It’s not surprising these days when a major media group reports sour Q2 results, but iHeartMedia’s financial announcement on Thursday was still eye-popping.
The largest radio broadcast group in the United Sates put an exclamation point on exactly how disastrous the COVID-19 pandemic has been for radio broadcasters by posting a 47% decline in revenue for the period from April–June 2020 compared to a year ago.
“The challenges that we have faced due to COVID-19 were unprecedented and had a severe, negative impact on our revenue in the second quarter,” said Bob Pittman, chairman and CEO of iHeartMedia.
[Read: iHeartMedia’s Q1 Results Dinged by COVID-19]
iHeartMedia’s second quarter reveal on Thursday didn’t come as much of a surprise to radio observers. Other major radio groups have been reporting very poor Q2 numbers due to the economic crisis caused by COVID-19, but now we can see just how steep those revenue declines were earlier this year.
The company saw revenue drop by 50% in April and 49% in May compared to one year ago, according to iHeartMedia’s financial report. Overall revenue was $488 million for the second quarter.
“[iHeartMedia] revenue suffered with a big drop in April, but it’s been showing improvement in each successive month, including the just closed July. It’s still too early to predict the slope of the recovery with any certainty,” Pittman said on Thursday.
Broadcast revenue suffered the biggest fall at iHeartMedia in Q2, dropping 57% to $244 million compared to $561 million in 2019. In contrast to broadcast, the company’s radio networks were down 38.4%; smart audio down 28%; and digital up 2.4%, mostly driven by podcasting, which was up 103%, Pittman reported.
iHeartMedia has taken steps to cut expenses to help navigate the financial impact of the pandemic. “Corporate expenses decreased 36.1% during the second quarter compared to the prior year quarter as a result of lower employee compensation, including variable incentive expenses and employee benefits resulting from expense reduction initiatives,” according to the company.
In addition, the COVID-19 pandemic has caused iHeartMedia to reexamine its real estate holdings going forward, and that includes iHeartMedia.
“We are taking a step back…looking at our organization, looking at things like real estate, which is a significant cost in this company,” said Rich Bressler, president and COO for iHeartMedia. “We continue to focus on maximizing liquidity and strengthening our capital structure during this period of uncertainty.”
iHeartMedia’s well publicized modernization efforts announced earlier this year are helping the bottom line, according to Bressler. “These initiatives remain on-track to deliver the expected $250 million of expense savings in 2020. We expect our modernization initiatives to deliver $100 million of annualized run rate savings by mid-2021. In addition to those savings, we are continuing to evaluate our cost structure to identify efficiencies.
“Our areas of focus will include continued optimization of our real estate footprint and the adoption of technology solutions that will drive increased efficiency and effectiveness in our operations,” Bressler said.
In response to a question from Sebastiano Petti, an equity research analyst at JP Morgan Chase and Co., Pittman on Thursday was blunt about squeezing additional savings out of new work from home strategies that have emerged during the pandemic.
“I will tell you I was not a fan of a work-from-home company at all, but I’ve realized that there are some people in our company who can work as productively or more productively from home, and it has very beneficial financial impacts for us. So we’re examining everything. And again, it’s been one giant experiment,” Pittman said.
