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iHeartMedia Gives Few Details on Modernization Plan

Will continue push into advanced technologies

There was a lot of talk about “deleveraging balance sheets” and “improving capital structure,” but iHeartMedia’s fourth quarter 2019 earnings call on Thursday gave little new insight into the transformative shift in business operations the broadcaster announced in January.

iHeartMedia, which emerged from Chapter 11 bankruptcy in May 2019, said its modernization initiatives will take advantage of new technologies in order to create operating efficiencies, according to the company’s earnings statement. iHeartMedia let go over 1,000 employees last month and said it will create what company executives call “AI-enabled Centers of Excellence” located in select cities. According to the company’s 10-K filing with the U.S. Securities and Exchange Commission, it still has 11,400 employees.

[Read: iHeart Defends Painful Change]

Those modernization initiatives at iHeartMedia, which operates 856 radio stations in approximately 160 markets, are expected to deliver $100 million in cost savings for the company by the middle of 2021, according to Thursday’s financial release.

Analysts during Thursday’s earnings call raised the issue of localism and whether iHeartMedia’s ratings could be hurt following all the staff cuts.

“We don’t think the quality will go down, but rather it will go up. We want the best programming in each market. Distance is no longer an issue in our business and our ability to project the best talent we have to any location any time is a substantial advantage for us,” said Bob Pittman, chairman and CEO of iHeartMedia.

iHeartMedia did disclose it anticipates seeing its real estate expenses jumping this year as it consolidates some broadcast facilities and downsizes others.

“Our investments in these modernization initiatives are expected to result in an increase in incremental capital expenditures related to real estate optimization of approximately $40 to $50 million in 2020. While we expect some additional capital expenditures impact from our modernization in 2021, the majority of this investment in capital expenditures is expected to impact 2020 and to be weighted to the second-half of the year.”

He added, “Additionally, we anticipate approximately $45 to $55 million of restructuring costs related to achieving our cost savings,” the company said in its financial statement.”

Overall revenue for the company came in flat for the fourth quarter of 2019 at $1.0261 billion compared to $1.0263 billion in Q4 2018. Broadcast revenue declined 2.7% in the last quarter to $611.79 million compared to Q4 2018, according to financial statements. Part of that drop is attributable to less political ad revenue in 2019, company executives said. Broadcast remains the company’s largest source of revenue.

For the year in 2019 overall revenue for iHeartMedia was $3.6 billion, up 2.0% from the previous year. Broadcast revenue for the year dipped overall by 1.4% to $2.2 billion.

“As the number one audio company in the U.S. based on reach, we look forward to expanding our unequaled multiplatform leadership position and leveraging the investments that we have made to modernize our infrastructure and become more efficient, effective and competitive,” Pittman said.

Premiere Networks and Total Traffic & Weather, both owned by iHeartMedia, generated revenue of $614.7 million in 2019 compare to $582.3 million in 2018, according to the company’s financials.

The broadcaster, which also owns online music service iHeartRadio, has seen its stock price drop this week right along with most of the market. Thursday’s price closed at $14.96, a slide of 6.1% for the day. It’s carrying $5.3 billion in debt even after emerging from bankruptcy protection just last year.

Pittman said the “audio environment has never been more exciting,” and at least part of his excitement can be traced to podcasting. The company did see gains in digital revenue, which were driven mainly by podcasting. iHeartMedia is the largest commercial podcast publisher, according to Podtrac, a third-party download service. Digital topped $376 million in revenue for the year, which is an increase of 32.2% over 2018.