iHeartMedia Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 8, 2024

There are 10 speakers on the call.

Operator

Good morning, and welcome to the Iheartmedia Q2 2024 Earnings Call. All participants are in a listen only mode. After the speakers' remarks, we will have a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mike McGinnis, Head of Investor Relations.

Operator

Thank you. Please go ahead.

Speaker 1

Good morning, everyone, and thank you for taking the time to join us for our Q2 2024 Earnings Call. Joining me for today's discussion are Bob Piment, 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.

Speaker 1

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

Speaker 2

the call over to Bob. Thanks, Mike, and good morning, everyone. We are pleased to report that our Q2 2024 results were in line with our previously provided adjusted EBITDA and revenue guidance ranges. We're seeing sequential improvement in our revenue growth. While the marketplace continues to be dynamic with the changing outlook on interest rates, inflation trends, global uncertainty and a rapidly evolving domestic political landscape, we continue to see strong momentum in our podcast business, our digital ex podcast business, and the sequential improvement of our multi platform group's year over year revenue performance.

Speaker 2

As we look at the back half of the year, our results will reflect the continuing positive impact on an ad market recovery year, material upside from political advertising as well as the benefit of our ongoing focus on cost efficiencies. Now let me take you through some of the key financial results of the quarter. In the Q2, we generated adjusted EBITDA of $150,000,000 In the middle of the guidance range, we provided up $140,000,000 to 160,000,000 dollars Our consolidated revenues for the quarter were up 1% compared to the prior year quarter, a little above the guidance range of approximately flat year over year. And excluding the impact of political, our consolidated revenues were up 1 10th of 1% compared to the prior year quarter. This marks the Q1 that our consolidated revenues increased year over year since Q4 2022.

Speaker 2

Turning now to our individual operating segments. The Digital Audio Group generated 2nd quarter revenues of $286,000,000 up 10% versus prior year, just above our previously provided guidance of up high single digits and represented 31% of the company's total revenue. For the quarter, the Digital Audio Group generated adjusted EBITDA of 92,000,000 dollars up 9% versus prior year. The Digital Audio Group's adjusted EBITDA margins were 32%, continuing the trend of sequential margin improvement from 1st to 2nd quarter. Within the Digital Audio Group are our podcast revenues, which grew 8% versus prior year.

Speaker 2

We expect our podcast revenues to return to double digit year over year growth for the Q3, the Q4 and the full year. Our non podcast digital revenues grew 10% versus prior year, and we expect that strength to continue as well. In June, iHeart was once again ranked the number one podcast publisher in the U. S, with more monthly downloads than the next 2 largest podcast publishers combined according to PodTrak. And our financial discipline in podcasting continues to pay off as our podcasting EBITDA margins remain accretive to our total company adjusted EBITDA margins.

Speaker 2

As a reminder, our leadership position in podcasting is in part the result of the power of our broadcast radio assets. 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 iHeart Country Festival. In addition to our industry leading podcast business and our digital radio streaming service, which has 5 times the digital listening of our closest competitor, we also have the largest social footprint of any audio service by a factor of 7, and we operate 3,000 national and local websites that reach more than 110,000,000 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 multi platform group, which includes our broadcast radio, networks and events businesses. In the Q2, revenues were $576,000,000 down 3% versus prior year, slightly better than our previously provided guidance of down mid single digits and down 4% excluding the impact of political advertising.

Speaker 2

Adjusted EBITDA was 104,000,000 compared to $162,000,000 in the prior year quarter due primarily to the timing of certain non cash marketing expenses associated with our Iheartradio music awards, which we discussed last quarter. Additionally, we expect the multiplatform group to have positive year over year revenue growth in the back half of the year, yet another indication of the continuing strengthening of the ad market and our performance within it. And this year, iHeart is serving as the exclusive audio home for the NBC coverage of the 2024 Summer Olympics in Paris with original new podcasts from the Olympic Village as well as station streaming real time play by play coverage of the games, all in partnership with NBCU. With the unparalleled reach and audience of Iheart's platforms, our coverage of the games results in significant engagement on our broadcast, digital, and podcast platforms and invaluable cross promotion to our partner, NBCU, showing the strength of our relationship with our listeners and validating the ability of our audio assets to drive off platform behavior too. Looking at the company as a whole, we remain focused on growth from expanding businesses developing new consumer and revenue opportunities to the development of programmatic platforms that enable the automated buying, selling and planning of our broadcast radio inventory, which allow us to participate in the growing and substantial digital and programmatic TAMs, And our continued focus on expense management, driving efficiencies, and structuring our business using technology, including AI, drives both short and long term profitability.

Speaker 2

And now I'll turn it over to Rich.

Speaker 3

Thank you, Bob. As I take you through our results, you'll notice that our Q2 2024 results were in line and in some cases slightly above our revenue and adjusted EBITDA guidance ranges. Our Q2 2024 consolidated revenues were up 1% year over year, a little above the guidance we provided of approximately flat year over year. Our consolidated direct operating expenses increased 7.6% for the quarter. This increase was primarily driven by higher variable content costs related to the increase in digital revenues as well as an increase to event costs related to the timing of the 2024 Iheartradio Music Awards, which was in the Q2 of 2024 and the Q1 of 2023, as mentioned in our last earnings call.

Speaker 3

Our consolidated SG and A expenses increased 9.6% for the quarter. The increase was driven primarily by higher non cash marketing expense due to the timing of the Iheartradio Music Awards as mentioned before, as well as the cost incurred in connection with executing on our cost savings initiatives, partially offset by lower bad debt expense and lower bonus expense. We generated 2nd quarter GAAP operating loss of $909,700,000 compared to a loss of $897,200,000 in the prior year quarter. Included in our GAAP operating loss was the impact of $920,000,000 non cash intangible impairment related to our FCC licenses and goodwill. Our 2nd quarter adjusted EBITDA was $150,000,000 within the guidance range we provided of $140,000,000 to 160,000,000 dollars and compared to $191,000,000 in the prior year quarter.

Speaker 3

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 Q2, the Digital Audio Group's revenues were $286,000,000 up 9.5% year over year and they comprised 31% of our 2nd quarter consolidated revenues. The Digital Audio Group's adjusted EBITDA was $92,000,000 up 8.6% year over year and our Q2 margins were 32.2 Within the Digital Audio Group are our podcasting revenues of $105,000,000 which grew 8.1% year over year. We expect to resume double digit revenue growth trajectory in the Q3, the Q4 and for the full year as well.

Speaker 3

And our non podcasting digital revenues of $181,000,000 which grew 10.3% year over year, reflecting the investments we have made in building out our more diversified digital capabilities. The multi platform routes revenues were $576,000,000 down 3.4% year over year, but down 4% excluding the impact of political. Adjusted EBITDA was $104,000,000 down from $162,000,000 in the prior year quarter and the multi platform group's adjusted EBITDA margins were 18.1%. Turning to the Audio and Media Services Group. Revenues were $70,000,000 up 6.5 percent year over year and adjusted EBITDA was $24,000,000 up 28.9 percent from $18,000,000 in the prior year.

Speaker 3

Excluding the impact of political, the Audio and Media Services Group revenues were up 0.1 percent. As we've highlighted in our past calls, we remain focused on financing opportunities available to us, including with respect to our debt maturities, the earliest of which is May 2026. We are engaged in active dialogue with the group holding more than the majority of our debt, and we look forward to sharing update regarding our ongoing refinancing activities when appropriate. At quarter end, we had approximately $4,850,000,000 of net debt outstanding, which was the lowest net debt position in the history of our company. Our total liquidity was $791,000,000 at quarter end, which includes a cash balance of $365,000,000 Our quarter ending net debt to adjusted EBITDA ratio was 7.3x.

Speaker 3

And in 2024, we expect to make progress towards our goal of a net debt to adjusted EBITDA ratio of approximately 4x. In the second quarter, our free cash flow was $6,000,000 compared to $34,000,000 in the prior year quarter. As a reminder, our free cash flow typically builds throughout the year and we expect to see significant sequential quarterly growth in our free cash flow in each of the remaining quarters in 2024. We also expect to generate robust political advertising this year. And as a reminder, that political revenue is paid upfront, which will help further fuel our free cash flow generation in Q3 and Q4.

Speaker 3

Turning now to our outlook for Q3 and the full year. We expect our Q3 twenty twenty four revenues to be up mid single digits. We are still closing the books for the month of July, but expect revenues to be up low single digits. Turning to the individual segments for Q3. We expect the Digital Audio Group's revenue and our podcasting revenue to both be up low double digits.

Speaker 3

We expect the Multiplatform Group's revenues to be down low single digits. We expect the Audio and Media Services Group's revenues to be up approximately 40%. We expect to generate 3rd quarter adjusted EBITDA in the range of $200,000,000 to $220,000,000 compared to $204,000,000 in the prior year quarter. We expect our full year 2024 revenues to be up mid single digits. Our full year 2024 political revenues are currently pacing approximately 20% higher than the last presidential election cycle and have sequentially improved from the up 16% we discussed in our Q1 call, which gives us confidence that this will be a record political year for us and that we will outperform the $167,000,000 of political revenue we generated in 2020.

Speaker 3

We expect to generate full year adjusted EBITDA in the range of 760 $1,000,000 to $800,000,000 compared to $697,000,000 in the prior year. Within that guidance range, our second half revenues will be up 8% to 11% year over year and our adjusted EBITDA will be up 25% to 30% year over year. 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 now expected to be approximately $90,000,000 Cash restructuring expenses will be approximately $70,000,000 this year as we continue to execute on new opportunities to optimize our organization for efficiency and growth.

Speaker 3

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

Our first question comes from Jim Goss from Barrington Research. Please go ahead. Your line is open.

Speaker 4

All right. Thank you. What was the reason for the podcast gains to be so depressed in the latest quarter relative to the rest of digital? And why are you pretty confident that you can return to double digit growth?

Speaker 5

Hey, Jim, it's Rich. Thank you. By the way, when we say depressed, still at 8% revenue growth in podcasting. And I think as Bob's comment, what he highlighted, 2 things. 1 is, we did have a tough comparison to last year.

Speaker 5

But I think more importantly, we said back to double digit revenue growth of podcasting for both Q3 and Q4 and for the full year growth overall. So and you'll see in this quarter, we gave not just quarterly guidance, but also just in terms of the way you think about the business, not just quarter to quarter, but also we gave you full year of guidance, we gave guidance for the second half of the year for the total company of 8% to 11% revenue growth and 25% to 10% EBITDA growth. And sometimes it's just some timing aspects, but the business continues to be extremely healthy and we're as optimistic as we've ever been.

Speaker 2

Let me just add a little specificity to that when we talk about unusual comps, we have one that was prior year related to COVID vaccine. As you can imagine, there was 0 chance that was coming back for this year. So there's a few things like that that we were up against in terms of comps which we think are an absolute anomaly and don't recur in the year.

Speaker 4

Okay. So it's more of a comp issue, so that's good to know. And in fact, just a little bit more on the evolution of the podcasting business in terms of content costs and ad demand. I think a lot more attention is being paid to it. I'm just wondering where you think how you think these developed and where you think we are in the maturity cycle for that business?

Speaker 4

Is it still very early or are we getting a little more second or third inning? Where would you say we are in terms of the development of podcasting?

Speaker 2

Well, it's a great question. I think in terms of audience usage, if you follow the statistics, not only are more people using podcasting, coming to podcasting, but they are spending more time with it. So you have 2 growth vectors, an increasing audience and an increasing usage by the existing audience. And I don't see that abating anytime soon. As you know, that has surpassed the reach now of the streaming music services.

Speaker 2

And I think obviously a very positive sign. I think in terms of monetization, we're still in the early days of understanding how to monetize it, although we're making great progress on it. And I think the industry is as well. Advertisers have a great interest, a great desire in podcasting. We walk in the door to talk to advertisers.

Speaker 2

Podcasting usually top of their list of things they want to talk about. I think in terms of the economics of it, I think that's still working through the system, although I think it's getting better. I mean there was a time in which people were, in our opinion, paying uneconomic prices for the content of the podcasting. I think they've all pretty much acknowledged that that didn't make money. And you're seeing company after company come out with statements saying they're pulling back and being more rational there.

Speaker 2

Again, that's usually the way industries go. When they start, there's sort of an exuberance and people think the normal laws of economics don't apply. They do. When they realize that you see them beginning to normalize. I think we're sort of in the normalizing phase of that.

Speaker 2

We've had extraordinary discipline, which is why we've been able to generate a nice healthy profit on podcasting almost since the beginning and continues to be an important profit driver for us, not just revenue driver.

Speaker 5

And Jim, maybe just to add one thing and build upon what Bob said. If you look at there's lots of projections out there by different people that do that for a living. And most of them say, happy U. S. Advertising podcasting market in and around $2,000,000,000 $1,800,000,000 $2,000,000,000 again depending on the estimate.

Speaker 5

When you go out 3 years, 4 years, 5 years and again early projections and there's a wide range out there. But under any scenario, it shows a U. S. Podcasting industry, whether it's $4,000,000,000 $5,000,000,000 $6,000,000,000 it's very healthy, significant growth. And just one last thing, we talked about being in what inning and I'm not the best sports guy in terms of analogies.

Speaker 5

But the one thing that is clear is big advertisers, to Bob's point in terms of audience and level of engagement, there's a level of engagement have just recently over the last couple of years started to come to podcasting. And so that's important because big advertisers bring big dollars.

Speaker 2

I would also just add one final point, which we make often, but this probably worth repeating here is that we have chosen since the beginning to play in the publisher segment of the podcasting industry, which is where we think profit lies. We have shied away from sales rep deals, although we have pieces of our company to do some sales reps for podcasting as part of other businesses. But as the focus of the company, we've been in publishing sector and think that is really the right place to be.

Speaker 4

Okay. And one other question if I may, a broader category. You alluded to the some of the discussions that might be involved in the debt maturities that are I think the earliest ones are in May of 2026, I think you mentioned. Aside from extending maturities or refinancings, are there any other options on the table, including debt equity swaps or ATMs or other things? I assume you want to get certain things done well ahead of that deadline.

Speaker 4

I'm just wondering if you might frame out some of the broader implications since I know you can't describe the specifics.

Speaker 5

Yes, Jim. So thanks, Yael, for the question. No surprise, we're not going to talk about any of the details. Just to say we continue to be in active discussions with a group of debt holders across the company, obviously bound by confidentiality agreement. We remain incredibly focused on improving our capital structure, working with the market to improve our capital structure.

Speaker 5

And obviously, we'll be back to you all when we have more to say on that.

Speaker 4

All right. Appreciate you taking my questions.

Speaker 2

Thank you.

Operator

Our next question comes from Jessica Reif Ehrlich from Bank of America Securities. Please go ahead. Your line is open.

Speaker 6

Thank you. Obviously, the 2 most important topics have already been covered. So maybe moving on to other drivers. Can you maybe talk about where else you can find cost savings? You've kind of been going through efficiencies for the last couple of years.

Speaker 6

So just where else could you find something? And then secondly, in terms of revenue, you guys have talked about programmatic. Can you talk about what the opportunity is and when we should start seeing a benefit?

Speaker 2

Sure. Let me hit the first one, Jessica, in terms of where we can find cost savings. Look, we think technology has unlocked a lot of cost savings. Technology provides efficiency. It always has over the past 40 or 50 years.

Speaker 2

And we think we're in probably one of the greatest technological jumps we've seen since probably the mid-90s when the internet entered the picture in terms of a productivity tool. Rich and I spend an enormous amount of our time sort of looking at the company and saying, if we started this company today, how would we structure it, how would we use technology, given the fact that we are we do have some technology systems already, we do have a structure already. And then we look and compare it to where we are today. And the areas where there's a big delta between where we do it if we started today and where we are, are areas that we look at. And we're fortunate to have, I think, a very robust and talented management team and one committed to increasing the efficiencies.

Speaker 2

And the efficiencies not only help the cost, but they also help everybody who works here feel better because they can get their work done better and faster and give us I think a competitive advantage. As you know, we've invested in technology systems, substantially upgrading what we had and building out things like the programmatic platform. And I will say on the programmatic platform has several benefits for us. 1, it unifies all of our old existing technology systems that had to do with serving advertising, tracking inventory, billing, etcetera. So we're putting together one system.

Speaker 2

So even if you want to use it the old way, I mean, I'm going to make a phone call and manually interact, you'll be interacting with exactly the same system of inventory. And then having that system like that. And as you know, we had investments like Jelly, which allowed us to take our radio broadcast radio stations and grab their inventory so we can deal with it the same way we can our digital products. So it also allows us now to have a programmatic platform, which allows us to be on all the important DSPs with our broadcast inventory. Our digital inventory, podcast inventory already on most of that most of those DSPs.

Speaker 2

But the real win for us is taking broadcast inventory and putting data to it and putting it on a system that is usable inside those DSPs, which is our programmatic platform. We also think we provide a fantastic benefit to the advertising community because they clearly want to buy on these digitally driven, digitally developed systems and now they're trying to add everything to those platforms. And what we provide for them is the actual reach and audience they need. If you think about it in audio, unlike video, the reach is in broadcast radio, reach 90% of America with our AMFM radio stations. And when you think about the biggest TV network, that's about 38%, the biggest cable network is less than 20%, Spotify, Pandora, the other audio players and digital only are at 20% 16% have been ad enabled products.

Speaker 2

So if you're an advertiser, how do you reach the audience? And broadcast radio has that. So there's a desire to get it in there to add the reach to these buys that you can't get without broadcast radio. So we think there's both a need in the marketplace for what we deliver and 2, a benefit to us of joining that parade.

Speaker 5

Hey, Justin. Just two quick things. Just one thing just back on the cost. Bob said, I think if you just go back over our history during not just taking advantage of technologies, but just in terms of just finding ways to be just more efficient in general, combining different operations. Just we've got a pretty good track record of taking costs out, whether there's been specifically announced cost programs or just the way we do this as to Bob.

Speaker 5

So I really just want to emphasize that in terms of the amount of course we've taken out. And then the only other thing I might add on programmatic is, to Bob's point, is look, we know the market is there already. You just look at the amount of dollars that are going through programmatic and subset to that on things like retail media networks, and which is just almost a subset of that. And we are actually on a one DSP platform now called Magnite, again, testing some proof of concepts out there. So we're actually live in the marketplace.

Speaker 5

Again, in a test, I think you and I have talked about this before in a test concept out there.

Speaker 2

And I would add one more thing on to Rich's point, and I think he's right on it just in terms of our own culture of cost. Since 2019, we've taken a substantial amount of cost out of the multi platform group and I think it's about 7%. And we have used those savings to fund our higher growth and new initiatives. So we constantly are looking at reallocation of resources. We don't keep adding costs on top of cost.

Speaker 6

Thank you.

Operator

Our next question comes from Steven Lachik from Goldman Sachs. Please go ahead. Your line is open.

Speaker 7

Hey, great. Thank you. Maybe 2 if I could. Bob, on the ad market, could you maybe just talk a little bit more about what you're hearing from your advertising partners that gives you confidence in the back half outlook for improvement in multi platform? And then to the extent you see opportunity to the upside in that outlook, I'd be curious what verticals you think they could come from?

Speaker 7

And then just quickly on political, I think you called out your of confidence is increasing on the political side. What's driving that? And then I guess specifically in some of these battleground states, could you remind us what your footprint looks like and to the extent you have exposure, the size and the magnitude of that? Thank you.

Speaker 2

Sure. Look, I think in the ad market, you're probably hearing the same things we're hearing that major holding companies are reporting their numbers. I think other companies are talking about how they're spending advertising. I think if anything, this probably the benefit we've heard people say they look 1st part of the year as they were nervous about spending. And in last year they had taken a lot of money out of mass market advertising and put it way down the bottom of the funnel to try to get the performance.

Speaker 2

What they're I think all saying is sort of the buzz around the industry is unfortunately that's running out of steam because the top of the funnel wasn't full. And so I think they're looking back to full funnel advertisers, advertising partners like us. They're looking to they just got to get reached. They got to find some new people to talk to get them to do whatever. They're also finding that if they put advertising like ours on top of their performance advertising that it indeed boosts the response rate.

Speaker 2

So if you're an advertiser and you say, look, I'm really heavy into digital and I need some more customers, I can either go to new people, new list if you will, or I can try and get more out of the existing people I'm already talking to. We help them in both. And so that I think has been a big advantage for us. But I think we've called this a recovery year in the ad market. Ad market tends to lead, as you know.

Speaker 2

I think it was slowed down last year and we see it's coming back this year and see no signs of that abating. I think in terms of verticals, remember, we have a really diverse group of advertisers, which we think is one of the strengths of this company. There's no category that's over 5% of our advertising revenue, no advertiser over 2%. I think that continues. And we have not really seen had particular focus on verticals.

Speaker 2

I think there are opportunities within almost every vertical. So we mentioned probably not COVID vaccines. But other than that on a narrow one, they're pretty much all looking for what they do either now or planning for 2025. On the political front, I think our footprint helps us enormously. If you've got 9 10 Americans listening, we've got almost every voter within our listening population.

Speaker 2

So for political advertisers, the question is how do you access those people regardless of state, city or nationally. And it's not only candidates, but it's also a lot of these initiatives that are on the ballots, which are additional opportunities for us as well. And obviously, the packs are spending heavily this year.

Speaker 5

By the way, and if you just look at just even some of the data, I mean, obviously, we also with the Fed said last week and speculation on rate cuts probably saw the unemployment data today, which was pretty encouraging. And also, I think we referred to in our remarks that we're actually pacing about 20% ahead this year. But just as a reminder, 2020 was the best presidential cycle political year we had as a company, which was $157,000,000 And again, pacing is just an indication. It's a point in time, but we're pacing 20% ahead this year. And the bulk of that is obviously the second half of the year.

Speaker 5

And I look, I think we all read the same press out that there's not going to be anything new in terms of the fundraising that's happening on both sides, not just from a presidential election, but on the Senate in the House and the down ballot amount of money. So there just seems to be an enormous amount of money that's coming to the marketplace, coupled with what we said about the economy and our confidence in the second half of the year.

Speaker 7

That's great. Thank you, both.

Speaker 5

Okay.

Operator

Our next question comes from David Hamburger from Morgan Stanley. Please go ahead. Your line is open. Hi.

Speaker 8

Thank you for the question. So could you unpack for us a little bit the trends and what's driving the growth in Digital ex Podcast? And then maybe you can help us understand better the complexion of the margin differential between the podcast business and the digital business broadly? You did mention how tied the podcast business is back to your broadcast radio business. So maybe you can help us understand better the complexion of the margins in the podcast business and how you see those evolving?

Speaker 2

Well, let me start with the margin issue that I think in podcast as we said we're in the publisher side of the business which has a much better margin. And I have it being the publisher obviously is a better margin business. In the rest of digital, we have some things like our own streaming service in which we have a very high margin because that's all of our product, but we also resell some other products even including OTT, those are at lower margins. So it's a mix of products there and we try and manage that mix very carefully to maximize the margin for us. If a seller can get $1,000 where are you going to put it?

Speaker 2

Well, first thing you have to do is put it somewhere that's going to be really great for the client. But within that, we also want to manage the mix. So it's also good for our business and we're also very cognizant of margin.

Speaker 5

Yes. And by the way, just building upon that, David. So if you look at our podcasting business, I'm sorry, our digital business ex podcasting, which we had a very strong quarter. I think that really should just continue to demonstrate and we've been talking about this, the growth and I think we've actually said historically we expect that growth to demonstrate to everyone the diversity of our digital business offerings. And yes, we talked a lot about podcasting, but to Bob's point, whether streaming, websites, social extensions out there, And there are, by the way, a range of, I think what we've said publicly is 40% to 70% EBITDA margins for those businesses, Obviously, and we don't talk about a lot of the details, but just pretty clearly the higher end margin business and Bob talked about publishing and podcasting and things, when you own a substantially on all of the IP that you have in the monetization of that.

Speaker 5

And then the other extreme when you engage with 3rd party to provide a total solution to clients out there, there won't be as hot on the higher end of that margin business. And then the only thing I'd say about podcast, since you've talked about just again, to reiterate the example, yes, the strength of our podcasting business. But just as a reminder, things like, we made a strategic decision years ago that every seller has the ability to sell anything, all our products, anytime, anywhere. And so if you're one of our 1,000 plus sellers in this company, you're out there not just selling broadcast, not just selling streaming, but you've got the ability to sell podcast every single day in terms of taking advantage of it. The ability, I think there's something like 3,000,000 or so, 4,000,000 podcasts in the United States right now.

Speaker 5

You've got the greatest podcast in the world, but you don't have awareness about podcasting, not just podcast to podcast, but using our broadcast airways to promote podcasting out there. So I think getting a little bit at your question, how we think about podcasting and incorporating to our business, they really are tied to the benefits of our other businesses also.

Speaker 2

I would add one more thing and you didn't specifically ask this, but I think it's important part inherent in your question is you're also seeing I think in the performance of the digital group as a whole and certainly in the digital even ex podcasting is you're beginning to see our platforms. We talked about the platforms we're building out to try and get the broadcast radio onto the digital buying systems. Well, we've already got a lot of our digital onto the digital buying systems. And I think you're beginning to see the impact of that in terms of the growth. And so if you sort of say, can you show me some early value of this investment you've made in Triton and Jelly and places like that, yes, look at the digital numbers and we expect that continue to grow in terms of importance not only for our broadcast radio, but also for our digital as well.

Speaker 5

Thank you.

Operator

Our last question will come from Marlene Pierrot from Bank of America Securities. Please go ahead. Your line is open.

Speaker 9

Great. Thank you for taking my questions. I just wanted to touch on the full year adjusted EBITDA guide of $760,000,000 to $700,000,000 excuse me, 700. Can you just I know you touched on this a bit, but walk through any one time items that are impacting that guide for this year?

Speaker 5

There are no one time items that are impacting that guide for the year. We gave full year guidance. We obviously also gave Q3 guidance within that number. So if you just kind of do some math, when you look at kind of ranges, you'd look at Q3 in the 205 range or something just even though we gave a range out there or pick any number you want. Then you look at Q4, which is kind of be around 3.20.

Speaker 5

I think if you just use the midpoint of the overall consensus and I'm going to go back in terms of giving all of you hopefully the confidence that we have in those numbers. Again, the bulk of our political revenue is in Q3 and Q4. I think we've talked about where we are pacing. By the way, the last time we all spoke to you in Q1 earnings, I think we were pacing up about 16% year over year political and now we're pacing up about 20% year over year in political. And I think as Bob talked about also in his comments, we just continue to see improvement in the business from Q1 to Q2.

Speaker 5

We expect to see it the rest of the year. And I think just all of us watching the environment we're in again with Fed, we're talking about the rate cuts out there, going to be employment information today, does not even reinforce our confidence in the back half of the year.

Speaker 9

Got it. That's helpful. And then if we do think about the full year number, excluding political, so if we take the high end, let's say 800, we assume political is 170, although I realize you commented was pacing 20% up. But just back of the envelope, those numbers imply roughly 6.30%. So how should we think about like how much do you attribute that to crowd out?

Speaker 9

So for example, like how much is that political actually crowding out core advertising?

Speaker 5

Yes, I mean, you really can and I appreciate your question. Remember, this is inventory. So we didn't sell it to political, it wasn't that we'd be selling the inventory out there. We'd be out there selling the inventory. I think one of the biggest benefits of political quite frankly, we expect to have a very strong free cash flow year and think about by the way political is another category, Bob talks about all the categories.

Speaker 5

Political, if you think about it, simplest terms of the category, the great thing about that category is we have paid off cash upfront, which is the only category we have that does that. But you really can't do separate out in that way.

Speaker 2

I think what we'll say about political, because you do see a better performance in political years is that it does put extra pressure on the inventory. There is extra demand. There's a category that comes every other year. That's helpful because of not only what it does for political, but what it does for everyone else.

Speaker 9

Got it. And are there any other expenses or cost cut guidance perhaps that you could provide or something potentially that we could think about?

Speaker 5

No, no real good. I'm going to go back to, I think, it was Jessica's question. I think it was Jessica's question a couple of questions ago. I just think not even just looking at all words and Bob talked about technology and taking advantage. I would just look at our track history over the last years and Bob I think highlighted we've taken out 7% as a multi platform group and both reinvested in our FedR high growth businesses in the digital areas, starting with podcasting, but also I'd highlight, we've also brought a lot of that down to the bottom line for the benefit of all of our stakeholders.

Speaker 5

We've generated significant amount of free cash flow too. So we both invested and brought free cash flow down to the bottom line. But taking out expenses is a way of life down here, as I think all of our management team, which has done a great job working with us, we tell you.

Speaker 2

And by the way, on the cost cuts, I want to add one other thing. It's not only are we always looking for more efficiency, but when you try new things, you add additional expenses, they don't 100% all work out. And I think what's critical is to have the discipline as managers to constantly be saying, okay, we said we're going to spend this money to get X. Did we get X? If we didn't get X, let's weed the garden, let's get rid of that.

Speaker 2

And I think one of the problems in many companies and it's something I think every company fights is you tend to keep stuff because you go well, it did something for me. Well, it didn't do what we said it was going to do and therefore it's not worth that expenditure and having the discipline to continue to take out what didn't work frees up a lot of cost and keeps your cost from getting bloated as well.

Speaker 9

Great. Well, I appreciate the time and the commentary. That's all I have.

Speaker 5

Great. Thank you. Just wanted to make sure there are no other questions. And if not, Bob and I and the entire management team, thank you all for taking the time to listen and focus on Iheart And we are all available for questions following up, Mike McGinnis and the rest of the guests. So thank you all.

Operator

This concludes today's call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
iHeartMedia Q2 2024
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