iHeartMedia, Inc. Reports Results for 2021 First Quarter

Rhea-AI Summary

iHeartMedia (Nasdaq: IHRT) reported Q1 2021 results showing a revenue decline of 9.5% YoY, totaling $707 million. Excluding political revenue, the drop was 7%. However, the results surpassed expectations, driven by a strong Digital Audio Group that saw a 70% revenue increase. The company reported a GAAP operating loss of $76 million, significantly less than last year’s $1.7 billion loss due to impairment charges. iHeart's cash balance stood at $529 million, with an expectation to return to 2019 Adjusted EBITDA levels by year's end.

Positive

• Digital Audio Group revenue increased 70% YoY.
• Podcast revenue surged 142% YoY.
• Cash flow from operations was $72 million.
• Free cash flow reached $53 million.
• The company expects Q2 revenue to rise approximately 65% YoY.

Negative

• Overall revenue decreased 9.5% YoY.
• GAAP operating loss of $76 million.

iHeartMedia, Inc. (Nasdaq: IHRT) today reported financial results for the quarter ended March 31, 2021.

Financial Highlights:

Q1 Results

• Q1 Revenue of $707 million down 9.5% YoY; excluding the impact of Political, Q1 Revenue was down 7% YoY
  • Surpassing the Company's guidance of down 11-13% YoY, with Digital driving the out performance
• GAAP Operating loss of $76 million compared to $1.7 billion in prior-year, which included $1.7 billion of impairment charges
• Consolidated Adjusted EBITDA of $102 million compared to $140 million in the prior year period
• Generated Cash Flows from operating activities of $72 million and Free Cash Flow of $53 million
• Cash balance and total available liquidity¹ of $529 million and $707 million, respectively, as of March 31, 2021

Sequential Revenue Improvement Continues

• Q1 revenue declined 9.5% YoY, compared to Q4 2020 which was down 8.8% YoY
• Excluding political revenue, Q1 declined 7% YoY, compared to Q4 2020 which was down 17% YoY

The Company Provides the Following Guidance

• We remain confident that we will be back to 2019 Adjusted EBITDA levels by the end of 2021
• April Revenues were up approximately 85 % YoY, with Podcasting revenue up approximately 170%
• We expect Q2 Revenues to be up approximately 65% YoY

Digital Audio Group Maintains Strong Growth and Profit Trajectory

• Digital Audio Group Revenues were up 70% YoY
• Podcast Revenue was up 142% YoY, and Digital Revenue excluding Podcast were up 55% YoY
• Segment Adjusted EBITDA of $40 million increased 141% YoY, and Segment Adjusted EBITDA margins expanded 750 bps YoY
• Digital Audio Group contributed 22% of the Company's Revenue and 39% of the Company's Consolidated Adjusted EBITDA in Q1

Podcast Continues its Strong Performance for Listeners, Creators, and Advertisers

• iHeart remains the number one podcast publisher, leading the industry in downloads and unique listeners, further increasing our lead over the 2^nd and 3^rd largest publishers, according to Podtrac. We are also #1 in podcast revenue and earnings
• Formed exclusive multi-year podcasting partnership with the NFL, which is expected to generate exceptional podcast content and listener engagement
• Launched a first-of-its-kind Private Podcast Marketplace for brands

Multiplatform Group Continues its Positive Momentum

• The Multiplatform Group's sequential improvement continued, with Q1 revenue down 21% YoY compared to Q4 2020 revenue which was down 22% YoY
  • Excluding Political, Q1 improved approximately 800 bps, from down 27% in Q4 2020 to down 19% in Q1 2021

Remain Focused on Bringing our Industry-Leading Audio Technology Platform to Market

• On March 31, 2021, iHeart completed the acquisition of Triton Digital with the integration efforts proceeding as planned

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1 Total available liquidity 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.

Statement from Senior Management

“The first quarter outperformed our expectations on all financial metrics as the Company continues its steady recovery from the COVID-19 downturn, which is not just a continuation of the positive trends we’ve seen across the business – we believe it’s a validation of our long-term multiplatform product and revenue strategy and the investments we have made in growth areas like podcasting, ad tech and the continued expansion of broadcast radio on digital devices,” said Bob Pittman, Chairman and CEO of iHeartMedia, Inc. “As a company we continue to prioritize identifying new opportunities across the audio, advertising, and data analytics sectors to expand our Total Addressable Market from just the $15B of Radio TAM to include the $160B of Digital TAM, providing us with new revenue opportunities for meaningful and sustainable growth for all our operating segments.”

“Our ability to adapt and innovate, as well as our strategic allocation of capital, during the COVID-19 pandemic have set the stage for strong growth in 2021. Our cost management, investments in key areas of growth, and focus on our core-competencies helped us to achieve Adjusted EBITDA of $102 million in the first quarter, and we remain confident that we will be back to 2019 Adjusted EBITDA levels by the end of 2021,” said Rich Bressler, President, Chief Operating Officer and Chief Financial Officer of iHeartMedia, Inc.

Consolidated Results of Operations

First Quarter 2021 Consolidated Results

Our consolidated financial results for Q1 remained negatively impacted by the COVID-19 pandemic; however, we continued to see sequential recovery from our low-point in April 2020. In Q1, consolidated revenue was down 9.5% YoY on a reported basis and down 7.2% excluding political revenue. Our Multiplatform Group revenue declined by 20.9% compared to the first quarter of 2020, due to the continuing negative economic effects resulting from the COVID-19 pandemic. Our Digital Audio Group revenue grew 69.8% YoY, led by continued growth in Podcasting, which increased by 141.9% YoY. Digital Revenue excluding Podcasting also grew, up 55.0% YoY driven by increased demand for digital advertising. Audio & Media Services revenue decreased 8.5% YoY on a reported basis and increased by 0.7% excluding the impact of political revenue.

Consolidated Direct operating expenses decreased 0.4%, driven primarily by lower employee compensation expenses resulting from our modernization initiatives and cost-reduction initiatives taken in response to the COVID-19 pandemic, and lower variable costs associated with lower Revenues and as a result of the postponement or cancellation of in-person events in response to the COVID-19 pandemic. These decreases were offset by higher variable costs in our Digital Audio Group, resulting from strong growth in digital revenue.

Selling, General & Administrative ("SG&A") expenses decreased 12.6%, driven by lower employee compensation expenses, resulting from cost reduction initiatives taken in response to the COVID-19 pandemic, along with lower sales commissions, which were impacted by the decrease in Multiplatform Group revenue. Trade and barter expenses also decreased primarily as a result of the cancellation / postponement of events as did travel and entertainment expenses resulting from operating expense saving initiatives. These decreases, which primarily impacted our Multiplatform Group, were partially offset by higher expenses for our Digital Audio Group and other increases compared to the first quarter of 2020 including variable compensation across our businesses and corporate functions.

Our consolidated GAAP Operating loss of $76.4 million compared to $1,730.8 million in the first quarter of 2020, which was impacted by non-cash impairment charges to our indefinite-lived intangible assets and goodwill totaling $1.7 billion as a result of the estimated adverse effects caused by the COVID-19 pandemic on future cash flows.

Adjusted EBITDA decreased to $102.2 million compared to $140.3 million in the prior-year period.

The Company generated operating cash flow of $71.7 million, compared to $91.5 million in the prior-year period and generated Free Cash Flow of $52.8 million, compared to $69.9 million in the prior-year period. These YoY changes were primarily a result of the negative impact of COVID-19.

New Reportable Segments

Beginning on January 1, 2021, we began reporting our financial statements based on three reportable segments: iHeartMedia Digital Audio Group, which includes all of our Digital assets including Podcasting; the iHeartMedia Multiplatform Group, which includes our Broadcast radio, Networks and Sponsorships and Events businesses; and our Audio & Media Services Group. These reporting segments reflect how senior management views the Company, align with certain leadership and organizational changes implemented in the first quarter of 2021 and will provide improved visibility into the underlying performances, results, and margin profiles of our distinct businesses. The Digital Audio business today encompasses approximately 22% of the Company’s consolidated revenue and approximately 39% of its Consolidated Adjusted EBITDA for the quarter ended March 31, 2021. In the first quarter of 2021 revenue grew by 70% year-over-year and Segment Adjusted EBITDA by 141% year-over-year. The Company expects that the Digital Audio segment will continue to grow at a higher rate than our other segments and is therefore expected to become a larger part of our business over time.

Additionally, beginning on January 1, 2021, Segment Adjusted EBITDA became the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding Restructuring expenses.

Business Segments: Results of Operations

First Quarter 2021 Multiplatform Group Results

(In thousands)	Three Months Ended March 31,								% Change
	2021				2020
Revenue	$	497,897			$	629,609			(20.9)	%
Operating expenses (1)	393,106				478,004				(17.8)	%
Segment Adjusted EBITDA	$	104,791			$	151,605			(30.9)	%
Segment Adjusted EBITDA margin	21.0		%		24.1		%

(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.

Revenue from our Multiplatform Group decreased 20.9% compared to the prior year period, primarily as a result of the negative impact of the COVID-19 pandemic on our traditional radio business. Broadcast revenue declined 22.3% YoY on a reported basis and declined 20.0% excluding the impact of political revenue, while Networks declined 14.5% YoY. Revenue from Sponsorship and Events decreased by 23.7% YoY, primarily as a result of the postponement or cancellation of live events in response to the COVID-19 pandemic. However, we continue to see sequential recovery from the low-point in 2020. Revenue for the Multiplatform Group was down 4.6% in March 2021 compared to the same month in the prior year.

Operating expenses decreased 17.8% YoY, driven primarily by lower employee compensation expenses resulting from our modernization and cost-reduction initiatives taken in response to the COVID-19 pandemic. In addition, variable operating expenses, including music license fees, sales commissions and trade and barter expenses, decreased in relation to lower revenue recognized during the period. Variable expenses related to events also decreased as a result of the postponement or cancellation of live events in response to the COVID-19 pandemic.

First Quarter 2021 Digital Audio Group Results

(In thousands)	Three Months Ended March 31,								% Change
	2021				2020
Revenue	$	157,553			$	92,776			69.8	%
Operating expenses (1)	117,542				76,182				54.3	%
Segment Adjusted EBITDA	$	40,011			$	16,594			141.1	%
Segment Adjusted EBITDA margin	25.4		%		17.9		%

(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.

Revenue from our Digital Audio Group increased 69.8% YoY compared to the comparative period in the prior year, led by continued growth in Podcasting, which increased by 141.9% YoY. Digital Revenues excluding Podcasting grew 55.0% YoY. Digital revenues increased as a result of general increased demand for digital advertising, the continued addition of premium content to our industry leading podcast business, process improvements in monetizing our digital audiences and inventory, as well as a general improvement to the macroeconomic environment.

Operating expenses increased 54.3% YoY in connection with our Digital Audio Group’s significant revenue growth, including the impact of variable content and talent costs and third-party digital costs due to higher revenue, as well as increased content and production costs primarily resulting from the development of new podcasts. In addition, operating expenses increased due to additional headcount, resulting from recent acquisitions, as well as higher variable compensation expenses including sales commissions and bonus arrangements.

First Quarter 2021 Audio & Media Services Group Results

(In thousands)	Three Months Ended March 31,
	2021				2020				% Change
Revenue	$	55,137			$	60,227			(8.5)	%
Operating expenses(1)	39,788				42,527				(6.4)	%
Segment Adjusted EBITDA	$	15,349			$	17,700			(13.3)	%
Segment Adjusted EBITDA margin	27.8		%		29.4		%

(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 8.5% compared to the comparative period in prior year, as a result of the presidential election in the prior year, which significantly impacted revenue from our Katz business. Excluding the impact of political, revenues were up 0.7%.

Operating expenses decreased 6.4% driven primarily by lower employee compensation expenses resulting from our modernization initiatives and our cost-reduction initiatives taken in response to the COVID-19 pandemic. In addition, variable operating expenses, including sales commissions, decreased in relation to lower revenue recognized during the period.

GAAP and Non-GAAP Measures

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(In thousands)

Three Months Ended March 31,

FAQ

What were iHeartMedia's Q1 2021 revenue results?

iHeartMedia reported Q1 2021 revenue of $707 million, down 9.5% YoY.

Did iHeartMedia meet its revenue guidance for Q1 2021?

Yes, iHeartMedia's Q1 revenue decline was better than the guidance of 11-13%.

How did the Digital Audio Group perform in Q1 2021?

The Digital Audio Group saw a revenue increase of 70% YoY.

What is iHeartMedia's operating cash flow for Q1 2021?

iHeartMedia generated $72 million in operating cash flow for Q1 2021.

What is the forecast for iHeartMedia's revenue in Q2 2021?

iHeartMedia expects Q2 2021 revenues to be up approximately 65% YoY.