iHeartMedia, Inc. 2021 Q2 SEC Filing Summary
Business context and reporting period
Form 10-Q for the quarter and six months ended June 30, 2021. iHeartMedia operates through the Multiplatform Group, Digital Audio Group, and Audio & Media Services Group. Prior-period segment information was recast to conform to the 2021 presentation.
Results continued to reflect recovery from COVID-19-related reductions in advertising demand, particularly in broadcast radio. Digital audio and podcasting continued to expand.
Key financial metrics
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 |
|---|---|---|---|---|
| Revenue | $861.6 million | $487.6 million | $1,568.3 million | $1,268.3 million |
| Operating income (loss) | $28.1 million | $(159.1) million | $(48.2) million | $(1,889.9) million |
| Net loss attributable to the Company | $(32.3) million | $(197.3) million | $(274.0) million | $(1,886.1) million |
| Adjusted EBITDA | $184.5 million | $(29.3) million | $286.8 million | $111.1 million |
| Cash flow from operations | $29.1 million | $11.4 million | $100.9 million | $102.9 million |
| Free cash flow | $(3.0) million | $(6.5) million | $49.8 million | $63.4 million |
Second-quarter operating margin was approximately 3.3%, versus negative 32.6% in the prior-year quarter. Net loss attributable to the Company was $0.22 per basic and diluted share. Six-month adjusted EBITDA increased 158% year over year, while six-month free cash flow declined despite higher revenue.
Revenue and segment performance
- Multiplatform Group revenue increased 69.7% to $605.9 million in the second quarter and 11.9% to $1,103.7 million for the six-month period. Second-quarter Segment Adjusted EBITDA was $181.4 million, with a 29.9% margin, compared with a $14.4 million loss and negative 4.0% margin in the prior-year quarter.
- Digital Audio Group revenue increased 112.3% to $197.9 million in the second quarter and 91.1% to $355.5 million for the six-month period. Podcast revenue rose 151.5% in the quarter and 147.4% year to date.
- Audio & Media Services Group revenue increased 55.9% to $61.2 million in the second quarter and 16.9% to $116.3 million year to date. Second-quarter Segment Adjusted EBITDA increased to $20.5 million from $0.3 million.
- Second-quarter broadcast radio revenue increased 84.9%, networks revenue increased 28.3%, sponsorship and events revenue increased 93.0%, digital revenue excluding podcast increased 100.7%, and podcast revenue increased 151.5%.
Liquidity, debt and cash flow
- Cash and cash equivalents were $583.3 million at June 30, 2021, down from $720.7 million at December 31, 2020. Total assets were $9.1 billion and stockholders’ equity was $788.8 million.
- Total debt was $6.0 billion, including $5.7 billion classified as long-term debt and $278.3 million classified as current. Net debt, based on total debt less cash, was approximately $5.4 billion.
- The ABL Facility had no borrowings, $32.8 million of letters of credit, and $405.0 million of borrowing-base availability; contractual restrictions reduced estimated immediately drawable availability to approximately $185 million. Management reported total available liquidity of approximately $768 million before the subsequent debt prepayment.
- On July 16, 2021, the Company prepaid $250.0 million of term loans using cash on hand and amended the Incremental Term Loan pricing. Management expects approximately $12.7 million of annual interest savings; the transaction reduced available liquidity by approximately $30 million relative to June 30.
- Operating cash flow was $100.9 million for the first six months. Investing cash use of $218.3 million primarily reflected the $228.5 million cash acquisition of Triton Digital and $51.1 million of capital expenditures, partly offset by $50.8 million from the sale of the Company’s San Antonio Spurs investment.
- Management expects approximately $162 million of cash interest payments during the remainder of 2021.
Material changes and unusual items
- The Company acquired Triton Digital on March 31, 2021, for $228.5 million in cash. Preliminary purchase accounting recorded $167.9 million of goodwill and $191.2 million of intangible assets.
- The Company recognized a $49.8 million year-to-date gain on investments, primarily from the sale of its San Antonio Spurs investment.
- Year-to-date impairment charges were $37.7 million, primarily non-cash charges related to abandoned or subleased real estate and leasehold improvements. This compares with $1.7 billion of impairment charges in the first half of 2020, largely related to goodwill and broadcast licenses.
- The six-month effective tax rate was negative 61.5%, primarily due to a valuation allowance against deferred tax assets associated with disallowed interest expense and net operating loss carryforwards.
- Special Warrant exercises and conversions substantially increased issued common shares. As of August 2, 2021, the Company reported 119.1 million Class A shares, 22.5 million Class B shares, and approximately 5.4 million Special Warrants outstanding.
Outlook, commentary and risks
Management expects advertising and operating conditions to continue recovering but states that COVID-19 may continue to negatively affect results, cash flows, and financial position. Broadcast and event revenue had not fully recovered to pre-pandemic levels as of the filing, while digital and podcast revenue continued to grow.
Modernization initiatives generated approximately $50 million of in-year savings in 2020 and remained targeted to achieve $100 million of cost savings. The Company also announced approximately $200 million of incremental in-year operating-expense savings in response to the pandemic, with plans to make most savings permanent.
Management believes available cash, operating cash flow, and ABL availability are sufficient to fund operations, capital expenditures, interest and other obligations for at least the next 12 months. Key risks include substantial indebtedness, variable-rate exposure, advertising sensitivity to economic conditions, COVID-19 uncertainty, competition from alternative media, execution of digital and podcast investments, litigation, music licensing and royalty costs, privacy and cybersecurity requirements, and regulatory restrictions on foreign ownership.
The FCC-related Remedial Petition for Declaratory Ruling concerning the GMEI Investors remained pending. The Board suspended the investors’ voting rights pending FCC approval for ownership above applicable thresholds. Ordinary-course legal proceedings and tax-related indemnification obligations also remain potential contingencies.
Most important facts to verify
- Whether the advertising recovery and broadcast revenue growth are sustained after the favorable comparison with the severely affected second quarter of 2020.
- Post-July 16, 2021 debt balances, liquidity, interest-rate savings, and the effect of the $250 million term-loan prepayment.
- Progress toward the stated modernization and cost-savings targets and whether savings offset higher talent, content, compensation and event-related costs.
- Integration performance and final purchase accounting for Triton Digital, including the recoverability of newly recorded goodwill and intangible assets.
- Status and outcome of the FCC Remedial PDR and related restrictions on the GMEI Investors’ ownership and voting rights.
- Future cash generation, covenant and refinancing risk associated with approximately $6.0 billion of debt and expected remaining-2021 cash interest payments.