Revenues at iHeartMedia in Q3 2020 improved compared to Q2 2020 and continue to grow month over month as the fourth quarter progresses. “While there is still some uncertainty about the future, we believe that if current macro trends persist, we’re on a path to full recovery,” Chairman and CEO Bob Pittman said Monday.
During a one-hour results call with analysts, he and President and COO Rich Bressler portrayed iHeart as a multi-platform company with diverse but complementary revenue streams. As it has built out new business lines like a flourishing and profitable podcast business, broadcast radio now accounts for only half of it revenue with the rest coming from digital, podcasting, networks and other channels. And these other segments had “meaningfully better revenue performance” than its broadcast radio segment during the quarter. For example, digital was up 17% year over year, from $97 million to $113 million, powered by a robust 74% increase in podcast billings. Even without podcasting, where iHeart continues to invest in acquisitions and make strategic partnerships, digital grew 8%.
“The parts of our business that have been the most resilient and performed the best during the downturn have been our newer, diverse offerings,” Pittman explained.
For example, Smart Audio, the programmatic platform the company uses to sell broadcast radio ads in a digital-like manner, was down 12% year over year, compared to the entire broadcast segment which was down 29% year over year. Pittman called this “more validation of the transformation and modernization” of the company.
And there are more changes under way. While the company continues to reduce the size of its workforce, it is using cloud-based technology and artificial intelligence to develop what Pittman called “the studio of the future” along with “centers of excellence that consolidate key resources for the whole company into one location.” This, he insisted, has improved quality while “significantly” reducing costs.
Back to Q3 financials, billings improved each month during the quarter with July down 27%, August off 21% and September down 18%. The company reported $744 million in revenues for the quarter, down 22% year over year, but up 53% from the depths of the pandemic in second quarter, when billings fell 47%. From its low point of $137 million of revenue in April, monthly revenue more than doubled in September to $291 million.
Political played a major role. Heavy election spending in October triggered a 2% year-over-year gain in what has emerged as the company’s best political year on record with political expected to be up 67% from the presidential election of 2016. The impact can be seen in three battleground states. Total October revenues in Michigan were up 25% year over year, Florida grew 14% and Wisconsin increased 12%.
And while that growth rate isn’t expected to continue in the short-term, Q4 is expected to perform better than Q3 with a year-over-year revenue decline in the low to mid-teens.
New Listening Habits
Podcasting remains the company’s “strongest performing business line,” Pittman told analysts, boasting 252 million downloads a month as of September, up 71% year over year. According to Podtrac, the iHeart Podcast Network was No. 1 in downloads each month in Q3.
While Americans’ media habits changed profoundly during the pandemic, even now with some parts of the country showing signs of getting back to normalcy, Pittman said digital listening on home devices is still up compared to pre-pandemic levels, in some case at the same or greater level than during the Q2 lockdown. The hope is the company “will continue to benefit from consumers having learned to find and use our products across these many new devices,” he said. “Early indicators show consumers are sticking with these new habits” – iHeart listening is showing double-digit year-over-year growth on digital devices, up 42% on smart TVs and +11% on smart speakers.
Continuing to shore up its balance sheet, iHeart said it’s on track to deliver $250 million in cost savings in 2020 from modernization and COVID-19-related initiatives. And the company has plans to make $200 million of those saving permanent. “This downturn accelerated our discovery of new ways to operate that will make us a leaner, more efficient organization with improved operating leverage that will continue forward into the future as revenue continues to recover,” said Pittman.
The company reported a net loss of $32.1 million in Q3 compared to net income of $12.4 million in the year ago period. Earnings before interest, taxes, depreciation and amortization (EBITDA, a measure of cash flow) decreased to $162.1 million compared to $274.7 million in the prior-year period.