iHeartMedia, Inc. Q2 FY2021 Earnings Call

Good afternoon, everyone, and thank you for taking the time to join us for our second quarter 2021 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 take your questions. Please note that in addition to our press release, we have an investor presentation that you can use to follow along with our remarks. Before we begin, let me quickly cover the safe harbor statements 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. 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 investor presentation available on our website. And now I'll turn the call over to Bob.

Thanks, Mike, and good afternoon, everyone. Thanks for joining our second quarter 2021 earnings conference call. The second quarter continues the positive trends we've seen in our business and highlights the value of our multi-platform strategy for consumers and advertisers, plus the value of our focus on and investment in ad tech and data. That strength is seen throughout our Multiplatform Group and our Digital Audio Group, including the continued strong momentum of our successful podcast business. Our employees are at the heart of our success. Rich and I are fortunate to lead this special organization, from folks with decades of experience in broadcast radio to our relatively new podcast team, the core of which has been working together in the space for over a decade as well as our teams across the company, who are building out the technologies that are the foundation for the future of the company. Their innovation, creativity and commitment are behind the momentum and strong results we're announcing today, and they've set the stage for what we believe is a full recovery to 2019 levels by the end of 2021. I thank them for their hard work and dedication, which has enabled us to turn the positive trends we've seen in the macro environment into financial success for iHeart. I also want to take a moment to highlight an important facet of our company that sets us apart from companies in the digital-only audio space. Unlike others in the audio sector, broadcast radio is licensed by the government to operate in the communities we serve. And at iHeart, we take service to our communities and society very seriously. Our commitment to environmental, social, and governance, or ESG, initiatives stems from our strong ties to the communities in which we live and work and deepens our connection and engagement with our listeners, which is at the heart of our core promise of companionship. Our ESG report, available on our website, details our accomplishments on this front, including initiatives and policies regarding the environment, diversity and inclusion, social justice, helping our communities navigate the pandemic, our corporate values and our high ethical and governance standards. Our ESG report is a living document that is continually updated to reflect our most recent ESG efforts and initiatives, and we'll be publishing the latest update to this report in the coming weeks. In addition to this document, every year, we publish our community impact report, which highlights a broad spectrum of the philanthropic efforts and initiatives of iHeart teams across America and how we, as an organization, use our position as America’s number one audio company to help make the world better. In a few moments, I'll take you through the overall podcast ecosystem, which is a new and powerful growth engine for us. But first, I want to review the highlights of our second quarter financial performance. Our business continues its sequential revenue and profit growth, improving since the low point of Q2 2020. In Q2 2021, the iHeart Multiplatform Group grew revenue by 70% and grew adjusted EBITDA from negative $14 million in Q2 2020 to $181 million in Q2 2021, while the iHeart Digital Audio Group grew revenue by 112% and adjusted EBITDA by 188%. In Q2 2021, our margins also improved year-over-year and quarter-over-quarter as both of our largest segments benefit from high operating leverage. The Multiplatform Group margins were 30%, up from 21% in the first quarter and up from negative 4% in the second quarter of last year. And the Digital Audio Group margins were 27%, up from 25% in the first quarter and up from 20% in the second quarter of last year. We were able to generate this margin improvement even with the investments we continue to make in our important new growth areas like podcasting, ad tech, data, and the continued expansion of broadcast radio and digital devices. Rich and I and the rest of the management team are monitoring the recent increase in COVID cases across the country. So our outlook for the back half of 2021 is not without uncertainty. But based on what we've seen so far, we remain confident that we will be back to 2019 adjusted EBITDA levels by the end of 2021, setting ourselves up for continued growth. And with that, I'll turn to how our business has performed in the quarter. We're encouraged by the strong results we delivered in the second quarter despite lingering headwinds from the COVID-19 pandemic.

Thanks, Bob. We continue to see improving trends in the macroeconomic environment, and our financial results continued their sequential improvement, reflecting both this general improvement in economic trends as well as the strong performance of our businesses. Our consolidated revenues were up 77% over the prior year period and continued their sequential improvement against our 2019 results. So while we recognize there is still more hard work to be done and the ongoing uncertainty as a result of the increasing COVID cases across the country, we continue to remain confident that we are firmly on the path to being back to 2019 adjusted EBITDA levels by the end of 2021, setting ourselves up for adjusted EBITDA and free cash flow growth in 2022 and beyond. In terms of our second quarter results, if you turn to Slide 11 of our investor deck, on a reported basis, our consolidated revenues increased by 77% over the prior year period, which is above the guidance we provided on our first quarter call of approximately up 65%. Direct operating expenses increased 31%, driven primarily by the significant increase in revenue, which drives higher talent and profit-sharing expenses, third-party digital costs, music license fees, and performance royalty fees. Variable expenses related to events also increased as a result of the return of certain live events. The increase in direct operating expenses was partially offset by lower employee compensation expenses resulting from our modernization initiatives and cost reduction initiatives we began in 2020 and continued into 2021. SG&A expenses increased 27%, driven by increased employee compensation expenses due to higher variable compensation, resulting primarily from higher bonus expenses based on financial performance and higher sales commission expenses as a result of higher revenue. As a reminder, last year, the vast majority of our employees did not get paid a bonus. And as a result, you'll see our corporate expenses increase. In addition, increased headcount from the investments in our digital businesses contributed to the increases in SG&A. Trade expenses also increased, primarily as a result of the return of live events. These increases were partially offset by the impact of cost reduction initiatives taken in response to the COVID-19 pandemic and lower bad debt expense. Our second quarter GAAP operating income was $28.1 million compared to an operating loss of $159.1 million in the prior year quarter, and our second quarter adjusted EBITDA was $184.5 million compared to a negative $29.3 million in the prior year quarter. If you return back to Slide 4, I'll provide additional color on the performance of our operating segments. Multiplatform Group revenues were up 70% in Q2, with 30% adjusted EBITDA margins, a significant improvement after posting negative EBITDA in Q2 of 2020. On a sequential basis, margins improved 890 basis points from Q1 2021, showing the operating leverage our Multiplatform Group has as revenue recovers.

I have three questions. Bob, you went through your suite of services and strengths quickly, and audio is a really hot advertising category. Now that you've made some acquisitions, are there still opportunities for better monetization with Triton? Can you explain how your product suite differentiates from the competition and what the opportunities are for you? Second, regarding advertising for the quarter, the numbers are phenomenal. Can you break down the pricing versus sellout, local versus national, and anything you can share about the outlook? Lastly, Rich, thank you for providing revenue guidance, but with everything reopening, operating expenses will need to increase. Can you share your thoughts on the trajectory of operating expenses from here?

Sure. Let me start, Jessica. I think you're referring to digital with Triton and also Voxnest, which are part of our ad tech stack. When we examine podcasting and digital, we really rely on our extensive sales force. We have the largest sales force in digital audio, significantly outpacing our competitors. This approach works well, but it's essential to consider it as a two-pronged strategy. One side focuses on high-touch interactions with larger, well-known advertisers seeking major marketing concepts involving these assets. The area where we see substantial growth potential is where about one-third of our inventory could remain unsold because it consists of smaller podcasts, reruns, and varied content. To address this, we are developing a marketplace that allows users to purchase audiences and impressions. A significant advantage for us is once advertisers identify their target audience, we can help them extend that reach from podcasting to digital audio and ideally into broadcast radio, where we also have unsold inventory that we can fill. From a sales perspective, it's about balancing large marketing ideas with the need for media and impressions. The addition of the Triton component enables us to concentrate more on that latter aspect. Furthermore, managing inventory has historically followed a manual marketplace model. Traditionally, purchases are made based on stations or time slots, leaving some inventory underutilized. We have previously compared this situation to a jar filled with rocks, where there is still space around the rocks for sand. We see impression-based selling and marketplaces as a way to utilize that 'sand' effectively and optimize our inventory.

Jess, I want to mention one thing before we move on to the second question about the advertising environment. As we've discussed before, considering that everyone here has to create a model, it's important to note that our tech stack and the reasons Bob mentioned contribute to our revenue growth of 112% this quarter, compared to 70% last quarter. Digital revenue, excluding podcasting, increased by 101%, while podcasting grew by 152%. As you project these numbers going forward for your models, keep in mind that we have one of the highest growth rates among major digital players. Additionally, the confidence in your projections, based on your assumptions regarding the total addressable market and the digital ecosystem, should be reflected in your models. Jess, what was your second question about advertising?

Could you separate the factors of pricing versus sellout and local versus national for the quarter? Additionally, any insights you can provide about the outlook would be helpful, especially since you mentioned a 20% revenue guidance. I'm curious about your current observations in the market.

We have avoided those. We don't believe they are the best metrics because it depends on the situation. If I have unsold inventory and can place it anywhere, will we sell it at a lower cost per thousand impressions? Definitely. On the other hand, if I have a highly sought-after program, should I increase the rates? Absolutely. There are many factors involved, and I think broad averages do not capture the full story, which is why we do not emphasize those as important metrics for us.

Right. And also understand that some of the distinctions between national and local, those lines blur and some of the definitions on those lines blur. And then...

I would like to add to that, Rich. There's something we didn't discuss in this earnings report, although we usually do. It's important to note that one of our significant innovations is the ability to build out our infrastructure. This allows any seller, regardless of location, to sell anything, instead of having separate groups of sellers for podcasts, local, and national markets. For instance, if a seller in Jackson, Mississippi secures a national advertiser, they can make that sale. The issue then becomes whether that money is classified as local or national. So, as Rich pointed out, the distinction is becoming increasingly unclear and less significant.

Jess, regarding your last point about our revenue projections for Q3, we did provide those, but we will not be sharing EBITDA projections. Instead, I encourage you to focus on the various activities we're implementing on the revenue front as well as our cost-saving initiatives. One such initiative is real estate optimization, which has contributed to the increase in our capital expenditures this year expected to generate substantial savings in operating expenses. We anticipate achieving a $100 million annual run rate in savings by mid-2021 from our modernization efforts, a reminder of our previous $200 million cost reduction during the COVID pandemic, most of which we plan to retain within the company. These changes will reflect in our financial results. As you consider EBITDA moving forward, pay attention to our margins. We've received numerous inquiries about when we will see margin expansion, and I want to highlight that as revenue increases, our fixed cost structure allows for significant flow-through and cash-free benefits that positively impact our bottom line. This quarter demonstrates that, with consolidated margins rising from 14% in Q1 to 21% now, multiplatform margins increasing from 21% to 30%, and digital group margins reaching 27%. All of this information should assist you in forecasting EBITDA numbers.

Maybe first on the Q3 guidance, I think it implies the third quarter will be down about 6% below the third quarter of 2019. Your Q2 revenue was also down about 6% on '19, and that was a nice improvement on Q1, which I think was down about 11%. So it seems like you've got this sequential trend behind you, and the pacing you gave for July seems pretty good. So just curious to kind of suggest that things get worse in August and September. Is that because you're seeing anything getting worse? Or you just want to be cautious at this point given the Delta variant, et cetera?

I think it's more comps than anything else on that. And Rich, I don't know if you want to...

No. No. I think it's just more comps. I wouldn't have used the word getting worse. I mean I think we gave kind of factually the numbers out there with, I think, just a view. Look at our results and look at how we're talking the results for the year and you look at the approach we gave everything in terms of what we look forward in terms of our leverage ratios and guidance and every other data point. So I wouldn't say worse. I would just say just kind of basing where we see the business for the third quarter at this point in time.

Yes, as we consider the guidance of returning to EBITDA levels by the end of the year, you mentioned the $200 million reduction in costs. While you're not providing guidance for next year at this time, for those assuming you'll return to a previous run rate next year, is the EBITDA simply $200 million better than your previous EBITDA at the same revenue? Or is there something like a mix shift involved, such as a higher proportion of digital leading to lower margins? What other factors should we take into account as we think about these building blocks?

We haven't made any announcements yet, and I prefer not to go into details at this time. There are always various combinations to consider. We have invested significantly to grow the company while also being selective about our future investments. During the pandemic, we demonstrated that, despite being a fixed cost business, we maintain considerable control over our operations. It's important that we continue to plan for the future. The positive impact of our past efforts is reflected in our current numbers, and we will keep this momentum going. Yes, I would like to add that I agree with everything you mentioned. We have initiatives aimed at cost savings, which I've already detailed. I don't feel the need to revisit those points. We have made significant progress on our margins, and as Bob mentioned at the start, audio is experiencing a strong demand. If you look at the growth of our digital businesses and the recovery of our multiplatform business, along with changing consumer habits and our ability to monetize those, it shows positive trends. While we can't predict specifics for 2022, we are aware that product mix will continue to evolve, as it does in any business. Our main focus is on creating the most value and driving the stakeholder value of the company.

Maybe one more yes question for you, Rich. You paid down a little bit of debt in the quarter. It seems like a signal of confidence now to do that. Should we expect more of that in the quarters ahead?

Well, I'm not going to commit to anything in terms of what we're going to pay down. But again, I think in terms of our debt, it is a sign of confidence that we prepaid the $250 million of the term loan, which is not in the numbers you see as we reported as of the end of the second quarter. And I think the significant progress we made in net leverage like just as a reminder, and we covered it in the remarks, we were like close to 11, 10.9x at the end of Q1. Then at the end of Q2, it was 7.6x. So a 3.3 turn improvement out there. So it doesn't mean we don't have a long way to go in getting to our target leverage, but the same thing, look at all the progress we made during Q2, and we are committed to getting to that 4x leverage ratio.

Just wanted to drill into the digital segment a little bit here. Obviously, a lot of time discussing just addressability and how that's a huge driver, particularly in podcasting. Obviously, huge revenue growth you're seeing obviously continues to accelerate. Just wanted to see if first, you can break down what you're seeing in podcasting. Is it higher CPMs? Is it just more engagement? What are you hearing from the bigger brands in terms of adoption? And then separately, regarding digital, the digital ex-podcasting has just been phenomenal growth. How durable are these trends? Can you unpack some of the underlying drivers of that digital ex-podcasting above and beyond your iHeart app and other drivers?

The largest factor driving growth in the digital advertising space is the current total addressable market of approximately $160 billion, which indicates substantial investment in digital advertising. This is beneficial for us on multiple fronts. Firstly, podcasting stands out as the leading category within digital advertising, and we hold a significant lead as the number one player in that space. Secondly, we have developed a robust advertising technology infrastructure that positions us to pursue this market more effectively. Lastly, we have made significant investments in making our broadcast radio offerings more appealing to advertisers by aligning them with digital standards. Previously, we faced concerns about lacking one-to-one advertising capabilities, especially with the emergence of mobile ID issues and the decline of cookies. However, even Google is shifting toward aggregated cohorts, which is becoming the new norm and is a space where we can excel. Our unique reach in broadcast radio complements digital campaigns by adding fresh reach at a cost-effective price, enhancing overall campaign performance. We believe we are positioned to gain from these dynamics at three levels: through podcasting, which often captures initial interest from advertisers; through additional digital offerings; and through our SmartAudio product, which allows for a digital-like experience in broadcast advertising. The investments we've made in data and technology are starting to deliver tangible results, and we anticipate this trend to persist.

And Sebastian, not to go through, repeat or go through it again, but everybody on the phone gets a chance to clear this up. Take a look at our investor deck, we have some of the same slides in terms of our audio tech stack in terms of the richness and depth of the audio tech stack and why we say we are the only ones that have that type of audio tech stack full stop, period. But we also added some other slides, quite frankly, in response to discussions like this in terms of including the history of how we got here in podcasting. So again, to give people confidence about the sustainability of it, there's a slide which I think is particularly interesting, Slide 9, which shows how deep we are in podcasting, our ranking in terms of the most shows in Podtrac, the most top 10 shows in Podtrac, the most shows with 1-plus million listeners. Again, I think what that proves out is, getting to your question, how sustainable is this in terms of the growth? Well, it's deep and widespread. So that helps on the sustainability point. And the last thing I might say is I know when we came off of Q1, where we had a 70% revenue growth overall in the digital line, one of the often-asked questions that Bob and I and Mike got from investors we see, is this an aberration? Or are you going to be able to continue to have strong performance on digital? And again, without giving any predictions going forward, I'm saying here's another data point that this is not an aberration in terms of our digital growth for the quarter.

Yes. Let me quickly add to that. You asked if the CPMs in podcasting are better, and the answer is yes. The CPMs in podcasting are comparable to OTT because it’s currently very popular, and people are experiencing higher engagement and better click-through rates. It's important to note that podcasting now reaches more people than major streaming digital services and music platforms like Spotify or Apple, and there are no signs of this trend slowing down. We have a bright future in podcasting, which we see as a complementary business to radio. It provides companionship, features host-driven content, and offers a similar user experience. We are among the few, along with other radio entities in podcasting, to have this advantage. With our scale and size, we believe we are in a unique position. To the consumer, there is no distinction between digital and broadcast radio; they simply enjoy stations like Z100 or KIIS FM on their phones or FM radios. They don't focus on the technology. We have also expanded our presence beyond AM/FM to over 200 platforms and more than 2,000 devices, making it easier for consumers to access us. This extensive reach is crucial, especially as traditional ad-supported TV's audience diminishes, making our role even more significant.

I have a quick follow-up question. I'm not considering anything that might be confidential or sensitive from a competitive standpoint. Given that we are announcing podcasting deals with leading brands like the MDA, NFL, and Sports Illustrated, do the economics related to content and revenue sharing differ significantly from what is currently reflected in the numbers? I'm referring to future expectations.

One of the beauties of being number one is most people that come to us for the podcast that we're doing in partnerships, one is successful podcast. And our size advantage and our success with making hit podcasts gives us a tremendous advantage. And I would say that's the #1 reason they come to us. It allows us to be pretty picky about which ones we'll do. In success, there's plenty of money for everybody. And I think people realize they've got their biggest chance of success with us. And we have enormous discipline on the economics of our deals. We're not interested in profitless prosperity. We don't need to buy our way into anything. We are number one, and we've been widening that gap. So we're going to continue to run our business that way. You see the earnings coming out of our digital group. We put a great emphasis on converting revenue to earnings. And I know that's a little different than some digital players. But it's the way in which we run the business. And we think, ultimately, going back to Rich's point earlier, it's the best way to assure that we create shareholder value.

I was curious about the value of the radio ad spot sales dedicated to your podcast promotion. Additionally, how do you set the transfer prices for your own imagery related to those podcast promotions?

I don't think that's quite how we view it. We see that many people are engaged in both radio and podcasting. Take The Breakfast Club, for instance, which is one of our largest podcasts and also a top morning show on our hip-hop radio stations. There is significant synergy there that we aim to leverage at every opportunity. Podcasting supports radio, and radio supports podcasting; they both enhance our digital presence. It’s challenging to separate these elements. Additionally, when we collaborated with the Fox TV network for our iHeartRadio Music Awards, we assisted Fox in building awareness, and in turn, they helped increase awareness for iHeart as well. This is a common approach in the industry, and we are aligned with that standard.

Yes. The simplest way to think about it is to consider the cost of all the revenue as a general guideline. We file the revenue before breaking it down into operating segments and continue to file it that way. So, simply put, that's my perspective on it.

Okay. So there's no geographic targeting or size of market issue. It's just...

No, no, no.

Okay. Then one other question. It seemed like the Broadcast radio group did quite well and better than I was expecting, but it seemed like Networks did not follow and track the same way at this time. Is that a comp issue? Or was there something going on there?

Yes, it's more of a comparison issue. If you recall last year, during the significant downturn, the Networks group, particularly Premiere, performed much better than the rest of broadcast radio. So this year, you are comparing it to a different number than the other parts of broadcast radio.

I have a question and a clarification regarding the guidance. Bob, you've mentioned several times the significant interest from advertisers, and your numbers are indeed impressive. You indicated that about a third of the inventory remains unsold, which surprises me considering the demand. Could you discuss how you plan to address that gap and achieve a full sellout? It seems these figures could potentially be even higher. What are the key drivers behind this?

Sure. The time of year plays a significant role. There are certain months when our inventory isn't as full, while January tends to bring in a lot of activity. Much of this comes from smaller podcasts, shows, and radio stations, particularly during overnight hours. Despite the lower interest in overnight slots, they actually offer cheaper CPMs and higher engagement. Advertisers typically prefer certain time slots that they consider valuable over others, focusing on major markets or particular demographics. However, the beauty of digital advertising is that we can target specific impression numbers for various audiences, such as auto intenders or new mothers, beyond traditional demographic groups. Once we identify these audiences, we can utilize all of our inventory more effectively. This is akin to managing RIM inventory in print media, where addressing unsold portions becomes crucial. Our investment in ad technology, particularly with platforms like Jelli, Voxnest, Triton, and Radiojar, enhances our ability to create an electronic marketplace for these products, helping us fill any gaps. We are confident that these investments will yield positive returns.

By the way, Ben, just one thing to tie things. It goes back to Jessica's first question in terms of getting value out of the tech sector, just to kind of tie those two together. Put aside what the percentage is for a second. Having that tech stack just allows you to more efficiently monetize all of your inventory. That's what I think about it.

Yes. And then just on the guidance, Rich, just to clarify, the July guidance but also the third quarter 20%, is that a reported number? Or is that excluding political? I think by the time you get to the end of the quarter, you're probably comping some political revenue.

No. That's a reported number.

I would like to follow up on the MDA and discuss your sports content strategy more broadly. What opportunities are you and the leagues pursuing? What types of content are you exploring in the sports sector? Additionally, what advertising opportunities do you expect these types of content to create for you?

Yes, that's a great question. We are a significant player in sports and broadcast radio, podcasting, and digital media. We cover team sports with play-by-play commentary on many of our stations across various leagues. Additionally, we operate sports-only stations and have The Gambler, which focuses on sports betting. We also include sports news segments on music radio stations. This allows us to gather large audiences for specialized content, which we believe presents a strong growth opportunity. Due to our size and scale, we work with prominent figures in the industry like Tom Castro, Colin Cowherd, and Dan Patrick, who are integral to our ecosystem. This enables us to monetize our offerings in ways that others may struggle with, and we attract partners due to our unique expertise.

Got it. And then just one more if I could. On TuneIn, I was wondering if you could maybe expand a little bit more on your decision to partner with them. I'm curious, what benefits are you seeing from distributing your digital stations with them? And then on the ad sales representation piece of the agreement, how big does this platform-type business get for you guys?

I believe you've made a valid point. This is a platform-focused approach, and TuneIn offers a solid product. We are optimistic that it will create more listening opportunities. As you know, we have a strategy centered on distributed listening; we aren't limited to just our AM/FM radio stations, as we are present on over 250 different platforms. For podcasts, we ensure our content is available on Apple, Spotify, and various others, maximizing our audience reach. I see TuneIn as an extension of this strategy. They are looking to leverage our ad sales resources for monetization, and I believe we can both gain from utilizing the technology platform. When we acquired Triton, we emphasized that this technology stack is valuable not only for our properties but also as a standalone platform. In audio, no one has created a platform as robust as those seen in display advertising and other digital advertising formats. We are working towards that goal, and I view this partnership as another significant step in that direction.

Yes, that's a great question. If you consider it, hopefully everything we announce and do will provide a clear picture of our strategy and how this fits in. Bob provided important context regarding podcasting, and as you mentioned, our goal is to find effective ways to partner, which is what we aim to achieve.

I want to share a broader perspective. Companies either excel at partnerships or they don’t. I believe one of iHeart's key strengths is our ability to partner exceptionally well; we don’t feel the need to own everything. Whenever we evaluate opportunities, we consider whether we should make, buy, or partner. More often than not, partnering proves to be the most effective approach, particularly when we can create mutually beneficial deals. These are the types of agreements we aim to establish and the partnerships we actively seek.

Just to revisit the balance sheet and debt briefly, you mentioned aiming for that 4x target or better. What are your thoughts on your share price being significantly higher than it was a couple of years ago? Are you considering using that as a means to reduce your debt, or do you believe you can effectively manage it through free cash flow generation over time?

Right now, I believe we have demonstrated that we can grow our earnings, which is likely the best method to enhance our leverage.

Yes, if you consider our approach, we believe that with our current capital structure, we can significantly enhance stakeholder and equity value by using our cash to reduce debt. Just to remind everyone, we have $1.5 billion of 8 3/8% notes maturing next May. Evaluating that situation is another opportunity to create value, as it constitutes about one-third of our annual interest payments. Regarding leverage, once we reach around 4x, Bob, Mike, and I will discuss it with the Board of Directors, focusing on how to keep increasing stakeholder and equity value. At that point, we will decide how to utilize the free cash.

I appreciate the information. I would like to follow up on the advertising categories that might be impacted by supply chain issues, such as auto dealers, or labor shortages affecting restaurants and bars. I assume these have lagged somewhat. Could you share your observations regarding these areas? Additionally, are there any categories that have exceeded your expectations as we've previously discussed?

We typically don't discuss specific sectors since we are highly diversified. No single sector significantly impacts us, and similarly, no single advertiser has a major effect. However, it's encouraging to see that in sectors like automotive, which are currently facing shortages due to chip supply issues, many automotive companies and dealers are determined to maintain demand. They recognize that when supply returns, they want to capitalize on the pent-up demand instead of starting from scratch with their marketing efforts. Advertisers who reduced spending during the pandemic are now finding themselves needing to reinvest at higher costs. Even those who know they have growth potential but cannot satisfy demand at the moment are still choosing to advertise to preserve their brand relationships and overall purchasing rapport with consumers.

Thank you, everyone. We really appreciate you joining us to hear about the iHeart story. Mike and the team, along with myself, will be available afterwards if you have any follow-up questions. Thank you very much.

Thank you.

Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.