iHeartMedia, Inc.

Good afternoon. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the iHeartMedia third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I will now turn the call over to Mike McGinnis, Deputy CFO and Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for taking the time to join us for our third 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 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. 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, investor presentations, 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, everyone. Thank you for joining our third quarter 2022 earnings conference call. We're pleased to report another quarter of solid operating results for iHeart in consumer usage, revenue, and earnings growth. Before I take you through our results, I want to thank our team members who made this performance possible, and in particular, the inspiring local teams who worked tirelessly through Hurricane Ian, and in some cases, even put their well-being on the line to ensure that listeners could find critically important updates, safety information, resources, and above all, a vital personal connection when they needed it the most. Radio is often the only media platform that is consistently available during natural disasters, and we're proud of this critical role we play in our communities. This strong community connection and dedication to serve, especially in times of crisis and need, is what sets radio, and indeed our company, apart from all other media. Now let me take you through some of the highlights of our performance. In the third quarter, consolidated revenues grew 7% compared to prior year at the high end of the guidance range we provided of approximately 3% to 7%. We generated adjusted EBITDA of $252 million for the quarter, also at the high end of the guidance range we provided of $240 to $255 million, and our Q3 adjusted EBITDA margins were 25.5%, a 70 basis point improvement versus prior year. We believe the company performed well in an uncertain macroeconomic environment, growing adjusted EBITDA by 10% compared to prior year. Our performance in this environment is a strong indication of the successful transformation this company has undergone, where our high-growth digital revenues comprise 26% of total company revenues. It's clear that our digital business is now significant enough to meaningfully impact our overall financial performance. Turning to our individual operating segments, the Digital Audio Group continues to deliver industry-leading growth, according to Magna, with revenue for the quarter increasing 23% versus prior year, adjusted EBITDA increasing 17% versus prior year, and adjusted EBITDA margins of 31%. Within the digital audio group are our podcast revenues, which grew 42% versus prior year, outperforming the overall podcast industry growth of 22% year-over-year, according to Magna, and our digital X podcast revenues, which were up 15% versus prior year, also outperforming the industry growth of 10% year-over-year, according to Magna. As a reminder, included in our digital X podcasting business are our streaming products, third-party extension products, social, OTT, display advertising, and our ad tech businesses. This range of products allows us to offer holistic advertising solutions, leveraging our deep relationships with our consumers to our tens of thousands of advertisers. All of this is powered by our sales strategy of any seller, anywhere, can sell anything. A unique iHeart capability that is executed by the largest ad sales force in audio and with the unparalleled ad tech solutions, we now offer our advertising partners across our multiple industry-leading platforms. In September, according to PodTrack, iHeartRadio is again ranked the number one podcast publisher in the U.S. with more monthly downloads than the next two largest podcast publishers combined. As we've noted before, publishing is by far the most profitable segment of the podcasting industry, and it remains our focus. We continue to be the largest podcast publisher in the U.S. with the widest range of and highest ranked content as measured by PodTrack, and we're the only publisher with ranked content in all 19 categories. We believe our experience and capabilities as audio content creators, combined with our unique ability to promote and build audiences for our podcast through our broadcast radio assets, which reach 90% of U.S. consumers every month, gives us an important edge. With that leadership position and with those assets, we believe we will continue to take user and revenue share in the expanding podcast marketplace forward. while maintaining our strong podcast EBITDA margin. Turning to our multi-platform group, which includes our broadcast radio, networks, and events business, in the third quarter, both revenues and adjusted EBITDA were essentially flat compared to the prior year, and our adjusted EBITDA margins were 31.4%. Our multi-platform group has again demonstrated its resiliency during this economic period, generating adjusted EBITDA margins in the low 30s, which we expect to expand as revenue recovers over the long haul. The multi-platform group will also benefit from this year's political ad spend due to our unique speed to market, scale, reach, and data capabilities. I also want to remind you that each month our radio assets reach more than twice as many people as the largest TV network, five times more than the largest ad-enabled streaming audio service, and slightly more than even Facebook and Google in the U.S., This unparalleled consumer reach gives us the unique ability to create new products and platforms from the iHeartRadio app to events, podcasting, and now to even the metaverse, as well as providing a truly unique asset to our advertising partners. That unparalleled reach, along with radio pricing per user lower than most other major media, combined with our ad tech platforms and the unified buying platforms emerging at agencies and clients, gives us confidence in the long-term growth potential of this segment of our business. Before I turn it over to Rich, let me share a couple of additional thoughts with you. Although advertising has certainly softened since the robust performance we saw at the beginning of the year, we don't think advertising has been as hard hit by an economic downturn as it would have been in past times. Let me tell you why we think that is. The people controlling advertising decisions today are in most cases the same people who controlled advertising decisions during the last economic and advertising downturn. According to analytic partners, advertisers that cut their advertising budgets during the last recession saw their sales decline by approximately 18%, while those who maintained or increased their advertising spend over that same period saw their sales increase by approximately 17%. We think advertisers learned a stark lesson, which we suspect is causing many of them to moderate advertising cutbacks. In looking at our data year over year, we also see a revenue growth rate differential between large advertisers and the long-tail small business advertisers. and the fact that our advertising partners skew toward the larger companies relative to the skew of the big digital advertising companies is probably a slight advantage during this period of uncertainty. As a final thought, I'd like to give you some insight into how we think about investing in our business. We believe that the focus of any new products always needs to be profitability, even in their earliest stages. This belief guided us as we built the iHeartRadio app, as we built our tentpole events like the iHeartRadio Jingle Ball Tour, the iHeartRadio Music Festival, the iHeartRadio Music Awards, and more, and most recently, as we built out our podcast business. Now, as we look at our next new platform, the Metaverse, we remain committed to building for profitability as well as users, even though we're in the very early stages of development. In the third quarter, we launched in the metaverse, building iHeartland in both Fortnite and Roblox, partnering with State Farm, Intel, and others as sponsors, and reaching millions of users immediately. Among all the games available in Roblox, iHeartland is among the top 1% based on daily active players and total daily playtime. And on Fortnite, among our competitive set, iHeartland is in the top 1% of maps based on player counts and playtime. These metaverse launches were hits with consumers, but more importantly, they were done profitably. We have also used the flywheel effect of the unparalleled consumer scale of our radio business and leadership position across audio, our rigorous cost discipline, and our strong monetization engine to build platform after platform for future growth. And we've done it while making sure that each platform is a profitable one. we can assure you that as a management team that we will build new adjacent businesses and more importantly as we do so that we will continue to focus on profitability and free cash flow as we look ahead we continue to transform the company and we're also proactively preparing should a prolonged economic downturn occur we believe the strong positions of our digital audio multi-platform groups with both consumers and advertisers give us the ability to navigate through this period of economic uncertainty and position us for continued growth through the recovery and beyond. And now, I'll turn it over to Rich.