begin the question and answer session. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, press star 1 again. Your first question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Thank you. Good morning, everybody. I got two questions.

I get the first is on your April your comments on April revenue down 5% versus down 4% in Q1

I don't know what you can say about May. It seems like there's very little visibility, but I heard what you said about the long-term outlook. I'm just wondering if you think that things are getting a little bit marginally worse.

And then it's obvious, I'm saying the obvious, but there's probably the most challenging macro and secular, you know,

and challenging environment that you've had in a, I don't know, a really long time when competition isn't going away. You've explained some of the margin challenges, but they are down. And you've already aggressively cut costs. I'm just wondering like what else can be done? You explained the margins on the digital side. Do you just need a recovery in revenue or is there more to do? Hey, Justin, tWitch, thank you.

So let me start a couple of things. I'm sure Bob will jump in too. The picture we portrayed, we said April was down 5%. But then also reading on that we said ex-political, we expect the rest of the quarter to get down to be down low single digits. So I think we've seen, we are seeing what we think is a slightly improving trend. And I think if you go back to Q.

that. And when you look at the margin question back to your overall, yes, you know, we've taken a significant amount of cost down. And by the way, by frankly, as we said, just taking advantage of the cap expenditure, which is who we've made, taking advantage of efficiencies to market using our real estate footprint. And yes, margins are down in Q1 and you refer to digital.

Commission structure that it was going to take us not just Q4 but Q1 to work through that. Reiterated that here and we said we expect to be fully that to be fully behind us when we get to Q2 and we expect when you think about modeling fully expect the digital business to be 35% IBITDA margins and if you just look at our overall guidance.

for Q2, the 180 to 200 million dollars of EBITDA. There's a lot of pieces to the revenue numbers, but I think you just kind of do the math. You get from like 811 million dollars revenue Q1 to about 905, 906 million dollars.

in Q2 again just doing the math that we gave out as Cheryl guidance and then I think you see some pretty significant margin improvement there and as a reminder Q1 and I repeat this above and I repeat this often is our smallest quarter of the year so you get the law of the small numbers when you're computing a bit of margins.

Let me jump in on your issue about secular competition. I think we are, when we look at both the consumer and the advertising, I think we're pretty pleased with the progress we've made on a relative basis in the competitive marketplace. The video has just held up extraordinarily well and you've seen some of the...

charts we put in this time just to show where the usage of podcasting is coming from. And it's not really coming from radio, it's coming from streaming music, it's coming from YouTube and it's coming from social primarily, which I think is very good news for us.

And I think on the advertising side, and by the way on the radio side too, the reach continues to be rock solid on radio. And at a time when linear TV and others have declined precipitously, as I mentioned in the comments. On the advertising front, again, I think the investments we've made.

in making our broadcast radio more like digital offerings has really paid off. And we've commented a little bit about comparing this to the last downturn in 2020. If you go back to 2020, I think multi-platform group in that first quarter was down something like 50%. And I think the next quarter was 30% and the fourth quarter was 22%.

I think multi-platform group was down almost 30% for the year, whereas this year in this downturn multi-platform groups down 7%. Much much closer to the other digital company, to the digital companies, and I think a market improvement on a relative basis. So again, and we point to again the idea that we're going to have a market improvement on

Fargo, please go ahead.

Thank you. Maybe first was just hoping to dig into the ad market a little deeper. Was wondering if you could contrast trends you're seeing in multi-platform versus digital and maybe even within digital, podcast versus non-podcast. I'm sort of specifically thinking about categories. I've heard that auto is coming back pretty strongly in local.

So we'd just love to take your commentary about what outperformed expectations and maybe some of those categories and how they're trending across your different channels. Well let me get the high level that we do think the ad market, we're probably seeing a slightly better marketplace than we had expected.

and our expectation based on what we see today is that it's going to continue to get better through the year. I think also major advertisers we felt were holding back trying to put away some money for the year in Q1. We think that as the year goes on and especially as you get to the biggest sales quarter for most companies which is Q4.

that again that money begins to flow and we're seeing evidence of that happening. I think in terms of categories, I think you're right about auto, we are seeing strength there, we're seeing strength in a couple of other categories that are a little unexpected. But again, I think that's going to the point that the

Advertisers realize that advertising works the lesson they learned and a hard lesson to learn in the 2020 down turn Is that if they stayed out of the marketplace? It actually costs them more to get back in when things turned off and hopefully that's a lesson that is Moderating the impact of of this downturn

Hey Steven and the other guy might have your normally and you've heard us Consistently talk about that we've got no individual advertise or more than 2% and no category More than 5% but actually It's like modification to that and I think this is good news and build a bomb with Bob said

is actually auto and now financial services are slightly more than 5%. And again, I think it goes back to Bob's point about having strength and even strength where we haven't had it recently in terms of advertising categories.

Great. And then a couple more kind of on the housekeeping side. Rich, you said you expect digital margins, I think, to get back to that 35% range. I wasn't sure, was that a Q2 guidance commentary or was that just a little bit more general? And then also on the cash side, do you have an outlook for cash interest?

the 35% EBITDA margins for the digital audio group. But you should expect to see significant improvement in the DAG margin from Q1 to Q2. In terms of free cash, and just to reiterate what we said earlier, because I do think it's significant for the rest of the year, and make sure everybody focuses on it, we've talked about...

for this year, just as a reminder, over the last couple of years we've actually been $160 million in capital expenditures, so significant reduction there, and you should think about our rich cash interest expense being about $390 million overall for the year.

Great. Thank you for all that color. Thank you, Steve. Your next question comes from the line of Dan Day from Be Riley Securities. Please go ahead.

Yeah, more in guys. Thanks for taking the questions. So we've heard recently a lot about the discrepancy between large and small markets from some other greatest Asian groups and then national versus local. Maybe just if you could share what you're seeing, you got a more diversified footprint, whether these larger NFL cities are...

Underperforming the ones outside the top 50 and then just been differential between National versus the SMBs. Thanks. The issues we've seen has been more of the businesses that have to advertise to get the cat after a streaming tomorrow.

They've tended to be stronger and more persistent. Advertisers that had the luxury to say, I'm building my brand, but if I don't build it so much this month, I'll pick it up next month or whatever. I think you've seen that has been where you've seen a little slower. As we said earlier, I think, and again, we sort of don't look at it as national, local or big markets or small markets.

because it's such a slow sales quarter for most companies, people do have the luxury to hold back then. Thanks, Rob, and one more for me. So you've put out a bunch of press releases on new podcast partnerships over the last couple of months. You talked in your prepared remarks about sort of, you know, rationalization of this market with a lot of the bigger guys pulling back. Just wondering if you could maybe compare and contrast the terms at which you're getting these partnerships today versus one or two years ago, whether there's meaningfully better economics, whether there's, you know, just the nature of the deals, whether, you know, who owns the IP is split at the end, dollars, et cetera, et cetera, whether that's changed at all.

than us or less able to monetize paying multiples of what we've offered. The good news along the way for us even in the past is...

many folks like NFL, et cetera, are looking at creating a long-term, sustainable podcast business. That means they're looking actually to building the biggest podcast they can, not necessarily getting a payment, which would compensate the group.

for not getting the best possible podcast built. And so what's nice now is that I think people are not having to make that hard decision. And I think, look, there's some podcasters that if somebody pays them a crazy amount of money, they just say, look, if I have a choice of building a big podcast or getting paid this check, I'll take the check. I think those are going away. And I think that's healthy because now it puts everybody on some level playing field, which is what are the economics of podcasting.

I think we've used this before. I think general direction, the belief is out there. We do 20 plus percent of the industry podcasting reviews and probably about 90 percent of the best we could tell of the profitability. And that's been, by the way, whether there were all the corner cases out there where people pay a lot of money or trying to put some behind the paywall.

And we've continued to be steady in that. And I really would encourage everybody on the call. We've added a number of new slides this quarter to the investment debt, a particular podcast and your Bob touched upon this. I think a few different times in the script than when he responded to Jessica's question. But there's a slide there that just shows how two things, how complimentary.

our assets are about 69% of podcasting listening is inside the home and 68% or so of radio listening is outside the home. Again, that just factually shows you that. And then there's another interesting slide that shows it because we get this question all the time. There are podcasts and listening.

you know, is coming from, and 70% is coming from social media. So you see that's slide 14 in the deck. So I don't have to walk through all the slides, but it really is an enhanced deck based on all the questions that we've been getting and to give back to you what the actual facts are, not the speculation.

All right, very thorough answer. Thanks, guys. Your next question comes from the line of Ben Swinburn with Morgan Stanley . Please go ahead. Thanks. Good morning, guys. A couple of questions. You guys have a fairly large digital business outside of podcasting.

I think last year almost 700 million dollars. I know there's a lot of sort of third-party business, you know inventory that you're selling and bundling with your other properties. Can you just talk about why that's a good business for iHeart? Does it allow you to maximize the value of your sales force? Maybe helps drive podcasting?

because I think a lot of that is selling other people's inventory, which is typically a lower margin business. So I was just curious if you could comment on that. And then Rich, on the cost side, the cash tax reduction is obviously significant this year. Is that timing or sort of permanent savings as we think about your free cash flow heading into the next couple years? Just wondering if maybe there's been a significant change in your cash tax outlook for the company. Thank you. Well, let me start with the digital. Actually, we…

The biggest areas we focus on are podcasting and our own streaming service, the iHeartRadio service. We've also used with Triton, been able to build out some marketplaces which allow us to capture some additional revenue coming into that world based on the strength of our own streaming service and our own podcasting business. And then we look at other businesses that we can either put on our platform and or we can use our Salesforce for. And we've got the biggest Salesforce in audio by a lot. And that's one of our great assets. We have trained people.

thinking it would be incremental to everything else we have. Instead, we found a little bit of float out of where we had higher margin business, so we made some corrections there. And I invite you to that effect will be gone. Yeah, and on taxes, Ben, I'm not gonna comment on any detail, I think going forward.

but we've done or comment on the details of our tax planning initiatives, but I think the team has done a really nice job at looking at all the tax initiatives and the opportunities that we have to maximize value for shareholders, and that's enabled us to reduce our overall cash taxes for this year quite significantly. Okay, thank you. Your next question comes from the line of Sebastiano Petty with JP Morgan. Please go ahead. Hi, thanks for taking the question. I just wanted to ask you a question about the

maybe follow up on some of the digital events question there. But we talked about some of these social extension or other products that you sold that are still working their way through the system. We're supposed to drag or weigh on digital margins, but margins didn't seem to be all that bad in the digital audio group. But.

Conversely, on the broadcast side, is the worst margins we've seen since 2Q20. Can you unpack maybe what occurred there? The OPEX obviously up in the multi-platform group, but can you just give us a little bit of help on how we should perhaps think about the trend in multi-platform group in the context of your guidance for not only the second quarter, but just expectations for continued recovery there? It's rich. We –

we expect to continue to make improvement in the multi-platform group. And just going back, it's had in terms of the challenges in the advertising environment that we've I think all talked about and you've heard from many other companies out there, multi-platform group has been a little bit harder hit.

It's absolutely a higher fixed cost business that we talked about. And so when you look at the flow through, it gets hit higher on the flow through. We've announced a number of cost programs, you know, the $250 million in total that we announced going before Q4, 2020.

I think you'll continue to look to see improvement in multi-platform revenues, and I think you'll see some significant improvement in flow-through in Q2 also. And I'll go back to one thing, you know, I've said a couple different times and I say on every call, any time you look at margins, it just gets greatly accentuated in Q1.

because of the law of small numbers, which I know we all know and is probably, and I appreciate sometimes hard to accept, but if you look at our Q2 numbers, verse Q2, excuse me, Q1 numbers, verse Q2 and Q3, which are dramatically larger than Q1 historically and roughly in that same size zip code, and then you go to a few quotes.

Q4 which is dramatically bigger. So we just get hit very hard in Q1 on margin to particularly when you have down revenues Okay and then with digital podcasting, any help on sizing, or the

Obviously, you're a streaming product. Can you pay it perhaps unpack?

The revenue contribution in the digital X podcasting, how should we think about social extension versus perhaps some of the other organic for lack of the better term, like the streaming product? Because in terms of your guidance in the context of the mid-single digit, just trying to unpack how we should be thinking about the trend of the year there.

some interesting audience networks and marketplaces as well. That continues to expand. And keep in mind, we also have a big social footprint ourselves. We have about seven times a larger social footprint than the next largest audio player.

and the ways we monetize that in addition to the social extension products that we have and others as well. And for us, we look at anything that sort of fits with the needs of our advertisers and that our sales force can bundle together with other things we're selling and that we think gives us a good economics, not just top line.

Thank you. Your next question comes from the line of Jim Goss with Barrington Research. Please go ahead.

Thanks, and good morning. Regarding your optimism about the...

multi-platform revenues rebounding. Are you suggesting that the sluggishness in ad spending to this point has largely taken into account any recessionary risks? Or do you think if a recession were to occur...

given the relationship to GDP historically, that there could be another downdraft? Well, I'm not smart enough to be able to predict all the economic futures here, but I think what we're seeing is certainly, as it relates to multi-platform group and specifically as it relates to radio, that we're seeing much better relative performance in this downturn than we did the last.

And I think that is, again, probably linked to how we have changed how we are selling and presenting broadcast radio to make it look more like a digital product. That was really behind our acquisition of Triton. It's why we built out that digital ad tech stack. We've been able to include broadcast in that. We've been able to go to cohorts in audience.

one with broadcasting as the marketplace changes. So I think that's probably positive force and I think that relative performance differential between now and 2020 is tied to that. Okay, thank you. And regarding reach, you brought that up and one of the trades, the Odyssey CMO.

I was talking about reach and monetization. That should be an opportunity, but that's been around for...

lot of years in terms of achieving a better monetization relative to your product. Are you thinking that what you were just describing is your means of maybe closing that gap right now that might be more successful than historically been?

I think you've hit it exactly right. I think that the reach is what we're selling. It's why we're there. It's also if you look at, which we just recently were running some numbers on, if you look at the overlap, a lot of digital overlaps. So whereas people thought they were adding one digital product to another digital product to another digital product.

is buying those products is not like it was 20 years ago or 10 years ago. They're not so much interested in buying spots as they are reaching audiences and they're expecting data and technology to help them. And over time, they're all building basically unified planning and buying systems and at least the major agencies and I think other.

platforms emerging as well and we have built our products so that we can be a part of those platforms and I think that has some really long term, you know, terrific benefits for us because if we can get an algorithm to start doing the media mix as opposed to personal bias doing the media mix.

we know we will do much better. Audio today is about, I think, 31, 32% of all media usage every day. By the way, according to Nielsen, radio finally passed TV in terms of usage in addition to reach, and so.

The idea is how do we get at that in terms of full monetization. We've invested heavily in the tools. We've invested over the past five or six years in building out the infrastructure to do it. And I think, again, we're beginning to see some of the positive benefits of that. And coming out of any slowdown, that should just accelerate.

By the way, just to come back and put a very fun point out, I would say, because you make the point about reach historically, I would say the two new data points that are there, one is the last point that Bob just said, when Nielsen came out and talked about a reach over TV reach. I think that kind of was like a moment that got marketers and advertisers to stand up and say, well, I hadn't quite realized that. I think the other piece is, it's only been within the last year or so.

in terms of our capabilities of a fully built out audio tech stack. Since we completed the acquisition of Triton, we always had the relationship with Triton. But now we have the relationship, so now we can, with dealing with advertisers, plan with their campaigns, monitor their campaigns, and report on their campaigns, just like the big digital players could do. And as Bob pointed out, it's a whole lot which started out astrue

not one-to-one, but one to inform many, one to cohorts, which is the direction the industry is going in, as we all know. So those are two new different things that were not there before. All right. Well, thank you very much. Appreciate it. Your next question comes from the line of Steven Laszczuk with Goldman Sachs. Please go ahead.

signs of recovery over the longer term. Well, thanks for the question. Look, you've heard us say this a little bit before, so be consistent. I think our job as a management team, starting with Bob and myself, is to constantly look for efficiencies.

in the company and you mentioned the numbers during the pandemic. And I'll just repeat what I said earlier is that we took out $250 million as we went to Q4 2022 on an annual basis. We announced another $75 million of cost savings to be realized in 2023.

Quite frankly, I think as you look at Q2 2022 to give everybody some comfort, additional comfort level hopefully in our guidance, you know, we expect about that 20 million of that 75 million you'll see flow through in Q2 for the year. So again, back to my earlier point about when people were asking about margins, whether it's multi-platform margins or the digital audio group margins.

why we have a high level of confidence with our revenue guidance to see additional flow through to that. And the last piece I would mention, although it doesn't go under the word, you know, expense from an accounting gap P&L standpoint, we've always talked about our ability to aggressively manage capital expenditures to the highest ROI, return on investment, investment projects.

when there were kind of uncertain, you know, advertising economic environments. And I think with the guidance, the new guidance we gave today of $90 million a year and capital expenditures down from the 110 to 120 that we talked about going into the year and down from the 160 million or so that we've been spending the last couple of years. I think, again, all of that to me, that reiterates.

What a great free cash flow company this is and the structure enables us to generate significant matter free cash flow. And I think we pointed that out today with the numbers we gave you for the rest of the year, even in uncertain advertising environments and uncertain economic times.

And I think Jessica started out with the first question. Do you know these are about the most uncertain times that they get any of that succinct in a long period of time? And I don't think Bob and I would, you know, all the good news also we talked about that. I don't think we would disagree with that. But it also shows your durability and resiliency this company has to generate free cash flow even during this period of time. Yeah, I just want to add one thing, which is a little longer term.

But we're also looking as every company is and how we use AI. And I think AI can fundamentally change the operational cost structure of the company. And I think that's the primary value for us. And it will turn employees from doing, you know, lots of employees doing rote work to our employees doing more of editing and more of the higher level work, which I think one will make their jobs more enjoyable. I think we'll do stuff faster and our cost will be lower. So, you know, I'm in the boat. I think Rich and I both are.

later this year.

Look, we are, and I think I've demonstrated not just in words, we are continuing to aggressively look to improve our overall capital structure, aggressively look to improve our cost of capital. We've got, you know, nothing's changed, Bob used the word long-term in terms of AI, long-term symptoms.

In terms of our leverage ratio, the company's target is still to get to 4 to 1 leverage ratio, which I think in a leverage capital structure that we have, taking that free cash flow, paying down debt, which gives the highest return to our shareholders, is a great way to return equity value to our shareholders. And we'll continue to look to improve the capital structure.

along those ways, which again, which is why it's so important and we're laser focused on the generation of free cash flow.

on those ways, which is why it's so important and we're ways to focus on the generation of free cash flow. So thank you.

and I and the rest of the team would like to thank everybody. And we are here and available for more questions. But thank you all. This concludes today's conference call. You may now disconnect your lines. Please wait. The conference will begin shortly. Music