It was an unusually busy Thursday morning for radio broadcasting industry analysts and investors, as both Townsquare Media and iHeartMedia released their third quarter financial results and held earnings calls prior to the Opening Bell for U.S. financial markets.
While Townsquare Media’s earnings are fueled by digital growth, iHeartMedia, the nation’s largest owner of AM and FM properties, also enjoyed strong digital audio revenue in Q3. Podcast revenue was particularly noteworthy.
That said, Multiplatform Group revenue remains the bulk of iHeart’s total dollars, and the growth struggle will likely be a key focal point of iHeart’s C-Suite as 2024 arrives.
Speaking on the company’s earnings call, Bob Pittman stated that iHeartMedia was pleased that its Q3 results were at the high end of its Adjusted EBITDA and Revenue guidance ranges.
But, what about the six analysts polled by Yahoo! Finance whose consensus revenue estimate came in at $936.43 million?
For iHeartMedia in Q3, revenue came in well ahead of that forecast, even as it fell 3.6% to $952.99 million from $988.93 million.
Adjusted EBITDA fell by 19.2% to $203.78 million from $252.24 million. Operating income of $69 million was seen in Q3, moving from an operating loss of $211 million a year ago.
Put it all together, and iHeartMedia was able to slash its net loss attributable to the company to $9.05 million from $310.36 million; earnings per share data was not provided by iHeart in its earnings press release.
One big reason for the improvement was a one-time income booster: $45.3 million in cash proceeds from the sale of 122 tower sites, which were used to lower iHeart’s outstanding debt of $5.229 billon. Lease-back agreements were initiated for all but one of those tower sites.
With Podcasting continues to be a strong growth engine for the company, the Multiplatform Group “does continue to be impacted by advertising industry uncertainty,” Pittman said.
However, he stated on the earnings call that Q4 is shaping up to be “weaker than originally anticipated,” as it was dampened by a lesser advertising demand and geopolitical events including the war between Israel and terrorist organization Hamas.
For Q4, iHeartMedia’s consolidated revenue is expected to decline in the high-single digits, and by low-single digits ex-political. CFO/COO Rich Bressler elaborated on the “additional uncertainty,” while noting that Q4 2022 was the largest quarter in iHeartMedia’s history.
Revenue for October 2023 was down 8%, with high-single-digit revenue declines for the Multiplatform Group. For the Audio Media Services Group, revenue is projected to be down 30%; this is largely impacted by Katz Television, which sees large swings between political and non-political years, Bressler explained.
DIGITAL GROWTH CAN’T CLOUD MULTIPLATFORM FALLS
While digital revenue improvements are being seen by both Townsquare Media and iHeartMedia, the total revenue digital represents for iHeart is still significantly lower than what it generates from its multiplatform group.
Therein lies the conundrum for a company that has invested heavily in its iHeartRadio app, live concert events, the metaverse and the most recognized air personalities in the U.S.
In Q3, Digital Audio Group revenue improved by 5.2%, to $267.22 million from $253.95 million. By comparison, Multiplatform revenue declined by 5.1% to $626.38 million, from $659.9 million. Audio and Media Services revenue slumped by 20.3%, to $61.98 million from $77.8 million, due to lower political ad activity year-over-year.
While the challenge is plain and clear, Podcasting as a “strong growth engine” for iHeartMedia is a positive development. In Q3, Podcast revenue grew to $102.7 million from $91.3 million. Advertiser demand led to the growth. But, it is a trend or a blip?
“We don’t think we are anywhere near maturity on podcasting,” Pittman said. With more time being spent on podcasting in addition to an increase in the number of total consumers, Pittman dismissed concerns by analyst Jim Goss of Barrington Research that the podcast market has matured. Pittman also noted that two-thirds of podcast consumption is at home, in contrast with radio consumption being largely out-of-home. As such, the “marriage of the two” audio choices presents strong revenue opportunities for iHeartMedia.
BIGGEST DOLLAR GENERATOR, WEAKEST GROWTH ENGINE
For those curious as to how Broadcast Radio factors in to the iHeartMedia revenue portrait, the company provided a breakdown of its revenue streams.
AM and FM radio continues to be the big dollar generation unit. But, broadcast radio revenue fell 6.1%, to $455.1 million. On a year-to-date basis, it is down 7%.
Networks are also seeing particular softness, with a nearly 9% year-over-year decline to $116.33 million in Q3 and a roughly 7% decline year-to-date.
This makes the Podcast growth of 12.5% interesting, as the Q3 revenue for Podcast is closing in on that of iHeart’s Networks unit.
