iHeartMedia, Inc. (Nasdaq: IHRT) today reported financial results for the quarter ended June 30, 2023.
Financial Highlights:1
Q2 2023 Consolidated Results
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Q2 Revenue of $920 million, down 3.6%; slightly better than the guidance range of down mid-single digits
- Excluding Q2 Political Revenue, Q2 Revenue down 1.8%
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GAAP Operating loss of $897 million vs. GAAP Operating income of $83 million in Q2 2022, which includes $961 million of non-cash intangible impairment charges
- Non-cash intangible impairment charges were recorded in Q2 2023 primarily driven by the current debt and equity valuations in the marketplace
- Consolidated Adjusted EBITDA of $191 million, within guidance range of $180 million to $200 million, compared to $237 million in Q2 2022 and more than double Q1 2023 Adjusted EBITDA
- Cash Flows from operating activities of $57 million
- Free Cash Flow of $34 million, Free Cash Flow including net proceeds from real estate sales was $39 million
Q2 2023 Digital Audio Group Results
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Digital Audio Group Revenue of $261 million up 3%
- Podcast Revenue of $97 million up 13%
- Digital Revenue excluding Podcast of $164 million down 2%
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Segment Adjusted EBITDA of $85 million up 7%
- Digital Audio Group Adjusted EBITDA margin of 32.4%
Q2 2023 Multiplatform Group Results
- Multiplatform Group Revenue of $596 million down 6%
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Segment Adjusted EBITDA of $162 million down 17%
- Multiplatform Group Adjusted EBITDA margin of 27.3%
Continued Proactive Capital Structure Improvement Through Debt Paydown
- Cash balance and total available liquidity2 of $165 million and $585 million, respectively, as of June 30, 2023
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Repurchased $80 million in principal balance of 8.375% Senior Unsecured Notes (at a discount to par) for $57 million in cash; expected to generate approximately $7 million of annualized interest savings
- As of June 30, 2023, since Q2 2022 combined Notes repurchases of $430 million at a discount to par for $372 million cash; in aggregate expected to generate approximately $40 million of annualized interest savings
- Cumulative reduction of the outstanding principal balance of these Notes from $1.45 billion as of March 31, 2022 to approximately $1 billion as of June 30, 2023
Guidance
- Q3 Consolidated Revenue expected to decline in the mid-single digits; Q3 Consolidated Revenue excluding the impact of Political expected to decline in the low-single digits3
- July Consolidated Revenue down approximately 5%
- Q3 Consolidated Adjusted EBITDA4 expected to be $195 million to $205 million
- Remain committed to long term target of approximately 4x Net Debt to Adjusted EBITDA ("net leverage")4
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2 Total available liquidity is defined as cash and cash equivalents plus available borrowings under our ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations. |
3 Included in Q3 2022 GAAP Consolidated Revenue is approximately $34 million of Political Revenue. |
4 A full reconciliation of forecasted Adjusted EBITDA, net debt and net leverage on a non-GAAP basis to the most-directly comparable GAAP metrics cannot be provided without unreasonable efforts due to the inherent difficulty in forecasting and quantifying with reasonable accuracy significant items required for the reconciliations, including gains or losses on investments, extinguishment of debt, equity in nonconsolidated affiliates, impairment charges, stock based compensation, and restructuring as well as the Company’s cash and cash equivalents balance. |
Statement from Senior Management
“We are pleased to report that our second quarter 2023 results reflected Adjusted EBITDA slightly above the midpoint of the guidance range, and more than double the Adjusted EBITDA we generated in the first quarter, and our consolidated revenue were above the guidance range. The continued positive performance of our Digital Audio Group, led by our Podcasting business, and the significantly improved relative performance of our Multiplatform Group during this soft advertising period, are encouraging metrics for us, and we’re seeing indications of improving macroeconomic trends which we expect to have a positive impact for us in the second half of the year, with most of that impact in Q4,” said Bob Pittman, Chairman and CEO of iHeartMedia, Inc.
“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," said Rich Bressler, President, COO and CFO of iHeartMedia, Inc. "These improving trends, in combination with our performance in the first and second quarters relative to guidance, along with a presidential election ahead that should generate record political advertising dollars. gives us confidence that if this advertising marketplace recovery continues, we expect to have a strong 2024 with a resumption of our growth story in terms of revenue, profitability and Free Cash Flow generation.”
Consolidated Results of Operations
Second Quarter 2023 Consolidated Results
Our consolidated revenue decreased $34.0 million, or 3.6%, during the three months ended June 30, 2023 compared to the same period of 2022. Digital Audio revenue increased $8.3 million, or 3.3%, driven primarily by continuing increases in demand for podcast advertising. Multiplatform revenue decreased $37.4 million, or 5.9%, primarily resulting from a decrease in broadcast advertising due to a challenging macroeconomic environment, as well as a decline in political advertising. Audio & Media Services revenue decreased $5.3 million primarily due to a decrease in political revenue, partially offset by continued growth in digital revenues.
Consolidated direct operating expenses decreased $10.3 million, or 2.8%, during the three months ended June 30, 2023 compared to the same period of 2022. The decrease was primarily driven by lower digital performance royalty fees including the impact of expenses recorded in 2022 upon the settlement of amounts related to prior years, as well as lower employee compensation as a result of cost savings initiatives. The decrease was partially offset by higher variable content costs resulting from an increase in digital revenue, including third-party digital costs and production costs.
Consolidated Selling, General & Administrative ("SG&A") expenses increased $14.7 million, or 3.9%, during the three months ended June 30, 2023 compared to the same period of 2022. The increase in Consolidated SG&A expenses was driven primarily by higher variable bonus expense and higher bad debt expense, partially offset by lower sales commissions.
Our consolidated GAAP Operating loss was $897.2 million compared to Operating income of $82.9 million in the second quarter of 2022, primarily resulting from a non-cash impairment charge of $964.5 million mainly due to the impairment of our goodwill and indefinite-lived intangible assets balances.
Adjusted EBITDA decreased to $191.2 million compared to $237.2 million in the prior-year period.
Cash provided by operating activities was $56.8 million, compared to $155.8 million in the prior-year period, and Free Cash Flow was $34.0 million, compared to $106.1 million in the prior-year period primarily due to a decrease in broadcast radio revenue due to a challenging macroeconomic environment, an increase in borrowing rates, and timing of payments.
Business Segments: Results of Operations
Second Quarter 2023 Multiplatform Group Results
(In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||
Revenue | $ | 595,944 | $ | 633,300 | (5.9 | )% | $ | 1,124,957 | $ | 1,204,460 | (6.6 | )% | |||||||||
Operating expenses1 | 433,542 | 438,804 | (1.2 | )% | 875,503 | 876,057 | (0.1 | )% | |||||||||||||
Segment Adjusted EBITDA | $ | 162,402 | $ | 194,496 | (16.5 | )% | $ | 249,454 | $ | 328,403 | (24.0 | )% | |||||||||
Segment Adjusted EBITDA margin | 27.3 | % | 30.7 | % | 22.2 | % | 27.3 | % | |||||||||||||
1 Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses. | |||||||||||||||||||||
Revenue from our Multiplatform Group decreased $37.4 million, or 5.9% YoY, primarily as a result of the challenging macroeconomic environment and a decline in political advertising. Broadcast revenue declined $33.4 million, or 7.2% YoY, driven by lower spot revenue and a decrease in political advertising. Networks declined $5.4 million, or 4.2% YoY. Revenue from Sponsorship and Events increased by $0.1 million, or 0.4% YoY.
Operating expenses decreased $5.3 million, or 1.2% YoY, driven primarily by cost savings initiatives and sales commissions, partially offset by higher bad debt expense.
Segment Adjusted EBITDA Margin decreased YoY to 27.3% from 30.7%.
Second Quarter 2023 Digital Audio Group Results
(In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||
Revenue | $ | 260,854 | $ | 252,561 | 3.3 | % | $ | 484,250 | $ | 466,780 | 3.7 | % | |||||||||
Operating expenses1 | 176,272 | 173,678 | 1.5 | % | 345,549 | 335,389 | 3.0 | % | |||||||||||||
Segment Adjusted EBITDA | $ | 84,582 | $ | 78,883 | 7.2 | % | $ | 138,701 | $ | 131,391 | 5.6 | % | |||||||||
Segment Adjusted EBITDA margin | 32.4 | % | 31.2 | % | 28.6 | % | 28.1 | % | |||||||||||||
1 Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses. | |||||||||||||||||||||
Revenue from our Digital Audio Group increased $8.3 million, or 3.3% YoY, driven by Podcast revenue which increased by $11.0 million, or 12.8%, YoY, to $96.7 million, driven primarily by increased demand for podcasting from advertisers, partially offset by Digital, excluding Podcast revenue, which declined $2.7 million, or 1.6%, YoY, to $164.1 million, driven by a decrease in COVID-19 related advertisers.
Operating expenses increased $2.6 million, or 1.5% YoY, due to higher variable costs, including third-party digital costs and sales commissions primarily resulting from higher revenue, partially offset by a decrease in performance royalty fees.
Segment Adjusted EBITDA Margin increased YoY to 32.4% from 31.2%.
Second Quarter 2023 Audio & Media Services Group Results
(In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||
Revenue | $ | 65,804 | $ | 71,065 | (7.4 | )% | $ | 127,155 | $ | 131,922 | (3.6 | )% | |||||||||
Operating expenses1 | 47,305 | 48,995 | (3.4 | )% | 93,312 | 93,465 | (0.2 | )% | |||||||||||||
Segment Adjusted EBITDA | $ | 18,499 | $ | 22,070 | (16.2 | )% | $ | 33,843 | $ | 38,457 | (12.0 | )% | |||||||||
Segment Adjusted EBITDA margin | 28.1 | % | 31.1 | % | 26.6 | % | 29.2 | % | |||||||||||||
1 Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses. | |||||||||||||||||||||
Revenue from our Audio & Media Services Group decreased $5.3 million, or 7.4% YoY, driven by a decrease in political revenue, partially offset by continued growth in digital-placement revenues.
Operating expenses decreased $1.7 million, or 3.4% YoY, primarily as a result of lower cost of sales due to lower revenues.
Segment Adjusted EBITDA Margin decreased YoY to 28.1% from 31.1%.
GAAP and Non-GAAP Measures: Consolidated
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Revenue | $ | 920,014 | $ | 954,005 | $ | 1,731,253 | $ | 1,797,463 | ||||||
Operating income (loss) | $ | (897,194 | ) | $ | 82,869 | $ | (946,056 | ) | $ | 95,204 | ||||
Adjusted EBITDA1 | $ | 191,181 | $ | 237,185 | $ | 284,605 | $ | 382,403 | ||||||
Net income (loss) | $ | (882,982 | ) | $ | 15,182 | $ | (1,105,345 | ) | $ | (33,557 | ) | |||
Cash provided by operating activities2 | $ | 56,772 | $ | 155,801 | $ | (37,211 | ) | $ | 103,589 | |||||
Free cash flow1,2 | $ | 33,999 | $ | 106,148 | $ | (99,149 | ) | $ | 31,379 | |||||
Free cash flow including net proceeds from real estate sales1,2 | $ | 38,628 | $ | 126,617 | $ | (94,520.3 | ) | $ | 55,214 | |||||
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1 | See the end of this press release for reconciliations of (i) Adjusted EBITDA to Operating income (loss), (ii) Adjusted EBITDA to Net loss, (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash used for operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt. See also the definitions of Adjusted EBITDA, Free Cash Flow, Free cash flow including net proceeds from real estate sales, Adjusted EBITDA margin, and Net Debt under the Supplemental Disclosure Regarding Non-GAAP Financial Information section in this release. | |
2 | We made cash interest payments of $93.7 million in the three months ended June 30, 2023, compared to $83.9 million in the three months ended June 30, 2022. | |
Certain prior period amounts have been reclassified to conform to the 2023 presentation of financial information throughout the press release.
Liquidity and Financial Position
As of June 30, 2023, we had $165.3 million of cash on our balance sheet. For the six months ended June 30, 2023, cash used for operating activities was $37.2 million, cash used for investing activities was $59.3 million and cash used for financing activities was $74.9 million.
Capital expenditures for the six months ended June 30, 2023 were $61.9 million compared to $72.2 million in the six months ended June 30, 2022. Capital expenditures during the six months ended June 30, 2023 decreased primarily due to cost savings initiatives.
As of June 30, 2023, the Company had $5,316.4 million of total debt and $5,151.1 million of Net Debt. The terms of our capital structure include no material maintenance covenants, and there are no material debt maturities prior to 2026, providing structural resilience. During the three months ended June 30, 2023, we repurchased $79.9 million in aggregate principa
