Second quarter was marked by recovery and growth at iHeartMedia as the company’s broadcast radio assets exhibited resilience against the lingering effects of the pandemic and its high-growth digital business built on the momentum of podcasting as the hottest sector in the advertising business.
“The second quarter continues the positive trends we’ve seen in our business and highlights the value of our multiplatform strategy for consumers and advertisers, plus the value of our focus on and investment in ad tech and data,” Chairman and CEO Bob Pittman told analyst and investors Thursday. “That strategy is seen through our Multiplatform Group and our Digital Audio Group, including the continued strong momentum of our successful podcast business.”
Excluding political, here is the company’s year-over-year revenue trajectory: -47% (Q2 2020), -25% (Q3 2020), -17% (Q4 2020), -7% (Q1 2021) and +78% (Q2 2021).
The company’s Multiplatform Group, which includes its 850 radio stations, networks, and national sales group, increased revenue by 70% to $605.8 million and grew earnings from negative $14 million in Q2 2020 to $181 million in Q2 2021. Broadcast revenue rose 84.9% to $451.1 million while Networks grew 28.3% to $123.6 million, with Premiere Networks up 13% and Total Traffic and Weather up 53%. Asked why growth at the networks was slower than broadcast, Pittman chalked it up to comps – the networks did better than broadcast during the depths of the pandemic in Q2 2020.
The Multiplatform Group also includes Smart Audio, the data-infused platform that sells broadcast radio inventory via impressions and audience cohorts instead of cost per point and demos, to tap into larger digital ad budgets. Smart Audio revenues shot up 95% year-over-year in Q2, highlighting the value of data and the company’s unified ad tech stack, which was a recurring theme on the earnings call.
Triple-Digit Digital Gains
After some wondered whether the 70% revenue increase the recently formed Digital Audio Group posted in first quarter could be sustained, the group – which includes the company’s podcast network, streaming audio platform and digital ad tech stack – soared 112% with earnings up 188%.
With podcast revenues up a staggering 152% year over year, Pittman used the call to frame the podcast ecosystem for investors. It relies on three interdependent stakeholders: listeners, advertisers and creators, each with unique needs. Pittman said iHeart is the only podcast publisher that has success with all three stakeholders, along with the tools and support that podcast creators need for success. The iHeart Podcast Network is attracting talent and striking up partnerships with creators “in all shapes and sizes,” from major brands like Bloomberg and Sports Illustrated, to celebrity creators like Will Ferrell and Jason Blum, Pittman noted. “We’re beginning to get the flywheel effect of this success with our audiences. The more successful podcasts we have with large audiences, the more effectively we're able to promote new podcasts and new episodes, helping to drive engagement and success for creators and advertisers.”
Underlying this is a tech stack that helps connect each stakeholder to the other and ensure financial success.
The company’s digital ad tech stack, which expanded with the acquisition of Triton Digital earlier this year, is proving its value as a platform on its own, apart from the role it plays in the company’s digital ecosystem. That was seen in a pair of deals announced this week with TuneIn and French broadcaster NRJ. Pittman characterized these as examples of iHeart’s expansion into other platforms.
Both the Digital and Multiplatform divisions boosted their profit margins – the digital unit to 27% from 25% in Q1 and from 20% in Q2 of 2020. And the Multiplatform group to 30%, up from 21% in Q1 and up from negative 4% in Q2 2020.
All in, iHeartMedia reported a 77% year-over-year revenue increase to $862 million for second quarter 2021, surpassing its earlier guidance of +65%.
50% Real Estate Reduction
From grizzled broadcast radio vets to fresh-faced podcast newcomers, Pittman said the company’s employees “set the stage for what we believe is a full recovery to 2019 levels by the end of 2021.”
That future will rely on a significantly smaller physical footprint. President, COO and CFO Rich Bressler briefly described the company’s real estate program as a “companywide effort to leverage new technologies and adopt new best practices to make our office spaces more efficient and help our employees deliver better results.” Once the project is completed the company expects to have reduced its occupied square footage, as well as its rent and real estate expenses, by around 50%.
With consumers itching to get back to live concerts, the company plans to make its iHeartMusic Festival in September, the iHeartCountry Festival and the iHeartRadio Fiesta Latina in October as well as the 11-date iHeartRadio Jingle Ball Tour in December live and in person events this year. But some virtual events staged during the past 18 months will become permanent because “they are both profitable and drive high engagement,” Pittman said.