iHeartMedia believes that the major actions announced today - in combination with the Company’s highly resilient capital structure -- will substantially expand the Company’s financial flexibility, provide sufficient liquidity to operate effectively even in an extended period of economic weakness, and position the Company for a solid growth trajectory when advertising demand returns to normal levels.
➤The Company’s proactive initiatives and capital structure supports include:
- Cash Balance of $647 million as of March 31, 2020
- Over 90% of iHeartMedia Debt Matures in 2026 or Later1
- Patient Debt Terms: No Maintenance Covenants for Term Loan or Notes
- Fundamental Strengths of the Company’s Margin and Free Cash Flow Profile
- Prior Modernization Initiatives Continue: Targeting $100 million in Run-Rate Savings by 2021; expect approximately $50 million in 2020
- New Cost Actions: Targeting Further $200 million Savings in 2020
- New Capex Actions: Reducing Capex by Expected $80 million in 2020
- CARES Act Free Cash Flow Benefit: Estimating $100 million Cash Taxes Savings in 2020
- Podcasting and Digital: Strong Audience and Revenue Growth Continuing
- Political Advertising: Significant Profit and Free Cash Flow Contribution Expected in 2020
In addition to the in-year expected savings of approximately $50 million related to the modernization initiatives announced in February, the Company has also initiated an additional $200 million in operating expense savings for 2020 driven by:
- Reductions in compensation for senior management and other employees
- Furloughing of certain employees that are non-essential at this time
- Suspension of new employee hiring, travel and entertainment expenses and 401(k) matching program
- Total direct operating expense savings in 2020 are expected to be approximately $250 million
- The Company also expects to see decreased variable sales expense and commissions associated with lower revenue
- Expect capital expenditures of approximately $75 million to $95 million in 2020 - a decrease of approximately $80 million from our previously announced guidance of $155 million to $175 million, which we believe will enable the Company to make key investments in our strategic initiatives related to Smart Audio and Digital, including podcasting
- Expect an estimated $100 million reduction in cash taxes in 2020 from CARES Act
- While National, Local and Network revenues have declined year-to-date, Podcasting and Digital revenue continue to show strong growth trends year-over-year
- Political advertising revenue in 2020 expected to remain consistent with prior election years; contribution weighted to the second half of 2020
“In addition to the previously announced $350 million draw on our $450 million senior secured asset-based revolving credit facility, which provided us with a cash balance of $647 million as of March 31, 2020, we have also identified additional operating expense savings totaling approximately $200 million over the remainder of 2020,” said Rich Bressler, iHeart’s President, Chief Operating Officer and Chief Financial Officer.
➤Operational and Financial Overview
- Year-to-date, our revenue has declined compared to last year primarily driven by a downturn in traditional broadcast radio revenues in local, national and network advertising. However, Digital revenue continues to show healthy growth, driven by our leading podcasting business.
- A sharp decline in our Sponsorships business is being driven by the postponement or cancellation of a number of our live events; however, this portion of our business is the smallest contributor to our revenue and earnings and has the lowest margin of any of our segments.
- As the business environment recovers, the Company expects the traditional promotional use of radio to be a strong benefit to us. As businesses reopen both nationally and locally, iHeart believes that it is advantaged by its unparalleled reach and the live and local trusted voices that advertisers need to get their messages out quickly.
- The Company expects the contribution of political advertising revenue in the second half of 2020 to be consistent with prior election years
- iHeart believes that it is more favorably positioned to withstand the current economic environment than its predecessor company’s audio segment was in prior recessions because:
iHeart’s ability to provide digital-like advertising solutions for its broadcast assets using its Smart Audio data and analytics platform, as well as offering its unique programmatic trading platform for broadcast radio.