iHeartMedia, Inc.

Good morning, my name is Audra and I will be your conference operator today. At this time, I would like to welcome everyone to the iHeartMedia Q3 2023 earnings call. Today's conference is being recorded. 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 would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Mike McGinnis, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for taking the time to join us for our third quarter 2023 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 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. 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 the call over to Bob.

Thanks, Mike, and good morning, everyone. We're pleased to report that our third quarter 2023 results were at the high end of our previously provided adjusted EBITDA and revenue guidance ranges. Throughout the year, we've seen gradual improvements in the advertising marketplace, which is reflected in the quarter-by-quarter sequential improvements in our advertising revenues, And despite the recent global geopolitical events, we expect that to continue through Q4. Now let me take you through some of the key financial results of the quarter. In the third quarter, we generated adjusted EBITDA of $204 million at the high end of the guidance range we provided of $195 to $205 million. Our consolidated revenues for the quarter were down 3.6% compared to the prior year quarter, a little better than the guidance we provided of down mid-single digits, and excluding the impact of political, our consolidated revenues were down 1%. In the third quarter, we generated $68 million of free cash flow. In addition to our reported free cash flow, we also generated $45 million of cash from the sale of radio broadcast towers, which we'll use to pay down debt. Turning now to our individual operating segments. In the third quarter, the digital audio group's revenues were $267 million, up 5.2% versus prior year. Adjusted EBITDA was $94 million, up 19.6% versus prior year. And the digital audio group's adjusted EBITDA margins were 35%, up from 31% in Q3 2022. And in the third quarter, the digital audio group accounted for 28% of our consolidated revenues. The Digital Audio Group's adjusted EBITDA performance for this quarter reflects the strategic fixed cost investments we've made in the past few quarters. It also illustrates the strong flow-through characteristics inherent in the business and this year's strong emphasis on having the most profitable mix of digital revenue products. as our Q3 digital audio group margins expanded 420 basis points year over year and were 260 basis points better than the second quarter. Turning to the revenue streams within the digital audio group, our podcast revenues continued to perform well, growing 13% versus prior year, illustrating the fact that podcasting continues to be a strong growth engine for the company. Additionally, our podcasting EBITDA margins continue to be accretive to our total company EBITDA margins. Podcasting is the best-performing segment of the advertising marketplace, and we continue to have the largest podcast audience reach in the U.S. In September, iHeart was once again ranked the number one podcast publisher in the U.S. with more monthly downloads than the next two largest podcast publishers combined, according to PodTrack. As a reminder, the three segments of the podcasting ecosystem are publishers, distributors, and sales reps. Publishers control the content and, as a result, enjoy the majority of the economics. compared to the distributors who have virtually no economic benefit and the sales reps who operate on razor-thin gross margins and are often unprofitable. From the beginning, our strategy is focused on the publishing sector of the industry, and the financial results of our business are evidence of the success of that strategy. Our leadership position in podcasting is, in part, the result of the power of our broadcast radio assets, which we have used to build new lines of business for the company, starting out with the iHeartRadio app over 10 years ago, our marquee live events business, and most recently with podcasting. Our broadcast radio assets uniquely reach 90% of Americans every month, which, for context, is twice the consumer reach of the largest TV network and three times the consumer reach of the largest digital-only streaming audio service, which is why broadcast radio is such a powerful tool for us in building new businesses. The intersection of AI and podcasting is also an area which we have been focusing on as an important driver of future growth. I'll give you three examples of how we're taking advantage of this evolving technology. First, strategically, we can use AI to finally cost-effectively translate our unparalleled English-language podcast library into other languages, which creates the potential for global expansion and is another vector of earnings growth for the company. Second, on a more tactical level, we're giving our sellers who make up the largest sales force in audio AI-enhanced tools to help them prospect and communicate with clients about podcasting along with radio and streaming products, too. And third, we're utilizing AI to enhance our dynamic podcast ad insertion capabilities, helping us to serve the right message and the right voice for the targeted demo time and territory in ways not previously possible with older technologies. In addition to our industry-leading podcast business, We also have the number one streaming digital radio service, which is five times larger than our closest competitor. We have the largest social footprint of any audio service by a factor of seven, and we operate 3,000 national and local websites that reach almost 120 million 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 business. In the third quarter, revenues were $626 million, down 5.1% versus prior year, and down 3.2% excluding the impact of political. Adjusted EBITDA was $162 million, down 21.6% versus prior year. The multi-platform group's third quarter adjusted EBITDA margins were 25.9%. and Rich will take you through the puts and takes of the multi-platform group's margins this quarter. The multi-platform group does continue to be impacted by some of the advertising uncertainty you've been hearing about. However, we've seen gradual improvement from quarter to quarter throughout the year, and we remain confident that the multi-platform group will be an additional growth engine for the company in the advertising marketplace recovery. We continue to see substantial upside in our broadcast radio assets, in large part because of our unique and unparalleled reach and scale, including our participation in the migration to data and analytics-infused planning, buying, and selling of media. Additionally, as ad-supported TV has suffered from their loss of audience, our broadcast radio assets with 90% monthly consumer reach in America is the only platform, along with Google and Meta, that can provide true mass market reach for advertisers. So what does that mean for the bottom line? Today, over 30% of consumer media consumption in a day is audio, yet it is only 9% of total advertising spend, and we expect that gap to close and to directly benefit our multi-platform group. As we talked about on previous calls, we expected Q4 to be the strongest quarter of the year for the company. Although it is still on track for that, it will be weaker than we originally anticipated due to some dampening of advertising demand, which coincided with the uncertainty caused by the recent geopolitical events. Having said that, in some years we do see significant last-minute advertising spend come in late November and December, Indeed, it has in the last two years. However, since we can't predict it, it's not included in our guidance. As we look ahead, we remain confident that both the advertising marketplace and our company will be back in growth mode in 2024. And now I'll turn it over to Rich.