iHeartMedia Q2 Earnings Call Highlights

Key Points

• iHeartMedia exceeded its Q2 outlook: Revenue rose 4.7% year over year to $977 million, adjusted EBITDA reached $152 million, and free cash flow improved to $46 million from negative $13 million a year earlier.
• Digital audio and podcasting drove growth: Digital Audio Group revenue increased 12.4%, while podcasting revenue climbed 20.7% to $162 million. The company is expanding video podcast distribution through partnerships with Netflix, Hulu and other platforms.
• Broadcast operations remained pressured, with Multiplatform Group revenue down 1.6% and adjusted EBITDA falling to $59 million amid macroeconomic uncertainty and non-cash marketing expenses. Management maintained its full-year targets of $800 million in adjusted EBITDA and $200 million in free cash flow, supported by expected political advertising strength.

iHeartMedia NASDAQ: IHRT reported second-quarter revenue growth that exceeded its prior outlook, led by continued expansion in digital audio and podcasting, while its broadcast-focused Multiplatform Group remained under pressure from macroeconomic uncertainty and non-cash marketing expenses.

Consolidated revenue totaled $977 million in the second quarter, up 4.7% from a year earlier and above the company’s guidance for low-single-digit growth. Excluding political advertising, revenue increased 3.5%. Adjusted EBITDA was $152 million, slightly above the midpoint of iHeartMedia’s $140 million to $160 million guidance range, while free cash flow improved to $46 million from negative $13 million in the prior-year quarter.

Chairman and Chief Executive Officer Bob Pittman said the company’s digital investments continued to reshape its earnings mix. For the sixth consecutive quarter, adjusted EBITDA from the Digital Audio Group exceeded that of the Multiplatform Group, which includes broadcast radio networks and events.

Digital audio and podcasting lead growth

The Digital Audio Group generated $364 million in second-quarter revenue, up 12.4% year over year and ahead of management’s approximately 10% growth forecast. Segment adjusted EBITDA increased 14.5% to $123 million, producing a 33.8% margin. Management reiterated its expectation for full-year Digital Audio Group EBITDA margins in the mid-30% range.

Podcasting revenue rose 20.7% to $162 million, compared with $134 million a year earlier. Pittman said approximately half of podcasting revenue at the end of the quarter was generated through iHeartMedia’s local-market sales force.

The company also highlighted its efforts to expand video podcast distribution. Pittman said iHeartMedia is producing video versions of many podcasts for its iHeartRadio service and selected podcast platforms, while also expanding distribution to streaming video services.

He said the company has expanded its Netflix relationship to include podcasts from Kate Hudson and Oliver Hudson, Lele Pons and Martha Stewart. Netflix is also making The Breakfast Club with Charlamagne its only live daily show, according to Pittman. iHeartMedia also announced that six titles would be brought to Disney’s Hulu service, including video episodes of Hey Jonas! and Pod Meets World.

Digital Audio Group revenue excluding podcasting increased 6.6% to $202 million. In response to an analyst question, Pittman said video podcasting is additive to the core audio business, helping expand audiences and creating potential for premium video advertising pricing while requiring lower production costs than traditional television production.

Broadcast segment declines amid uncertainty and expenses

The Multiplatform Group recorded revenue of $536 million, down 1.6% from the prior year and slightly below guidance for approximately flat revenue. Excluding political advertising, revenue declined 2.8%. Segment adjusted EBITDA fell to $59 million from $96 million a year earlier.

Pittman attributed revenue pressure in part to macroeconomic uncertainty, particularly the effect of gas and diesel prices across the economy. He also said non-cash marketing expenses accounted for most of the segment’s EBITDA decline.

President and Chief Operating Officer Rich Bressler said consolidated direct operating expenses rose 2.4%, primarily because of higher variable content costs and third-party digital costs associated with digital revenue growth. Selling, general and administrative expenses increased 11.8%, driven mainly by non-cash co-marketing partnerships designed to increase engagement with the iHeartRadio digital service.

Management said those partnerships support the company’s proprietary audience database and its AudioGraph, broadcast programmatic and programmatic advertising offerings. Bressler said the partnerships will begin to decrease in the second half of the year and that the associated revenue and expenses have zero impact on adjusted EBITDA over time.

Pittman said iHeartMedia’s broadcast radio business has a monetization challenge rather than an audience challenge. The company is adding broadcast inventory to demand-side platforms including Amazon, Google and Yahoo, while developing offerings for other digital planning and buying platforms through AudioGraph and programmatic tools.

“We think the AudioGraph and programmatic will give us that,” Pittman said, referring to advertisers’ preference for digital buying systems.

Political advertising and services segment support outlook

The Audio & Media Services Group, which includes Katz TV, Katz Radio and RCS, posted revenue of $80 million, up 18.8% from a year earlier. Excluding political revenue, segment revenue rose 10.6%. Adjusted EBITDA increased 54.6% to $37 million, supported primarily by digital audio and video revenue growth.

Management expects political advertising to be a major contributor to EBITDA and free cash flow in the second half, particularly in the fourth quarter. Pittman said early indications suggest the midterm election cycle could be substantial, with some observers expecting activity comparable to a presidential-election year.

Bressler said the company’s largest advertising-category gains in absolute dollars during the quarter were political, gambling, computers, electronics and appliances, and professional services. The largest declines were in telecom, financial services, auto, and food and beverage.

Guidance and balance sheet

For the third quarter, iHeartMedia expects consolidated revenue to rise in the mid-single digits year over year and adjusted EBITDA to range from $180 million to $220 million. Digital Audio Group revenue is expected to grow in the low teens, including approximately 20% podcasting revenue growth. Multiplatform Group revenue is expected to be approximately flat, while Audio & Media Services Group revenue is expected to rise about 20%.

The company reaffirmed its full-year adjusted EBITDA target of $800 million and free-cash-flow target of $200 million. Bressler said the outlook assumes some improvement in macroeconomic and advertising conditions, especially in the fourth quarter, alongside strong political advertising performance.

At quarter end, net debt was approximately $4.7 billion, liquidity was $457 million and cash totaled $174 million, including $125 million borrowed under the asset-based lending facility. The company expects to repay that ABL borrowing by the end of 2026 using free cash flow. iHeartMedia also said it amended and extended its $450 million ABL facility to Jan. 30, 2029, from May 17, 2027.

About iHeartMedia (NASDAQ:IHRT)

iHeartMedia, Inc NASDAQ: IHRT is a leading media and entertainment company specializing in radio broadcasting, digital streaming and live events. The company operates more than 860 full-power AM and FM radio stations across the United States, delivering music, news, sports and talk programming to local markets. Through its flagship digital platform, iHeartRadio, the company provides listeners with free and subscription-based access to thousands of live radio stations, curated music playlists and on-demand podcasts.

Originally founded in 1972 as Clear Channel Communications, the business rebranded to iHeartMedia in 2014 to reflect the growing importance of its digital and event-driven offerings.

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