iHeartMedia, Inc.

Good day and thank you for standing by. Welcome to the iHeartMedia first quarter 2022 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. Please be advised that today's call is being recorded. If you're recording for the assistance, please press star 0. For the lecture and the conference, over to speaker today, Mr. Michael McGinnis, Deputy CFO. Please go ahead.

Good afternoon, everyone, and thank you for taking the time to join us for our first quarter 2022 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO, and Rich Bressler, our President, COO, and CFO. At the conclusion of our prepared remarks, management will take your questions. In addition to our press release, we have an investor presentation that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, this call will include certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in our earnings release, investor presentation, and our SEC filings. which are available in the investor relations section of our website. And now I'll turn the call over to Bob.

Thanks, Mike, and good afternoon, everybody. Thank you for joining our first quarter 2022 earnings conference call. We're pleased to report another quarter of strong results for iHeart during a quarter when we, like all businesses, faced a unique combination of macroeconomic challenges. We believe our performance this quarter is further evidence of the successful execution of our digital transformation and multiplatform strategy, which delivered solid results while operating in a turbulent macro environment. The digital transformation of the company continues as a priority, and the investments we've made and will continue to make in that effort present significant opportunities for the company to participate in exciting new and developing markets. Our recent announcement of the NFT-based non-fund squad media franchise and our Super League Roblox partnership are examples of how we think iHeart can leverage our existing non-cash resources to build a position in these exciting new metaverse and Web3 areas. As you may have seen in March, we announced that Sam Engelbart, co-founder and partner of Galaxy Digital, joined our board of directors. In addition to a wealth of operating experience, Sam has expertise, key relationships, and a deep understanding of Web3 and emerging consumer tech platforms. That experience, coupled with Sam's background in media and entertainment, will be uniquely valuable to the company as this space develops. We are committed to building on the momentum of iHeart's successful transformation into a data-led, digital-driven business with leading consumer platforms like podcasting, all powered by the scale and unparalleled reach of our highly profitable broadcast radio assets, the largest audio sales force, and the only unified ad tech stack in audio advertising. We believe our first quarter performance is further evidence of the resiliency and high growth potential of our business, and that we are poised for continued success in 2022 and beyond. In everything we do, we focus on optimizing our earnings and free cash flow. We believe this is the right approach to create equity value for our shareholders, particularly in this current environment. Before Rich takes you through the detailed results of the first quarter, I want to touch on a couple of key points. We continued our strong financial performance in the first quarter. Our first quarter consolidated revenue grew 19.4%. compared to prior year, slightly exceeding the high end of our guidance range we provided of 17 to 19%. One of our strengths as a company is our diverse revenue base. We execute across 160 owned local markets, and no single advertising category comprises more than 5% of our revenues, and no single advertiser more than 2%, all of which helps to mitigate pockets of ad category softness. We generated adjusted EBITDA of $145 million for the quarter, an increase of 42% versus prior year, and we expanded our adjusted EBITDA margin by 275 basis points. Looking at our operating segments individually, we continue to deliver industry-leading growth in our digital audio group. Within the digital audio group are our podcast revenues, which were up 79% versus prior year, which outperformed the overall podcast industry growth of 22%, according to Magna, and our digital X podcast revenues, which were up 22% versus prior year, which outperformed the industry growth of 16%, according to Magna. We expect to continue to increase our share of both. Included in our digital X podcasting business are our streaming products, third-party extension products, social, OTT, and display advertising. This allows us to offer holistic advertising solutions, leveraging our deep relationships with our consumers to tens of thousands of our long-term advertisers. All of this is PowerBuyer's sales strategy of any seller, anywhere, can sell anything. A unique iHeart capability and is enabled by the unparalleled ad tech we've built and acquired. This quarter, digital revenues represented 25% of total company revenues compared to pre-pandemic Q1 2020 when they represented only 12%. And this quarter, podcasting revenues alone represented almost 10% of total company revenues, clear evidence of the success of our digital transformation. And in March, according to PodTrack, iHeart was again ranked the number one podcast publisher in the U.S. with more downloads than the next three largest podcast publishers combined. Our multi-platform group, which includes our broadcast radio, networks, and events businesses, continues to demonstrate that it is also a growth engine for the company in both revenue and earnings, as well as powering the creation of our new platforms. We grew multi-platform group revenue by 15% year-over-year, even though we were operating in a challenging environment, and we believe that the multi-platform group will continue its growth trajectory for five important reasons. One, we see evidence that certain key advertising categories like auto, entertainment, and retail will continue their recovery to pre-pandemic levels, and others like pharma will continue their strong growth. And we also see opportunity in ad platforms, as well as new ad categories and accounts like cryptocurrency players and sports betting. Two, According to Miller Kaplan, we continue to take share from and outpace our competitors in the radio advertising space, and we expect that to continue as a meaningful vector of growth. Three, looking more broadly across the media landscape, we continue to focus on the TV and digital TAMs, which represent other important growth vectors for us. According to Nielsen, ad-supported TV reach continues to decline. In the month of April, it was down to just 41% reach of American consumers for the largest broadcast TV network, and just 24% for the largest cable TV network, compared to iHeart's broadcast radio audience, which again, according to Nielsen, reaches 90% of Americans every month. Broadcast radio in general, and iHeartMedia specifically, is the most efficient and cost-effective asset an advertiser can utilize to provide the missing reach in any TV-centric advertising campaign at scale. Four, on the digital TAM side, we continue to modernize our advertising capabilities with data-infused solutions, including our smart audio product that makes our broadcast inventory compatible with digital planning and buying. Additionally, the recently launched iHeart Audience Network, the first open audio marketplace that brings together broadcast, podcast, and streaming audience at unprecedented scale, coupled with the largest sales force in audio, provides us the capabilities for our broadcast radio to further participate in the $160 billion digital TAM. And for all advertising opportunities, we have one more unique characteristic, our on-air personalities. A recent engagement lab study shows that radio has twice the trust of social media and more trust than even TV. And trust is key to any marketing campaign, period. And finally, within our multi-platform group, we see the continued recovery of our events business, which we expect to continue to grow given our ability to build new live and virtual events and the pent-up consumer and advertiser demand for these live events and experiences. Before I turn it over to Rich, I want to spend a moment to give you our general outlook on the advertising marketplace and what we think its impact is on us. Looking at the marketplace, we believe advertising always follows the consumer. And right now, we see a consumer base that wants to spend, to travel, and to lead full lives again. And importantly for us, they're highly engaged with audio. Yet at the same time, many sectors of the economy are experiencing obstacles, rising inflation, higher interest rates, supply chain issues, and global uncertainty. Even with those headwinds, we believe advertisers are choosing to build for and support returning consumer demand. As evidenced by our first quarter advertising revenue, and even with the macro concerns, that balance is encouraging for us for the remainder of the year. As we look ahead to the rest of the year, we expect our revenues to continue to grow, our margin profile to continue to expand, and our free cash flow to grow substantially over prior year. We'll continue to examine our business for further efficiencies and modernizations, and as we adopt new technologies, we believe we'll find new ways to optimize our expense base, including our previously announced real estate rationalizations. We'll also continue to build out capabilities like we did in Q1 for our digital sales service and new audience platforms. We'll continue to invest in areas with high growth potential like our new advertising and data platforms. And we'll remain committed to innovation and being at the forefront of new technologies and digital platforms like Web3 and the Metaverse like we've done before in podcasting. Audio has never been hotter, and we believe our strong position as the number one audio company in America is across broadcast radio, podcast publishing, and digital radio is our unique advantage in the media space. And now, Rich will take you through more details of our earnings.

Thanks, Bob. As I take you through our results, you'll notice that, as Bob mentioned, we perform well despite external factors that have been impacting the economy. Our consolidated revenues were up 19.4% year-over-year, slightly exceeding the high end of the revenue guidance range we provided. Our direct operating expenses increased 13% for the quarter, driven primarily by the significant increase in revenue, which drives higher content and profit-sharing expenses, third-party digital costs, and expenses related to the return of local and national live events. Our SG&A expenses increased 12% for the quarter, driven by increased compensation expense relating to investments in key growth areas and higher sales commissions due to higher revenue. In a moment, I will talk more about the key investments we are making. Our first quarter GAAP operating income was $12.3 million compared to an operating loss of $76.4 million in the prior year quarter. And our first quarter adjusted EBITDA was $145.2 million compared to $102.2 million in the prior year quarter. If you turn back to slide four, I will provide you additional color on the performance of our operating segments And as a note, there are additional slides in the investor presentation on our segment revenue performance. Digital audio group revenues were up 36% year over year, and adjusted EBITDA was up 31% year over year. Within the digital audio group is our podcasting business, whose revenues grew 79% year over year, and our non-podcasting digital revenues, which grew 22% year over year. Podcasting is the fastest growing area of the media industry today. But we know as a new marketplace, the dynamics can be complex and confusing. So let me take a minute to go through it. On slide 11 of the investor deck, we provided a view of the podcast value chain. To the left is the high end of the value chain, podcast publishers, and to the right is the low end, podcast distributors. Podcast publishers capture the full financial benefit of the advertising revenue. As an example, iHeart, as the podcast industry's largest publisher, develops the content, publishes it across multiple distribution platforms, sells the ads, and captures the publisher's high margin. And moving down the value chain are the sales reps, who sell podcasts for publishers who lack a sales force. This is essentially an intermediary function with much lower margins than publishers enjoy. And at the low end of the value chain are distributors. who carry the podcast RSS feeds, make no advertising revenue off the podcast itself, and simply distribute podcasts for reasons other than a direct economic benefit. Although some parts of our company participate in other pieces of the value chain, the strong financial performance of our podcasting business comes from the fact that iHeart is the number one podcast publisher. Although our podcasting business might receive less press than some of our competitors, we do believe it is positioned to generate substantially higher financial returns than others today and in the future. We've also had questions in the past on where our podcast growth comes from. The last podcast content purchase we made was for Stuffed Media in 2018, and since then have remained committed to developing podcasts with our in-house talent and with our creative and business partners. As you can see on slide 10, between March 2021 and March 2022, our total podcasting downloads grew from 257 million for the month to 443 million, an increase of 186 million downloads in the month, representing a 72% growth year over year. In terms of mix, 65% of that 186 million increase reflects growth in existing podcasts we had launched more than a year ago. The other 35% of that growth in downloads reflected new podcasts that we launched during the period. With this organic-led growth strategy, we emphasize building over buying, which allows us to minimize risk in deploying upfront capital and to maximize focus on leveraging our platform to sustainably grow audience and advertising revenues for each podcast we develop. Looking again at the digital audio group as a whole, margins compressed slightly in the first quarter at 24.5%, down from 25.4% in the prior year quarter. This was the result of important high return investments the company made to support the anticipated growth of the business. Let me explain. Our Q1 expense base included approximately 12 million of incremental year-over-year investments to support the future growth of our business. Six million of these incremental investments are non-recurring, and six million of those are now part of our fixed expense base and primarily relate to scaling up our digital sales support, which directly contributes to revenue expansion. We do not expect to make material incremental investments in this fixed-cost base for the remainder of the year. Even with these investments in our fixed-cost base, we expect margin expansion to resume throughout the remainder of 2022 and remain confident that the long-term full-year margin profile for this business is in the mid-30% range. Multi-platform revenues were up 15% year-over-year, and adjusted EBITDA was up 28% year-over-year. Multi-platform group adjusted EBITDA margins continued their improvement. This quarter, margins were 23% up 240 basis points compared to Q1 2021. And this margin expansion occurred with more live events than Q1 2021, whose margin aren't as high as our broadcast assets, as well as the benefit of employee tax credit reflected in our Q1 2021 results. While political revenue in the quarter had an immaterial impact on our year-over-year comparisons, we expect significant political spend in the back half of the year. Audio and media services group revenues were up 10% year-over-year, and adjusted EBITDA was up 7% year-over-year. On slide 20, there's a summary of our debt. At quarter end, we had approximately $5.5 billion of net debt outstanding, which includes a cash balance of $280 million. We also continue to improve our net debt to adjusted EBITDA leverage. As a reminder, the terms of our debt structure include no material maintenance covenants, and there are no material debt maturities prior to 2026. We continue to actively monitor market conditions, and we'll look to improve and optimize our capital structure as opportunities arise. In the first quarter, our free cash flow was a negative $75 million. As a reminder, Q1 has historically been our lowest free cash flow quarter for the year due to seasonally low revenues and the payout of annual cash bonuses. So as expected, our Q1 free cash flow was impacted by our over-target bonus and other variable compensation payments earned by the company's employees for our strong over-target full-year 2021 results. As a reminder, the company proactively eliminated almost all bonuses in 2020 as part of our COVID business response. So free cash flow in Q1 2021 reflected no bonus payments. Additionally, we were also impacted in Q1 by the timing of certain working capital items, specifically within payables, that were reversed in Q2 when we'll see the working capital benefits. Our negative Q1 free cash flow was anticipated, and we expect to generate positive free cash flow in each quarter moving forward in 2022. And we remain on track to generate a significant amount of free cash flow for the full year, which is always back half-weighted. Looking ahead to the rest of the year, we would like to provide the following specific guidance, even though there are a number of significant external variables at work, starting with the second quarter. We expect our Q2 2022 revenues to be up approximately 10% to 14% year-over-year. We are still closing the month of April, but our preliminary April consolidated revenues were up 8% compared to 2021. As Bob mentioned, we believe April reflected some short-term concerns around the macroeconomic environment and unusual comps from prior year resulting from a number of COVID-related advertising campaigns that did not repeat in 2022. This alone drove approximately 400 basis points. So normalizing for those, April would have increased 12% on a year-over-year basis. And more importantly, we're seeing positive trends with our May and June advertising currently pacing in the mid to high teens in terms of year-over-year growth. We also expect to generate $225 million to $245 million of adjusted EBITDA in Q2 2022, which would equate to year-over-year EBITDA growth of 24% to 35%. This guidance includes the impact of investments we're making to build out our digital ad support and ad tech platforms, as well as the impact of some wage inflation. We are reaffirming that for the full year 2022, we expect to generate adjusted EBITDA in excess of the pre-COVID full year 2019 level of $1 billion. Further, for the full year, in spite of being a full cash taxpayer, we expect to generate more than 2019's free cash flow of $350 million. And as a reminder, in 2019, the company wasn't a full cash taxpayer. and we have high capital expenditures in 2022 to complete our high ROI real estate consolidation project. Consistent with previous guidance, we expect our capital expenditures to be between $150 and $165 million. And finally, we continue to make significant progress towards our previously announced leverage target of approximately four times. Please note, this guidance assumes a continuation of the current U.S. economic environment. We appreciate you joining our first quarter earnings call. And now we'll turn it over to the operator to take your questions. Thank you.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Again, if you would like to ask a question, press star the number 1 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jessica Reeve-Ehrlich with VOFA Securities. Your line is open.

Thank you. A couple of questions. I guess starting, I don't know where to start, but can we talk about the trajectory of costs? You talked about $12 million incremental costs. What's the cadence of that and how should we think about just generally cadence of costs throughout the year, you get your outlook for sort of outlook for revenue. And is there anything we should be thinking about in terms of podcast content that, you know, in terms of timing?

Hey, Jess, it's Rich. Thanks for the question. No, I don't think, you know, we highlighted the $12 million of which in Q2, which we said, think about it as $6 million added to fixed costs is ongoing. And that $6 million was one time. And when you think about cost, you know, we gave guidance or directional that we expect to get back to mid-30s margins in the digital business. And I think we've been very consistent with that just, you know, since we broke it out as a separate segment that we expect that the business to operate, excuse me, kind of in the mid-30s range. And, you know, just to put a fine point on the cost, you know, these are costs that we put into the business because of just the tremendous growth we've had in digital. And we see that continuing to be a very strong growth, both with and without podcasting for us. And so really putting a digital ad sales support and things like that to the digital business. And, you know, when you do that, in the first quarter you have it, you take a little bigger hit, which is why we broke it out and emphasized what was one time and what was ongoing.

I think, you know, to put a fine point on that too, Rich was talking about fixed cost on that, which is why as the revenue grows, that becomes more and more efficient as we get our operating leverage. And your point on podcasting is we continue to have a podcast margin that's greater than our overall margin. We watch very carefully the cost on podcasting, especially, you know, whatever rev shares we do with anybody, with partners, et cetera. And I think, you know, being as big as we are We have the luxury of being pretty picky on economic deals for podcasting, and we have the courage to walk away from something that sounds big, but if we can't make money on it, we're not interested.

And then just one follow-up before you go to someone else. On the revenue, I mean, the guide is, you know, the revenue goes double-digit, really underlying if you make that adjustment for April is, You know, it's still very strong, especially in this environment. Can you just give us some color on what you're seeing in the marketplace from different categories, especially given like it feels like there's pockets of softness and the newer areas are making up. But you guys are there day to day. What are you seeing?

Yeah, it's interesting. You know, it's sort of this tug of war. It's interesting to watch because you've got a consumer that is so ready for the pandemic to be over. that has money, wants to spend it, wants to do things, wants to make up for all the time they couldn't do it. And then on the other hand, obviously, we got those macro issues. But I think, you know, the advertisers, and this probably would be expected, the smart advertisers at least are saying, I got a consumer who wants to spend. I got a consumer that's willing. I want to advertise and attract that consumer at this moment when they're hot. And I think that continues. So If there's a tug of war, I think the consumer wins, and I think the advertiser follows the consumer. And we're seeing that even in some of the areas that have had supply chain constraints. What's been interesting is that a number, a surprising number of advertisers said, I know I don't have anything to sell, but I'm going to keep advertising because I know it will be more expensive for me to regain that customer once I have the product than it would be to just continue to have the relationship and the pent up demand. And we've been playing into that pretty well as well.

Yeah. And just the only thing I might just add to what Bob said, and I think he really covered in his remarks, you know, I think if you kind of go back and look at what we've built out here in this company and built out, you know, the audio tech stack, and there are some slides in the investor deck there that people could refer to, you know, our ability now to, you know, go to market and, And particularly, we're the only reach medium over 90% of Americans. There really is no other alternative out there in terms of a reach medium out there. If you look at now what's happening with broadcast TV, I think the biggest broadcast is down to less than 50%. I think the biggest cable networks are down to like 20%. So that decline overall clearly works to our benefit. And then couple that with the capabilities that we've built out. And what's happening in terms of advertisers moving more to cohort, you know, away from one-to-one to all the things we know about, you know, just continues to benefit us. And I think you see the strength in our numbers. And then every once in a while you get like a little bit of a chop, like we said, in this environment like April. But that's why it was so important to point out what's happening in May and June.

Great. Thank you.

Your next question comes from the line of Steve Cahill with Wells Fargo. Your line is open. Excuse me, Mr. Steve Cahill. Your line is open. Can we ask a question?

Thank you. I'll figure out this mute button soon. Maybe first, just to follow up on Jessica's question, to dig a little deeper into the ad market, could you give a little more just color commentary on maybe where you're seeing categories be real dynamic? We've heard that things like maybe QSR and CPG have slowed down a little bit. It sounds like you're probably seeing that offset by some categories that have picked up, particularly in May and June. And with that, I was wondering if you could tell us what percentage you've sold of May and June that gives you some confidence in the Q2 outlook.

Well, the QSR, CPG, et cetera, I don't think we've seen and I don't think we've predicted that that as an overall category is a weak category. I think there may be some players that have been weak in it, but there's some that are strong as well. So we have not seen it, even though automotive, which I think people have thought is weak, has not been what you would expect it to be from the headlines because, again, you've got some dealers that say, I want to maintain that relationship. You've also got some tier one manufacturers at the highest level that are saying now is the opportunity for me to win consumers. So, again, I go back to I think that you've got a strong consumer even if supply isn't there. And I think most advertisers recognize that's an important place for them to play, and they sure don't want to be absent when the consumer is there. So, again, I go back to if this is a tug of war, I think the consumer wins and drives the advertiser.

Yeah, and Steve, just one item just to reiterate, I think that we covered during our prepared remarks is, again, no one category for us is bigger than 5% in advertising, and no one advertiser for us is bigger than 2%. of our overall advertising. So, you know, there is no one category that's driving our results either historically or going forward that we talked about.

Yeah, thanks for that. And then, Rich, maybe just to follow up on the EBITDA guide. So, you know, you all took out a lot of costs during the pandemic. I know some of that was benchmarked for reinvestment. If I look at the first quarter, you know, revenue exceeded 2019's first quarter. Justin Cappos, margin was about 250 basis points below second quarter revenue also going to be above 2019. Justin Cappos, margins are even further below where they were I know some of that is mixed because digital is a little lower than multi platform. Justin Cappos, But it just seems like it's one of these stories where you're you're making investments, the investments probably makes sense internally it's a little tougher for us on the outside, to see when we see that margin start to catch back up to historical levels. Justin Cappos, So any any outlook, you could give on how we can think about the margin shape in the medium term thanks.

Sure, sure. And I appreciate the question. Understand from the outside, which is why, you know, the one thing I just and then I'll go right to your question, Steve, just to remind everybody, you know, the first quarter we do have when you look at margins a little bit, the law of small numbers, right? It's our smallest quarter by far the year historically has always been our smallest quarter by far for the year. And so you do have a cost base that you don't get the full flow through benefit. in any environment out there just due to the size of numbers. If you look at, you know, from the overall margin going forward, one of the reasons, you know, to your question, yes, we're investing some money that I articulated in answer to Jessica's question in the high-growth businesses, but at the same time, I said you'll continue to see margin expansion throughout the year, and we absolutely expect to be back to the guidance we've given of our mid-30s type of digital margins on a full-year basis. So...

Hey, can I also add, I just think when you look at this business, remember structurally we're a high operating leverage business, high fixed cost business. And when we start scaling and have some of these growth platforms like we've got, especially as it relates to digital and podcasting, at a certain point we have to expand the fixed cost structure to handle that future revenue stream. The first month we do it, the first quarter we do it, is not going to be nearly as efficient as three or four quarters down the road. But I think we, Rich and I, spend a lot of time looking at the additional money we've got coming in and figuring out if we need to reinvest it in other places. Certainly the investments we made in smart audio and in digital and probably most significantly in podcasting have all turned out to be very strong and important investments investments for us and have enabled the growth we're experiencing today. So we, again, as we look at every quarter, we do look at it with that view and I think are pretty tough on cost, but at the same time, we want to spend what we need to spend.

Steve, and let me just one additional one I just had, which I think hopefully will be helpful. As you think about us as a company, if you go to the midpoint for Q2 of our revenue and EBITDA guidance, so just kind of go to the midpoint I think you'll see as a company that will work out somewhere between 24% and 25% overall margins as a company, which is up 400 basis points from Q2 of 2021, right? And so we're looking at 17% today, which is up from 14% in Q1 2021. But just to kind of help everybody, because I do appreciate your question, think about Q2. I think if you just do that math I articulated, you'll see we're getting some, we're going to have some pretty significant margin expansion starting right away in Q2.

Thank you.

The next question comes from the line of CBUS Channel, Patty with JP Morgan. Your line is open.

Hi, thanks for taking the question. Just sticking with the EBITDA and cost commentary, I mean, Is there a little bit of mix shift kind of going on underlying here within the EBITDA guidance and perhaps, you know, the results in the first quarter that we should be thinking about as, you know, perhaps live events comes back and, you know, some of these other business lines and obviously as political comes on, that'll be very high incremental margins. But just as a quick follow-up, is there anything, you know, just revenue mix wise that we should be cognizant of as we model, you know, a economic recovery and reopening here?

Well, certainly events is a lower margin, as we've said before, than our overall margin. So as we bring back events, although it contributes to the bottom line, it does so at a lower margin and does pull back a bit. And you're right about political. Political comes in at an extraordinarily good margin. And that is, as you know, almost all a third and fourth quarter impact.

Yeah. And I really appreciate the question because I probably should have highlighted, honestly, in one of the first couple of questions. Remember, This year we've come back to live events. Last year, you know, we basically had zero live events. And so that does come with a low margin. So really appreciate that. And, again, I'm just going to reemphasize what I said four or five minutes ago because I think it's worth reemphasizing. We are dealing, when we're talking about margins here, for the smallest numbers of the year. So small numbers, small changes, I'm sorry, have an impact on margins here disproportionately.

I think a quick follow-up, you know, you have articulated that getting back to a net debt to adjusted EBITDA target of approximately four, you know, is kind of where you want to go before you start reevaluating capital return, you know, decisions. But given, you know, what's going on in the macro environment, your confidence in the underlying business, does it make sense to perhaps think about, you know, returning capital maybe before you kind of get to that four-term leverage?

Yeah, so I would think about it this way. Look, we're always evaluating everything with our board of directors. Right. And so all these decisions are ultimately, you know, the board of directors decision out there. But we have to constantly keep challenging ourselves. But sure. But our plan is just to be clear. And so there's no ambiguity there. is to continue to use our free cash flow to pay down debt until we get to approximately four to one. And again, you'll see, you know, we just continue to make progress on that, both in terms of generation of free cash flow. And, you know, there's always another part of a leverage ratio, which is called EBITDA, and on the growth of the EBITDA of the company. Thanks.

Again, if you would like to ask a question, press star the number one on your telephone keypad. Our next question comes from the line of Dan Day with B Reilly Securities. Your line is open.

Yeah, afternoon, guys. Appreciate you taking the questions. Look, the question I keep getting on all the radio names is just, you know, people are worried about entering a recessionary environment over the next year or two and just – You know, I know you guys have been around this business for a while. Maybe just speak to what you've experienced historically as it relates to, you know, radio ad spend in that type of environment, what the puts and takes are that we should be thinking about in that regard.

Well, first and foremost, I think your CS today, we gave the percentages and the change in revenue mix since even 2020 pre-pandemic. that continues to give us, I think, comfort that we've got a pretty diversified revenue stream across not only broadcast radio, but we've got it across digital radio, we've got it across other digital services, and podcasting. Podcasting alone is almost 10%, or I think it is about 10% of our revenue in this quarter. And so we think that gives us a much different profile than past downturns that you've seen in the economy with just the straight radio business. Additionally, I think being able to transform our broadcast radio business into a digital-like inventory, impressions, data infused, use data for targeting, attribution, again, allows us to play in a different world than traditionally this company or the radio business is played in. So I think all those are strengths in terms of us mitigating any possible negative effects and any sort of downturn.

Yeah, and by the way, I just wanted to add one more, and I appreciate that question proactively. I know a lot of people have had a chance, probably not yet, to really go through our investor deck. I would encourage you all to do so. We updated it quite a bit from the last call based on feedback And, you know, particularly in the area of digital and podcasting, you know, we get a number of questions about ourselves as a role as a podcaster, as a, you know, publisher, and what really the difference is from an economic value in terms of the publisher. And I covered it on the call, but we have three or four slides in there in terms of how the value chain works on podcasting. So I'd encourage everyone to look at that. And also, we also get a number of questions on what digital ex-podcasting looks like. and what the opportunities are, whether it's social or streaming audio or websites. So we also put a slide in there to kind of size the market and the TAM out there and our results.

Let me end with one more thing on that, though, that I think audio is also hot now. And audio has not been the thing, has not been hot for probably 25, 30 years. So having that moment, I think changes whatever trajectory might be historic for anyone in the audio business, including radio.

Well, thank you. Thanks, everybody. Thanks for the questions. Thanks for taking the time to listen to the iHeart story. And we're all available to answer any follow-up questions. Thank you.

This concludes today's conference call. Thank you for participating. Human Now disconnects.