HOME IS WHERE THE iHEART IS

iHeartMedia is starting to see the radio advertising business recover as ad revenue in July experienced a significant improvement over April, a month where advertising was cut in half due to the COVID-19 pandemic.

“The challenges that we have faced due to COVID-19 were unprecedented and had a severe, negative impact on our revenue in the second quarter,” said Bob Pittman, Chairman and Chief Executive Officer of iHeartMedia. “Despite those financial challenges, we retained our strong relationship with the consumer as the #1 audio company in America and the #1 media company in America by reach. As the advertising marketplace is recovering, we are working hard to ensure that we have the products and services to fully capitalize on the opportunity while proactively taking steps to fortify our balance sheet and our liquidity.”

iHeartMedia President/COO/CFO Rich Bressler said that, overall, ad placements are increasing with many bigger brands returning especially in the fields of consumer products, home improvement, insurance, healthcare, and streaming services such as Netflix.

Advertisers, Pittman noted, are asking for new approaches and new ideas from iHeart. “When they spend a dollar, they want to maximize the value of the dollar like never before.”

Pittman told analysts on a conference call that the company has installed a series of cost-saving measures including a permanent reduction in real estate, drastic cuts in travel and entertainment expenses and the elimination of outside consultants.

The moves, Pittman said, “are setting the stage for accelerated growth” once the pandemic ends. “We’re taking a hard look at our cost structure.”

He said the pandemic “has allowed us to look at different ways to do business. Now that we’ve done this for three months, we can measure productivity and we’ve asked our employees what works better? What works worse? These are things we would have never tested except through a tragedy like this. We’re examining everything we’re doing.”

The company analyzed three scenarios—recovery beginning in Q3; recovery beginning in Q4; prolonged recession in 2021—and determined it will have sufficient liquidity in all cases. Direct operating expense savings in 2020 are expected to be approximately $250m; modernization initiatives are expected to deliver $100m in run-rate savings by mid-2021; and iHeart is on track to achieve the previously announced $200m of additional savings this year.

Revenue in the quarter was $488m with $244m from broadcast, $96m from networks, and $93m on the digital side. Podcasting was the bright spot as revenue grew 103% in Q2 over 2019.

Pittman touted iHeart’s growth in digital listenership during lockdown periods and that iHeart “continues to benefit from consumers learning to use in-home devices.” By “reimagining the events business” and presenting, for example, Living Room Concerts, the company was able to generate sponsorship revenue.

In the long run, Pittman cautioned, “the speed of ad revenue recovery is uncertain.” The company is not offering any guidance for year-end results at this time.