New York, NY, November 3, 2022 – iHeartMedia, Inc. (Nasdaq: IHRT) today reported financial results for the quarter ended September 30, 2022.
Financial Highlights:
Q3 2022 Consolidated Results
▪Q3 Revenue of $989 million, up 7% YoY; at high end of guidance of up approximately 3%-7%
▪GAAP Operating loss of $211 million vs. GAAP Operating income of $80 million in Q3 2021
•Includes FCC license non-cash impairment charge of $302 million driven by increase in interest rates
▪Consolidated Adjusted EBITDA of $252 million increased 10% YoY; at high end of guidance of $240 million to $255 million
•Consolidated Adjusted EBITDA margin of 25.5%, up 70 bps from 24.8% in Q3 2021
▪Cash Flows from operating activities of $103 million
▪Free Cash Flow of $63 million; Free Cash Flow including $8 million of net proceeds from real estate sales was $70 million
Q3 2022 Digital Audio Group Continues Strong Growth
▪Digital Audio Group Revenue of $254 million up 23% YoY
•Podcast Revenue of $91 million up 42% YoY
•Digital Revenue excluding Podcast of $163 million up 15% YoY
▪Segment Adjusted EBITDA of $78 million increased 17% YoY
•Digital Audio Group Adjusted EBITDA margin of 30.8%
Q3 2022 Multiplatform Group Demonstrates Resilience
▪Multiplatform Group Revenue of $660 million flat YoY
▪Segment Adjusted EBITDA of $207 million decreased 1% YoY
•Multiplatform Group Adjusted EBITDA margin of 31.4%
Strong Free Cash Flow Generation, Proactive Capital Structure Improvement and Debt Paydown
▪Free Cash Flow of $63 million; including $8 million of net proceeds from real estate sales, Free Cash Flow including net proceeds from real estate sales was $70 million
▪Cash balance and total available liquidity1 of $295 million and $718 million, respectively, as of September 30, 2022
▪Repurchased $75 million in principal balance of 8.375% Senior Unsecured Notes (at a discount to par) for $68 million in cash; expected to generate approximately $6 million of annualized interest savings
•As of September 30th combined Notes repurchases of $189 million at a discount to par of $173 million; expected to generate approximately $16 million of annualized interest savings
Guidance
▪Q4 Consolidated Revenue expected to increase by approximately 2%-6% YoY
▪October Consolidated Revenue up approximately 8% YoY impacted by strong political spend
▪Q4 Consolidated Adjusted EBITDA expected to be $305 million to $325 million
▪Expect to make significant progress in 2022 towards the previously announced Net Debt to Adjusted EBITDA ("net leverage") target of approximately 4x
1 Total available liquidity is defined as cash and cash equivalents plus available borrowings under our ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.
1
Statement from Senior Management
“We’re pleased to report another quarter of solid operating results for iHeart, and our performance in the midst of the current climate of economic uncertainty is a strong indication of the successful transformation this company has undergone in which our high-growth digital revenues comprises 26% of total company revenues,” said Bob Pittman, Chairman and CEO of iHeartMedia, Inc. “Our Digital Audio Group continues to deliver industry-leading growth, and our Multiplatform Group has again demonstrated its resiliency during a difficult economic environment. We believe the strong positions of both of these groups with both consumers and advertisers give us the ability to both navigate through this period of economic uncertainty and position us for continued growth through the recovery and beyond.”
“This quarter our Adjusted EBITDA of $252 million, and our consolidated revenues, up approximately 7% year over year, were both at the high end of our guidance range – a solid performance despite the uncertain macroeconomic environment,” said Rich Bressler, President, Chief Operating Officer and Chief Financial Officer of iHeartMedia, Inc. “We also continue to keep profitability and Free Cash Flow Generation at the forefront, and despite this uncertain environment, our business has continued to achieve year over year growth in users, revenues, Adjusted EBITDA and Free Cash Flow.”
2
Consolidated Results of Operations
Third Quarter 2022 Consolidated Results
Our consolidated revenue increased $60.9 million, or 6.6%, during the three months ended September 30, 2022 compared to the same period of 2021. Digital Audio revenue increased $48.2 million, or 23.4%, driven primarily by continuing increases in demand for digital advertising and the continued growth of podcasting. Multiplatform revenue increased $0.9 million, or 0.1%, primarily resulting from increased political advertising revenue as 2022 is midterm election year, partially offset by a decrease in revenue due to a more challenging macroeconomic environment. Audio & Media Services revenue increased $11.7 million due to the increase in political advertising revenue.
Consolidated direct operating expenses increased $46.0 million, or 14.1%, during the three months ended September 30, 2022 compared to the same period of 2021. The increase in direct operating expenses was primarily driven by higher variable content, talent and profit sharing expenses in our Digital Audio Group and our Multiplatform Group.
Consolidated Selling, General & Administrative ("SG&A") expenses increased $9.8 million, or 2.5%, during the three months ended September 30, 2022 compared to the same period of 2021. The increase in Consolidated SG&A expenses was driven primarily by costs incurred in connection with executing on our cost reduction initiatives as well as increased sales commission expenses as a result of higher revenue. These increases were partially offset by lower variable bonus expense.
Our consolidated GAAP Operating loss was $211.2 million compared to Operating income of $80.1 million in the third quarter of 2021, which was driven primarily by a non-cash impairment charge of $302.1 million attributable to our FCC licenses as a result of increased interest rates.
Adjusted EBITDA increased to $252.2 million compared to $230.2 million in the prior-year period.
The Company generated $103.1 million of cash from operating activities, compared to $95.7 million in the prior-year period, and Free Cash Flow was $62.8 million, compared to $45.5 million in the prior-year period primarily due to an increase in cash flows from operations due to political advertising revenue as 2022 is a midterm election year and the continued growth of our Digital Audio Group business.
3
Business Segments: Results of Operations
Third Quarter 2022 Multiplatform Group Results
(In thousands)
Three Months Ended September 30,
%
Nine Months Ended September 30,
%
2022
2021
Change
2022
2021
Change
Revenue
$
659,896
$
658,979
0.1
%
$
1,864,356
$
1,762,726
5.8
%
Operating expenses1
452,631
450,549
0.5
%
1,328,688
1,268,107
4.8
%
Segment Adjusted EBITDA
$
207,265
$
208,430
(0.6)
%
$
535,668
$
494,619
8.3
%
Segment Adjusted EBITDA margin
31.4
%
31.6
%
28.7
%
28.1
%
1 Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.
Revenue from our Multiplatform Group increased $0.9 million, or 0.1% YoY, as a result of increased political advertising revenue as 2022 is a midterm election year, partially offset by a decrease in revenue due to a more challenging macroeconomic environment. Broadcast revenue grew $2.1 million, or 0.4% YoY, driven by higher political advertising revenue and an increase in trade and barter revenue, partially offset by lower spot revenue, while Networks declined $(0.7) million, or 0.5% YoY. Revenue from Sponsorship and Events decreased by $(0.1) million, or 0.2% YoY.
Operating expenses increased $2.1 million, or 0.5% YoY, driven primarily by higher content, talent and profit sharing expenses, partially offset by a decrease in variable bonus expense which was lower in the third quarter of 2022 compared to the prior year based on financial performance compared to targets.
Segment Adjusted EBITDA Margin modestly decreased YoY to 31.4% from 31.6%.
Third Quarter 2022 Digital Audio Group Results
(In thousands)
Three Months Ended September 30,
%
Nine Months Ended September 30,
%
2022
2021
Change
2022
2021
Change
Revenue
$
253,953
$
205,769
23.4
%
$
720,733
$
561,252
28.4
%
Operating expenses1
175,636
138,646
26.7
%
511,025
399,828
27.8
%
Segment Adjusted EBITDA
$
78,317
$
67,123
16.7
%
$
209,708
$
161,424
29.9
%
Segment Adjusted EBITDA margin
30.8
%
32.6
%
29.1
%
28.8
%
1 Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.
Revenue from our Digital Audio Group increased $48.2 million compared to the prior year, including growth from Digital, excluding Podcast revenue, which grew $21.1 million, or 14.9%, YoY, to $162.7 million, driven by increased demand for digital advertising as well as Podcast revenue which increased by $27.1 million, or 42.1%, YoY, to $91.3 million, driven by higher revenues from the development of new podcasts as well as growth from existing podcasts. Digital Audio Group revenue increased as a result of general increased demand for digital advertising and the growing popularity of podcasting.
Operating expenses increased $37.0 million, or 26.7% YoY, due to higher variable content and production costs primarily resulting from the development of new podcasts and higher third-party digital costs and profit share expenses primarily resulting from higher revenue.
Segment Adjusted EBITDA Margin decreased YoY to 30.8% from 32.6%.
4
Third Quarter 2022 Audio & Media Services Group Results
(In thousands)
Three Months Ended September 30,
%
Nine Months Ended September 30,
%
2022
2021
Change
2022
2021
Change
Revenue
$
77,794
$
66,078
17.7
%
$
209,716
$
182,390
15.0
%
Operating expenses1
48,044
43,656
10.1
%
141,509
124,148
14.0
%
Segment Adjusted EBITDA
$
29,750
$
22,422
32.7
%
$
68,207
$
58,242
17.1
%
Segment Adjusted EBITDA margin
38.2
%
33.9
%
32.5
%
31.9
%
1 Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring Expenses.
Revenue from our Audio & Media Services Group increased $11.7 million, or 17.7% YoY, due to an increase in political advertising revenue as 2022 is a midterm election year.
Operating expenses increased $4.4 million, or 10.1% YoY, primarily as a result of higher employee compensation related to seasonal (political) staffing, higher merchandising costs and a new purchase agreement with third-parties for specific inventory spots.
Segment Adjusted EBITDA Margin increased YoY to 38.2% from 33.9%.
GAAP and Non-GAAP Measures: Consolidated
(In thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Revenue
$
988,930
$
928,051
$
2,786,393
$
2,496,321
Operating income (loss)
$
(211,187)
$
80,111
$
(115,983)
$
31,881
Adjusted EBITDA1
$
252,242
$
230,213
$
634,645
$
516,968
Net income (loss)
$
(309,776)
$
3,673
$
(343,333)
$
(270,343)
Cash provided by operating activities2
$
103,110
$
95,736
$
206,699
$
196,593
Free cash flow1,2
$
62,753
$
45,462
$
94,132
$
95,258
Free cash flow including net proceeds from real estate sales1,2
1 See the end of this press release for reconciliations of (i) Adjusted EBITDA to Operating income, (ii) Adjusted EBITDA to net income (loss), (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash provided by (used for) operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt. See also the definitions of Adjusted EBITDA, Free Cash Flow, Free cash flow including net proceeds from real estate sales, Adjusted EBITDA margin, and Net Debt under the Supplemental Disclosure Regarding Non-GAAP Financial Information section in this release.
2 We made cash interest payments of $89.9 million in the three months ended September 30, 2022, compared to $79.2 million in the three months ended September 30, 2021. We made cash interest payments of $249.9 million in the nine months ended September 30, 2022, compared to $247.5 million in the nine months ended September 30, 2021.
Certain prior period amounts have been reclassified to conform to the 2022 presentation of financial information throughout the press release.
5
Liquidity and Financial Position
As of September 30, 2022, we had $295.4 million of cash on our balance sheet. For the nine months ended September 30, 2022, cash provided by operating activities was $206.7 million, cash used for investing activities was $82.8 million and cash used for financing activities was $179.7 million.
Capital expenditures for the nine months ended September 30, 2022 were $112.6 million compared to $101.3 million in the nine months ended September 30, 2021. Capital expenditures during the nine months ended September 30, 2022 increased primarily due to our real estate consolidation initiatives aimed at reducing our structural cost base.
As of September 30, 2022, the Company had $5,553.7 million of total debt and $5,258.3 million of Net Debt. The terms of our capital structure include no material maintenance covenants, and there are no material debt maturities prior to 2026, providing structural resilience. During the three months ended September 30, 2022, we repurchased $75.0 million in aggregate principal amount of iHeartCommunications Inc.'s 8.375% Senior Unsecured Notes due 2027 (at a discount to par) for $68.1 million in cash.
Cash balance and total available liquidity2 were $295.4 million and $718.4 million, respectively, as of September 30, 2022.
The Company believes its previously announced modernization initiatives and other cost saving actions - in combination with the Company’s resilient capital structure - have substantially expanded the Company’s financial flexibility and liquidity while positioning the Company for further margin improvement over time.
2 Total available liquidity is defined as cash and cash equivalents plus available borrowings under our ABL Facility. We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.
6
Revenue Streams
The tables below present the comparison of our historical revenue streams (including political revenue) for the periods presented:
(In thousands)
Three Months Ended September 30,
%
Nine Months Ended September 30,
%
2022
2021
Change
2022
2021
Change
Broadcast Radio
$
485,571
$
483,456
0.4
%
$
1,365,356
$
1,293,134
5.6
%
Networks
127,239
127,920
(0.5)
%
372,329
366,592
1.6
%
Sponsorship and Events
42,562
42,663
(0.2)
%
114,226
93,641
22.0
%
Other
4,524
4,940
(8.4)
%
12,445
9,359
33.0
%
Multiplatform Group1,2
659,896
658,979
0.1
%
1,864,356
1,762,726
5.8
%
Digital ex. Podcast
162,700
141,573
14.9
%
475,254
405,276
17.3
%
Podcast
91,253
64,196
42.1
%
245,479
155,976
57.4
%
Digital Audio Group
253,953
205,769
23.4
%
720,733
561,252
28.4
%
Audio & Media Services Group1,2
77,794
66,078
17.7
%
209,716
182,390
15.0
%
Eliminations
(2,713)
(2,775)
(8,412)
(10,047)
Revenue, total
$
988,930
$
928,051
6.6
%
$
2,786,393
$
2,496,321
11.6
%
1 Excluding the impact of political revenue, Revenue from the Multiplatform Group and Revenue, total increased by 1.8% and 3.8% for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, respectively. Excluding the impact of political revenue, Revenue from Audio & Media Services increased by 0.1% for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. See the end of this press release for a reconciliation of revenue, excluding political advertising revenue, to revenue.
2 Excluding the impact of political revenue, Revenue from the Multiplatform Group and Revenue, total increased by 4.4% and 9.8% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, respectively. Excluding the impact of political revenue, Revenue from Audio & Media Services increased by 4.8% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. See the end of this press release for a reconciliation of revenue, excluding political advertising revenue, to revenue.
7
Conference Call
iHeartMedia, Inc. will host a conference call to discuss results and business outlook on November 3, 2022, at 4:30 p.m. Eastern Time. The conference call number is (888) 330-2446 (U.S. callers) and +1 (240) 789-2732 (International callers) and the passcode for both is 71596. A live audio webcast of the conference call will also be available on the Investors homepage of iHeartMedia's website investors.iheartmedia.com. After the live conference call, a replay will be available for a period of thirty days. The replay numbers are (800) 770-2030 (U.S. callers) and +1 (647) 362-9199 (International callers) and the passcode for both is 71596. An archive of the webcast will be available beginning 24 hours after the call for a period of thirty days.
About iHeartMedia, Inc.
iHeartMedia (Nasdaq: IHRT) is the number one audio company in the United States, reaching nine out of 10 Americans every month. It consists of three business groups.
With its quarter of a billion monthly listeners, the iHeartMedia Multiplatform Group has a greater reach than any other media company in the U.S. Its leadership position in audio extends across multiple platforms, including more than 860 live broadcast stations in over 160 markets nationwide; its National Sales organization; and the company’s live and virtual events business. It also includes Premiere Networks, the industry’s largest Networks business, with its Total Traffic and Weather Network (TTWN); and BIN: Black Information Network, the first and only 24/7 national and local all news audio service for the Black community. iHeartMedia also leads the audio industry in analytics, targeting and attribution for its marketing partners with its SmartAudio suite of data targeting and attribution products using data from its massive consumer base.
The iHeartMedia Digital Audio Group includes the company’s fast-growing podcasting business -- iHeartMedia is the number one podcast publisher in downloads, unique listeners, revenue and earnings -- as well as its industry-leading iHeartRadio digital service, available across more than 250 platforms and 2,000 devices; the company’s digital sites, newsletters, digital services and programs; its digital advertising technology companies; and its audio industry-leading social media footprint.
The company’s Audio & Media Services reportable segment includes Katz Media Group, the nation’s largest media representation company, and RCS, the world's leading provider of broadcast and webcast software.
For further information, please contact:
Media
Wendy Goldberg
Chief Communications Officer
(212) 377-1105
wendygoldberg@iheartmedia.com
Investors
Mike McGuinness
EVP, Deputy CFO, and Head of Investor Relations
(212) 377-1336
mbm@iheartmedia.com
8
Certain statements herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors which may cause the actual results, performance or achievements of iHeartMedia, Inc. and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The words or phrases “guidance,” “believe,” “expect,” “anticipate,” “estimates,” “forecast” and similar words or expressions are intended to identify such forward-looking statements. In addition, any statements that refer to expectations or other characterizations of future events or circumstances, such as statements about expectations regarding economic recovery and the recovery of advertising revenue, our expectations about future continued growth, expectations regarding the Company's digital transformation, financial performance of our segments, our capital and operating expense reduction initiatives, our business plans, strategies and initiatives, expected interest rates and interest expense savings, our expectations about certain markets and our anticipated financial performance, liquidity, and net leverage are forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other important factors, some of which are beyond our control and are difficult to predict. Various risks that could cause future results to differ from those expressed by the forward-looking statements included in this press release include, but are not limited to: risks related to weak or uncertain global economic conditions; the impact of the COVID-19 pandemic; increased competition; dependence upon the performance of on-air talent, program hosts and management; fluctuations in operating costs; technological changes and innovations; shifts in population and other demographics; impact of our substantial indebtedness; impact of acquisitions, dispositions and other strategic transactions; information technology and cyber-security risks; risks related to our indebtedness; legislative or regulatory requirements; impact of legislation, ongoing litigation or royalty audits on music licensing and royalties; regulations and concerns regarding privacy and data protection; risks related to our Class A common stock; and regulations impacting our business and the ownership of our securities. Other unknown or unpredictable factors also could have material adverse effects on the Company’s future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof. Additional risks that could cause future results to differ from those expressed by any forward-looking statement are described in the Company’s reports filed with the U.S. Securities and Exchange Commission, including in the section entitled “Item 1A. Risk Factors” of iHeartMedia, Inc.’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The Company does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.
9
APPENDIX
TABLE 1 - Comparison of operating performance
(In thousands)
Three Months Ended September 30,
%
Nine Months Ended September 30,
%
2022
2021
Change
2022
2021
Change
Revenue
$
988,930
$
928,051
6.6
%
$
2,786,393
$
2,496,321
11.6
%
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)
371,719
325,766
14.1
%
1,067,625
939,094
13.7
%
Selling, general and administrative expenses (excludes depreciation and amortization)
399,892
390,086
2.5
%
1,163,293
1,105,056
5.3
%
Depreciation and amortization
109,305
108,100
334,144
343,408
Impairment charges
309,750
11,647
311,329
49,391
Other operating expense, net
9,451
12,341
25,985
27,491
Operating income (loss)
$
(211,187)
$
80,111
$
(115,983)
$
31,881
Depreciation and amortization
109,305
108,100
334,144
343,408
Impairment charges
309,750
11,647
311,329
49,391
Other operating expense, net
9,451
12,341
25,985
27,491
Share-based compensation expense
10,437
5,993
24,582
17,581
Restructuring expenses
24,486
12,021
54,588
47,216
Adjusted EBITDA1
$
252,242
$
230,213
9.6
%
$
634,645
$
516,968
22.8
%
Certain prior period amounts have been reclassified to conform to the 2022 presentation of financial information throughout the press release.
1See the end of this press release for reconciliations of (i) Adjusted EBITDA to Operating income, (ii) Adjusted EBITDA to net income (loss), (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash provided by (used for) operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt. See also the definitions of Adjusted EBITDA, Free Cash Flow, Free cash flow including net proceeds from real estate sales, Adjusted EBITDA margin and Net Debt under the Supplemental Disclosure section in this release.
10
TABLE 2 - Statements of Operations
(In thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Revenue
$
988,930
$
928,051
$
2,786,393
$
2,496,321
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)
371,719
325,766
1,067,625
939,094
Selling, general and administrative expenses (excludes depreciation and amortization)
399,892
390,086
1,163,293
1,105,056
Depreciation and amortization
109,305
108,100
334,144
343,408
Impairment charges1
309,750
11,647
311,329
49,391
Other operating expense, net
9,451
12,341
25,985
27,491
Operating income (loss)
(211,187)
80,111
(115,983)
31,881
Interest expense, net
87,890
82,481
248,603
252,489
Gain on investments, net
(3,466)
(10,367)
4,359
39,468
Equity in loss of nonconsolidated affiliates
(132)
(1,056)
(190)
(1,115)
Gain on extinguishment of debt
6,892
(7,896)
15,095
(7,896)
Other expense, net
(581)
(1,785)
(3,026)
(2,955)
Income (loss) before income taxes
(296,364)
(23,474)
(348,348)
(193,106)
Income tax benefit (expense)
(13,412)
27,147
5,015
(77,237)
Net income (loss)
(309,776)
3,673
(343,333)
(270,343)
Less amount attributable to noncontrolling interest
587
493
1,211
486
Net income (loss) attributable to the Company
$
(310,363)
$
3,180
$
(344,544)
$
(270,829)
1Impairment charges in nine months ended September 30, 2022 includes $302.1 million related to the impairment of FCC licenses, $8.5 million related to impairments of right-of-use assets and $0.7 million related to leasehold improvements (in the latter two cases, related to leasehold improvements as a result of proactive decisions by management to exit and sublease a number of operating leases in connection with strategic actions to streamline the Company's real estate footprint as part of the Company's modernization initiatives). Impairment charges of $49.4 million in the nine months ended September 30, 2021 related to $38.0 million of impairments of right-of-use assets and $11.4 million related to leasehold improvements as a result of proactive decisions by management to abandon and sublease a number of operating leases in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives.
11
TABLE 3 - Selected Balance Sheet Information
Selected balance sheet information for September 30, 2022 and December 31, 2021:
(In millions)
September 30, 2022
December 31, 2021
Cash
$
295.4
$
352.1
Total Current Assets
1,408.6
1,472.9
Net Property, Plant and Equipment
692.3
782.1
Total Assets
8,329.7
8,881.3
Current Liabilities (excluding current portion of long-term debt)
739.4
848.7
Long-term Debt (including current portion of long-term debt)
5,553.7
5,738.9
Stockholders' Equity
592.8
915.8
Supplemental Disclosure Regarding Non-GAAP Financial Information
The following tables set forth the Company’s Adjusted EBITDA, Adjusted EBITDA margin, revenues excluding political advertising revenue, and Free Cash Flow and Free cash flow including net proceeds from real estate sales for the three and nine months ended September 30, 2022 and 2021, and Net Debt as of September 30, 2022. Adjusted EBITDA is defined as consolidated Operating income (loss) adjusted to exclude restructuring expenses included within Direct operating expenses and SG&A expenses, and share-based compensation expenses included within SG&A expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Impairment charges and Other operating expense, net. Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude Income tax (benefit) expense, Interest expense, net, Depreciation and amortization, Loss (gain) on investments, net, (Gain) loss on extinguishment of debt, Other expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating expense, net, Share-based compensation expense, and restructuring expenses. Restructuring expenses primarily include expenses incurred in connection with cost-saving initiatives, as well as certain expenses, which, in the view of management, are outside the ordinary course of business or otherwise not representative of the Company's operations during a normal business cycle. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Revenue.
The Company uses Adjusted EBITDA and Adjusted EBITDA margin, among other measures, to evaluate the Company’s operating performance. Adjusted EBITDA is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management. We believe this measure is an important indicator of the Company’s operational strength and performance of its business because it provides a link between operational performance and operating income. It is also a primary measure used by management in evaluating companies as potential acquisition targets.
The Company believes the presentation of these measures is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by the Company’s management. The Company believes it helps improve investors’ ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that have different capital structures or tax rates. In addition, the Company believes this measure is also among the primary measures used externally by the Company’s investors, analysts and peers in its industry for purposes of valuation and comparing the operating performance of the Company to other companies in its industry.
Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating income as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of the Company’s ability to fund its cash needs. As it excludes certain financial information compared with operating income, the most directly comparable GAAP financial measure, users of this financial information should consider the types of events and transactions which are excluded.
We define Free Cash Flow as Cash provided by (used for) operating activities less capital expenditures, which is disclosed as Purchases of property, plant and equipment in the Company's Consolidated Statements of Cash Flows. We define Free cash flow including net proceeds from real estate sales as Free Cash Flow further adjusted to include proceeds from real estate sales. We use Free Cash Flow and Free cash flow including net proceeds from real estate sales, among other measures, to evaluate the Company’s liquidity and its ability to generate cash flow. We believe that Free Cash Flow and Free cash flow including net proceeds from real estate sales are meaningful to investors because they provide them with a view of the Company's liquidity after deducting capital expenditures, which are considered to be a necessary component of ongoing operations; and include proceeds from real estate sales
12
in the case of Free cash flow including net proceeds from real estate sales. In addition, we believe that Free Cash Flow and Free cash flow including net proceeds from real estate sales helps improve investors' ability to compare our liquidity with that of other companies.
Since Free Cash Flow and Free cash flow including net proceeds from real estate sales are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, Cash provided by operating activities and may not be comparable to similarly titled measures employed by other companies. Free Cash Flow and Free cash flow including net proceeds from real estate sales is not necessarily a measure of our ability to fund our cash needs.
The Company presents revenue, excluding the effects of political revenue. Due to the cyclical nature of the electoral system and the seasonality of the related political revenue, management believes presenting revenue, excluding the effects of political revenue, provides additional information to investors about the Company’s revenue growth from period to period.
We define Net Debt as Total Debt less Cash and cash equivalents. We define the Net Debt to Adjusted EBITDA ratio as Net Debt divided by Adjusted EBITDA. The Company uses the Net Debt to Adjusted EBITDA ratio to evaluate the Company's leverage. We believe this measure is an important indicator of the Company's ability to service its long-term debt obligations.
Since these non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, the most directly comparable GAAP financial measures as an indicator of operating performance or liquidity.
As required by the SEC rules, the Company provides reconciliations below to the most directly comparable measures reported under GAAP, including (i) Adjusted EBITDA to Operating income, (ii) Adjusted EBITDA to net income (loss), (iii) Free Cash Flow and Free cash flow including net proceeds from real estate sales to cash provided by (used for) operating activities, (iv) revenue, excluding political advertising revenue, to revenue, and (v) Net Debt to Total Debt.
We have provided forecasted Revenue and Adjusted EBITDA guidance for the quarter ending December 31, 2022 and net leverage guidance for December 31, 2022, which reflects anticipated Adjusted EBITDA for the year ending December 31, 2022 and net debt as of December 31, 2022. Our Earnings Call on November 3, 2022 may present guidance that includes Adjusted EBITDA and Free Cash Flow. A full reconciliation of the forecasted Adjusted EBITDA, Free Cash Flow and net debt on a non-GAAP basis to its most-directly comparable GAAP metrics cannot be provided without unreasonable efforts due to the inherent difficulty in forecasting and quantifying with reasonable accuracy significant items required for the reconciliations.
13
Reconciliation of Operating Income (Loss) to Adjusted EBITDA
(In thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Operating income (loss)
$
(211,187)
$
80,111
$
(115,983)
$
31,881
Depreciation and amortization
109,305
108,100
334,144
343,408
Impairment charges1
309,750
11,647
311,329
49,391
Other operating expense, net2
9,451
12,341
25,985
27,491
Share-based compensation expense
10,437
5,993
24,582
17,581
Restructuring expenses
24,486
12,021
54,588
47,216
Adjusted EBITDA
$
252,242
$
230,213
$
634,645
$
516,968
1 Impairment charges in nine months ended September 30, 2022 includes $302.1 million related to the impairment of FCC licenses, $8.5 million related to impairments of right-of-use assets and $0.7 million related to leasehold improvements (in the latter two cases, related to leasehold improvements as a result of proactive decisions by management to exit and sublease a number of operating leases in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives). Impairment Charges of $49.4 million in the nine months ended September 30, 2021 related to $38.0 million of impairments of right-of-use assets and $11.4 million related to leasehold improvements as a result of proactive decisions by management to abandon and sublease a number of operating leases in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives aimed at reducing our structural cost base.
2 Increase in Other operating expense, net is driven by non-cash net book losses recognized in relation to sales of real estate.
14
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(In thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Net income (loss)
$
(309,776)
$
3,673
$
(343,333)
$
(270,343)
Income tax (benefit) expense
13,412
(27,147)
(5,015)
77,237
Interest expense, net
87,890
82,481
248,603
252,489
Depreciation and amortization
109,305
108,100
334,144
343,408
EBITDA
$
(99,169)
$
167,107
$
234,399
$
402,791
(Gain) loss on investments, net
3,466
10,367
(4,359)
(39,468)
(Gain) loss on extinguishment of debt
(6,892)
—
7,896
—
(15,095)
—
7,896
Other expense, net
581
1,785
3,026
2,955
Equity in loss of nonconsolidated affiliates
132
1,056
190
1,115
Impairment charges
309,750
11,647
311,329
49,391
Other operating expense, net
9,451
12,341
25,985
27,491
Share-based compensation expense
10,437
5,993
24,582
17,581
Restructuring expenses
24,486
12,021
54,588
47,216
Adjusted EBITDA
$
252,242
$
230,213
$
634,645
$
516,968
Reconciliation of Cash Provided By Operating Activities to Free Cash Flow and Free cash flow including net proceeds from real estate sales
(In thousands)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
Cash provided by operating activities
$
103,110
$
95,736
$
206,699
$
196,593
Purchases of property, plant and equipment
(40,357)
(50,274)
(112,567)
(101,335)
Free cash flow
62,753
45,462
94,132
$
95,258
Net proceeds from real estate sales1
7,700
8,610
31,535
21,051
Free cash flow including net proceeds from real estate sales
$
70,453
$
54,072
$
125,667
$
116,309
1 During the three and nine months ended September 30, 2022 and September 30, 2021, we continued to deploy capital expenditures to accelerate the proactive streamlining of our real estate footprint aimed at reducing our structural cost base. This initiative has succeeded in making certain real estate assets redundant, enabling the Company to sell such assets to partially fund the initiative’s gross capital expenditures.
15
Reconciliation of Revenue to Revenue excluding Political Advertising
(In thousands)
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
2022
2021
2022
2021
Consolidated revenue
$
988,930
$
928,051
6.6
%
$
2,786,393
$
2,496,321
11.6
%
Excluding: Political revenue
(33,968)
(7,837)
(66,215)
(19,521)
Consolidated revenue, excluding political
$
954,962
$
920,214
3.8
%
$
2,720,178
$
2,476,800
9.8
%
Multiplatform Group revenue
$
659,896
$
658,979
0.1
%
$
1,864,356
$
1,762,726
5.8
%
Excluding: Political revenue
(18,283)
(5,858)
(37,418)
(13,491)
Multiplatform Group revenue, excluding political
$
641,613
$
653,121
(1.8)
%
$
1,826,938
$
1,749,235
4.4
%
Digital Audio Group revenue
$
253,953
$
205,769
23.4
%
$
720,733
$
561,252
28.4
%
Excluding: Political revenue
(2,270)
(367)
(4,942)
(1,034)
Digital Audio Group revenue, excluding political
$
251,683
$
205,402
22.5
%
$
715,791
$
560,218
27.8
%
Audio & Media Group Services revenue
$
77,794
$
66,078
17.7
%
$
209,716
$
182,390
15.0
%
Excluding: Political revenue
(13,415)
(1,612)
(23,855)
(4,997)
Audio & Media Services Group revenue, excluding political
$
64,379
$
64,466
(0.1)
%
$
185,861
$
177,393
4.8
%
Reconciliation of Total Debt to Net Debt
(In thousands)
September 30, 2022
Current portion of long-term debt
$
665
Long-term debt
5,553,049
Total debt
$
5,553,714
Less: Cash and cash equivalents
295,399
Net debt
$
5,258,315
16
Segment Results
The following tables present the Company's segment results for the Company for the periods presented:
Segments
(In thousands)
Multiplatform Group
Digital Audio Group
Audio & Media Services Group
Corporate and other reconciling items
Eliminations
Consolidated
Three Months Ended September 30, 2022
Revenue
$
659,896
$
253,953
$
77,794
$
—
$
(2,713)
$
988,930
Operating expenses(1)
452,631
175,636
48,044
63,090
(2,713)
736,688
Adjusted EBITDA
$
207,265
$
78,317
$
29,750
$
(63,090)
$
—
$
252,242
Adjusted EBITDA margin
31.4
%
30.8
%
38.2
%
25.5
%
Depreciation and amortization
(109,305)
Impairment charges
(309,750)
Other operating expense, net
(9,451)
Share-based compensation expense
(10,437)
Restructuring expenses
(24,486)
Operating loss
$
(211,187)
Operating margin
(21.4)
%
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses and share-based compensation expenses.
Segments
(In thousands)
Multiplatform Group
Digital Audio Group
Audio & Media Services Group
Corporate and other reconciling items
Eliminations
Consolidated
Three Months Ended September 30, 2021
Revenue
$
658,979
$
205,769
$
66,078
$
—
$
(2,775)
$
928,051
Operating expenses(1)
450,549
138,646
43,656
67,762
(2,775)
697,838
Adjusted EBITDA
$
208,430
$
67,123
$
22,422
$
(67,762)
$
—
$
230,213
Adjusted EBITDA margin
31.6
%
32.6
%
33.9
%
24.8
%
Depreciation and amortization
(108,100)
Impairment charges
(11,647)
Other operating expense, net
(12,341)
Share-based compensation expense
(5,993)
Restructuring expenses
(12,021)
Operating income
$
80,111
Operating margin
8.6
%
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses and share-based compensation expenses.
17
Segments
(In thousands)
Multiplatform Group
Digital Audio Group
Audio & Media Services Group
Corporate and other reconciling items
Eliminations
Consolidated
Nine Months Ended September 30, 2022
Revenue
$
1,864,356
$
720,733
$
209,716
$
—
$
(8,412)
$
2,786,393
Operating expenses(1)
1,328,688
511,025
141,509
178,938
(8,412)
2,151,748
Adjusted EBITDA
$
535,668
$
209,708
$
68,207
$
(178,938)
$
—
$
634,645
Adjusted EBITDA margin
28.7
%
29.1
%
32.5
%
22.8
%
Depreciation and amortization
(334,144)
Impairment charges
(311,329)
Other operating expense, net
(25,985)
Share-based compensation expense
(24,582)
Restructuring expenses
(54,588)
Operating loss
$
(115,983)
Operating margin
(4.2)
%
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses and share-based compensation expenses.
Segments
(In thousands)
Multiplatform Group
Digital Audio Group
Audio & Media Services Group
Corporate and other reconciling items
Eliminations
Consolidated
Nine Months Ended September 30, 2021
Revenue
$
1,762,726
$
561,252
$
182,390
$
—
$
(10,047)
$
2,496,321
Operating expenses(1)
1,268,107
399,828
124,148
197,317
(10,047)
1,979,353
Adjusted EBITDA
$
494,619
$
161,424
$
58,242
$
(197,317)
$
—
$
516,968
Adjusted EBITDA margin
28.1
%
28.8
%
31.9
%
20.7
%
Depreciation and amortization
(343,408)
Impairment charges
(49,391)
Other operating expense, net
(27,491)
Share-based compensation expense
(17,581)
Restructuring expenses
(47,216)
Operating income
$
31,881
Operating margin
1.3
%
(1) Operating expenses consist of Direct operating expenses and Selling, general and administrative expenses, excluding Restructuring expenses and share-based compensation expenses.
