Q1 2025 iHeartMedia Inc Earnings Call
Good afternoon, My name is Adrienne and I'll be your conference operator today.
Speaker Change: At this time I would like to welcome everyone to the I Heart Media first quarter 2025 earnings call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press the star key followed by the number one on your telephone.
Speaker Change: Pat if you would like to withdraw your question Press Star one again.
Speaker Change: At this time I would like to turn the conference over to Mike Mcginnis head of Investor Relations. Please go ahead.
Speaker Change: Good afternoon, everyone and thank you for taking the time to join US for our first quarter 2025 earnings call. Joining me for today's discussion are Bob Pittman, our chairman and CEO and rich Bressler, our president COO and CFO.
Speaker Change: At the conclusion of our prepared remarks 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.
Speaker Change: 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 and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings, including our recent 8-K filings. Additionally.
Speaker Change: Additionally, during this call we will refer to certain non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures are included in our earnings release earnings presentation, 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 afternoon, everyone.
Speaker Change: I know all of you we're trying to read the tea leaves some of this advertising marketplace in this uncertain environment and so are we at this point in time, we're seeing generally stable AD spend but we of course continue to monitor it closely due to the lack of visibility.
Speaker Change: Even with that lack of visibility, let me remind you that over the past few years, we've repeatedly shown our ability to take quick and decisive action on both cost and growth opportunities for the benefit of both the immediate and long term and to leverage new technologies to significantly reduce our operating expenses without reducing our capabilities.
Speaker Change: We remain committed to identifying opportunities across our organization to operate more efficiently and take advantage of new and evolving technologies like programmatic and AI, which are critical to delivering short term results and long term growth even during periods of economic uncertainty now let me jump to the financial results in the first.
Speaker Change: We generated adjusted EBITDA of 105 million flat to prior year and consistent with our previously provided guidance our consolidated revenue for the quarter was up 1% compared to the prior year quarter above our guide of down low single digits, excluding the impact of political our consolidated revenue was up one eight per.
Speaker Change: Turning to our individual operating segments. The digital audio group generated first quarter revenue of 277 million up 16% versus prior year. The digital audio group generated first quarter adjusted EBITDA of 87 million up 27, 8% versus prior year and the digital audio groups adjusted.
Speaker Change: EBIT margins were 31, 4% compared to 28, 5% in the prior year, making continued progress toward our stated goal of achieving adjusted EBITDA margins in the mid thirties within the digital audio group, our podcast revenue grew 28% compared to prior year, well above our revenue guidance of up high teens.
Speaker Change: We're beginning to feel the flywheel effect of being the strong number one in podcast publishing our podcasting financial discipline and our focus on the high margin podcast publishing sector continue to fuel what we believe is the most profitable podcasts business in the United States and to accelerate our growth importantly, our podcasting EBIT margins remain accretive.
Speaker Change: Our total company EBITDA margins are non podcast digital revenues grew eight 7% compared to prior year.
Speaker Change: Turning now to the multi platform group, which includes our broadcast radio networks and events businesses.
Speaker Change: In the first quarter revenue was 473 million down four 2% versus prior year and excluding the impact of political advertising revenue was down three 4%. The multiplatform group's adjusted EBITDA was 70 million down nine 3% versus prior year, Let me share with you a data point from this quarter.
Speaker Change: <unk>, which we believe illustrates the progress, we're making and moving our broadcast radio business back into growth mode, including their multi platform group is our premier broadcast radio networks business, which sells broadcast radio advertising with national reach instead of market by market or local advertising our premier broadcast networks revenue returned to growth in Q.
Speaker Change: One and was up two 1% compared to prior year. We believe this is an important indicator of the growing strength broadcast radio has among national advertisers and evidence of the progress we're making in returning broadcast radio to revenue growth.
Speaker Change: Additionally, we continue to increase our share of the radio industry advertising revenue pie in the first quarter I heart grew to 40% of the advertising revenue in markets measured by Miller Kaplan given our audience reach plus the investments we've made in AD tech and data coupled with the fact that we have the largest sales force in audio we.
Speaker Change: That share growth to continue.
Speaker Change: Turning to the audio and media services group revenue was $59 million down 14, 2% year over year and adjusted EBITDA was 16 million down 33, 3% and most of that decline was driven by cats TV, excluding the impact of political the audio and media services group revenue was down 11, 8% in some.
Speaker Change: Marie we believe we're demonstrating one our ability to generate positive financial results, even in an uncertain environment to our continued podcast outperformance as we submit our number one leadership position.
Speaker Change: Three our commitment to reignite growth in our broadcast radio business and for that our modernization program remains on track to generate 150 million net savings in 2025, driven primarily by technology and AI and now I'll turn it over to rich.
Rich Bressler: You, Bob and good afternoon.
Rich Bressler: Our Q1 2025 consolidated revenue was up 1% year over year above the guidance, we provided of down low single digits due to March coming in slightly better than we were expecting both our multi platform and digital segments.
Rich Bressler: Let me provide you with some additional granularity on our advertising revenue performance this quarter.
Rich Bressler: As a reminder, we have no advertising category greater than about 5% of our total advertising revenue and no individual avatars.
Rich Bressler: It is more than 2% of our total advertising revenue in the first quarter, our top five largest advertising categories in terms of total revenue, where health care financial services homebuilding and improvement entertainment and auto in terms of gains and declines in absolute dollars as you can see on slide nine the four largest <unk>.
Rich Bressler: <unk> in the first quarter were professional services Tech and telco beauty and fitness and education and the four categories that declined the most where restaurants auto gambling and political.
Rich Bressler: Our consolidated direct operating expenses increased four 4% for the quarter.
Rich Bressler: This increase was primarily driven by higher variable content cost associated with the growth of our digital business, including higher podcast profit sharing expenses and third party digital costs, partially offset by a decrease in employee compensation costs in connection with our modernization initiatives taken in 2024.
Rich Bressler: Our consolidated SG&A expenses decreased one 1% for the quarter, driven primarily by our modernization initiatives, including decreased employee compensation costs, partially offset by an increase in employee health and benefit expenses, including the reestablishment of the 401k matching program during the first.
Rich Bressler: Quarter of 2025, and additional bad debt expense.
Rich Bressler: We generated first quarter GAAP operating loss of $25 4 million compared to an operating loss of $34 7 million in the prior year quarter.
Rich Bressler: We generated first quarter adjusted EBITDA of 105 million flat to prior year and at the midpoint of our previously provided guidance range.
Rich Bressler: Before I turn to our segment performances I wanted to spend a moment on the modernization initiative, we announced on last quarter's call.
Rich Bressler: As a reminder, these actions will generate net savings of $150 million in 2025, when compared to 2024 and our Q1 results included the benefit of $27 million of net savings. This quarter. We have included slide in our Investor presentation Slide five that provides.
Rich Bressler: A few different ways of identifying the cost savings, including by segment function and tight.
Rich Bressler: Hopefully this level of granularity is helpful. As you update your models.
Rich Bressler: Turning now to the performance of our operating segments and as a reminder, there are slides in the earnings presentation on our segment performances in the first quarter. The digital audio group's revenue was $277 million up 16% year over year and above our guidance of up low double digits. The digital audio group.
Rich Bressler: Adjusted EBITDA was $87 million up 27, 8% year over year, and our Q1 margins were 31, 4% up from 28, 5% in the prior year within the digital audio group, our podcasting revenues were $116 million, which.
Rich Bressler: Which grew 28% year over year and well above the guidance, we provided of up high teens.
Rich Bressler: Podcasts and strong Q1 performance with its high EBITDA flow through help expand the segments Q1, adjusted EBITDA margin by nearly 300 basis points compared to prior year.
Rich Bressler: Our first quarter non podcast in digital revenue grew eight 7% year over year to $161 million the.
Rich Bressler: The multiplatform group's revenue was $473 million down four 2% compared to the prior year and in line with our guidance of down mid single digits, excluding the impact of political revenue our multi platform group revenue was down 3.4% adjusted EBITDA was 70 million.
Rich Bressler: Dollars down nine 3% from $77 million in the prior year quarter.
Rich Bressler: Multi platform groups adjusted EBITDA margins were 14, 8% compared to 15, 6% in the prior year quarter.
Rich Bressler: Turning to the audio and media services group revenue was $59 million down 14, 2% year over year, and adjusted EBITDA was $16 million down 33.3% from $24 million in the prior year and most of that decline was driven by cats TV, excluding the impact of political.
Rich Bressler: The audio and media services group revenue was down 11, 8%.
Rich Bressler: At quarter end, our net debt was approximately 4.6 billion. Our total liquidity was $569 million and our cash balance was $168 million a quarter ending net debt to adjusted EBITDA ratio was six five times in the first quarter, our free cash flow was a negative.
Rich Bressler: <unk> 80.7 million essentially flat to the negative 80.9 million in the prior year quarter. As a reminder, Q1 is our seasonal low point for free cash flow in the year and we expect to generate positive free cash flow in each of the remaining quarters in 2025.
Speaker Change: With Bob's comments on the advertising marketplace as a backdrop, let me now turn to our second quarter guidance, we expect to generate second quarter adjusted EBITDA in the range of $140 million to $160 million compared to $150 million in the prior year.
Speaker Change: We expect our consolidated Q2, 2000, and twenty-five revenue to be down low single digits compared to prior year.
Speaker Change: Our April pacing was down 2% compared to prior year and down 1.4%, excluding the impact of political.
Speaker Change: Turning to the individual segments for Q2, we expected digital audio group's revenue to be up low double digits with podcasting revenue expected to grow in the low twenties.
Speaker Change: We expect the multi platform groups revenue to be down mid to high single digits and.
Speaker Change: And we expect the audio and media services group revenue to be down approximately 5% due primarily to the impact of political advertising.
Speaker Change: Full year guidance, we issued last quarter did not contemplate the current macro volatility we are all seeing therefore frosty at our full year guidance, we will need some positive movement in the macro and improvement to the uncertainty of the back half of the year to avoid the possible negative impact on the advertising marketplace for audio.
Speaker Change: 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 dialed in I would like to ask a question. Please press star one on your telephone keypad duration hand in China Q. If you would like to withdraw your question simply press Star one again.
Speaker Change: Well go first to Stephen Loseke at Goldman Sachs.
Speaker Change: Hey, guys. Thanks for taking the questions maybe two if I could.
Speaker Change: Bob Rich just on the AD market I know you mentioned the lack of visibility.
Speaker Change: Thats out there in the moment I'm curious if you could perhaps just adding a little bit of color to what youre seeing out there at the moment conversations youre, having with your AD partners I'd be curious to what extent they pulled back after the tariff announcements over the last couple of weeks to what extent you might be starting to see them reengage over the last couple of days here, especially post this morning.
Speaker Change: And I'm curious to what extent are we think we need to get visibility to return to the AD market here.
Speaker Change: Over the next couple of weeks and months.
Speaker Change: Well I think the news like today is certainly helpful.
Speaker Change: And I think if you go back and look at the.
Speaker Change: Data point, we had in for Premier networks, which is really our national advertising were up over 2%.
Speaker Change: For the quarter I think that's sort of an indication that the bigger advertisers who are hanging in there and taken this in stride I think the risk has been in the small and medium sized businesses, which were I think a little more subject to.
Speaker Change: Any sort of bad news and again I think improving news like today helps that and we feel better about it.
Speaker Change: Yes, no I wouldn't have anything to add to it and I think just in terms of what you're seeing I mean, we gave you.
Speaker Change: The pacing numbers, where we are through April and again, you might as I remarked, we always remind you all of ourselves everyday a patient just a point in time and just remember when we gave guidance in Q1, we said that we were up 5% in January down about 7% in February in terms of pacing at that point in time.
Speaker Change: We're finishing January.
Speaker Change: We said we'd be down low single digits in revenue for Q1, and we were up 1% as you saw what we reported today. So that's why it did.
Speaker Change: Data point, but again, it's just a point in time.
Speaker Change: Got it that's helpful and then Bob maybe a higher level question for you I think you called out market share today.
Speaker Change: In and around 40% of the industry I think investors think of you as a market share gainer, but I'd just be curious if you could speak a little bit more about the state of the terrestrial radio industry today, and maybe what gives you confidence that you can take that market share from 40% today to something north of that over the next couple of years, Yeah, I think look I think.
Speaker Change: Fundamental issue with broadcast radio is we've got more listeners than we did 10 years ago.
That the audience side, our broadcast radio is just fine. This is a monetization issue that broadcast radio is facing.
Speaker Change: Making the transformation from being.
Speaker Change: A business that was sold as spots.
Speaker Change: And today, it's moving too.
Speaker Change: <unk> and digital platforms, and I think we're making that transformation or AD Tech stack is moving along as expected programmatic.
Speaker Change: Certainly beginning to emerge broadcast radio as well.
Speaker Change: Probably the biggest argument for the share gains is that given our size.
Speaker Change: What you are finding I think especially with the larger advertising partners as they want fewer partners not more partners.
Speaker Change: And I think we're certainly would have to be partner number one and you know what other partners. They haven't radio I don't know, but I think thats, probably beneficial velocity industry consolidates.
Speaker Change: Steve.
Speaker Change: I just had just two very quick point.
One as you look forward if you kind of go back over the last whatever.
Speaker Change: 10, one years, we've consistently taken share.
Speaker Change: Okay.
Speaker Change: Miller Kaplan standpoint, so I would say.
Speaker Change: Hopefully you can get ready comfort as a look forward.
Speaker Change: From a credibility standpoint, we've taken share going that and number two we have her.
Speaker Change: Feedback, which was very good about okay.
Speaker Change: Just about audience or can you give us data points in terms of broadcast and Thats, what we share with you today that Bob just articulated with respect to Premier networks.
Speaker Change: Sure.
Speaker Change: Great. Thank you both.
Speaker Change: We'll move next to Sebastiana petty at J P. Morgan.
Alright, thanks for taking the question.
Speaker Change: Podcasting and the.
Speaker Change: Transponder coming through better than expected.
Speaker Change: Second quarter guide rich.
Speaker Change: Fox about or Youre guiding to continued acceleration in the 20% range.
Speaker Change: Let's think about what's underlying that obviously you guys have been a leader in broadcasting for quite some time, but we hear the narrative about consumption into video and video.
Speaker Change: Video podcast and Youtube now a larger player in the market so any color around what's driving that.
Speaker Change: How do you guys continue to accelerate that top line and then one other kind of more thematic broader kind of question.
Speaker Change: I think Bob you said healthy for the market to consolidate maybe thinking about consolidation from a different angle.
Speaker Change: There is a bit of a fair bit of focus on broadcast deregulation in the local TV space how.
Speaker Change: How might radio be impacted if there is a loosening up of ownership rules does that change how you guys view yourself as a buyer or seller of assets. Thank you.
Speaker Change: Well, let me start with Wi Fi casting.
Speaker Change: I think it starts with the fact that we got the podcast people want to listen to we've got a large podcast audience and it's growing.
Speaker Change: Look at pod track, which measures pods.
Speaker Change: Podcast listening.
Speaker Change: Not only do we do extraordinarily well overall.
Speaker Change: Pretty substantial lead over the second largest podcast publisher, but we've also got a diversified across all 19 categories of.
Speaker Change: Podcast listening is measured by contract so.
Speaker Change: So I think it starts with that and second when you get into how are people looking at pod casting.
The vast majority want to listen to podcasts are there are some people that will prefer to watch a podcast will I think at that point. It is not really so electrified gas as much as it is a video show.
Speaker Change: And certainly there is that goes on look at the success of Youtube, but I don't think thats the by casting business per se.
Speaker Change: I understand that Youtube, we'd like to take some of that pod casting revenue.
Speaker Change: And I don't blame them, but I think again, the consumer has spoken and so although we look at it and and watch it carefully I think we're in exactly the right position and feel very good about it so.
Speaker Change: Sebastian just on your first question just wanted to pick up on what Bob.
Speaker Change: And just as a reminder.
Speaker Change: From a strategic standpoint, a number of years ago, which obviously turned out to be an important decision for us we didn't go behind the paywall, we wanted to make sure all our podcast.
Speaker Change: Available anywhere we carry everybody else's podcast I just wanted to get the biggest inventory.
Speaker Change: And we want to monetize.
Bob: Sufficiently Bob talked about within our company we've got it.
Bob: 1000 sellers on the ground that are.
Selling everything anywhere any time and that includes our tests. So you really have the 2000 person sales.
Bob: Sales force for that question I would stay tuned on the 150 plus offices selling we've talked about all that we've built up over the years.
Bob: The ability to.
Bob: Places monitor them then to report on them across all of our platforms. So again when you look at this is not just something we started three or four days ago with three or four months ago, three or four years ago, and I think youre seeing the cumulative effect and classified I think most importantly with.
Bob: With all the capabilities. We have is the demand that we have that data in.
Bob: You see it.
Bob: The efficiency and the effectiveness of podcast and <unk>.
Bob: <unk> said this before is bigger advertisers or our biggest advertisers have only recently over the last couple of years really start this shoveled podcasts and the reason why that's so important is bigger advertiser spend bigger dollars.
Bob: And look I want to add one other point is and we've talked about it before but it's worth repeating here that type casting is probably radio on demand just like Netflix is probably television on demand. It's an adjacent business to radio. So we have a natural advantage here not only have an advantage in terms of creation and knowing.
Bob: How to do it and having the resources to do it but we also have this.
Bob: The incredible promotional vehicle called broadcast radio, where we're able to advertise these podcast.
Bob: Both of them talk about them to an audience that is.
Bob: Very audio centric anyway and understand what we're doing here. So again I think that is the sort of natural advantage for us.
Bob: And by the way.
Bob: On your second question I think is something with respect to.
Bob: Regulation, whether it's any of the license industry.
Bob: FCC license industries.
Bob: None of us have noticed the dominance of all reading the same press, but.
Bob: From our standpoint, we already reached 90% plus of the country 90, 10 Americans Bob highlighted.
Bob: Great.
Bob: In terms of our strength is that our broadcast listening is higher than it was 10 years ago out there. So we've got a great footprint within the U S. I don't see any.
Bob: Think of that that will affect our operating strategy.
Bob: Thank you both.
Speaker Change: We will move to our next question from Aaron Watts at Deutsche Bank.
Aaron Watts: Hi, guys I appreciate the expanded slide deck and thanks for taking the questions I've got two if I may 1st.
Speaker Change: First on the costs.
Speaker Change: The $27 million of cost savings you mentioned for first quarter run rate, our actual impact in the quarter.
Speaker Change: And how should we think about the cadence of the balance of the savings coming through the rest of the year any lumpiness on the way to $1 50 at year end.
Eric: Eric Thanks for that.
Eric: Thank you.
Eric: The comment on the slides.
Eric: So the 27, you Shouldnt think about as run rate.
Eric: Then you have to think about our cost.
Eric: What kind of supporting revenue said, you'd expect expect them to kind of dictate the speed along with the business, but I think at a high level.
Eric: Thought about them 27 in Q2.
Eric: And then 40 per quarter in each of the next three quarters that would be kind of.
Eric: Just think about those costs and that comes back to the $1 50.
Speaker Change: Okay. That's helpful and rich should the revenue environment slow I know thats not what were hoping for but if it happened are there additional cost rationalization opportunities that could be identified.
Eric: Yes sure.
Eric: One is.
Eric: We did in the deck as you pointed out I think it's slide five.
Eric: That goes through some more details on corso.
Eric: I think what's important about that slide is tricky to look at it and look at the number of levers that Bob.
Eric: And the rest of the management team can focus on and I think also Bob mentioned in his opening remarks.
Eric: We've repeatedly.
Repeatedly I think since we've been here has shown the ability.
Eric: To be look at opportunities by the way a big part of that is just constantly looking at taking advantage of AI technology is making things more efficient for both the medium and long term leveraging new technologies and at the same time make sure we've been talking about podcast and make sure we continue to see.
Eric: Continue to feed our growth opportunities and I think that balance is why youre seeing.
Eric: Just as a tangible example of what you see in your podcast revenue.
Eric: Okay.
Eric: That's that's helpful. If I if I could squeeze one last one in and again I appreciate the time Nielsen updated its ratings methodology recently I'm curious your early observations on that and whether the new way of looking at listenership is resonating with advertisers.
Eric: Well I think the most important thing is that.
Eric: Cited about it is that Nielsen is making a priority to try and capture all the listening thats really happening.
Eric: Not only is that important in terms of we chose us more listeners, but as advertisers do these econometric models the media mix models.
Eric: What's important is that when they see a signal of a purchase of bi they look back and see what caused it if they're if Nielsen is under measuring are listening. They don't show that person makes it worse, we don't get credit and someone else gets credit for what we did so I think it's a step forward with Nielsen in term.
Eric: So, let's make Nielsen more representative and more accurate for us to use not only in terms of pricing, it's selling our products, but also in terms of the value for the media mix models.
Rich Bressler: Thanks, Bob Thanks Rich.
Eric: Thank you.
Eric: Yeah.
Eric: Next we'll move to Patrick Sholl at Barrington Research.
Patrick Sholl: Good afternoon. Thank you.
Patrick Sholl: I was just curious if you could talk a little bit on the adoption of transacting programmatically. If there is any sort of difference across categories and how that contributed to.
Patrick Sholl: The premiere Networks' revenue trends.
Patrick Sholl: Yes.
Speaker Change: I don't think at this point it was material in terms of the performance of <unk>.
Speaker Change: Premier I think that was probably more of an indication of how did the big national advertisers that are buying national footprint look versus the smbs.
Speaker Change: We continue to make great progress as you know we've already.
Speaker Change: Pretty much got our.
Speaker Change: Digital inventory often running on most of the important platforms for programmatic and seeing some revenue coming in there are the big push for us has been.
Speaker Change: To get our broadcast inventory up on this as well and I think we're making good progress there.
Speaker Change: Okay.
Speaker Change: <unk> announced.
Speaker Change: Last quarter. In addition to being an magnate about getting a broadcast just to be clear inventory to GBP 360, and Yahoo, and we can.
Speaker Change: Continue to work with the other.
Speaker Change: DSP and.
Speaker Change: <unk>.
Speaker Change: And recognize in terms of where the advertising marketplaces going in.
Speaker Change: We are adapting to that.
Speaker Change: Okay. Thank you and then maybe just one last on podcasting.
Speaker Change: Sure.
Speaker Change: On the.
Speaker Change: Growth in the quarter I guess.
Speaker Change: How much of that comes from just increased rates on the impressions are delivering versus growing the amount of impressions.
Bob: It's Bob.
Bob: It's both I would say is if you think about it just.
Bob: Apples to apples year over year that Theres nothing unusual.
Bob: Any one time item in the numbers is just both coming from both volume and from rates.
Bob: But remember we've got such a wide.
Bob: Per view in terms of the number of podcasts, we have the number of downloads from our biggest downloads to smaller downloads out there and we haven't.
Bob: We have 1000 people selling it every single day out there some impart crash along with the rest of our products.
Bob: It's a combination of both.
Speaker Change: Okay. Thank you.
Bob: Okay.
Bob: I'll pause for a second make sure there are no other questions.
Speaker Change: And it does not thank you very much on behalf of Bob myself, the rest of the management team.
Speaker Change: And we along with Mike will get us and the team are available for any follow up questions. Thank you will.
Speaker Change: And this concludes today's conference call. Thank you for your participation you may now disconnect.
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