Ladies and gentlemen, thank you for standing by, and welcome to the iHeartMedia Q1 2020 Earnings Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference to your moderator, Kareem Chin, Senior Vice President of Investor Relations.

Good afternoon, everyone. Thank you for taking the time to join us for our first quarter 2020 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President, COO, and CFO. At the conclusion of our prepared remarks, management will be glad to take your questions. Please note that in addition to our press release, we have an accompanying investor presentation that you can follow along with our remarks. Before we begin, let me quickly cover the safe harbor language on Slide 2. During this call, we will make forward-looking statements, including the current and expected impact of COVID-19 on the company's liquidity, financial position, and results of operations. These estimates are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ from these expectations and assumptions, and these risks and uncertainties are discussed in more detail in our filings with the SEC. In addition, as noted on our March 26, 2020 press release, due to the uncertainty surrounding the impact of COVID-19, we reiterate that the company will not be providing full year 2020 financial guidance on this call. During this call, we will refer to certain non-GAAP financial measures. Reconciliations between our GAAP and non-GAAP financial measures can be found in our earnings release or in the presentation available on our website. And now I'll turn the call over to Bob.

Thanks, Kareem, and good afternoon, everybody. Thank you for joining our first quarter 2020 earnings conference call. Before Rich and I get into our performance for the first quarter and some real-time color around what we are seeing in the business environment today, I'd like to take this opportunity to thank all of iHeart's employees for their inspiring response to the COVID-19 pandemic. As we look at Q1, we began the quarter with continued momentum from 2019. January and February were very strong in terms of both the usage and revenue across all our platforms. However, revenue began to fall off in March, as it did for most ad-supported companies, and that trend became even more pronounced in April with a sharp decline in ad revenue across almost all of our revenue segments. As we move past Q1 and examine our performance today, we're seeing two distinctly different stories, one for the consumer and the other for advertising. So I'd like to talk about, one, what we're seeing with our consumers, two, what we're seeing with advertising, three, how we've mitigated some of that downturn in revenue, and four, how we're positioned for the upturn in advertising when it comes. Let me start with the consumer. We know advertising is driven by consumer engagement, and engaged audiences are the key to strong sustainable revenue. I know that's not the case right now given this temporary downturn in advertising, but it will be when it returns. And I'd like to take you through the current landscape and discuss how we're well positioned for that recovery. Radio, which is at the heart of what we do, is all about companionship. We inform. We entertain. We discuss. We curate. But most of all, we keep our listeners company. In real times of need like this one, they need us more than ever. We've seen it time and time again with hurricanes, earthquakes, tornadoes, shootings, floods and more. We've always been there for our listeners, and the same is true now. As more consumers shifted their lives into the home in late March and April, we saw the listening follow, not only on AM/FM, but listening on home devices exploded. We've had a strategy for the past decade to be where our listeners are with the products and services they expect from us. As a result, we're now on 250 additional listening platforms and are in a uniquely strong position to participate in this increased at-home listening. Let me give you a few numbers. Web is up 43%. Smart TVs are up 35%, up 28% on gaming consoles, and up 18% on Siri. Even devices that the consumer is already using a lot in the home, like Alexa, are also up. Others have measured that same impact. Nielsen did a survey in late March showing 28% of consumers listening to the radio more during the pandemic versus just 17% who are listening less. Havas Group, one of the large advertising agency groups, released a study from April that 34% of respondents were doing more radio listening than pre-COVID, and a Mindshare study showed the same. In addition to our AM/FM and digital platforms, we're also seeing real growth in our podcast platform. We continue to maintain our lead as the number one commercial podcast publisher with about a 2:1 lead over the next largest commercial podcaster, that's according to Podtrac, the industry standard for podcast measurement. And we are one of only two major podcast publishers who grew in terms of unique audience from February to March, another sign of our strong momentum. We also grew usage by 35% year-over-year based on unique audience. And more importantly, our podcast revenue in Q1 grew 80% year-over-year and is currently pacing at over 100% year-over-year for Q2. In addition, as those of you who follow us closely know, the revenue is generated by podcast publishers, not distributors. But as further evidence of the power of podcasting, we did see usage for podcasting on our own iHeartRadio app increase over 100% year-over-year and 29% month-over-month, making us one of the largest podcast distributors as well. We constantly track consumer sentiment and behavior and even publish a daily report that our program is used to make their programming more relevant every single day. This understanding of and responsiveness to the consumer is the reason most of our morning shows added an hour and now end at 11 a.m. instead of the traditional 10 a.m. Our listeners have shifted their days. And as we began to reopen America, that kind of finger on the pulse and the ability of our live and local programming to respond immediately is critical to both our listeners and to our advertisers who are searching for ways to be relevant in the moment and in tune with this massive consumer shift. We've also created unique programming on all our platforms to respond to the realities of this temporary environment. The iHeartRadio Living Room Concert for America on Fox was the first major virtual concert and gained record ratings on TV, huge listening on the radio and, more importantly, raised over $15 million. We amplified it all using our position as the number one audio player in social. And on our radio stations, we quickly added hourly COVID-19 reports and daily COVID-19 newsletters and podcasts. We saluted businesses doing good and supported the efforts of others from Verizon's Pay it Forward campaign to the Global Citizen concert. We saluted healthcare professionals and those on the front lines every night with Empire State of Mind by Alicia Keys, featured on Z100 in New York, hosted by Elvis Duran with the Empire State Building providing a synchronized light show to accompany it. We also built out Wednesday night Living Room Concert to State Farm and First Responder Fridays with FirstNet, built by AT&T. And finally, we're continually looking for new ways to fill the holes in the lives of our audiences. We've built out a virtual prom for high school seniors, featuring sets from DJs Marshmello, Diplo and more, a special performance from Lewis Capaldi and hosted by Dua Lipa and our on-air personality, JojoWright. And more significantly, we're filling the void for graduates with commencement speeches for the class of 2020, which will be delivered as both podcast and over our 850 radio stations nationwide. Speakers include John Legend, Eli Manning, Mellody Hobson, Katie Couric, Bobbi Brown, David Solomon, Halsey, Pitbull and over 30 more. I also want to point out that while we are the number one audio company in America, we're also a major player in non-audio digital as well. And through this crisis, that digital audience has reached a new all-time high. Our internal numbers for March show reaching 117 million uniques on our digital properties. That's including station and personality sites in our app. That's an increase of 32% year-over-year. Those digital users are in addition to the 216 million social fans and followers for our products. Now turning to advertisers. We have built our company, our platforms and our products to serve our communities and create trust and engagement across multiple platforms with the greatest reach of any other audio company or even any other media company in the U.S. In normal times, we're able to monetize that with advertisers to generate growing revenue with a strong margin and great free cash flow characteristics. We fundamentally believe and have always seen that advertising revenue follows consumers, just not at this moment of dislocation. Advertising overall and most of our advertising streams have seen a major drop, and the reasons are obvious. Many businesses are shut down. Businesses and brands needed time to rebuild their messages to be relevant in a completely changed world. Companies needed to save money, and many did so by reducing or eliminating ad spend. We've seen the most significant declines in our broadcast radio advertising revenue. However, revenue from our SmartAudio, data and analytics ad product, which also includes a programmatic platform for broadcast radio, has proven to be more resilient than our traditional offerings. That part of our Broadcast advertising revenue has declined by only half the decline of the rest of our traditional Broadcast revenue, which bodes well for our future as SmartAudio increases as a part of the total ad revenue for our company. Digital continues to grow, driven, in large, by podcasting, which, as I mentioned before, is one area of our business where advertising is following listening even in this challenging environment. We're not only monetizing that usage growth. But right now, our podcast revenue growth rate is pacing 3x our podcast listening growth rate. We believe that's due to our position as the number one commercial podcaster as measured by Podtrac, coupled with the diversity we have in content categories. On the Podtrac category ranker, no publisher is featured in more categories or genres than iHeart. We're featured in 16 of the 19 categories. The tight integration of our podcast with our broadcast radio gives us unique and powerful capabilities to create hit podcasts again and again. As we reported earlier on sponsorships, we have postponed or canceled a number of events, large and small, which will impact the revenue line. Fortunately, it's our smallest revenue segment, representing about 4% of total revenue in Q1, and it has our lowest margins of all. Rich and I and others in our management group have lived through downturns before at different companies and at different times. As is required at times like this, we responded quickly with major cost reductions to mitigate some of the revenue loss and preserve liquidity. We will save costs from commissions as revenue declines, but our high operating leverage structure meant we had to reduce fixed costs as well. We announced in February, pre-COVID, that we had taken steps to modernize the operations of the company to make it function more like a company operating in 2020 and to be more cost-efficient. Through these steps, we reduced expenses by a $100 million annual run rate with $50 million in savings expected in 2020. As a result of the downturn related to COVID-19, we found another $200 million in expected cost savings on top of that $50 million for a total of $250 million expense reductions in addition to the substantial sales cost savings in 2020. We've also reduced our capital expenditures by $80 million, and we found another $100 million in cash tax savings. Rich will explain how we have also focused on liquidity as well. Although we can't predict the future, we feel that these significant actions, combined with our liquidity, will allow us to weather the storm even under conservative recovery scenarios. We also believe that four key strategic actions we've made in the last decade, which I'm going to discuss, have put us in a much better position as the world returns to normal and well prepared to capture the business demand as it returns. Let me start with our first strategic decision. Almost 10 years ago, we launched our digital radio platform, iHeartRadio, to allow our stations to be heard no matter where the consumer is and on devices other than broadcast radio. As I mentioned earlier, our strategy was, and is, to be where our listeners are with the products and services they expect from us. iHeartRadio is now in over 250 platforms from smartphones to video game consoles, smart TVs, and smart speakers. This gives additional horsepower in the home and is a key point of differentiation between us and other audio players. Our massive reach comes from AM/FM devices where we have a 2:1 audience lead over the next largest broadcast radio company, but on digital radio, that lead is magnified. We have a 5x audience lead over the next largest broadcast radio company. So our company is now agnostic as to the listening platforms, which gives us the flexibility to meet the needs of consumers and of advertisers on whatever platforms they choose. Our second strategic decision was podcasting. After studying and testing it, a few years ago, we had seen enough evidence to make the decision that podcasting could truly become our fourth audio platform, and we made a strategic decision to prioritize it and invest behind it. Today, in the U.S., podcasting reaches more people in a month than the streaming music collection services like Spotify, and it's grown at a much faster clip. It is consistent with our strong audio positioning. And it's not only a way to increase our engagement with users, it's also its own powerful revenue platform, plus it is a gateway to iHeart to bring new advertisers to our other audio platforms. This podcast platform will be an ever-increasing importance to our company for both usage and revenue. And third, seven or eight years ago, we realized that to reach our potential and not be completely at the mercy of what happens with the defined pool of radio revenue at the ad agencies, we began to build out our capabilities to interface directly with clients and deal with more than just media. In addition to our great relationships with our agency partners, our marketing solutions teams now build and execute marketing ideas for our clients as well as our valuable agency partners. That puts us in the middle of revenue discussions well before budgets are built or allocated to the different media. Today, approximately half our revenue, in one form or another, has a direct client relationship. We believe this marketing solutions capability makes us a more valuable partner to our clients and our agencies. Finally, our SmartAudio data and analytics suite of products and services, built on Jelli, the technology company we purchased at the end of 2018, is taking the best of the targetability and attribution of digital and moving it to our high-reach broadcast inventory. This sets us apart from traditional media companies and provides a foundation for more robust revenue growth than our traditional broadcast revenue and begins to tap into the digital pool of ad revenue. In essence, we're making our broadcast radio inventory like digital. Rich will take you through our Q1 performance, but I wanted to leave you with these points. We hate to be in this environment with this kind of impact on our revenue. However, we recognized it quickly, and we responded by reducing costs and increasing liquidity. We monitor the business environment every single day and we're working with advertisers on their plans to reenter the market. We know the reopening of businesses and brands depends on consumer demand, and advertising has always been the fuel that drives that demand. Importantly, we're now focused on recovery. We're well positioned to capture ad demand as it returns, whether national or local and across all of our platforms. We believe the strategic decisions we made in the past put us in a unique position versus other media companies to benefit from the upturn, no matter when it comes and whatever speed it arrives. And with that, I'll turn it over to Rich.

Thanks, Bob. As you are all aware, our first quarter results reflect both the strong performance we saw in January and February, followed by the sharp declines we started to see in March. As we all know, the pandemic caused a significant economic downturn. We saw these declines accelerate into April. And as Kareem said at the outset, we have withdrawn our full-year guidance and will not be providing updated guidance until we have more clarity on how and when normalized levels of advertising demand will return. As Bob mentioned, our strategy over the last several years has been focused on developing and investing in our multiple platforms, sales infrastructure, and data and analytics capabilities to strengthen our position as the number one audio company in the United States. We believe that the diversified offering we have today has helped our business to be more resilient during this downturn and positioned us favorably to capitalize on eventual recovery. In terms of the first quarter results, our consolidated revenue decreased by 1.9% over the prior year period. Excluding the impact of political revenue in the prior year quarter, revenues decreased by 4.8%. Direct operating expenses increased by 6.6% in the quarter, driven primarily by one-time costs related to our modernization initiatives, which were primarily incurred in January and February as well as higher content costs from higher podcasting and digital revenue and higher music license fees and digital royalties. The increase in direct operating expenses was partially offset by lower event production costs as a result of the postponement of events in response to COVID-19. SG&A expenses increased 5.9%, driven by one-time costs related to our modernization initiatives, trade and barter expenses related to iHeartRadio Podcast Awards, and higher bad debt expense. Corporate expenses increased $800,000 during the quarter as a result of costs incurred in relation to our modernization initiatives and higher share-based compensation related to our new equity compensation plan. This increase was partially offset by lower employee expenses, including lower variable incentive compensation expenses resulting from proactive initiatives taken to mitigate the potential financial impact of COVID-19. Adjusted EBITDA declined by 10.6% compared to the prior year quarter, driven by the revenue declines related to COVID-19. Our GAAP operating loss of $1.73 billion was driven by a non-cash intangible impairment charge. If you recall, when we emerged from bankruptcy in May of 2019, when the macroeconomic environment was drastically different than today, we applied fresh start accounting, which resulted in a significant write-up of our intangible assets. Now, with the downturn associated with COVID-19, we have to readjust the book value of those intangible assets. In our traditional radio business, Broadcast revenue declined by 5.2% on a reported basis, while Networks declined 2.6% year-over-year. Those declines were driven by the economic slowdown that began in March related to COVID-19. Our digital revenue stream grew 22.2%, primarily driven by the continued growth in podcasting as well as other digital revenue. Audio & Media Services, which is heavily impacted by political spending, grew 17.2% on a reported basis and increased by 3.2%, excluding the impact of political revenue. Sponsorship and events revenue decreased by $10.4 million compared to the prior year, primarily as a result of the postponement or cancellation of events in response to COVID-19. Turning back to our consolidated results and looking at the items below the line. Interest expense increased $90.2 million compared to the same period of 2019 as a result of the interest incurred on our new debt issued upon our emergence from Chapter 11 on May 1. At quarter end, we had approximately $5.3 billion of net debt outstanding which includes a cash balance of approximately $646.8 million. In February, we made a $150 million prepayment and amended our term loan facility to reduce the interest rate and to modify certain covenants. In March, we drew down $350 million under our $450 million ABL facility as a precautionary measure to preserve financial flexibility in light of the current economic uncertainty. As a reminder, the terms of our debt structure include no material maintenance covenants, and there are no material debt maturities prior to 2023. 90% of our debt does not mature until at least 2026, providing significant structural resilience in the current uncertain macro environment. Cash taxes in the quarter were immaterial, and we generated approximately $70 million of free cash flow from operations. As we look ahead to the rest of 2020, we expect that revenue will continue to be challenged given the impact that COVID-19 continues to have on the macroeconomic and advertising environment. In response to the currently weak economic environment, we announced key operating expense savings initiatives last month to partially offset these expected revenue headwinds. These savings are expected to generate approximately $200 million in operating cost savings for 2020, driven by reductions in compensation for senior management and other employees, furloughing of certain employees that are nonessential at this time, suspension of new employee hiring, travel and entertainment expenses and major reduction of consulting fees and other discretionary expenses. These actions are incremental to the modernization initiatives we announced in February, which will generate $100 million of annual run rate savings, of which we expect to see $50 million of that savings in 2020. Therefore, in total, we expect to deliver approximately $250 million of cost savings in 2020 from these combined initiatives and also expect decreased variable sales expense and commissions associated with lower revenue, which will be incremental to the operating expense savings that I just discussed. In addition to our operating expense savings initiatives, we have also taken actions to reduce our capital expenditures in 2020 by approximately $80 million compared to the guidance given on our previous earnings call. This will reduce our total CapEx for 2020 to a range between $75 million and $95 million. And we expect certain provisions of the CARES Act to partially offset the negative impact that COVID-19 is having on our 2020 free cash flow. Finally, as you may have seen, we announced yesterday that our Board of Directors adopted a short-term stockholder rights plan in order to protect the best interests of all iHeartMedia stockholders during the current period of high equity market volatility and price disruption. The rights plan is similar to rights plans adopted by other publicly-traded companies. We believe that our previously announced modernization initiatives and our recently announced cost-saving actions, in combination with our resilient capital structure, all provide us with financial flexibility and sufficient liquidity to operate effectively even in an extended period of economic weakness. As Bob said, we are well positioned to capture ad demand as it returns, whether national or local and across all of our platforms. We believe the strategic decisions we have made in the past decade put us in a unique position versus other media companies to benefit from the upturn no matter when it comes and at whatever speed it arrives. And now we'll turn over to the operator to take your questions. Thank you.

And your first question comes from Jessica Reif Ehrlich with Bank of America.

Thank you. I just wanted to drill down into advertising, if possible. On political, is there any reason to believe that political won't pick up in the back half? Can you give us any color on how big sports and entertainment are as categories? And some of the categories that were the first to go on list to come back. How big the travel and restaurants? How big is that? And then just to parse it out, and then some of the categories that we understand are still very strong are pharma, financials, tech, how big are they as a category for you?

Jessica, this is Bob. Let me start, and I'll have Rich join in. I guess the good thing about the company overall and the history of it is we really don't have any specific category that's over about 5% of our revenue, and there's no single advertiser that's over 2% of our revenue. Travel and hotel, that category has never been a big category for us. So we don't have a lot of exposure there. Clearly, we've got exposure to movies. As movies come back, that should be very good for us. We have some sports stations. We're not the major player in sports, but we do carry play by play, et cetera. So we will have some opportunities there and have been hit somewhat on that downturn. In terms of political, we have no reason to believe that political is not going to be as robust as we initially expected it to be and are looking forward to that. And I think as we look forward on our business, we really can't predict the future, and I don't want to try and do it. But I can share a couple of data points just to give you some sense of what it looks like. And for this, the only hard number I've got because I really don't want to give you an evaluation as pacing and point out that pacing is not a great predictor of the future, it's just a data point. But we did see May bookings slightly up over April, and we see June better than May. And Q3 a bit better than Q2. So we have some evidence that says, yes, we see that return. And again, political probably will be booked then more at the last minute than in advance. But again, we're in uncharted waters, so I want to be cautious. But I did want to share a little bit just to help you with that as I can. Rich, do you want to add something?

Yes. Hi, Jessica. Yes, Bob, thanks. Thanks, everybody, for being here with us today. The only thing I'd add, Jess, is that when you look at different categories and Bob reiterated that nothing is more than 5%, yes, and we did have some nice momentum on the entertainment side of the business historically, particularly as three, four, five years with the movie studios and other entertainment. But at the same time, we have really started to build up traction on a number of streaming services that are out there. This is prior to COVID-19 even. The existing streaming services, and quite frankly, the ones to be announced in the future. And so again, not trying to say it's one for one or dollar for dollar. But sometimes when you get the headwinds that we talked about, you discover other opportunities as these streaming services try and break through the clutter for all the in-home activity that Bob articulated that we're seeing.

Okay. And then just is there any way you can make a comparison to this period, which is something we've never seen? But any comparison to the 2001 recession or 2008, 2009? What's different in your product mix now that maybe will help you weather it a little bit better?

Well, this company, as it is today, wasn't around for either one of those, but Rich and I both were, and saw them and we sort of examined this company against it. The predecessor company, Clear Channel, was really basically just outdoor and radio during 2008, 2009. And I think having these multi-platforms has been very valuable to us. As we pointed out that we made some strategic bets as a company. We bet on – we made a bet on SmartAudio. We made a bet on podcasting. We made a bet on digital. And it's encouraging to see that those three areas are not down nearly as much as our traditional revenue streams. So even before this happened as we sort of projected, okay, where are we really going to get our growth from? What are those growth revenue streams? What are we going to focus the company on doing to see those perform like this, has been very encouraging. 2008, 2009, we basically had – we just sold radio advertising. The truth is we did not have many relationships with clients. We didn't have many relationships at the agencies, except with the buyers. And so we were completely dependent upon how much money somebody allocated to radio. And as you know, in 2008, 2009 is really when social took off. And we found that every time there is a big recession is when people start taking chances on new stuff. In 2008, 2009 – or before that, if your business was doing well and somebody said you should have social, people go, 'I don't think I want to rock the boat too much. Sounds great, but things are going well. I'm going to stick with what I've got.' When things turn down, so we say, 'Okay, I'll try that now.' And I think the fact that podcasting is still growing right through this downturn is evidence of how those things happen. We also think there was a real growing interest in audio before the downturn. And our hope and our expectation is that audio will benefit during this downturn for people saying, 'Okay, I'm going to focus on audio. What, I really haven't spent enough time with it or in the case of companies like P&G proved that they have moved too far away from it, went back to it and had record growth before this happened.' So we're going to see that. And look, I think if you go back to the early 2001, 2002, you were looking at the emergence of search, got the benefit of somebody trying something new. 1987 was the cable networks. Okay, I've always been on broadcast, but I'll try these newfangled things called cable networks. 1997, 1998, a little downturn there was, we'll try online. It's when AOL got that big surge in ad revenue. So again, nobody likes these things. But we're cognizant of the fact that advertisers will reevaluate things and take more chances at moments like this even with much smaller dollars. And so we're spending a lot of our efforts with our sellers and with our partners trying to push that through.

Great. Thank you.

And your next question comes from Steven Cahall with Wells Fargo.

Thanks. I just wanted to follow-up on some of the podcasting discussions. So if we think about being up like 80% to 100%, I imagine that listening isn't up quite that much or maybe it is. But can you just help us think about how much of that is just volume? Because my guess it's a lot more. This is as you talk about a lot of advertisers converting into podcasting. And it's still pretty early with measurement, but maybe you can talk a little bit about what effective CPMs are starting to look like and how advertisers feel about that medium versus traditional radio? And related to that, what do you think is driving such strong growth on the iHeart app in terms of the distribution platform for podcasting?

Sure. Well, let me start with the podcast. I think that we're seeing about 3x the revenue growth that we're seeing in usage growth, and the usage growth is very strong. I think that probably indicates that we're not only growing with the growth of the category, but we're also probably growing our share as another vector within that. It's very clear with the size we've got now. We've got not only the biggest podcast of all time, but by a pretty good margin, the largest commercial podcaster. We've sort of got a flywheel effect going now because we've got such a large broadcast radio audience that we can continue to promote these podcasts the way others can't. I think we ran the numbers. We give it something like $100 million of broadcast radio advertising, cost us nothing because it was advertising we didn't sell. But by using that to promote podcast, it gives us a machine to continue to crank out these hit podcast. We've also developed these strong relationships with clients and agencies, really at the strategy and investment level. They are looking for new ways for their advertisers to reach their consumers, new marketing vehicles. What they find with podcasting is that there's tremendous engagement. People listen to the whole things. They talk about it. We're getting CPMs that look like online video, OTT, which were really the premium CPMs. So as opposed to radio, which sells overall at about a third the CPM of TV, even though the impact is about the same as TV at the same weight level, in this case, we're getting premium pricing and not seeing a whole lot of resistance to it. And I think in terms of your other question was on – Steve, remind me?

Yes. Yes. Well, what's driving the big increase in iHeart app distribution of podcast?

Well, I think the – we've got all these platforms we built out, and we've been building them out for 10 years, our strategy – and everybody says, what was your digital strategy? We didn't really have a digital strategy. We had a product strategy, which is, if our listeners are listening and are available on their phone, we ought to have iHeart on the phone. We ought to have our stations there. So we built out this platform called iHeartRadio to carry all of our radio stations. What we find is that people want to listen in all these different places. If they're on the video game machine, they want to do some listing. We're finding a lot of listening now coming on smart TV. Now the bulk of the listening, even when you add Spotify, iHeart, everybody that's doing any sort of audio streaming together, that's only about 15% of listening. Most of it is still AM/FM. But a few years ago, that was 95%. So it continues to grow. I think by having a service that can be there in any of those places, it's been very important for us. The ability now to take our podcast there as well is significant as well. But on our podcasting, unlike our radio stations, we have a distributed content model, which means we're – we let everybody carry. You can get it on Apple podcast. You can get it on Spotify. You can get it anywhere you get podcast, not just the iHeartRadio app. We think that has given us the best distribution possible for our podcast.

Hey, Steven, if I could just add one thing on podcasting or just a couple of things, that your opening question, just to reiterate what we just announced today is that our usage is up 35% over year-over-year. Our revenue is pacing up more than 100% year-over-year. I think there was a perception to your question because there's been the last couple of weeks kind of in the trade press, the podcasting is down. I think as Bob pointed out in his opening remarks, it may be down to the industry, but if you look at ourselves and actually I think the New York Times, which announced yesterday with The Daily, we are significantly up with the numbers that we talked about. The second piece, and we talked about this even prior to COVID-19 and just continuous extension, remember, from a podcasting revenue stream, we always talked about – to remind us all, we always talk about two vectors in terms of where we're going to make money on podcasting and why – when people say, gee, what was your path to make money? When do you think you're going to make money? We've been making significant money already. Those two paths were, and while we're so optimistic about the future on podcast and continue to be, one, was just the whole podcasting revenue pie going up. We continue to see that. I think somewhere in the last day or two. I'm forgetting this, for all of those pieces running together, there were some estimates out there about the podcasting pool of dollars going to like $1 billion in 2021 as we look forward. Probably was about $400 million or so in 2019. I don't know, it's going to be $600 million $700 million the whole pool of U.S. advertising dollars. We always said we participate in that growth. The other vector we participate in is getting our fair share. Historically, and to this point, even with all our success, because of the historical nature of people that were advertising in podcast is, which historically used to be more a DR, direct response advertising.

That's great, and if I could squeeze one more in, I really appreciated those three scenarios that you laid out in the release and in the slides, maybe just a question about your confidence in being free cash flow positive in those scenarios, if you could comment on that. And related to that, a couple of your radio peers are sort of trading like they may not survive this downturn. If that happens, how does that change your outlook for the industry in that environment? Thanks.

Well, let me start on the last part, and I'll let Rich talk on the free cash flow. I think we are a different company than really anybody else in the audio space. We have both a digital platform. We have all the social platform. We have an ability to grow when others can't grow. That gives us completely different characteristics. We also have national reach, which really no one in radio has as well as having substantial leadership position even in all the markets we're in, just market-by-market. I don't sort of – we don't spend a lot of time saying how are we looking versus other people in radio. We're spending a lot of time saying how are we looking versus a lot of other people in media. Indeed, we built the SmartAudio because we saw what Facebook and Google were doing and said we need to be able to offer those same kind of capabilities. If that's $1 billion – if that's $100 billion of revenue, we need to be looking there for what we do next. Rich, do you want to hit the free cash flow and maybe add some comments there.

Yes. Sure. Yes, Bob. Sure. One thing I would say, Steven, as you think about this, when Jess asked her question, she talked about these unprecedented times. Bob pointed out that the two of us have been through lots of challenging and difficult times and have been through pretty much all these recessions. I will say the one thing that is consistent whether you're in a recession period of time or in this pandemic period of time, which is obviously awful or whatever period of time you're in is a management philosophy. Our philosophy, and you know this, by the way, even when we came out of restructuring and for the three quarters or three plus because we have pride entering into this pandemic is the way you manage your company. So I'm not going to make a prediction about free cash flow going forward because that would be in effect giving guidance. But I think, as you know this, even when we came out of restructuring period, we were laser-focused on the generation of free cash, even with a much improved balance sheet. We were making great progress towards our stated goals in terms of what we wanted to pay down debt and our leverage ratio and give us the financial flexibility. We were cutting cost even before. Again, we were in this pandemic and talked about our margin expansion, which had dropped during the restructuring period. Again, we're making great progress on that during that period of time. So that operating philosophy, which obviously you have to step up to a different level, as Bob and I both articulated and give you some numbers around it, that doesn't change. It just probably – it just gets more intense. But you have to have it even during good times. And the great thing about this company is, as we always talked about this, we have lots of levers to pull. Bob – we talked about whether it's capital expenditures. We talked about whether it's the benefit of the CARES Act, the taxes. But just as we're on – there also – this is also a great company in terms of working capital, which I can assure you that we're aggressively managing. So in good times, and by the way, even with the fixed cost base, we've got more leverage to pull than probably most companies in America right now to continue to generate cash.

Great. Thank you.

And your next question comes from Zack Silver with B. Riley FBR.

Okay. Great. The first one for me is, given that you guys have stations pretty much everywhere in the country, can you give us a rough sense of how advertising is trending directionally in markets that are a little more open, have been a little more open or starting to open up versus ones that are being hit particularly hard by the pandemic and still remain completely closed?

Yes. Let me hit that, and Rich can add. We – obviously, as you would imagine, that's exactly what we're spending a lot of time looking at. Oklahoma and Georgia were the first two we looked at. It's a little early to see the sales come through on any activity. But we monitor activity of sales, contacts with the advertisers, proposals form, et cetera. The sales activity has gone up dramatically in the markets that are opening up. Now whether that turns to sales and whether it comes back at the same dollar volumes we do on each sale, et cetera, we don't know yet. If I gave you anything, I'd be guessing. But I can tell you we are seeing differentials there, enough so that it really causes us to say, 'Okay, the minute one opens up, there's going to be a flood of demand.' We're going to have to be ready for it, and we're building out our capabilities and our sales plans based on that.

Yes. And just the only thing I'd add – the one last thing, whether it's national and local, just as a reminder, and Bob always says this, advertising is a fuel that's going to create consumer demand. That's just the fact he was stating. For all of us that are in some states that are opening or partially reopening, like how do you know like the restaurants open, stores open, what their hours are, what's the appropriate shopping engagement in those locations. It just really hit you if you got out being the executive, helping run this company, just kind of living my day-to-day life. How do you know what's out there? People have to advertise and tell consumers about their current state.

I think to add to Rich's point, radio, which is where we started as a company, one of the things that everybody says radio does better than anyone else is an opening, a grand opening, a reopening. In essence, almost every business locally is going to have to have a grand reopening. Logic would tell you that we would benefit from that whether we do remotes or whether we just pile on the advertising forward, push traffic. We're very good at building traffic. Every business is going to have to build back its traffic, and it's going to have to reintroduce itself to its consumers. We are hopeful that, that continues to play out as it has in the past.

Got it. That's helpful. And then one more, if I could. Just on the incremental $200 million in OpEx savings that you've called out. A lot of the characterization of that seems like when things hopefully get back to normal, they'll be coming back. But longer term with this and with the changes that you've made in some of your operations, just based on things like social distancing, work from home and that, do you see any longer-term potential structural changes to your operating expenses coming from this?

Yes, we do. I think probably every business you'd talk to would say the same thing. I can't imagine – we're going to travel. Travel and entertainment, T&E, is going to come back anywhere near the levels that it was. I think everyone has learned that I can do a lot over Teams or Zoom or whatever. I also think we'll think about real estate costs much differently, which is a big cost for us. I think there are some jobs that we're finding are better off done or can be done just as well or better out of the office, especially if we can monitor productivity and monitor work carefully. This is causing us to rethink structurally what we'll do. We think there were expenses we had in the company that we realized we don't need going forward, that they were probably legacy. We were afraid to get rid of it. This forced us to, as we talk about in recessions, this is when you say, 'Okay, who cares if there's a risk? We got to try it.' Some of those have worked out well. It's certainly on our mind and certainly in our plans, and Rich and I and senior managers are already talking about it.

Got it. Thank you, Bob.

And your next question comes from Jim Goss with Barrington Research.

Thanks. You mentioned earlier in the call that you've been adding an extra hour of drive time to your early morning programs. I'm wondering if that's added incremental monetization that's either an incremental purely or at least offset some of the hit you might have taken because of the softer ad rates? Do you think any of that would continue beyond the COVID crisis and that listeners might be getting used to that or there might be more work at home in the future?

I'm not sure a lot of our personalities want to keep going that extra hour. It's a long day. We did it in response to listener demand. They shifted their days. One of the things we're doing every day is we get an actual report on sentiment, consumer sentiment, what they're feeling, what they're looking for, how moods are changing. It's fascinating to watch it. We use it for our programming. That's of course where we picked up that they really were shifting back a day, and we need an hour more of the morning shows. I wish we had been able to monetize it. But I think we characterize April as probably the worst monetization month I've ever seen. Hopefully, as we say, we're seeing signs it gets better after this. I think probably more than anything else, though, if you look at radio, there's always – in the audio section, there's radio and there's the music collection. There's companionship and escape the world. There was always a question about what people thought was more important. I think it's pretty clear what they think. I mean if you pretty well-publicized that the streaming music services, the music collection, dropped during this period of time and that people were looking to the radio more than ever because they really needed that human companionship. I need to trust the voice. There was so much stuff being said they didn't know what to believe. In the beginning, they wanted all our radio stations to talk about COVID. Now some of our radios stations, they don't want to talk about much at all. They need time away from COVID. We're finding like 75% of people say, 'I need time away from COVID information.' We're adjusting what we do. But they're looking for that human connection. I think, again, in the advertising community, it's probably pretty stark proof of the power of radio and that strength of that unique relationship we have with the consumer. I think as things come back, again, that accrues to our benefit. Having all these multi-platforms, we've put iHeart on the smart TVs, on all these devices that a lot of people didn't use. They used Alexa. That had pretty good usage. Used some of the other smart speakers, but now they're using the smart TV. They're using the Roku, the Sonos, and they're going to these other home devices. We think that usage will stay there even after people come back to a more normalized life.

Okay. A couple of other things, podcast creation during the crisis, is it less impacted because it's something – perhaps it's going to be somewhat easier to do without big production and so give you more variety? And the other one would be, have you learned anything during this that you think will further change your business on a more sustained basis, similar to what you were talking about earlier on?

Yes. We have continued, I would say, we've accelerated our place of launching new podcasts. If you watch our slate, you'll see those popping on. We've also done it with bigger and more important people. I think it's sort of a recognition that, look, iHeart is the leader in podcast. If I want to get a hit podcast, my best chance is with iHeart. I'm really proud of our folks for doing these commencement speeches for the class of 2020 in which you've got these kids, seniors, that are missing their graduation, what a moment to miss. We have gotten these fantastic, important people to do commencement speeches, which we're delivering as podcasts. Now in a true iHeart fashion, we're also able to take them and put them on the radio as well. So for us, we look at moments in time, like the commencement speeches. We look at the big players and do that. We look at building out podcasts, like what would be a good idea and who would be the best people to do it and let's go after it. We've gotten hit a very good rhythm with that. In terms of our other creation, in terms of radio and everywhere else, we've got an enormous number of our shows being done at home. I must tell you, if you look at the TV news people doing their shows from home and Nielsen, to the radio folks, doing their show from home, I think the radio shows from home sound a lot more normal. We haven't lost much. In some cases, we've gained things by doing it. I think it's allowing us to think a little more creatively about how we put these shows together, how we deliver them, how they're much more relevant and of the moment. Yes, we're learning a lot about how we can work differently with our engineers, where they're located, how they're working together. I think we're learning that we can be a lot more efficient. We don't need as many steps in a process anymore, because it's forced us to just pick the phone or call somebody, pick them up on teams, call them on the phone and say, 'Give me an answer right now.' It's made things more immediate. It's cut out bureaucracy. I think that's lowered frustration, allowed us to do bigger ideas faster. We've done a number of big ideas for advertisers during this period of time. What we hate is the loss in ad revenue. But during this time, we've also had some big wins, big programs with advertisers that have come in. We've been able to deliver. In some ways, we've been able to deliver because we've been able to move so quickly through this new way of doing business.

Bob, if I could add one…

Do you want to add…?

No, no, I wouldn't add much, Bob. I just – I think what we've said, I think somebody asked the question before about some of our cost initiatives, which, when you look at, like every company in America, we're just becoming more efficient. The only thing I was going to add is look at what we're doing here today. I mean I don't know the how the rest of all your companies in terms of earnings. But I'm sitting – I'm sure my other colleagues are, which I'm seeing in the kitchen on an iPhone, looking with my pad, and that's how we got ready to do this call over the last couple of days. Mike McGuinness' team, they closed the books, everybody was doing a remote. I can't believe it could be any less expensive or more efficient to get ready for a call. I'd rather be sitting next to Bob, obviously, doing this call. But yes, we're able to communicate, in addition to all the advertising things that Bob talked about.

I think it also causes us to organize our information differently. Those places, we were still probably using legacy too much. Here's that book. I've printed it out. Here, I'm handing this to you on your desk with five people around this table all looking at the same piece of paper. Moving everything electronically, really the systems were there. We probably weren't using them nearly as much as we should have. We weren't using Teams. We weren't using Zoom. It was sort of rare to do somebody to teleconference into a meeting. We're going to find that's going to add a lot of efficiency and snap to the operation.

Sounds good. Appreciate it.

I think we have time for probably one more question, and there is.

Okay. And your final question comes from Jay Brownlow with Mallard Creek Capital.

Hi, guys. I'm one of your landlords in several major markets, and while there's plenty of detail in the deck and reporting generally on revenue segmentation. Can you tell us and shed some light on what operating income and cash flow were for Crestview Radio and your other major revenue channels that comprise audio for 2019 and for Q1, if you go can?

Rich, do you want to take that?

Yes. I mean, Jay, probably the best thing is for you to follow up with that with Kareem. We've got – we don't give – we only give one EBITDA number out there. Because, again, just to remind everybody, we have one cost structure that drives our multi-platform approach for all of our revenue streams. Everything has been out there in terms of the filing of the 10-K and will for this quarter to be on the 10-Q, and if you have any additional follow-up questions, you should feel free to reach out to Kareem, and he'll grab Mike McGuinness also at that time. I just want to – I think I just want to add, Bob and I, and I'm sure Bob will offer, just our thanks, most importantly, to everybody, be healthy. We very much appreciate the support. By the way, we wish we could give you more details on guidance, more details on looking forward during this time of uncertainty. But believe me. We're incredibly sympathetic like that. We can't wait until we get back to the time where we are giving more detailed guidance about the future of our business.

Yes. I just want to add my thanks as well. I have a little add to what Rich says other than – this is an interesting moment for us. We – Rich and I have approached this as we've got to. We didn't cause it. We're here. We need to make this a real learning experience for us and learn and take some lessons away, take some chances on the business, improve the business because what this is really about sort of Phase I was, okay, let's protect our workforce. Let's get them out of the office. Let's get them into working. Let's get our systems set up. Let's do all that. Let's try and get through the worst of cancellations and our advertisers adjusting to this moment. Let's build the products, make product adjustments we need to do. Now I think we're in the mode of, okay, let's look ahead. There's going to be a recovery; don't know how fast, don't know when it's coming, don't know how big, but there's going to be a recovery. How do we make sure that we maximize our impact there, how do we get the most out of that demand when it returns? We've spent a great deal of time in sort of this Phase II on recovery and making sure our organization is built for it, making sure we're not missing anything. We’re also talking about how we adjust our organization and our business to take advantage of lessons we've learned from this process. No one wants a process like this. But since we got it, we need those learning experiences, and we are spending a great deal of time looking at that. Hopefully, what we'll find is that coming out of this. We'll be a more important and better company than we were going into it.

Great. Thank you, everybody.

Thanks.

That does conclude today's call. You may now disconnect.