iHeartMedia, Inc. Reports Results for 2020 Fourth Quarter and Full Year

NEW YORK–(BUSINESS WIRE)–iHeartMedia, Inc. (Nasdaq: IHRT) today reported financial results for the quarter and year ended December 31, 2020.

Financial Highlights:

Q4 Results: Strong Sequential Improvement Continues

  • Q4 Revenue of $936 million down 9% YoY, improving from down 22% YoY in Q3 and 47% YoY in Q2, and a 26% increase from $744 million in Q3
  • Q4 Revenue benefited from strong digital growth of 53% YoY (Podcast Revenue increased 100% YoY) and significant political advertising
  • GAAP Operating income of $113 million compared to $165 million in the prior-year; a 190% increase from $39 million in Q3
  • Adjusted EBITDA of $265 million compared to $306 million in the prior year; a 64% increase from $162 million in Q3
  • Generated Cash Flows from operating activities of $80 million and Free Cash Flow of $53 million in Q4
  • Cash balance and total available liquidity1 of $721 million and $893 million, respectively, as of December 31, 2020

Full Year 2020

  • Revenue of $2,948 million, declined 20% YoY

    • Digital revenue increased 26% YoY, including a 91% increase in podcasting revenue
  • GAAP Operating loss of $1,738 million, driven primarily by non-cash impairment charges in Q1 and the impact of COVID-19
  • Adjusted EBITDA declined to $539 million, compared to $1,001 million in the prior year period
  • Generated Cash Flows from operating activities of $216 million and Free Cash Flow of $131 million

Key Actions and Strategic Developments:

Digital Audio Business to Report Separate Segment Financial Results Starting in Q1 2021

  • Moving to three reportable segments: iHeartMedia Multiplatform Group, iHeartMedia Digital Audio Group and Audio & Media Services
  • Q4 Digital Audio Group revenue of $172 million, up 53.0% YoY and 18.4% of Consolidated Revenue; and Adjusted EBITDA of $61 million (Adjusted EBITDA margin of 35%)

Pending Triton Digital Acquisition Completes Multi-Year Creation of the Only Total Audio Advertising Technology and Data Solution

  • iHeart now positioned to provide complete ad tech solution: hosting/infrastructure, monetization, and measurement
  • Substantial content and distribution synergies: now uniquely able to deliver enhanced monetization in podcasting, digital/streaming radio, and broadcast radio

Dramatically Expanded Trading Liquidity and Public Float for iHeart Class A Stock

  • FCC-Ruling milestone permits Special Warrants to convert to liquid Class A stock
  • Class A share count expanded to 111 million shares from 65 million, with the total market value of Class A shares now at $1.6 billion2

Continued Progress in Achieving Large Structural Cost Improvements to Provide Increased Operating Leverage as Advertising Activity Continues to Recover

__________

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.

2

Based on 111 million Class A Shares post-conversion and closing share price as of February 22, 2021

Statement from Senior Management

“We are pleased that the Company continues its steady recovery from the COVID-19 downturn — and it’s particularly rewarding to see the impressive performance from our areas of strategic investment, like Podcasting, SmartAudio, Digital, and Ad Tech. In addition, with our new reportable segments, we will be able to provide additional insights into both our largest segment and our fastest-growing segment, and help highlight the key metrics and impressive performance of each,” said Bob Pittman, Chairman and CEO of iHeartMedia, Inc. “Our company’s continued transformation was further highlighted by our agreement to acquire Triton Digital, which gives iHeartMedia the only total audio advertising technology and data solution in the market, and which we expect will contribute to our continued growth in our digital and data-enhanced revenue.”

“Our swift response to the COVID pandemic and our diligent management of expenses throughout the year enabled us to successfully achieve approximately $250 million of savings in 2020. This cost management enhanced our operating leverage and helped us to achieve Adjusted EBITDA of $265 million in the fourth quarter, which was an improvement of 64% over the third quarter,” said Rich Bressler, President, Chief Operating Officer and Chief Financial Officer of iHeartMedia, Inc. “The continued sequential improvement of our Revenue, Adjusted EBITDA and Free Cash Flow over the past three quarters has us well positioned for continued recovery into 2021, and our commitment to make the majority of the $200 million of COVID-19 related savings permanent will further enhance the company’s operating leverage as revenue recovers.”

Consolidated Results of Operations

Fourth Quarter 2020 Results

Our financial results for Q4 remained negatively impacted by the COVID-19 pandemic; however, we continued to see significant sequential recovery from our low-point in April 2020. In Q4, revenue was down 8.8% YoY on a reported basis and down 17.0% excluding political revenue. Our Broadcast revenue declined by 19.1%, while Networks declined by 15.6% YoY, and SmartAudio declined by just 5.1%. Sponsorship and Events revenue decreased by $37.3 million or 51.8%, primarily as a result of the postponement or cancellation of events. Digital revenue grew 53.0%, led by continued growth in Podcasting, which increased by 99.8% YoY. Excluding Podcasting, Digital grew 42.3%. Audio & Media Services revenue increased 49.9% on a reported basis and decreased by 5.3% excluding the impact of political revenue.

Direct operating expenses decreased 7.8%, driven primarily by lower variable costs due to lower revenues, including music license fees, events-related expenses, and programming services, and lower employee compensation expenses resulting from cost reduction initiatives.

Selling, General & Administrative (“SG&A”) expenses decreased 6.6%, driven by lower employee compensation expenses, sales commissions, travel and entertainment expenses, utilities and maintenance fees, and trade and barter expenses. These expense reductions were primarily a result of the cost savings initiatives we implemented in response to COVID-19. The decrease in SG&A was partially offset by higher bad debt expense.

Corporate expenses decreased 14.3% compared to the prior-year period, primarily as a result of lower employee compensation expenses, including variable incentive expenses and employee benefits, resulting from cost reduction initiatives.

GAAP Operating income of $112.8 million compared to $165.1 million in the fourth quarter of 2019 was driven by lower revenue.

Adjusted EBITDA decreased to $265.5 million compared to $306.1 million in the prior-year period, and increased 64% from $162.1 in Q3.

The Company generated operating cash flow of $79.8 million, compared to $205.4 million in the prior-year period and generated Free Cash Flow of $53.1 million, compared to $175.7 million in the prior-year period. These YoY changes were primarily driven by lower operating cash flow resulting from the negative macroeconomic impact of COVID-19.

Full Year 2020 Results

2020 revenue decreased 20.0%, or $735.3 million YoY, and decreased 23.9% excluding the impact of political revenue. Broadcast revenue declined by 28.1%, while Networks declined by 21.1% YoY, and SmartAudio declined by just 4.1%. Sponsorship and Events revenue decreased by $101.9 million, or 48.6%, primarily as a result of the postponement or cancellation of certain live events. Our Digital revenue grew 26.1%, led by continued growth in Podcasting, which increased by 90.6% YoY. Audio & Media Services revenue increased 16.1% on a reported basis and decreased by 10.3% excluding the impact of political revenue.

Direct operating expenses decreased 7.7% compared to the prior year, driven by lower variable costs due to lower revenue, including music license fees, events-related expenses, and programming services, and lower employee compensation expenses resulting from cost reduction initiatives.

SG&A expenses decreased 7.5% driven by lower employee compensation expenses, sales commissions, travel and entertainment and trade and barter expenses. The decrease in SG&A expenses was partially offset by higher bad debt expense.

Corporate expenses decreased 23.8% compared to the prior-year, primarily as a result of lower employee compensation, including variable incentive expenses and employee benefits, resulting from cost reduction initiatives.

Non-cash goodwill and intangible asset impairment charges of $1,727.9 million recognized in the first quarter of 2020 drove a GAAP Operating loss of $1,737.6 million for the year ended December 31, 2020, compared to GAAP Operating income of $506.7 million in the year ended December 31, 2019. We applied fresh start accounting upon our emergence from bankruptcy in May 2019, at a point when the macroeconomic environment was significantly different than it was in March of 2020. This required stating the Company’s assets and liabilities, including intangible assets and goodwill, at estimated fair values at the time of emergence. These non-cash charges reflected impairments to such goodwill and intangible asset book values and were based on estimates and assumptions regarding the future adverse effects of the COVID-19 pandemic. No impairment charge on goodwill or intangible assets was recognized in the second, third or fourth quarters of 2020. In addition, depreciation and amortization expense was higher as a result of fresh start accounting applied upon our emergence from bankruptcy in May 2019.

Adjusted EBITDA for the year ended December 31, 2020 decreased to $538.7 million compared to $1,000.7 million in the prior-year.

The Company generated operating cash flow of $215.9 million, compared to $461 million in the prior-year period and generated Free Cash Flow of $130.7 million, compared to $349.2 million in the prior-year period.

GAAP and Non-GAAP Measures

(In thousands)

Successor Company

 

 

 

Three Months Ended December 31,

 

%

 

2020

 

2019

 

Change

Revenue

$

935,530

 

 

$

1,026,072

 

 

(8.8)

%

Operating income

$

112,847

 

 

$

165,126

 

 

(31.7)

%

Adjusted EBITDA1

$

265,493

 

 

$

306,140

 

 

(13.3)

%

Net income

$

2,943

 

 

$

62,132

 

 

(95.3)

%

Cash provided by operating activities from continuing operations2

$

79,784

 

 

$

205,363

 

 

(61.1)

%

Free cash flow from continuing operations1,2

$

53,102

 

 

$

175,675

 

 

(69.8)

%

(In thousands)

Successor

Company

 

Successor

Company

 

 

Predecessor

Company

 

Non-GAAP

Combined3

 

 

 

Year Ended

December 31,

 

Period from May

2, 2019 through

December 31,

 

 

Period from

January 1, 2019

through May 1,

 

Year Ended

December 31,

 

%

 

2020

 

2019

 

 

2019

 

2019

 

Change

Revenue

$

2,948,218

 

 

$

2,610,056

 

 

 

$

1,073,471

 

 

$

3,683,527

 

 

(20.0

)%

Operating income (loss)

$

(1,737,624

)

 

$

439,636

 

 

 

$

67,040

 

 

$

506,676

 

 

NM

Adjusted EBITDA1

$

538,673

 

 

$

775,549

 

 

 

$

225,149

 

 

$

1,000,698

 

 

(46.2

)%

Net income (loss)

$

(1,915,222

)

 

$

113,299

 

 

 

$

11,165,113

 

 

$

11,278,412

 

 

NM

Cash provided by (used for) operating activities from continuing operations2

$

215,945

 

 

$

468,905

 

 

 

$

(7,505

)

 

$

461,400

 

 

(53.2

)%

Free cash flow from (used for) continuing operations1,2

$

130,740

 

 

$

392,912

 

 

 

$

(43,702

)

 

$

349,210

 

 

(62.6

)%

__________

1

See the end of this press release for reconciliations of (i) Adjusted EBITDA to Operating income, (ii) Adjusted EBITDA to net income (loss), (iii) Free Cash Flow from continuing operations to cash provided by operating activities from continuing operations, (iv) revenue, excluding political advertising revenue, to revenue, (v) Digital revenue, excluding podcasting revenue, to Digital revenue and (vi) Net Debt to Total Debt. See also the definitions of Adjusted EBITDA, Free Cash Flow and Adjusted EBITDA margin under the Supplemental Disclosure section in this release.

2

 

We made cash interest payments from continuing operations of $86.2 million in the three months ended December 31, 2020, compared to $104.5 million in the three months ended December 31, 2019. We made cash interest payments from continuing operations of $357.2 million in the year ended December 31, 2020, compared to $187.6 million in the year ended December 31, 2019.

3

See Supplemental Disclosure Regarding Non-GAAP Financial Information.

Certain prior period amounts have been reclassified to conform to the 2020 presentation of financial information throughout the press release.

New Reportable Segments

Beginning in Q1 2021, we will report 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 Q1 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 16% of the company’s consolidated revenue and approximately 24% of its earnings for the year ended December 31, 2020, and in Q4 2020 revenue grew by 53% year-over-year and Adjusted EBITDA by 74% year-over-year. The company expects that the Digital Audio segment will continue to grow at a higher rate than our other segments and will therefore become a larger part of our business. These segments will continue to report into Bob Pittman, Chairman and CEO, and Rich Bressler, President, COO and CFO

Additionally, beginning on January 1, 2021, Segment Adjusted EBITDA will be 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 Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses.

We have provided in this press release three years of certain annual financial results assuming the segment change was made as of January 1, 2018 for reference.

Key Initiatives to Improve Cost Structure and Margins

In January 2020, iHeartMedia announced key modernization initiatives designed to take advantage of the significant investments that the Company has made in new technologies to build an improved operating infrastructure to upgrade products and deliver incremental cost efficiencies. This modernization is a multi-pronged set of strategic initiatives that we believe positions the Company for sustainable long-term growth, margin expansion, and value creation for shareholders.

As targeted, our investments in modernization delivered approximately $50 million of in-year savings in 2020, and we remain on track to deliver annualized run-rate cost savings of approximately $100 million by mid-year 2021.

In April 2020, the Company announced approximately $200 million of incremental in-year operating-expense-saving initiatives in response to the weaker economic environment caused by the COVID-19 pandemic. These savings were achieved, driven primarily by the following action steps:

  • Reductions in compensation for senior management and other employees
  • Suspension of 401(k) matching program
  • Significant reduction in new employee hiring and travel and entertainment expenses
  • Major reductions of consultant fees and other discretionary expenses
  • Continued modernization of Company infrastructure

The total operating expense savings resulting from our modernization initiatives and the operating cost savings initiatives that were developed in response to the impact from the COVID-19 pandemic generated approximately $250 million of cost reductions in 2020. We continue to identify additional efficiencies, including opportunities to further to modernize our organization and to reduce our real estate footprint that will deliver lasting savings in 2021 and beyond.

Liquidity and Financial Position

As of December 31, 2020, we had $720.7 million of cash on our balance sheet. For the year ended December 31, 2020, cash provided by operating activities from continuing operations was $215.9 million, cash used for investing activities by continuing operations was $147.8 million and cash provided by financing activities from continuing operations was $241.2 million.

Capital expenditures related to continuing operations for the year ended December 31, 2020 were $85.2 million compared to $112.2 million in the year ended December 31, 2019. Capital expenditures during the year ended December 31, 2020 consisted primarily of investments in our programmatic platforms and IT software and infrastructure.

On July 16, 2020, iHeartCommunications entered into an amendment to its credit agreement governing the $2.5 billion aggregate principal amount of senior secured term loans to issue $450.0 million of incremental term loan commitments, resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs. A portion of the proceeds was used to repay the remaining balance outstanding on our ABL Facility of $235.0 million, with the remaining $190.6 million of the proceeds available for general corporate purposes.

As of December 31, 2020, the Company had $6,016.9 million of total debt and $5,296.3 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, with the exception of the ABL, which matures in 2023, providing structural resilience in the current uncertain macro-environment.

The Company believes its previously announced modernization initiatives and other cost saving actions – in combination with the Company’s resilient capital structure – have substantially expanded the Company’s financial flexibility and liquidity while positioning the Company for further margin improvement as advertising demand continues to normalize.

Update on FCC Petition for Declaratory Ruling

On November 5, 2020, the Company received a Declaratory Ruling from the Federal Communications Commission (the “FCC”) granting the Company’s request to allow up to 100% of the Company’s common stock to be owned by non-U.S. persons, subject to certain conditions contained in the Declaratory Ruling. This ruling provided the critical prerequisite for the Company to proceed to simplify its share classes and enhance the liquidity of its Class A common stock by facilitating the conversion of the Company’s Special Warrants into Class A Common Stock.

On January 8, 2021, the Company completed an exchange of Special Warrants, which resulted in the conversion of approximately 45 million Special Warrants into shares of iHeartMedia Class A Common Stock and approximately 22 million Special Warrants into shares of iHeartMedia Class B Common Stock. This exchange substantially expands the Company’s liquidity of our currently tradable Class A Common Stock to 111 million shares, an increase of 72% from its pre-exchange Class A Share count. The total market value of the Company’s Class A shares is $1.6 billion3, based on the closing share price as of February 22, 2021, which represents 76% of the company’s fully diluted shares and excludes the value of approximately 29 million outstanding Class B shares and of the approximately 6 million outstanding Special Warrants, which both carry a 1:1 conversion provision to our Class A Common Stock.

__________
3 

Based on 111 million Class A Shares post-conversion and closing share price as of February 22, 2021.

Revenue Streams

The tables below present the comparison of our historical revenue streams (including political revenue) for the periods presented:

(In thousands)

Successor Company

 

 

 

Three Months Ended December 31,

 

%

 

2020

 

2019

 

Change

Broadcast Radio1

$

494,725

 

 

$

611,794

 

 

(19.1)

%

Digital

172,168

 

 

112,495

 

 

53.0

%

Networks

135,061

 

 

160,072

 

 

(15.6)

%

Sponsorship and Events

34,599

 

 

71,856

 

 

(51.8)

%

Audio and Media Services1

100,232

 

 

66,882

 

 

49.9

%

Other

646

 

 

4,989

 

 

(87.1)

%

Eliminations

(1,901)

 

 

(2,016)

 

 

 

Revenue, total1

$

935,530

 

 

$

1,026,072

 

 

(8.8)

%

(In thousands)

Successor

Company

 

Successor

Company

 

 

Predecessor

Company

 

Non-GAAP

Combined

 

 

 

Year Ended

December 31,

 

Period from May

2, 2019 through

December 31,

 

 

Period from

January 1, 2019

through May 1,

 

Year Ended

December 31,

 

%

 

2020

 

2019

 

 

2019

 

2019

 

Change

Broadcast Radio2

$

1,604,880

 

 

$

1,575,382

 

 

 

$

657,864

 

 

$

2,233,246

 

 

(28.1

)%

Digital

474,371

 

 

273,389

 

 

 

102,789

 

 

376,178

 

 

26.1

%

Networks

484,950

 

 

425,631

 

 

 

189,088

 

 

614,719

 

 

(21.1

)%

Sponsorship and Events

107,654

 

 

159,187

 

 

 

50,330

 

 

209,517

 

 

(48.6

)%

Audio and Media Services2

274,749

 

 

167,292

 

 

 

69,362

 

 

236,654

 

 

16.1

%

Other

9,370

 

 

14,211

 

 

 

6,606

 

 

20,817

 

 

(55.0

)%

Eliminations

(7,756

)

 

(5,036

)

 

 

(2,568

)

 

(7,604

)

 

 

Revenue, total2

$

2,948,218

 

 

$

2,610,056

 

 

 

$

1,073,471

 

 

$

3,683,527

 

 

(20.0

)%

1

Excluding the impact of the increase in political revenue, Revenue from Broadcast Radio, from Audio and Media Services and in Total decreased by 26.1%, 5.3% and 17.0%, respectively. See the end of this press release for a reconciliation of revenue, excluding political advertising revenue, to revenue.

2

Excluding the impact of the increase in political revenue, Revenue from Broadcast Radio, from Audio and Media Services and in Total decreased by 31.6%, 10.3% and 23.9%, respectively. See the end of this press release for a reconciliation of revenue, excluding political advertising revenue, to revenue.

Conference Call

iHeartMedia, Inc. will host a conference call to discuss results on February 25, 2021, at 4:30 p.m. Eastern Time. The conference call number is (833) 350-1328 (U.S. callers) and (236) 389-2425 (International callers) and the passcode for both is 5754819. A live audio webcast of the conference call will also be available on the Investors homepage of iHeartMedia’s website investors.iheartmedia.com. After the live conference call, a replay will be available for a period of thirty days. The replay numbers are (800) 585-8367 (U.S. callers) and (416) 621-4642 (International callers) and the passcode for both is 5754819. An archive of the webcast will be available beginning 24 hours after the call for a period of thirty days.

About iHeartMedia, Inc.

iHeartMedia, Inc. (Nasdaq: IHRT) is the number one audio company in America based on consumer reach. The Company’s leadership position in audio extends across multiple platforms, including through more than 850 live broadcast stations in over 160 markets nationwide; through its iHeartRadio service, which is available across more than 250 platforms and 2,000 devices including smart speakers, smartphones, TVs and gaming consoles; through its influencers; social; live events; podcasting; and other digital products and newsletters. The company uses its unparalleled national reach to target both nationally and locally on behalf of its advertising partners, and uses its proprietary SmartAudio suite of data targeting and analytics to provide unique advertising products across all its platforms. More information is available at investor.iheartmedia.com.

Certain statements herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors which may cause the actual results, performance or achievements of iHeartMedia, Inc.

Contacts

Media
Wendy Goldberg

Chief Communications Officer

(212) 377-1105

WendyGoldberg@iheartmedia.com

Investors
Mike McGuinness

Executive Vice President of Finance, Deputy Chief Financial Officer and Head of Investor Relations

(212) 377-1336

mbm@iheartmedia.com

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