Q4 2024 iHeartMedia Inc Earnings Call
Good afternoon and welcome to the iHeartMedia Q4 2024 earnings call. All participants are in a listen-only mode. After the speaker's remarks, we'll have a question and answer session. To ask a question, please press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
I would now like to turn the call over to Mike McGuinness, Head of Investor Relations. Thank you, please go ahead.
Reletions section of our website. And now I'll turn the call over to Bob. Thanks Mike, and good afternoon everyone. Before I take you through the fourth quarter financial results, I want to share two key highlights from last year.
we successfully completed the comprehensive exchange transaction that we discussed in our third quarter call.
This exchange accomplished three things. One, it extended the majority of our debt maturities by three years. Two, it kept our current consolidated annual cash interest expense essentially flat. And three, it provided overall debt reduction.
This improved capital structure provides the company with the flexibility it needs to remain focused on creating shareholder value.
and an important part of creating that value is to continue modernization of our company.
In 2024, we took another significant step in that journey, flattening our organization, eliminating redundancies, and breaking down silos.
It will be easier to do business with us, and easier for us to get our business done, and will help to accelerate earnings growth as well. As we discussed last quarter, the actions we took over the course of 2024 will generate over $200 million of annual cost reductions.
There will be some ordinary course add-backs of approximately $50 million to our expense base, which results in net savings of approximately $150 million.
And with that, I'll turn to our fourth quarter financial results.
In the fourth quarter we generated adjusted EBITDA of $246 million, up 18.2% versus prior year. Our consolidated revenues for the quarter were up 4.8% compared to the prior year quarter. Excluding the impact of political, our consolidated revenues were down 1.8%.
Turning to our individual operating segments, the Digital Audio Group generated fourth quarter revenues of $339 million, up 6.7% versus prior year, which represents approximately 30% of the company's revenue.
The Digital Audio Group generated fourth quarter adjusted EBITDA of $119 million, up 2.1% versus prior year, and the Digital Audio Group's adjusted EBITDA margins were 35%.
Within the Digital Audio Group, our podcast revenues grew 5.7% compared to prior year, and our non-podcast digital revenues grew 7.1% compared to prior year. Our podcasting financial discipline continues to fuel what we believe is the most profitable podcasting business in the United States.
Additionally, our podcasting EBITDA margins remain accretive to our total company EBITDA margins. And, as Rich will discuss later, our podcasting revenues in Q1 are expected to grow in the high teens.
In January, iHeart was once again ranked the number one podcast publisher in the U.S. according to PodTrack.
Speaker Change: and iHeart is the number one sales network in podcasting as well with approximately three times the downloads and monthly audience of the next largest US sales network according to PodTrack with a similar leadership position globally as well. To that end this week iHeart podcast served as the official podcast partner for the 2025 Web Summit Qatar where our marquee talent including Malcolm Gladwell and Jay Shetty led panel discussions.
Speaker Change: and on Monday we announced a groundbreaking multi-year partnership with the Government Communications Office of the State of Qatar to help create a thriving podcasting industry in the Middle East and North Africa.
Speaker Change: We see this as further validation of the continued growth potential of the podcast industry and of our ability to expand our leadership position as the largest U.S. podcast publisher to the global market as well.
Speaker Change: And in the fourth quarter, we launch the next generation of our iHeartRadio app, which combines the key features of the car radio that listeners know and love with innovative technological enhancements.
Speaker Change: We've had a strong, positive response from our listeners, so if you've not done so already, I encourage everyone to check out the redesigned iHeartRadio app and see for yourselves.
Speaker Change: Turning now to the Multi-Platform Group, which includes our broadcast radio, networks, and events businesses.
Speaker Change: In the fourth quarter, revenues were $684 million, flat versus prior year, and excluding the impact of political advertising, revenues were down 5%. The Multi-Platform Group's adjusted EBITDA was $150 million, up 5.9% versus prior year.
Speaker Change: Broadcast Radio has more listeners today than it did 20 years ago.
Speaker Change: In an environment in which broadcast and cable TV audiences have dwindled and print audiences have disappeared, broadcast radio audiences have remained strong and our broadcast radio is the undisputed leader in monthly audience reach even when compared to Google and Facebook.
Speaker Change: and as we look at our advertising growth opportunities for broadcast radio the most important variable for advertising on any medium is what's happening to the audience.
Speaker Change: On that front, broadcast radio is not only healthy but robust.
Speaker Change: This, combined with the ad tech innovations we're rolling out to inject our broadcast radio inventory into data-infused digital buying platforms, including programmatic, makes us more confident than ever in the growth of broadcast radio revenue.
Speaker Change: Turning to the Audio and Media Services Group, revenues were $98 million, up 44.7% year-over-year. And adjusted EBIT, it was $49 million, up 136% from $21 million in the prior year.
Speaker Change: excluding the impact of political, the audio and media services groups revenues were down 1.6 percent.
Speaker Change: As we look to the year ahead, we remain focused on supporting our high-growth businesses like podcasting, while, as I said before, finding new ways to unlock the power and value of our broadcast radio assets, including our ongoing work to integrate our broadcast radio inventory into programmatic platforms.
Speaker Change: This is a critical early step in aligning our broadcast assets with digital buying behavior, which will allow iHeart's broadcast radio assets to participate in the growing digital and programmatic TAMs.
Speaker Change: and as we continue to innovate and grow, our operational efficiency is critical to our success and we remain relentlessly focused on cost efficiencies and on our commitment to take advantage of new and evolving technologies like programmatic and AI to deliver both short and long-term results.
Speaker Change: Before I turn it over to Rich, I'd like to take a moment to briefly mention the devastating Los Angeles wildfires.
Speaker Change: Serving our local communities is at the heart of everything we do and I want to acknowledge the incredible work of our teams on the ground during that time of crisis. It's moments like this and the hurricanes last fall that the dramatic value of what we do becomes apparent. And now I'll turn it over to Rich.
Rich: non-cash marketing expense through the iHeartRadio Music Festival, partially offset by cost incurred in connection with cost savings initiatives implemented in the fourth quarter. We generated fourth quarter GAAP operating income of $104.5 million, compared to income of $79.8 million in the prior year quarter. We generated fourth quarter adjusted EBITDA of $246 million, up 18.2% versus prior year,
Rich: saw in Q4 reflected this revenue mix. We expect to turn our flow-through performance around in the first quarter, with our podcasting revenues up in the high teens, as Bob mentioned, and to comprise the majority of our digital revenue growth, which will help us to continue our year-over-year digital audio group margin expansion. The multi-platform group's revenues were $684 million, flat compared to prior years, and below the guidance of mid-single digits.
Rich: Our Multi-Platform Group revenues were down 5%. Adjusted EBITDA was $150 million of 5.9% from $142 million in the prior year quarter. Multi-Platform Group's Adjusted EBITDA margins were 21.9% compared to 20.7% in the prior year quarter. Turning to the Audio and Media Services Group, revenues were $98 million of 44.7% year over year and Adjusted EBITDA was $49 million.
Rich: Robert Pittman, Richard Bressler, Robert Pittman, Robert Pittman, Robert Pittman, Robert Pittman,
Rich: Richard Bressler, Robert Pittman, Robert Pittman, Robert Pittman, Robert Pittman, Robert Pittman,
Rich: have achieved our goal of 3.2 times by the end of 2028. Now I will turn it over to the operator to take your questions. Thank you.
Speaker Change: Thank you. As a reminder to ask a question please press star followed by the number one on your telephone keypad. To withdraw any questions press star one again.
Speaker Change: Our first question comes from Jessica Reeve-Ehrlich from Bank of America. Please go ahead, your line is open.
Jessica Reeve-Ehrlich: Thank you. I have a couple of questions, if that's okay. So, first...
Speaker Change: Bob and Rich, I know you've both consistently talked about the resilience of broadcast listening.
Speaker Change: Can you talk about how you're thinking about monetizing that going forward and maybe in that context, I know Bob you mentioned both programmatic and AI.
Speaker Change: How much of a needle mover will programmatic be? You know, what does the ramp look like? And then I have a follow-up. Thanks.
Speaker Change: Sure. Look, I think the programmatic is an essential part of what we're doing. It's a growing part of the ad market, and I think you're sort of implying the answer to the question, which is, how do we take this incredible amount of listening we've got, the strong relationships we've got with our consumers, and oh, by the way, when measured, broadcast radio has enormous performance.
Speaker Change: in terms of performance marketers, in terms of delivering the metrics they need. So, clearly the issue for us in broadcast radio is we need to make this inventory fit.
Speaker Change: the buying systems that are out there and the new way people are buying which is very digital centric.
Speaker Change: Programmatic is part of it. It's also automated buying. It might be actually live conversations, but they can
Speaker Change: executed through an automated platform, and beginning to have it sit side by side with the other digital options. Our hope also, as people are putting these systems together, that algorithms
Speaker Change: versus human beings make the decisions about allocating the dollars to different media. We know there is certainly a bias against radio, it's considered old media. I think we've gotten tarred with a brush of, you know, TV or print that have really seen a substantial degradation in their audience. And here we are with this incredible audience, incredible performance. So I think when the algorithm looks at the facts and makes choices about allocations,
Speaker Change: Brotherton United States. Remember, CV's don't help your father or mother. Success is through coffee. Success is through love. Success is through interdependence. Tap the medium and let it be previous to the beginning.
Speaker Change: I think this year is, as we talked last year, this is probably the year in which we're rolling it out. We're beginning to get in DSPs, rolling out our platforms.
Speaker Change: So we probably will learn a lot this year, and I think we should begin to see some revenue this year, but I think the impact probably is built next year and the following year.
Speaker Change: Hey Jeff, the only thing I'd add, just a quick little thought I've said, is you talked about the ramp and everything, but the first step before you kind of get to the ramp and learn, is to get into platforms. And that's why Bob's point about the DV360 and the Yahoo, two very significant platforms, is significant for us.
All right.
Okay, and then maybe just two more quick ones, but
Speaker Change: Could you address the video podcasting opportunity? You know Spotify has been talking about that a bit and you obviously have a really strong position in podcasting. And then just finally on the overall market outlook, I mean obviously there's a lot of puts and takes as you guys have outlined, but LA is your biggest market. Can you
Speaker Change: Give us some color on what the impact was in Q4 and how it looks moving forward.
Look, there's a lot of talk about video podcasting.
Speaker Change: Clearly, YouTube would love everything to be video podcasting. When you look at the research, though, it looks like about 10% of podcast users would prefer video. Others are willing to look at video, but most people actually, the overwhelming majority, actually want it to be audio. They are using podcasting because it's a great experience for them because they don't want to use their eyes.
Speaker Change: easy going and casual is what people prefer. Podcasting like radio is a lot about companionship. It's who is that person I've chosen to hang out with and I hang out with them regularly.
Speaker Change: Although there are opportunities for us, if we can make more money adding video to it, we will. Some of our podcasts do have video and we are open to it. It's not terribly expensive. It's just what do you want to focus on.
Speaker Change: We always start with the consumer, and if the consumer really wants it, we'll figure out how to deliver it, and you're right, given we're the number one podcast publisher, we've got by far the biggest stable.
Speaker Change: to play with and there's a lot we can do there.
Speaker Change: and the guidance we just gave is high teen growth in Q1. So yes, as Bob talked about, we're monitoring and looking at consumer usage, but just look at the facts and the runway we still have with the podcasting business we have today.
Speaker Change: There's a big delta between video and broadcast radio in terms of CPMs. There's not a big delta between podcasting and video, so we don't really get a bump up in value if you add video to it.
Speaker Change: On the L.A. front, you know, clearly L.A. is a big market for us. It was disrupted by the fires. I think it's beginning to get back to normal. And not only was the market
Speaker Change: disrupted, but our direct-to-client sales group, which is a very important part of our company, national sales, is based there, so we had disruption there. People lost houses, you know, employees sort of went through the struggle. Fortunately, we didn't, and our company, have any loss of life, so it's just this property.
Speaker Change: And I think, again, we think that was probably, in terms of the L.A. market, a little bit of a blip. Probably the bigger impact in the L.A. market is that there's more people going back to office.
Speaker Change: Yeah, and just one of those, I think you also just touched upon in terms of the overall advertising market, and we laid out the puts and takes.
Speaker Change: in our opening remarks, and I think, you know, just looking at all the other companies and supported companies between yesterday and today, you know, that release, I think we're, you know, kind of all seeing the same trends.
Speaker Change: of the year and the uncertainty, you know, whether it's the tariffs, we also have the consumer confidence piece come out today, you know, uncertainty in terms of the inflation and interest rates.
Speaker Change: But at the same time, as we look forward, and I think is very important, we reiterated our confidence in the business.
Speaker Change: for the rest of the year. Again, going back to what Bob said earlier about the strength of our assets.
Speaker Change: There's a big change between this administration and the last one. And I think people are digesting it. I don't think the uncertainty is totally unexpected, and it's certainly understandable, but we think going forward that that begins to steady up a lot and we move back and continue to be optimistic about the area.
Thank you.
Speaker Change: Our next question comes from Patrick Scholl from Barrington Research. Please go ahead, your line is open.
Patrick Scholl: Hi, I was wondering if you could talk a little bit more about the automated buying and how much that sort of contributes to...
Patrick Scholl: the improving trend of the year to make up for that difference in total advertising as a result of the political comp.
Patrick Scholl: Yes, a really good question. I think it comes in and it comes in pieces. It's a gradual movement. First step is
Patrick Scholl: replacing it, there's also the programmatic advertising which is built on the automated systems and you know probably we'll get into some of the real time bidding stuff as well. We have some marketplaces already up. We have the iHeart audience network up which allows us to you know have a pretty broad array of options for advertisers in digital and we are adding the broadcast radio options to that which is for us the great opportunity.
Patrick Scholl: I think that, again, I go back to probably the biggest upside we've got in terms of underappreciated asset or underutilized asset is broadcast radio inventory. I mean, it's got audience that no one else has, and it has impact for advertisers. Again, that's pretty remarkable.
Patrick Scholl: And just to be clear on one point, we're not assuming anything, to Bob's point, as we've gotten into the systems and learning, we're not assuming any significant contribution.
Patrick Scholl: this year from NAPA, but obviously we're incredibly excited about the TAMS that will enable us to take advantage of.
Speaker Change: okay and then on you talked about January advertising being up
Speaker Change: I realized I was short-lived, what were some of the drivers of that?
Speaker Change: turnaround from kind of maybe a slower than expected close to the air to at least a positive start.
Speaker Change: You know it's interesting we talked about you know that pause in advertising we saw before the election
Speaker Change: We had thought and hoped it would be re-expressed in December. It wasn't. I think there's an argument that it was re-expressed in January. There was a little longer sales cycle in that, and you saw that sort of rush of optimism turn into buying. I think as reality set in and—
Speaker Change: you know, January, February, saying, you know, wait a minute, you know, what are tariffs? What, what, what, inflation's not completely gone and other issues. I think people take a little bit of a step back and look.
Speaker Change: Keeping in mind that if there's ever a quarter in which advertisers feel confident and comfortable Stepping back a little bit. It's first quarter. It's probably of all four quarters. It's the one that there is least
Speaker Change: pressure to advertise. Most people don't. It's the lowest advertising quarter of the year, so not totally unexpected. But, you know, hopefully what we're seeing is a return to some
Speaker Change: comfort and stability and absorption and digestion of all the change.
Okay, thank you.
Speaker Change: Our last question comes from Stephen Lashek from Goldman Sachs. Please go ahead, your line is open.
Stephen Lashek: Hey guys, thanks for taking the questions, too, if I could. Maybe first on podcasting, for Bob and Rich, I was wondering if you could talk a little bit more about your expected drivers of growth in the podcasting business this year, perhaps between adding new content to the platform, improving engagement, monetization. What do you see as the main drivers or the largest drivers of that expected growth in podcasting revenue?
Speaker Change: And then second, maybe just on political, I think it came in a little bit below what we had expected in the 2024 cycle. Just curious if you'd talk a little bit about why that might have been the case and what do you think that means, if anything, for the next few rounds of political spending as we come up on the midterms and the next presidential cycle. Thank you.
Speaker Change: Sure, the drivers of podcasting are all of them. I mean, we're in that fortunate phase of podcasting in which everything's growing. We're expanding the product on our platform. We're expanding the audience.
Speaker Change: We're expanding the value and the pricing, there's expanding demand, people are beginning to say, I've got to have podcasting, it's sort of a must-buy. So all of those are drivers now, and for us, I think, probably see that at least continuing through this year, and hopefully beyond that as well.
Rich: You know, I think, again, looking at all that Rich talked to, the specifics,
Speaker Change: But I think in political, I think the lesson here this year is that the political campaigns want a lot of data, and it's probably more data-driven than it's ever been. And so when you say, what's the...
Speaker Change: This won't surprise you to know we're actually working on it right now, even though the midterms don't begin for a while, to be ready for that, to absorb the lessons we learned.
Speaker Change: Yeah, and by the way, the one thing I might just add is
Speaker Change: to, you know, we did talk about it in Q3, the pause that happened.
Speaker Change: with the change in the candidates and everything on the Democratic side, and again, we covered that and knew that.
Speaker Change: at that time, but we thought there might be some more money coming in post the election.
Speaker Change: which didn't materialize. But at the same time, we didn't quite get to the number that we thought. If you look at the performance of MPG,
Speaker Change: in Q4, we did have overall 8% EBITDA growth in Q4 on relatively flat revenues. So the absolute performance was terrific.
Got it. That's great. Thank you both.
Well, Operator, if there's no other questions...
Speaker Change: We, again, appreciate everybody taking the time to listen, to spend the time to focus on the iHeart story, and, you know, the team is available, starting with Bob, myself, and Mike for any follow-ups, and thank you again.
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.