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iHeartMedia’s Q1 Results Dinged by COVID-19

Sets stage for potential painful second quarter

The coronavirus pandemic in the United States squashed any hopes for a good first quarter of 2020 for iHeartMedia.

The radio company reported late last week it saw a deep decline in advertising revenue in March as the COVID-19 pandemic intensified. Revenue through the first three months of this year was $780.6 million, down 1.9% year-over-year driven by the effects of the COVID-19 outbreak. Excluding political revenue, that dip was 4.8%, the company said.

The company, which announced sweeping modernization initiatives in February, suffered a $1.65 billion net loss in the first three months of the year, but that figure was in part caused by a readjustment of intangible assets tied to its emergence from bankruptcy in 2019, according to company officials.

[Read: iHeart Offers Programmatic “COVID Recovery Program”]

The media giant reported its traditional radio business revenue declined by 5.2% to $461.6 million, and declined 8.3% excluding the impact of political revenue. Meanwhile, its radio network revenue, which includes Premiere Networks and Total Traffic and Weather, declined 2.6% year-over-year.

iHeartMedia, which owns about 850 radio stations in 150 markets, had about $647 million cash on hand at the end of March 2020, according to the financial report. It has also cut capital expenditures by about $80 million for the remainder of 2020.

Bob Pittman, chairman and CEO of iHeartMedia, spoke on the earnings call and said the year started off with strong growth. “However, revenue began to fall off in March, as it did for most ad supported companies, and that trend became even more pronounced in April, with a sharp decline in ad revenue across almost all of our revenue segments,” Pittman said on the call.

Direct operating expenses for the media company increased 6.6%, driven primarily by incremental costs related to the company’s modernization initiatives, which were incurred mainly in January and February, according to the company’s report. Those expenses also included higher content costs from higher podcasting and digital subscription revenue and higher music license fees and digital royalties.

On the plus side the company says its digital revenue grew by 22.2% compared to the first quarter a year ago, driven by podcasting revenue, which saw an 80% increase.

Pittman says while national and local ad budgets were cut even further in April, advertising sales revenue is beginning to return in markets that are reopening. “Advertising overall and most of our advertising streams have seen a major drop, and the reasons are obvious. Many businesses are shut down. Businesses and brands needed time to rebuild their messages to be relevant in a completely changed world. And companies needed to save money, and many did so by reducing or eliminating ad spend,” he said.

iHeartMedia announced in April it was taking steps to trim about $200 million in costs from its business this year in response to the pandemic. The steps included employee furloughs, wage cuts other initiatives. The $200 million in cost-savings is in addition to $50 million in expected savings achieved through modernization initiatives.