Debtholders Say Yes to Exchange Offer As iHeart Loss Widens

“We’re pleased to report that our third quarter results were in line with our previously provided Adjusted EBITDA and Revenue guidance ranges,” Bob Pittman, Chairman and CEO of iHeartMedia, said in prepared comments released ahead of the company’s third quarter earnings call on Thursday — the first of the day from several from publicly traded broadcast media licensees.

Did iHeartMedia meet analyst expectations as it continues to attract scrutiny for a much-publicized reduction-in-force impacting close to 5% of its total employee roster? That question may not be the one investors want the answer to, as the company’s net loss mushroomed even as revenue topped $1 billion.

What happened to iHeartMedia in Q3? Higher expenses could be the No. 1 issue for Pittman and for COO/CFO Rich Bressler.

For the three months ending September 30, revenue reached $1.01 billion, rising from $952.99 million. That was in-line with the consensus estimate offered from analysts to Yahoo! Finance; five analysts track iHeartMedia.

Speaking on the call, Pittman provided “two important and positive updates.” The first regards iHeartMedia’s outstanding debt. Exchange offer transactions are moving forward, extending the majority of debt maturities by three years. He spoke highly of the levels of support from the company’s debt holders, while iHeartMedia gains flexibility with its high operating leverage business’ finances.

In a separately distributed announcement, iHeartMedia shared that a “Transaction Support Agreement” with some lenders and holders of iHeartCommunications term loans and outstanding notes has been finalized. This group of debt holders, the “Initial Supporting Holders,” represent roughly 80% of iHeartMedia’s lenders.

“In the first transaction structure, if certain thresholds of holder participation are met, iHeartCommunications will issue new secured debt in exchange for the Existing Debt held by participating holders,” iHeartMedia said. “Alternatively, if certain thresholds of holder participation are not met, newly-formed subsidiaries of the company holding certain transferred assets and an intercompany note (to be issued by iHeartMedia + Entertainment, Inc.) will issue new secured debt in exchange for the Existing Debt held by participating holders.”

This is standard for an exchange offer, in the event not enough support from debtholders comes. However, this is not anticipated for iHeartMedia. And, as the company believes, completion of either exchange transaction will result in a strengthened financial position.

Simpson Thacher & Bartlett LLP served as counsel and PJT Partners served as financial advisor to the Company. Davis Polk & Wardwell LLP served as counsel and Perella Weinberg Partners served as financial advisor to an ad hoc group of certain of the Initial Supporting Holders.

INSIDE THE Q3 RESULTS

With Pittman sharing how iHeartMedia excelled during Hurricane Milton and Hurricane Helene, becoming a lifeline and lone communications source in Western North Carolina as its WWNC-AM and FM partners became all-News and community connection hubs, Bressler offered a detailed review of iHeartMedia’s Q3 revenue.

In the multiplatform group, which includes broadcast advertising, revenue slipped by 1.1% to $619.54 million, from $626.38 million. Why? “A decrease in broadcast advertising in connection with continued uncertain market conditions” was the answer — a refrain many radio station companies have offered quarter after quarter since the COVID-19 pandemic wreaked havoc for broadcast media but saw the Television industry quickly rebound by the end of 2020.

The iHeartMedia Digital Audio Group revenue surged by 12.7%, to $301.04 million, from $267.22. While the double-digit growth is encouraging, the digital revenue remains less than half of that for the multiplatform group.

Isolating Podcasting revenue, dollars grew by 11.1%, to $114.05 million, from $102.67 million.

Audio & Media Services Group revenue leaped to $90.05 million, from $61.98 million. This unit includes the RCS business, and Katz Media Group.

Add it all up, along with lower political advertising Bressler attributed to a switch in candidates from Joe Biden to Vice President Kamala Harris by the Democratic Party, and adjusted EBITDA increased to $204.59 million, from $203.78 million.

Free Cash Flow increased to $73.5 million, from $67.6 million.

The problem is iHeartMedia’s expenses, which Pittman seemingly defended on the call as costs associated with ensuring the company remains future-proof, setting it up for revenue generation in the coming years. While consolidated revenue in Q3 increased to $2.74 billion from $2.68 billion, operating expenses widened to $2.28 billion, from $2.196 billion.

The iHeartMedia Q3 net loss widened to $41.33 million, from $8.97 million.

And, while iHeartMedia has more cash on hand ($431.8 million) as of September 30 compared to the end of 2023 ($346.4 million), the stockholders’ deficit widened to $1.41 billion from $384.8 million.

With a Goldman Sachs analyst opening the Q&A session congratulating Pittman and Bressler on strong 2025 guidance, Bressler noted that Q4 2024 revenues are forecast to be up in the high single-digit range. October is pacing up 15%, Bressler said. With 2024 a “recovery year,” Pittman noted, this is positive news from iHeart, with multiplatform revenue trending up in the mid-single-digit range in Q4.

The net debt for iHeartMedia at the end of Q3 was $4.79 billion.

ANALYST ADDRESSES REDUCTION-IN-FORCE

Jim Goss of Barrington Research addressed coverage in Streamline Publishing’s Radio Ink and RBR+TVBR that detailed a significant reduction-in-force initiative that not only claimed air personalities and programming executives, but also market managers in various markets.

Pittman was defensive, responding to the analyst by noting, “That article got it completely wrong. We can take talent in any location and put them on the air in any other location, allowing us to upgrade our talent in every market where we are in. It is all about companionship, and great talent is great talent. Look at Ryan Seacrest … everybody wants to be his friend. We are increasing our relationship with the consumer and we are using technology to do it.”

In his pre-call remarks, Pittman remarked, “Technology is the key to increasing our operating leverage because it allows us to speed up processes, streamline legacy systems, and enables us to take another significant step in our modernization journey. We have flattened our organization, eliminated redundancies and broken down silos, which will have a major impact on costs, expected to generate $200 million of annual savings in 2025 compared to 2024, and benefiting full year 2025 Adjusted EBITDA by $150 million on a year over year basis.”