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U.S. radio companies aren’t exactly struggling through post-pandemic recoveries, but economic conditions are preventing a stronger comeback.  

The earnings releases of four U.S.-based, publicly traded radio companies – iHeartMedia, Cumulus Media, Audacy and Townsquare Media – reveal an industry in flux. While the music streaming and satellite radio businesses enjoy some security from subscription-based models that can withstand economic upheaval, the radio industry depends on advertising dollars that can fluctuate greatly. Ongoing economic problems caused some advertisers to pull back in the third quarter and cloud radio’s future. 

According to Cumulus Media CEO Mary Berner, “starting in late Q2, national advertisers reduced marketing to mitigate the headwinds they face from inflationary pressures, persistent supply chain issues, finance, market turmoil and overall recession risks,” she explained during the company’s Oct. 28 earnings call. Collectively, the macroeconomic pressures resulted in a decline in broadcast revenues of roughly 5% in the third quarter, said Berner, and was the “main driver” in the company’s 2% decline in total revenue to $233.5 million. 

iHeartMedia CEO Bob Pittman lamented during the company’s Nov. 3 earnings call that the business “doesn’t have the robustness that we expected.” Still, iHeartMedia, the country’s largest radio company, landed at the high end of its revenue guidance with total revenue of $989 million, up 7% from the prior-year period. Revenue of its multi-platform group — which includes broadcast radio — was $659.0 million, up 0.1% year-over-year, with the help of political advertising. “This will be the best non-presidential political year that we’ve had,” said president, COO and CFO Rich Bressler. 

Townsquare Media’s third-quarter revenue of $120.6 million came in at the low end of its guidance range — $120 million to $127 million — and its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $30.9 million hit the midpoint of its guidance range of $30 million to $32 million. 

Audacy was hurt by advertisers’ pullback in the third quarter. Revenue dropped 3.8% to $317 million, and radio revenues dropped 6%, due to “a substantial deterioration of market conditions,” president and CEO David Field said on the company’s Tuesday (Nov. 8) earnings call. “This has obviously taken a toll on our EBITDA and [debt] leverage and has raised concerns.”

Digital remains radio companies’ growth engines. S&P Global Market Intelligence forecasts radio digital revenues to climb 4.8% next year. iHeartMedia’s digital audio segment, which includes its podcasting business, grew 23.4% year-over-year to $254 million in the third quarter. That accounted for 26% of the company’s consolidated revenue, up from 12% in the first quarter of 2020. Podcasting revenue alone accounted for $91.3 million, up 42.1% year-over-year. At Cumulus, digital revenue growth of 20% far outstripped overall revenue growth of 5% in the third quarter. Within its digital segment, podcasting revenue grew 27% year-over-year. Townsquare Media’s digital revenue increased 17%, accounting for half of total revenues, and helped the company set records for third-quarter net revenue and adjusted EBITDA.  

Radio companies have taken measures to weather financial uncertainty that will extend into 2023. Cost-cutting remains popular after companies sharply reduced expenses in 2020. IHeartMedia saved about $250 million from 2020 to 2021 — a reduction of historical annualized cost base of about 10% — and targeted an additional $75 million of annual savings this year, said Bressler. Cumulus is “on track to be more than $75 million below the 2019 baseline” of fixed costs, said Berner. Audacy added to its cash reserves by selling real estate worth $56 million in the third quarter and has plans for additional sales.  

S&P Global Market Intelligence expects radio local spot advertising to improve by 3% and national ad revenues to grow 1.5%, both down significantly from 2022 growth levels. Solomon Partners estimates 0.8% audio ad spending growth in 2023 based on major advertising agency forecasts from Dentsu, GroupM, Zenith and Magna. 

Whatever happens in 2023, radio companies are better prepared than they were for the pandemic in 2020. That downturn “was probably the swiftest and worst downturn I’ve ever lived through,” said iHeartMedia’s Pittman. “And even in that year we had positive free cash flow.” 

Still, economic pressures have weighed heavily on radio companies’ share prices. Barrington lowered its price target for iHeartMedia shares from $18 to $13 in an investor note issued Monday. iHeartMedia shares fell 15.1% over Tuesday and Wednesday, to $6.61. Year to date, iHeartMedia shares are down 68.6%. 

Shares of Cumulus Media rose 8.9% following its third-quarter earnings release on Oct. 28 — although the stock gave back those gains and more over the next week and a half. As of Wednesday, Cumulus shares are down a relatively mild 38.7% year-to-date. Investors pushed up the share price 39.9% on April 14 on news of a takeover bid by a consortium led by radio veteran Jeff Warshaw. Cumulus rejected the offer and instead offered shareholders a $50 million stock repurchase program. In June, Cumulus spent $25 million to purchase 1.7 million shares, or 8.7% of outstanding Class A shares.   

Audacy shares fell 6.3% to $0.298 on Wednesday following the company’s third-quarter earnings release, bringing the year-to-date decline to 88.3%. Audacy shares were trading at $0.59 per share on Aug. 1 when the company was notified by the New York Stock Exchange that it was not in compliance with a listing standard that requires a minimum closing price of $1 over 30 consecutive trading days.