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Radio companies had mixed results in the third quarter in their efforts to build digital businesses, cut costs and manage a decline in broadcast advertising dollars as consumers shift to newer entertainment platforms.
iHeartMedia’s consolidated revenue of $997 million was down just 1.1%, well within the company’s guidance of a low single-digit decline. Excluding the impact of political advertising in the prior-year period, revenue was up 2.8%. CEO Bob Pittman said during the company’s earnings call on Monday (Nov. 10) that the advertising environment is “pretty good” and iHeartMedia is “not feeling anything” related to the U.S. government shutdown.
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An operating loss of $116 million stemmed from a $209 million impairment charge related to the value of iHeartMedia’s FCC licenses. Excluding the impact of the write-down and other extraordinary items, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a common measure of profitability from ongoing operations, was flat at $205 million.
The multi-platform division, which includes iHeartMedia’s broadcast and network businesses, had revenue of $591 million, down 4.6% due to lower political advertising and what the company called “uncertain market conditions.” Adjusted EBITDA of $119.2 million marked an 8.3% decrease from the prior-year period, despite lower employee compensation costs.
The digital audio group, which includes podcasts, had revenue of $342 million, up 14%, and adjusted EBITDA of $130.3 million, up 30.3%. Podcast revenue increased by 22% to $140 million.
Based on trends for the top advertisers and advertising agencies, Pittman said he has “confidence” that the multi-platform division will return to revenue growth. “We’re feeling similar momentum to what other ad-supported companies have discussed right now: Spending is holding up, and discussions with advertisers are positive,” he noted on the company’s earnings call. Although iHeartMedia has not felt any impact from the government shutdown, Pittman conceded it “does add a level of uncertainty.”
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iHeartMedia said it remains on track to create $150 million in annual cost savings in 2025. In addition, the company took steps in the third quarter to save an additional $50 million in 2026, which COO/CFO Rich Bressler said will come mainly from the multi-platform division.
Looking ahead, iHeartMedia expects fourth quarter revenue to be down in the low single digits. Adjusted EBITDA is expected to be $200 million to $240 million, down from $246 million in the prior-year quarter because of political advertising in the 2024 election year. The multi-platform division is expected to be down in the low single digits. Digital revenue is expected to grow in the high single digits, and podcast revenue specifically is expected to grow in the mid-teens.
Cumulus Media, the country’s third-largest radio broadcaster by revenue, reported that third-quarter revenue fell 11.5% to $180.3 million. CEO Mary Berner cited a “challenging” advertising environment and touted Cumulus’s efforts to cut costs and employ AI to improve efficiency. Broadcast revenue plummeted 17.2% to $115.0 million. Digital revenue fell 2.6% to $39.0 million but would have grown 8.4% without the losses of The Daily Wire and conservative commentator Dan Bongino, who left podcasting to become the deputy director of the FBI. Consolidated adjusted EBITDA fell to $16.7 million from $24.1 million a year earlier.
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Townsquare Media faced “numerous headwinds,” CEO Bill Wilson said in a statement, but the company met its previous guidance on revenue and adjusted EBITDA. Revenue dropped 7.4% to $106.8 million and would have dropped 4.5% if political advertising were excluded. Adjusted EBITDA fell 13.5% to $3.4 million.
iHeartMedia shares fell 6.0% to $4.29 on Tuesday (Nov. 11) following the earnings announcement on Monday afternoon. The stock had jumped 55.9% in the week ended Nov. 7 following a report that the company was in talks with Netflix to distribute its podcast content.
Cumulus Media shares soared 31% to $0.135 the day after the company released earnings on Oct. 30. The stock has since lost all of those gains and more, however, and closed at $0.10 on Tuesday (Nov. 11).
Townsquare Media shares fell 11.3% to $5.42 on Monday following the quarterly earnings report. The stock rose 0.6% to $5.45 on Tuesday.
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.
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