iHeartMedia, Inc. Reports Results For 2019 Second Quarter

San Antonio, TX, August 15, 2019 –iHeartMedia, Inc. (NASDAQ: IHRT) today reported financial results for the quarter ended June 30, 2019.  IHRT successfully emerged from Chapter 11 on May 1, 2019 with a streamlined capital structure and completed the listing of its shares on the NASDAQ stock exchange (ticker: “IHRT”) on July 18, 2019.

Financial Highlights

Second Quarter

• Revenue of $913.3 million, up 2.4% year-over-year
  • Excluding political revenue1, revenue increased 3.9%
  • Digital revenue increased 32.8% year-over-year 

• Operating income of $181.6 million was up 0.2% year-over-year
• Adjusted EBITDA1of $262.9 million, up 3.2% year-over-year

• Adjusted EBITDA margins1improved to 28.8% from 28.6%, up 20 basis points year-over-year

Year-to-Date

• Revenue of $1,709.1 million, up 2.7% year-over-year
  • Excluding political revenue1, revenue increased 3.7%
  • Digital revenue increased 30.6% year-over-year 

• Operating income of $200.7 million was down from $243.3 million in the six months ended June 30, 2018 due to non-cash impairment charge of $91.4 million in first quarter of 2019
• Adjusted EBITDA1of $419.9 million, up 6.4% year-over-year

• Adjusted EBITDA margins1improved to 24.6% from 23.7%, up 90 basis points year-over-year

2019 Full Year Guidance

• Reaffirming consolidated revenue growth of low single digits
• Adjusted EBITDA margins expected to be 27-29% 
• Expect to generate free cash flow of $250-$275 million in the second half of the year, resulting in expected cash at year-end of $375-$400 million
  • Available cash anticipated to be used primarily for debt reduction

1See Supplemental Disclosure Regarding Non-GAAP Financial Information.

“iHeartMedia is the number one audio company in America and the only true multi-platform audio company able to reach consumers at scale,” said Bob Pittman, Chairman and CEO of iHeartMedia, Inc. “There are two segments of the audio sector -- radio, which provides companionship and connection when people want to join the world; and the music collection segment, which people use when they want to tune out and escape the world.   As the leader in the radio, or companionship, segment of the audio sector, iHeartMedia uses its unparalleled reach and consumer connection to deliver a compelling experience for our audiences and revenue opportunities across our multiple platforms.  As we look ahead, iHeartMedia intends to increase our share of radio advertising spend, participate in TV and digital advertising revenue pools, extend our leadership in podcasting and drive sponsorship revenue.”

“We successfully emerged from Chapter 11 on May 1, 2019 and are pleased that the restructuring process resulted in a capital structure that matches our successful operating business. We now have an iHeart business that will focus exclusively on increasing our lead as the number one audio company in the U.S.  As demonstrated in our results, iHeartMedia’s increased revenue and overall positive financial performance reflects the resilience and growth of our businesses and the value of our recent investments, particularly in podcasting and data and analytics,” said Rich Bressler, President, Chief Operating Officer, and Chief Financial Officer. “We are focused on building long-term shareholder value through a combination of operational and capital structure initiatives and we are prioritizing de-leveraging in our capital allocation policies.”

Key Operational Highlights

Continued to outperform the broadcast radio industry

• Outperformed the broadcast radio industry by over 350 basis points this year alone, according to Miller Kaplan.
• iHeartMedia is ranked #1 in over 4 times more markets than the next largest broadcast group in its top 160 markets.  
• iHeartMedia reaches 275 million Americans - more than the top two closest broadcast radio competitors combined.

Extended leadership in the fast-growing podcast segment

• #1 commercial podcaster in America measured by monthly downloads and unique listeners as measured by Podtrac.
• More than 300% growth in podcast listeners on the iHeartRadio app in the last year.
• Expanded unique monthly podcast audience by 277% year over year - faster than any other major company. 
• Launched new original podcasts on iHeartRadio, including “Insomniac,” hosted by Scott Benjamin, “Sleepwalkers,” hosted by Emmy and Peabody Award winner Oz Woloshyn and co-hosted by Karah Preiss, former host of The Huffington Post science show “Talk Nerdy To Me,” and “Life Will Be the Death of Me,” hosted by comedian Chelsea Handler. 

Produced events that enhance artist partnerships, provide crossover promotions for our stations and deliver unique brand building and activation opportunities to advertisers

• Announced the lineup for the “2019 iHeartRadio Music Festival,” the annual two-day event hosted at Las Vegas’ T-Mobile Arena, which will be broadcast live via iHeartMedia radio stations across more than 150 markets and will air on a televised special on The CW Network and will be live-streamed on The CW App.
• Hosted the “2019 iHeartRadio Wango Tango Presented by The JUVÉDERM® Collection of Dermal Fillers” at the Dignity Health Sports Park in Los Angeles, which was exclusively broadcast in a 90-minute television special on Freeform, livestreamed by LiveXLive, and aired on iHeartMedia radio stations across 100 markets.
• Showcased Country music’s biggest superstars at the sixth annual “iHeartCountry Festival Presented by Capital One®” at the Frank Erwin Center in Austin, Texas, which was broadcasted live in over 100+ local markets and on iHeartRadio.com, as well as livestreamed exclusively on LiveXLive.

Expanded our reach through digital and social channels

• Posted our 12thconsecutive month of year-over-year total listening hours growth, as of June 2019.
• Finished the quarter with more than 130 million registered users on the iHeartRadio app.
• Recorded 13 million monthly unique visitors on Snapchat and 23 million monthly unique visitors on YouTube. 

Consolidated Results of Operations

GAAP and Non-GAAP Measures

Certain prior period amounts have been reclassified to conform to the 2019 presentation of financial information throughout the press release.

1. See the end of this press release for reconciliations of (i) Adjusted EBITDA to net income (loss) and (ii) revenue, excluding political advertising revenue, to revenue. See also the definition of Adjusted EBITDA and Adjusted EBITDA margin under the Supplemental Disclosure section in this release.
2. See Supplemental Disclosure Regarding Non-GAAP Financial Information.

As of June 30, 2019, we had 145,274,997 common shares and warrants outstanding, including 56,873,782 shares of Class A Common Stock, 6,947,567 shares of Class B Common Stock and 81,453,648 special warrants. The Class B Common Stock and the special warrants are convertible on a 1:1 basis into shares of Class A Common Stock, upon satisfaction of certain conditions.

Second Quarter 2019 Results

Revenue increased $21.6 million, or 2.4%, during the second quarter of 2019 as compared to the second quarter of 2018. Revenue increased as a result of higher digital revenue which increased $22.5 million driven by growth in podcasting, primarily as a result of our acquisition of Stuff Media in October 2018, as well as other digital revenue, including live radio and other on-demand services.  Broadcast spot revenue decreased $7.8 million, primarily driven by an $8.1 million decrease in political revenue as a result of 2018 being a mid-term congressional election year, partially offset by increased programmatic buying by our national customers.  Revenue from our Network businesses, including both Premiere and Total Traffic & Weather, increased $8.9 million, and Audio and Media Services revenue decreased $2.9 million as a result of a $4.1 million decrease in political revenue.

Direct operating expenses increased $13.1 million, or 5.0%, during the second quarter of 2019 as compared to the second quarter of 2018.  Higher direct operating expenses were driven primarily by higher variable expenses, including digital royalties, content costs and production expenses from higher podcasting and digital subscription revenue.  We also incurred a $1.2 million increase as a result of the application of fresh start accounting, and a $1.2 million increase due to the impact of the adoption of the new leasing standard in the first quarter of 2019.  SG&A expenses increased $2.5 million, or 0.8%, during the second quarter of 2019 as compared to the second quarter of 2018. Higher employee costs, primarily driven by the acquisitions of Stuff Media and Jelli in the fourth quarter of 2018, were partially offset by lower commissions as a result of our revenue mix and by a $1.3 million impact as a result of the application of fresh start accounting.

Operating income increased $0.3 million, or 0.2%, during the second quarter of 2019 as compared to the second quarter of 2018.

Net income of $11.3 billion during the second quarter of 2019 was driven by a net gain of $9.5 billion recognized in relation to our emergence from bankruptcy and a $1.8 billion gain on disposal of our Outdoor business.

The Company's Adjusted EBITDA increased 3.2% to $262.9 million during the second quarter of 2019 as compared to the second quarter of 2018.

YTD 2019 Results

Revenue increased $44.6 million, or 2.7%, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The increase in revenue is primarily due to higher digital revenue of $39.1 million driven by growth in podcasting, primarily as a result of our acquisition of Stuff Media in October 2018, as well as other digital revenue, including live radio and other on-demand services and revenue from our Network businesses, including both Premiere and Total Traffic & Weather, which increased $15.0 million.  Broadcast spot revenue decreased $10.7 million, primarily due to a $10.9 million decrease in political revenue as a result of 2018 being a mid-term congressional election year.  Audio and Media Services revenue decreased $0.9 million due to a $5.1 million decrease in political revenue.

Direct operating expenses increased $39.2 million, or 7.8%, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.  Higher direct operating expenses were driven primarily by higher digital royalties, content costs and compensation-related expenses from higher podcasting and digital subscription revenue, as well as higher production costs related to our events, including the iHeartRadio Music Awards. We also incurred a $2.4 million increase in lease expense due to the impact of the adoption of the new leasing standard in the first quarter of 2019.  SG&A expenses decreased $10.8 million, or 1.6%, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.  The decrease in our SG&A expenses was due to lower trade and barter expenses, primarily resulting from timing, partially offset by higher employee costs, primarily driven by the acquisitions of Stuff Media and Jelli in the fourth quarter of 2018. 

Operating income decreased $42.6 million, or 17.5%, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 as a result of a $91.4 million non-cash impairment charge recorded in the first quarter of 2019.

Net income of $11.2 billion in the six months ended June 30, 2019 was driven by a net gain of $9.5 billion recognized in relation to our emergence from bankruptcy and a $1.8 billion gain on disposal of our Outdoor business.

The Company's Adjusted EBITDA increased 6.4% to $419.9 million during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

Liquidity and Financial Position

As of June 30, 2019, we had $127.2 million of cash on our balance sheet.  We made cash interest payments of $137.5 million in the six months ended June 30, 2019 compared to $206.9 million in the six months ended June 30, 2018.  For the six months ended June 30, 2019, cash provided by operating activities was $43.0 million, cash used for investing activities was $278.9 million and cash used for financing activities was $56.2 million.

Capital expenditures for the six months ended June 30, 2019 were $53.6 million compared to $27.3 million in the six months ended June 30, 2018. We estimate total capital expenditures for 2019 to be between $110 million and $120 million.

Our emergence from bankruptcy resulted in a new capital structure with significantly lower levels of long-term debt and a corresponding decrease in debt service requirements after emergence compared to historical debt levels.  Our consolidated long-term debt decreased from $20.5 billion to approximately $5.8 billion.

Our primary sources of liquidity are cash on hand, which consisted of $127.2 million as of June 30, 2019, cash flow from operations and borrowing capacity under our ABL Facility. As of June 30, 2019, we had no borrowings outstanding under the ABL Facility, a borrowing base of $450.0 million and $59.2 million of outstanding letters of credit, resulting in $390.8 million of excess availability.  We expect that our primary uses of liquidity will be to fund our working capital, make interest payments and voluntary prepayments of principal payments on our long-term debt, capital expenditures and other obligations.

Over the past ten years, we have transitioned our Audio business from a single platform radio broadcast operator to a company with multiple platforms including podcasting, networks and live events. We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience. We believe that our ability to generate cash flow from operations from these business initiatives and borrowing capacity under our ABL Facility, taken together, will provide sufficient resources to operate our businesses, fund capital expenditures and other obligations and make principal and interest payments on our long-term debt that will ultimately de-lever our balance sheet over time.

On August 7, 2019, we completed the sale of $750.0 million in aggregate principal amount of 5.25% Senior Secured Notes due 2027 (the "Notes") in a private placement. We used the net proceeds from the Notes, together with cash on hand, to prepay at par $740.0 million of borrowings outstanding under our Term Loan Facility.  Our Term Loan Facility called for quarterly principal payments of approximately $8.75 million in addition to interest payments at LIBOR + 4.00%.  As a result of our $740 million pre-payment, no such principal payments are required for the remaining term of the Term Loan Facility - resulting in an approximately $35 million annual reduction in required debt service payments.  In addition, annual cash interest payments are expected to be approximately $7 million lower than would have been required before the refinancing transaction.

Comparison of operating performance:

Certain prior period amounts have been reclassified to conform to the 2019 presentation of financial information throughout the press release.

1. See the end of this press release for reconciliations of (i) Adjusted EBITDA to net income (loss) and (ii) revenue, excluding political advertising revenue, to revenue. See also the definition of Adjusted EBITDA under the Supplemental Disclosure section in this release.
2. See Supplemental Disclosure Regarding Non-GAAP Financial Information.

TABLE 1 - Statements of Operations

TABLE 2 - Selected Balance Sheet Information

Selected balance sheet information for June 30, 2019 and December 31, 2018:

Included within the Predecessor Company's Consolidated Balance Sheet as of December 31, 2018 were current assets, long-term assets, current liabilities and long-term liabilities of $1,015.8 million, $3,351.5 million, $729.8 million and $5,872.3 million, respectively, of the Company's Outdoor business classified as discontinued operations.

TABLE 3 - Total Debt

At June 30, 2019 and December 31, 2018, iHeartMedia, Inc. had total debt and cash and cash equivalents of:

1On August 7, 2019, we completed the sale of $750.0 million in aggregate principal amount of 5.25% Senior Secured Notes due 2027 (the "Notes") in a private placement. We used the net proceeds from the Notes, together with cash on hand, to prepay at par $740.0 million of borrowings outstanding under our term loan facility.

2The Debtors-in-Possession Facility (the "DIP Facility"), which terminated with our emergence from the Chapter 11 Cases, provided for borrowings of up to $450.0 million. Upon the effectiveness of the Plan of Reorganization on May 1, 2019, the DIP Facility was repaid and canceled and we entered into the Asset-based Revolving Credit Facility (the "ABL Facility"). As of June 30, 2019, we had a facility size of $450.0 million under iHeartCommunications' ABL Facility, had no outstanding borrowings and had $59.2 million of outstanding letters of credit, resulting in $390.8 million of excess availability.

3In connection with our Chapter 11 Cases, the $6.3 billion outstanding under the Senior Secured Credit Facilities, the $1,999.8 million outstanding under the 9.0% Priority Guarantee Notes due 2019, the $1,750.0 million outstanding under the 9.0% Priority Guarantee Notes due 2021, the $870.5 million of 11.25% Priority Guarantee Notes due 2021, the $1,000.0 million outstanding under the 9.0% Priority Guarantee Notes due 2022, the $950.0 million outstanding under the 10.625% Priority Guarantee Notes due 2023, $6.0 million outstanding Other Secured Subsidiary Debt, the $1,781.6 million outstanding under the 14.0% Senior Notes due 2021, the $475.0 million outstanding under the Legacy Notes and $10.8 million outstanding Other Subsidiary Debt were reclassified to Liabilities subject to compromise in our Consolidated Balance Sheet during the Predecessor period.

The current portion of long-term debt was $53.4 million and $46.1 million as of June 30, 2019 and December 31, 2018, respectively.

On May 1, 2019, in accordance with the Plan of Reorganization iHeart Operations, Inc., a wholly-owned subsidiary, issued and sold 60,000 shares of Series A Perpetual Preferred Stock for net proceeds of $58.4 million.  The Series A Preferred Stock is mandatorily redeemable in ten years and is therefore classified as debt on our balance sheet, with dividends treated as interest expense.

Supplemental Disclosure Regarding Non-GAAP Financial Information

The following tables set forth the Company’s Adjusted EBITDA for the three months and six months ended June 30, 2019 and 2018. Adjusted EBITDA is defined as consolidated Operating income adjusted to exclude restructuring and reorganization expenses included within Direct operating expenses, Selling, General and Administrative expenses, (“SG&A”) and Corporate expenses and non-cash compensation expenses included within Corporate expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization; Impairment charges; and Other operating income (expense), net. Alternatively, Adjusted EBITDA is calculated as Consolidated net income (loss), adjusted to exclude Income tax (benefit) expense, Interest expense, Depreciation and amortization, Reorganization items, net, Other (income) expense, net, Loss on investments, net, Equity in earnings (loss) of nonconsolidated affiliates, Impairment charges, Other operating (income) expense, net, share-based compensation, and restructuring and reorganization expenses. Restructuring expenses primarily include severance expenses incurred in connection with cost savings initiatives and other expenses for matters management does not believe to be indicative of on-going operations. Reorganization expenses primarily include the amortization of retention bonus amounts paid or payable to certain members of management directly as a result of the Reorganization.

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Revenue.

The Company uses Adjusted EBITDA and Adjusted EBITDA margin, among other measures, to evaluate the Company’s operating performance.  Adjusted EBITDA is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management.  We believe this measure is an important indicator of the Company’s operational strength and performance of its business because it provides a link between operational performance and operating income.  It is also a primary measure used by management in evaluating companies as potential acquisition targets.

The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management.  The Company believes it helps improve investors’ ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that have different capital structures or tax rates.  In addition, the Company believes this measure is also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry.

Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of the Company’s ability to fund its cash needs.  As it excludes certain financial information compared with operating income, the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions which are excluded.

The Company presents revenue, excluding the effects of political revenue. Due to the cyclical nature of the electoral system and the seasonality of the related political revenue, management believes presenting revenue, excluding the effects of political revenue, provides additional information to investors about the Company’s revenue growth from period to period.

Since these non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, the most directly comparable GAAP financial measures as an indicator of operating performance.

As required by the SEC rules, the Company provides reconciliations below to the most directly comparable amounts reported under GAAP, including (i) Adjusted EBITDA to net income (loss) and (ii) revenue, excluding political advertising revenue, to revenue.

Predecessor - Successor Presentation

Our financial results for the periods from April 1, 2019 through May 1, 2019, from January 1, 2019 through May 1, 2019 and for the three and six months ended June 30, 2018 are referred to as those of the “Predecessor” period. Our financial results for the period from May 2, 2019 through June 30, 2019 are referred to as those of the “Successor” period. Our results of operations as reported in our Consolidated Financial Statements for these periods are prepared in accordance with GAAP. Although GAAP requires that we report on our results for the period from April 1, 2019 through May 1, 2019, from January 1, 2019 through May 1, 2019 and the period from May 2, 2019 through June 30, 2019 separately, management views the Company’s operating results for the three and six months ended June 30, 2019 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods.

The Company cannot adequately benchmark the operating results of the period from May 2, 2019 through June  30, 2019 against any of the previous periods reported in its Consolidated Financial Statements without combining it with the period from April 1, 2019 through May 1, 2019 and the period from January 1, 2019 through May 1, 2019 and does not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding the Company’s overall operating performance. Management believes that the key performance metrics such as revenue, operating income and Adjusted EBITDA for the Successor period when combined with the Predecessor period provides more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our Consolidated Financial Statements in accordance with GAAP, the tables and discussion included within this release also present the combined results for the three and six months ended June 30, 2019.

The combined results for the three months ended June 30, 2019, which we refer to herein as the results for the "three months ended June 30, 2019" represent the sum of the reported amounts for the Predecessor period from April 1, 2019 through May 1, 2019 and the Successor period from May 2, 2019 through June 30, 2019.  The combined results for the six months ended June 30, 2019, which we refer to herein as the results for the "six months ended June 30, 2019" represent the sum of the reported amounts for the Predecessor period from January 1, 2019 through May 1, 2019 and the Successor period from May 2, 2019 through June 30, 2019. These combined results are not considered to be prepared in accordance with GAAP and have not been prepared as pro forma results per applicable regulations. The combined operating results do not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

Reconciliation of Revenue, excluding Political Advertising Revenue, to Revenue

Revenue Streams

The tables below present the comparison of our historical revenue streams for the periods presented:

Conference Call

iHeartMedia, Inc. will host a conference call to discuss results on August 15, 2019, at 8:30 a.m. Eastern Time. The conference call number is (800) 230-1059 (U.S. callers) and (612) 234-9959 (International callers) and the passcode for both is 470499. A live audio webcast of the conference call will also be available on the Investors homepage of iHeartMedia's website investor.iheartmedia.com. After the live conference call, a replay will be available for a period of thirty days. The replay numbers are (800) 475-6701 (U.S. callers) and (320) 365-3844 (International callers) and the passcode for both is 470799. An archive of the webcast will be available beginning 24 hours after the call for a period of thirty days.