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Slower Ad Markets Bog Down iHeartMedia’s Q2 Results

CEO Pittman: “We are seeing improvements”

Expense management continues to reduce fixed costs and give iHeartMedia some resiliency during this period of economic softness, company officials said during an earnings call on Tuesday to announce its second quarter performance.

The persistent advertising downturn caused iHeartMedia’s consolidated revenue to decrease $34 million, or 3.6%, during the three months ended June 30, 2023, as compared to the same period in 2022. The total revenue number came in at $920 million for the most recent quarter.

The broadcaster reported a GAAP operating loss of $882.9 million in Q2 2023, and gave guidance during its investor’s call that the loss includes $961 million of non-cash intangible impairment charges related to FCC licenses and goodwill. 

iHeart, the largest radio owner in the United States, noted $5.3 billion in total debt at the end of the second quarter in its filing with the U.S. Securities and Exchange Commission. The company notes it has no debt maturities until mid-2026.  

Revenue generated by the Digital Audio group was the shining star for iHeart in the quarter, according to results released Tuesday. Digital audio revenue increased $8.3 million, or 3.3%, driven primarily by continuing increases in demand for podcast advertising. Total digital audio revenue was $261 million for the second quarter with podcast revenue growing 13% versus prior year.

The radio station group, identified as the Multiplatform group in investor filings, saw revenue decrease $37.4 million, or 5.9%, dropping to $595 million. The dip primarily resulted from a decrease in broadcast advertising due to a challenging macroeconomic environment, as well as a decline in political advertising, according to the revenue report. 

The Multiplatform division includes iHeart’s 850 radio stations in the United States and revenue from Premiere Radio and sponsored events.   

The company’s third reportable division — Audio & Media Services group — had its revenue decrease $5.3 million primarily due to a decrease in political revenue, but that was partially offset by continued growth in digital revenues, company officials say. The division includes revenue from RCS and Katz Media Group.

Chairman/CEO Bob Pittman on Tuesday’s call said iHeart continues to see broadcast radio and podcasting as complementary businesses.

“While 68 percent of broadcast radio listening happens out of home, 69 percent of podcast listening occurs in the home,” said Pittman. “These listening patterns are complementary. The natural synergy between the two mediums gives us a real advantage in podcast content creation, promotion, marketing and advertising sales. And critically for us, podcast usage does not come at the expense of radio listening.”

Pittman, who has been iHeart CEO since 2011, also gave insight into the state of the broadcast radio industry. “While it will likely advance at a lower growth rate than our digital business, we feel certain broadcast radio will provide long-term sustainable earnings growth for iHeart,” he said. “What’s most exciting about radio is it has the audience.”    

iHeartMedia, which has over 3000 local and national websites, continues to focus on selling advertising via multiple platforms, Pittman said. 

“Each one is a door any advertiser can come through. We have built out a unified platform for audio. So if people find an audience they want to reach we have sellers who can sell across any audio platform,” he said. “And automated buying in many cases that is self-serve for our advertisers.” 

The company divulged that capital expenditures for the six months ending June 30, 2023 were $61.9 million as compared to $72.2 the year prior. Capital expenditures during the six months decreased primarily due to cost savings initiatives, according to filings. The company announced at the end of 2022 it had reshaped its footprint and workforce by downsizing its office space by half and reducing its U.S. workforce by 20 percent as it realigned the organization. 

Looking ahead, iHeartMedia President, COO and CFO Rich Bressler said consolidated revenue was down about 5 percent in July, but the company is still expecting improved revenue growth by the fourth quarter of 2023, led by an increase in national advertising dollars. 

In a press release ahead of its quarterly call with investors, Bressler said: “We continue to see macroeconomic improvements in the advertising marketplace and believe they are an indication that our Multiplatform revenues will continue their quarterly sequential improvement and that our Digital Audio Group revenues will continue to grow in the second half of 2023.”

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