Business Context and Reporting Period
iHeartMedia, Inc. filed this unaudited Form 10-Q for the three months ended March 31, 2021. The company operates through the Multiplatform Group, Digital Audio Group, and Audio & Media Services Group. Results remained affected by COVID-19-related weakness in advertising, although management reported sequential improvement and year-over-year growth in March 2021.
Key Financial Metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $706.7 million | $780.6 million | (9.5%) |
| Operating loss | $76.4 million | $1.731 billion | Improved |
| Net loss attributable to company | $241.7 million | $1.689 billion | Improved |
| Loss per diluted share | $1.65 | $11.60 | Improved |
| Adjusted EBITDA | $102.2 million | $140.3 million | (27.1%) |
| Adjusted EBITDA margin | 14.5% | 18.0% | Down 3.6 percentage points |
| Cash flow from operations | $71.7 million | $91.5 million | (21.6%) |
| Free cash flow | $52.8 million | $69.9 million | (24.5%) |
Revenue mix shifted materially toward digital. Multiplatform revenue declined 20.9% to $497.9 million, Digital Audio revenue increased 69.8% to $157.6 million, and Audio & Media Services revenue declined 8.5% to $55.1 million. Podcast revenue rose 141.9% to $38.4 million; digital revenue excluding podcast increased 55.0% to $119.2 million.
At March 31, 2021, cash and cash equivalents were $529.1 million, versus $720.7 million at December 31, 2020. Total debt was $6.005 billion, resulting in debt less cash of approximately $5.476 billion. The company had no ABL borrowings, approximately $178 million of restricted borrowing availability under the ABL Facility, and reported total available liquidity of approximately $707 million.
Material Changes Versus the Prior Comparable Period
- Revenue declined primarily because COVID-19 reduced broadcast advertising, network activity, and sponsorship and events revenue.
- Digital Audio revenue and Segment Adjusted EBITDA increased 69.8% and 141.1%, respectively, supported by podcasting, digital advertising demand, audience monetization, and acquisitions.
- Multiplatform Segment Adjusted EBITDA declined 30.9% to $104.8 million, with margin decreasing to 21.0% from 24.1%.
- Digital Audio Segment Adjusted EBITDA increased 141.1% to $40.0 million, with margin expanding to 25.4% from 17.9%.
- Consolidated SG&A declined $49.5 million to $342.3 million, primarily due to cost-reduction initiatives and lower compensation, commissions, travel, and event-related expenses.
- Q1 2021 included $37.7 million of non-cash impairment charges, primarily related to abandoned or subleased real estate. Q1 2020 included $1.728 billion of impairment charges, including goodwill and FCC licenses, related to COVID-19 and the economic downturn.
- Cash used in investing activities increased to $249.3 million, primarily because of the $228.4 million cash acquisition of Triton Digital on March 31, 2021.
- Shares issued increased substantially following the conversion of approximately 69.5 million Special Warrants into Class A and Class B common stock.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expects COVID-19 to continue affecting revenue, cash flow, and financial position, but stated that the financial impact cannot currently be reasonably estimated.
- Management expects available liquidity to fund obligations over at least the next 12 months and anticipates approximately $254 million of cash interest payments during the remainder of 2021.
- Modernization initiatives generated approximately $50 million of in-year savings in 2020, and management remained on track for approximately $100 million of annualized run-rate savings by mid-2021. The company also announced approximately $200 million of incremental operating-expense savings in response to COVID-19, with most expected to be permanent.
- The company remains highly leveraged, with approximately 42% of aggregate debt principal bearing floating interest rates. Its weighted-average interest rate was 5.4% at March 31, 2021.
- Goodwill impairment testing performed January 1, 2021 resulted in no impairment charge; future impairment remains possible if operating results, margins, growth assumptions, or discount rates deteriorate.
- The FCC-related Remedial Petition for Declaratory Ruling remains pending. Foreign investors disclosed ownership of approximately 8.7% of Class A common stock, above the 5% threshold applicable without specific FCC approval. The board suspended the investors’ voting rights pending FCC action.
- The company faces ordinary-course litigation, including commercial, defamation, employment, intellectual property, real estate, governmental, and tax matters. The filing states that outcomes could materially affect results, although no specific material loss amount is provided.
- The $60.0 million Series A mandatorily redeemable preferred stock remains classified as a liability. It may be redeemed at the company’s option beginning May 1, 2022 and is subject to mandatory redemption on the tenth anniversary of issuance.
- The stockholder rights plan expired on May 5, 2021, after the quarter-end.
Investor Verification Priorities
- Verify the pace of recovery in broadcast advertising, networks, sponsorships, and events as pandemic-related restrictions ease.
- Assess whether digital and podcast growth can offset continued weakness in the Multiplatform Group and support consolidated margin recovery.
- Monitor liquidity, operating cash flow, interest payments, debt maturities, ABL availability, and the company’s ability to reduce net leverage.
- Evaluate the strategic and financial contribution of the Triton Digital acquisition and the finalization of its preliminary purchase accounting.
- Track execution of the modernization and cost-reduction programs, including whether projected savings are realized without impairing revenue growth.
- Monitor FCC resolution of the Remedial Petition and related restrictions on foreign ownership and voting rights.
- Review future impairment testing, particularly for goodwill, FCC licenses, lease assets, and other intangible assets.