iHeartMedia said it had sturdy third quarter earnings but that rising inflation and the potential for a weakening economy concern the company.
The largest U.S. radio group owner reported an infusion of digital revenue in Q3 and that the broadcast division saw fractional gains. Year-over-year total revenue was up 6.6% compared to the same three months of 2021.
Its digital audio group, which includes podcasting, totaled $254 million in revenue, for growth of 23% YoY. Digital revenues now represent 26% of total company revenue, said Chairman/CEO Bob Pittman.
“It’s clear that our digital business is now significant enough to meaningfully impact our overall financial performance,” he said during an investor conference call with analysts last last week.
iHeart is the largest podcasting publisher in the United States as measured by PodTrak. Podcast revenue increased by $27.1 million to $91 million in Q3, according to the company, for a 42% gain in YoY.
The company reported a small increase (0.4%) in broadcast revenue in its multiplatform group in the quarter; that group includes its 850 radio stations and its radio network business. Total revenue for the division was $484.5 million in Q3.
According to its latest filing with the Securities and Exchange Commission, expenses increased $46 million, up 14.1% for the three months. That jump was attributable to “higher variable content like talent and profit sharing in its digital audio and multiplatform groups.”
The company reported an operating loss of $211 million for Q3 compared to income of $80 million in 2021 for the same quarter. iHeart says this year’s Q3 operating loss “was primarily driven by a non-cash impairment charge of $302.1 million attributable to the company’s FCC licenses as a result of increased interest rates.”
Some financial analysts had predicted the drag of the economy would likely to start showing in third quarter earnings reports from the major broadcast groups, and Pittman called it an “uncertain macro environment” on Thursday’s investor call.
“Advertising has certainly softened since the robust performance we saw at the beginning of the year. But we don’t think advertising has been as hard hit by an economic downturn as it would have been in past times.”
Pittman continued: “We are preparing so should a prolonged economic downtown occur. We believe the strong position of our digital audio and multiplatform group with consumers and advertisers gives us the ability to navigate through this period of economic uncertainty and position us for continued growth throughout the recovery and beyond.”
The multiplatform group launched a metaverse effort in the third quarter, putting “iHeartLand” onto Fortnite and Roblox. Pittman says the philosophy of the company remains the same: “Building profitable platforms, even in their earliest stages, to guarantee the long-term growth and success of the company.”
In his preview of fourth quarter pacing, iHeart President/COO Rich Bressler was optimistic, especially about the multiplatform group, considering the influx of political advertising dollars the company is seeing for the mid-term election this week. The company reports that October consolidated revenue was up approximately 8% YoY due to that political spending.
The company’s balance sheet listed $5.55 billion in total debt and $5.25 billion of net debt, which includes a cash balance of $295 million as of Sept. 30.