iHeartMedia, Inc. (NASDAQ:IHRT) reported first quarter 2024 results that aligned with the company's previously provided adjusted EBITDA and revenue guidance ranges. The company experienced a slight year-over-year revenue decline of 1.5%, which was within the expected range of flat to down 2%.
Despite the dip in revenue, adjusted EBITDA showed a 12% increase from the prior year, reaching $105 million. The Digital Audio Group was a notable performer, with revenues up 7% and a record Q1 EBITDA margin.
iHeartMedia's podcast business continued its growth trajectory, with an 18% increase in podcast revenues. The company also highlighted the potential for increased political advertising revenue in the latter half of the year and emphasized ongoing cost efficiencies.
Key Takeaways
- iHeartMedia's Q1 2024 results met the provided guidance ranges for adjusted EBITDA and revenue.
- Revenues decreased slightly by 1.5% year-over-year, while adjusted EBITDA increased by 12% to $105 million.
- The Digital Audio Group's revenues grew by 7%, and its adjusted EBITDA margins reached a Q1 record.
- Podcast revenues within the Digital Audio Group increased by 18% year-over-year.
- The Multiplatform Group saw revenues decrease by 6.7% and adjusted EBITDA down by 11.3%.
- Free cash flow for Q1 was negative $81 million, an improvement from negative $133 million in the prior year.
- The company anticipates robust political advertising revenue in the second half of the year.
Company Outlook
- iHeartMedia expects Q2 2024 revenues to be approximately flat year-over-year.
- The Digital Audio Group is projected to have high-single-digit revenue growth in Q2.
- The Multiplatform Group's revenue is expected to be down mid-single digits in Q2, improving sequentially from Q1.
- The Audio and Media Services Group's revenues are expected to be down low-single digits in Q2.
- Full year adjusted EBITDA performance is expected to show significant year-over-year improvement.
Bearish Highlights
- The Multiplatform Group experienced a revenue decline of 6.7% in Q1.
- Adjusted EBITDA for the Multiplatform Group decreased by 11.3%.
- Free cash flow remained negative in Q1, although it showed improvement from the previous year.
Bullish Highlights
- The Digital Audio Group's revenue increased by 7% and adjusted EBITDA by 26% in Q1.
- Podcast revenues continue to grow, with an 18% increase.
- Political advertising is expected to provide a material upside in the second half of the year.
Misses
- While the Digital Audio Group performed well, the overall company revenue experienced a slight decline.
- The Multiplatform Group's revenues and adjusted EBITDA figures were down from the previous year.
Q&A highlights
- There were no questions during the Q&A session of the earnings call.
Management expressed confidence in the ongoing recovery and improvement of the business, highlighting the strength of the podcast business and the anticipated political advertising boost. The team remains focused on managing expenses and leveraging technology for long-term profitability.
InvestingPro Insights
iHeartMedia's first quarter results for 2024 have demonstrated resilience in certain sectors, despite a mild revenue dip. The company's focus on digital audio growth and podcast revenue expansion aligns with broader industry trends. Here are some InvestingPro Insights to consider:
InvestingPro Data indicates that iHeartMedia has a market capitalization of $217.97 million. Despite the company not being profitable over the last twelve months, as indicated by a negative P/E ratio of -0.20 and an adjusted P/E ratio for the last twelve months as of Q4 2023 of -1.08, the gross profit margin remains strong at 60.16%. This suggests that while net income is currently negative, the company is effective at controlling the cost of goods sold relative to sales.
One of the key InvestingPro Tips is that iHeartMedia's stock price movements are quite volatile, which could be a point of concern for potential investors seeking stability. Additionally, the company is trading near its 52-week low with a price that is 30.7% of the 52-week high, indicating that the stock may be undervalued or that the market has concerns about the company's future prospects.
For investors looking for more in-depth analysis, there are additional InvestingPro Tips available on the iHeartMedia page at https://www.investing.com/pro/IHRT. These tips could provide further insights into iHeartMedia's financial health and stock performance. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to even more valuable insights and data points to inform your investment decisions.
Full transcript - iHeartMedia A (IHRT) Q1 2024:
Operator: Hello. Thank you for standing by. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the iHeartMedia Q1 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Mike McGuinness, Head of Investor Relations. You may begin.
Mike McGuinness: Good morning, everyone. And thank you for taking the time to join us for our first quarter 2024 earnings call. Joining me for today’s discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President, COO and CFO. At the conclusion of our prepared remarks, management will take your questions. In addition to our press release, we have an earnings presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our financial performance and operating results. These statements are based on management’s current expectations and actual results could differ from what is stated as a result of certain factors identified on today’s call and in the company’s SEC filings. Additionally, during this call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, earnings presentation and our SEC filings, which are available in the Investor Relations section of our website. And now I’ll turn the call over to Bob.
Bob Pittman: Thanks, Mike, and good morning, everyone. We’re pleased to report that our first quarter 2024 results were in line with our previously provided adjusted EBITDA and revenue guidance ranges. As expected, we saw February and March improve over the January pace of business. Although the marketplace continues to be dynamic with a changing outlook on interest rates, inflation trends and global and domestic uncertainty, we remain confident that this is a recovery year, highlighted by the strong momentum in our podcast business and the sequential improvement of our Multiplatform Groups’ year-over-year adjusted EBITDA performance. We also see material upside from political advertising in the back half of the year and the benefit of our ongoing focus on cost efficiencies as well. Now let me take you through some of the key financial results of the quarter. In the first quarter, we generated adjusted EBITDA of $105 million. In the middle of the guidance range, we provided of $100 million to $110 million. Our consolidated revenues for the quarter were down 1.5% compared to the prior year quarter, within the guidance range of flat to down 2%. Our Q1 free cash flow was negative $81 million, a significant improvement, compared to the negative $133 million in the prior year. As a reminder, Q1 is our seasonal low point for free cash flow in the year and we will generate positive free cash flow in each of the remaining quarters in 2024, with each quarter increasing sequentially. We anticipate our full year free cash flow to be significantly higher than last year. Turning now to our individual operating segments, the Digital Audio Group generated first quarter revenues of $239 million, up 7% versus prior year and represented 30% of the company’s total revenue. For the quarter, the Digital Audio Group generated adjusted EBITDA of $68 million, up 26% versus prior year. The Digital Audio Group’s adjusted EBITDA margins were 29%, up from 24% in Q1 2023, marking the Digital Audio Group segment’s highest Q1 EBITDA margin ever. Within the Digital Audio Group, our podcast revenues grew 18% versus prior year. Podcasting continues to be the hottest new consumer medium, and we are the leader in that medium in every key metric, audience, revenue and earnings. Podcasting remains a strong growth engine for the company and our financial discipline and podcasting expenses continues to pay off, as our podcasting EBITDA margins remain accretive to our total company adjusted EBITDA margins. In March, iHeart was once again ranked the number one podcast publisher in the U.S., with more monthly downloads than the next two largest podcast publishers combined, according to PodTrack. Our leadership position in podcasting is, in part, the result of the power of our broadcast radio assets. As a reminder, we’ve used those assets to build not only the podcast business, but also the iHeartRadio app, which is the number one digital radio service and our marquee live events business, which includes the recent iHeartRadio Music Awards and the iHeartCountry Festival. In addition to our industry-leading podcast business and our digital radio streaming service, which has 5 times the listening of our closest competitor, we also have the largest social footprint of any audio service by a factor of seven and we operate 3,000 national and local websites that reach more than 110 million people in the United States each month, all of which represent additional opportunities for our advertising partners to interact with our highly engaged consumer base and provide additional revenue growth for the company. Turning now to the Multiplatform Group, which includes our broadcast radio, networks and events business. In the first quarter, revenues were $493 million, down 6.7% versus prior year, and down 7.6%, excluding the impact of political advertising. Adjusted EBITDA was $77 million, down 11.3% versus prior year and this represents a substantial sequential quarterly adjusted EBITDA improvement from down 38% year-over-year in Q4 2023. iHeart continues to be ranked number one in radio audience and more markets than the next two largest radio companies combined and our events business continues its strong momentum. For example, the iHeartRadio Music Awards generated 84 billion social impressions, 3 times more than the Super Bowl and 2.3 times more than the Grammys, and we’ve continued to make meaningful progress in the development of our programmatic platforms that enable the automated buying, selling and planning of our broadcast radio inventory, which give our broadcast radio inventory exposure to the digital TAM. Looking at the business as a whole, we had our first quarter of year-over-year adjusted EBITDA growth in five quarters, driven by the substantial sequential year-over-year improvement in the performance of all of our segments, the Multiplatform Group, the Digital Audio Group and the Audio and Media Services Group, positive indicators of a recovery year. In addition to continuing to build out our business and develop new consumer and revenue opportunities, our management team remains focused on expense management, driving efficiencies and structuring our business using technology, including AI, for long-term profitability and the maximized shareholder value. And now I’ll turn it over to Rich.
Rich Bressler: Thank you, Bob. As I take you through our results, you’ll notice that, as Bob mentioned, our first quarter 2024 results were in line with our previously provided revenue and adjusted EBITDA guidance ranges. Our Q1 2024 consolidated revenues were down 1.5% year-over-year, in line with the guidance we provided of flat to down 2%. Our consolidated direct operating expenses decreased 0.9% for the quarter. This decrease was primarily driven by lower variable content costs, lower event costs related to the timing of the 2024 iHeartRadio Music Awards, which were on April 1st this year and March 27th last year, partially offset by higher third-party digital costs related to the increase in digital revenues. Our consolidated SG&A expenses decreased 4.4% for the quarter. This decrease was driven by lower marketing expense due to the timing of the 2024 iHeartRadio Music Awards and lower variable bonus expense, partially offset by an increase in certain costs incurred in connection with the execution of our cost savings initiatives. We generated a first quarter GAAP operating loss of $34.7 million, compared to a GAAP operating loss of $48.9 million in the prior year quarter. Our first quarter adjusted EBITDA was $105 million, up 12%, compared to $93 million in the prior year quarter and within the guidance range we provided of $100 million to $110 million. Turning now to the performance of our operating segments, and as a reminder, there are slides in the earnings presentation on our segment performances. In the first quarter, the Digital Audio Group’s revenues were $239 million, up 7% year-over-year and they comprised 30% of our first quarter consolidated revenues. The Digital Audio Group’s adjusted EBITDA was $68 million, up 25.9% year-over-year and our Q1 margins were 28.5%, a year-over-year increase of 428 basis points. This was the highest Q1 EBITDA margin for the Digital Audio Group in our company’s history. Within the Digital Audio Group are our podcasting revenues, which grew 18% year-over-year and our non-podcasting digital revenues, which grew 1.2% year-over-year. The Multiplatform Group revenues were $493 million, down 6.7% year-over-year or down 7.6%, excluding the impact of political. Adjusted EBITDA was $77 million, down 11.3% year-over-year and this represents a substantial sequential improvement from down 38% year-over-year in Q4 2023. The Multiplatform Group’s adjusted EBITDA margins were 15.6%. Turning to the Audio and Media Services Group, revenues were $69 million, up 12.7% year-over-year and adjusted EBITDA was $24 million, up 54% from $15 million in the prior year. Excluding the impact of political, the Audio and Media Service Group revenues were up 6.1%. At quarter end, we had approximately $4.86 billion of net debt outstanding, which was the lowest net debt position in the history of our company. Our total liquidity was $788 million at quarter end, which includes a cash balance of $361 million. Our quarter ending net debt to adjusted EBITDA ratio was 6.9 times. In 2024, we expect to make progress towards our goal of a net debt to adjusted EBITDA ratio of approximately 4 times. As highlighted on past calls, we have no material maintenance covenants and no debt maturities until May 2026. We continue to be opportunistic in responding to market developments and are evaluating all opportunities surrounding our capital structure. In aggregate, we now have repurchased $534 million of our 8.38% [ph] senior unsecured notes at a meaningful discount to their par value, generating both earnings and free cash flow accretion. This has reduced the outstanding amount of our 8.38% senior unsecured notes from $1.45 billion to approximately $916 million, resulting in aggregate annualized cash interest savings of approximately $45 million. In the first quarter, our free cash flow was a negative $81 million, a significant improvement from negative $133 million in the prior year quarter. And our Q1 2024 free cash flow excludes the positive impact of the $101 million of cash proceeds from our equity stake in the sale of BMI that we received in February. As a reminder, Q1 is our seasonal low point for free cash flow in the year and we will generate positive free cash flow in each of the remaining quarters in 2024. Our free cash flow for the year will also benefit from the Presidential Election cycle, which we expect to generate robust political advertising, which as a reminder is paid upfront and will help fuel our free cash flow generation, particularly in Q3 and Q4. Turning now to our outlook for Q2, we expect our Q2 2024 revenues to be approximately flat year-over-year. We are still closing the month of April, but expect revenues to be down 0.4%. Turning to the individual segments for Q2, we expect the Digital Audio Groups revenues to be up high-single digits. We expect the Multiplatform Groups revenue to be down mid-single digits, a sequential improvement from Q1. And we expect the Audio and Media Services Group revenues to be down low-single digits. We expect to generate second quarter adjusted EBITDA in the range of $140 million to $160 million, compared to $191 million in the prior year quarter. For this quarter, we will not have our usual flow through of revenue due to the timing of the iHeartRadio Music Awards, which occurred in Q1 last year and in Q2 this year. We recognize expense associated with the event, including production and marketing costs when the awards are aired on Fox and streamed on Hulu. Turning to some of the items affecting our full year free cash flow, we expect our cash taxes to be approximately 10% of adjusted EBITDA in 2024. Our estimate of full year 2024 capital expenditures is expected to be approximately $100 million. Cash restructuring expenses will be approximately $60 million this year as we continue to execute on new opportunities to optimize our organization for efficiency and growth. As Bob mentioned, we continue to see signs of improvement throughout our business and the broader advertising marketplace. And as we look ahead, we expect to generate significant political revenues as a result of the Presidential Election cycle. Although most of the political revenue comes in the back half of the year, as an early indicator, our full year 2024 political revenues are currently pacing approximately 16% higher than the last Presidential Election cycle when we generated $167 million of political revenue. With that context, we expect to see a significant year-over-year improvement in our full year adjusted EBITDA performance. On behalf of our entire management team, Bob and I want to thank our team members who work to deliver for their communities, our advertising partners and for iHeart every day. Now we will turn it over to the Operator to take your questions. Thank you.
Operator: Thank you. [Operator Instructions] There are no questions at this time. I will turn the call to the speakers for closing remarks.
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Rich Bressler: Well, Bob and I and the entire management team again would like to thank you all for taking a few minutes this morning to listen to the iHeart story and we are available anytime for any follow-up questions. Again, thank you all.
Operator: This concludes today’s conference call. We thank you for joining. You may now disconnect your lines.
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