Good afternoon. My name is Rob, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the iHeartMedia Third Quarter 2022 Earnings Conference Call. I will now turn the call over to Mike McGuinness, Deputy CFO and Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for taking the time to join us for our third quarter 2022 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. In addition to our press release, we have an investor presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our financial performance and operating results. These statements are based on management's current expectations and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, during this call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, investor presentations, and our SEC filings, which are available on the Investor Relations section of our website. And now I'll turn the call over to Bob.

Thanks, Mike, and good afternoon, everyone. Thank you for joining our third quarter 2022 earnings conference call. We're pleased to report another quarter of solid operating results for iHeart and consumer usage, revenue, and earnings growth. Before I take you through our results, I want to thank our team members who made this performance possible. And in particular, the inspiring local teams who worked tirelessly through Hurricane Ian and in some cases, even put their well-being on the line to ensure that listeners could find critically important updates, safety information, resources, and above all, a vital personal connection when they needed it the most. Radio is often the only media platform that is consistently available during natural disasters, and we're proud of this critical role we play in our communities. The strong community connection and dedication to serve, especially in times of crisis and need is what sets radio and indeed our company apart from all other media. Now let me take you through some of the highlights of our performance. In the third quarter, consolidated revenues grew 7% compared to the prior year at the high end of the guidance range we provided of approximately 3% to 7%. We generated adjusted EBITDA of $252 million for the quarter, also at the high end of the guidance range we provided of $240 million to $255 million, and our Q3 adjusted EBITDA margins were 25.5%, a 70 basis point improvement versus the prior year. We believe the company performed well in an uncertain macroeconomic environment, growing adjusted EBITDA by 10% compared to the prior year. Our performance in this environment is a strong indication of the successful transformation this company has undergone, where our high-growth digital revenues comprised 26% of total company revenues. It's clear that our digital business is now significant enough to meaningfully impact our overall financial performance. Turning to our individual operating segments. The digital audio group continues to deliver industry-leading growth according to MAGNA, with revenue for the quarter increasing 23% versus the prior year, adjusted EBITDA increasing 17% versus the prior year, and adjusted EBITDA margins of 31%. Within the digital audio group, our podcast revenues, which grew 42% versus the prior year, outperform the overall podcast industry growth of 22% year-over-year according to MAGNA, and our digital ex-podcast revenues, which were up 15% versus the prior year, also outperforming the industry growth of 10% year-over-year according to MAGNA. As a reminder, included in our digital ex-podcasting business are our streaming products, third-party extension products, social, OTT, display advertising, and our ad tech businesses. This range of products allows us to offer holistic advertising solutions, leveraging our deep relationships with our consumers to our tens of thousands of advertisers. All of this is powered by our sales strategy of any seller, anywhere can sell anything, a unique iHeart capability that is executed by the largest ad sales force in audio, and with the unparalleled ad tech solutions we now offer our advertising partners across our multiple industry-leading platforms. In September, according to Podtrac, iHeartRadio was again ranked the #1 podcast publisher in the U.S. with more monthly downloads than the next two largest podcast publishers combined. As we've noted before, publishing is by far the most profitable segment of the podcasting industry, and it remains our focus. We continue to be the largest podcast publisher in the U.S. with the widest range of and highest-ranked content as measured by Podtrac, and we're the only publisher with ranked content in all 19 categories. We believe our experience and capabilities as audio content creators, combined with our unique ability to promote and build audiences for our podcast through our broadcast radio assets, which reach 90% of U.S. consumers every month, gives us an important edge. With that leadership position and with those assets, we believe we will continue to take user and revenue share in the expanding podcast marketplace while maintaining our strong podcast EBITDA margin. Turning to our multi-platform group, which includes our broadcast radio networks and events business. In the third quarter, both revenues and adjusted EBITDA were essentially flat compared to the prior year, and our adjusted EBITDA margins were 31.4%, our multi-platform group has again demonstrated its resiliency during this economic period, generating adjusted EBITDA margins in the low 30s, which we expect to expand as revenue recovers over the long haul. The multi-platform group will also benefit from this year's political ad spend due to our unique speed to market, scale, reach, and data capabilities. I also want to remind you that each month, the radio assets reach more than twice as many people as the largest TV network, five times more than the largest ad-enabled streaming audio service, and slightly more than even Facebook and Google in the U.S. This unparalleled consumer reach gives us the unique ability to create new products and platforms from the iHeartRadio app to events, podcasting, and now to even the metaverse, as well as providing a truly unique asset to our advertising partners. That unparalleled reach, along with radio pricing per user being lower than most other major media, combined with our ad tech platforms and the unified buying platforms emerging at agencies and clients, gives us confidence in the long-term growth potential of this segment of our business. Before I turn it over to Rich, let me share a couple of additional thoughts with you. Although advertising has certainly softened since the robust performance we saw at the beginning of the year, we don't think advertising has been as hard hit by an economic downturn as it would have been in past times. Let me tell you why we think that is. The people controlling advertising decisions today are, in most cases, the same people who controlled advertising decisions during the last economic and advertising downturn. According to Analytic Partners, advertisers that cut their advertising budgets during the last recession saw their sales decline by approximately 18%, and while those who maintained or increased their advertising spend over that same period saw their sales increase by approximately 17%. We think advertisers learned a stark lesson, which we suspect is causing many of them to moderate advertising cutbacks. In looking at our data year-over-year, we also see a revenue growth rate differential between large advertisers and the long tail small business advertisers, and the fact that our advertising partners skew towards the larger companies relative to the SKU of the big digital advertising companies is probably a slight advantage during this period of uncertainty. As a final thought, I'd like to give you some insight into how we think about investing in our business. We believe that the focus of any new products always needs to be profitability even in the earliest stages. This belief guided us as we built the iHeartRadio app as we build our tentpole events like the iHeartRadio Jingle Ball Tour, the iHeartRadio Music Festival, the iHeartRadio Music Awards, and more, and most recently, as we built out our podcast business. Now as we look at our next new platform, the Metaverse, we remain committed to building for profitability as well as users, even though we're in the very early stages of development. In the third quarter, we launched in the Metaverse, building iHeartLand in both Fortnite and Roblox, partnering with State Farm, Intel, and other sponsors, and reaching millions of users immediately. Among all the games available on Roblox, iHeartLand is among the top 1% based on daily active players and total daily playtime. And on Fortnite, among our competitive set, iHeartLand is in the top 1% of maps based on player counts and playtime. These Metaverse launches were a hit with consumers, but more importantly, they were done profitably. We have also used the flywheel effect of the unparalleled consumer scale of our radio business and leadership position across audio, our rigorous cost discipline, and our strong monetization engine to build platform after platform for future growth, and we've done it while making sure that each platform is a profitable one. We can assure you that as a management team that we will build new adjacent businesses, and more importantly, as we do so, we will continue to focus on profitability and free cash flow. As we look ahead, we continue to transform the company, and we're also proactively preparing should a prolonged economic downturn occur. We believe the strong positions of our digital audio and multi-platform groups with both consumers and advertisers give us the ability to navigate through this period of economic uncertainty and position us for continued growth through the recovery and beyond. And now I'll turn it over to Rich.

Thanks, Bob. As I take you through our results, you'll notice that, as Bob mentioned, we performed well despite the uncertain macroeconomic environment. Turning to Slide 19 of our investor deck. Our consolidated revenues were up approximately 7% year-over-year at the high end of the guidance range we provided of up approximately 3% to 7%. Excluding the impact of political, our consolidated revenues were up approximately 4% year-over-year. Our direct operating expenses increased 14% for the quarter, driven primarily by the increase in revenue, which drives higher content and profit sharing expenses, third-party digital costs, and expenses related to the return of local and national events. Our SG&A expenses increased 3% for the quarter, primarily driven by one-time charges related to our cost reduction initiatives we began in Q3, and higher sales commissions due to higher revenue, partially offset by a lower bonus expense compared to our over-target bonus performance in prior years. Our third quarter GAAP operating loss was $211 million compared to an operating income of $80 million in the prior year quarter. As a result of a noncash impairment of $302 million on our FCC licenses. Prior to this impairment, we had approximately $1.8 billion of intangible assets on our balance sheet related to FCC licenses. Each year, we are required to test these intangible assets for impairment. The fair value analysis is highly sensitive to changes in weighted average cost of capital, and the significant increase in interest rates since March has triggered a noncash impairment on those intangible assets. Our third quarter adjusted EBITDA was $252 million compared to $230 million in the prior year quarter at the high end of the guidance range we provided of $240 million to $255 million. If you turn back to Slide 4, I'll provide additional color on the performance of our operating segments. And as a note, there are additional slides in the investor presentation on our segment revenue performance. Digital Audio group revenues were up 23% year-over-year, and adjusted EBITDA was up 17% year-over-year. Within the digital audio group, our podcasting revenues, which grew 42% year-over-year, and our non-podcasting digital revenues, which grew 15% year-over-year. As a point of reference, Slides 7 through 12 in our investor deck show in detail the podcast ecosystem dynamics, and our leadership position in this high-value segment of publisher. Looking at the digital audio group as a whole, margins declined slightly in the third quarter to 30.8%, down from 32.6% in the prior year. This decline is due to the timing of certain expenses related to content launches in this quarter, and we feel confident that the adjusted EBITDA margin for Q4 will be back in the 35% range. Multi-platform group revenues and adjusted EBITDA were both essentially flat year-over-year. Excluding the impact of political, multi-platform group revenues would have been down 2% year-over-year. Multi-platform Group adjusted EBITDA margins were 31.4%, up 70 basis points sequentially from 30.7% in Q2 2022, and down 20 basis points from 31.6% in Q3 2021. And as a reminder, slightly over half of our political spend occurs in the fourth quarter. Audio & Media Services Group revenues were up 18% year-over-year and adjusted EBITDA was up 33% year-over-year. These increases were primarily attributable to expense management as well as radio and TV political revenues within our CAPS business. Turning to Slide 23, there is a summary of our debt. At quarter-end, we had approximately $5.3 billion of net debt outstanding, which includes a cash balance of $295 million. Within each quarter's performance, we also continue to improve our net debt to adjusted EBITDA ratio. We have now moved that ratio into the mid-5s, and we expect to continue to make progress towards our goal of moving that ratio to approximately 4x through expanding adjusted EBITDA, as well as efficiently converting these earnings into free cash flow and using that free cash flow to reduce our overall debt. As highlighted on our past calls, we have no material maintenance covenants and no debt maturities until 2026. In the current macro environment, this type of debt profile positions us to be both resilient and opportunistic in responding to debt market developments. In Q3, we proactively repurchased $75 million of the principal of our 8 3/8% senior unsecured notes, adding to the $114 million principal repurchases we completed in Q2. As of September 30, we have repurchased a total of $189 million of our 8 3/8% senior unsecured notes, resulting in annualized interest savings of approximately $16 million. We have been able to repurchase these notes in the market at a meaningful discount to their par value, generating both earnings and free cash flow accretion. We will continually monitor market conditions and look to further improve and optimize our capital structure as opportunities arise. In the third quarter, we generated $63 million of free cash flow, and when including the proceeds from real estate sales, our adjusted free cash flow was $70 million. Our cash balance is $295 million, and our total available liquidity is $718 million. As Bob highlighted, we remain focused on free cash flow generation and are committed to utilizing that cash in the amount that creates the most value for our shareholders. Despite this uncertain environment we've been discussing, our business has continued to achieve year-over-year growth in both revenues, adjusted EBITDA, and free cash flow. Now let me provide you with some specific guidance for Q4. We expect our Q4 2022 revenues to be up approximately 2% to 6% year-over-year. We are still closing the month of October, but our preliminary October consolidated revenues were up approximately 8% year-over-year, much of it based on the strength of political. We also expect to generate Q4 adjusted EBITDA in the range of $305 million to $325 million, which implies a full-year 2022 adjusted EBITDA guidance range of $940 million to $960 million, which will yield the second highest full-year EBITDA in the company's history. Further, for the full year, we expect to generate in the range of $325 million to $350 million of free cash flow. As we think ahead, I want to remind you all that in 2020, the worst year we have ever seen, the company still generated positive free cash flow, and we expect those strong free cash flow generating characteristics to persist. We also expect political advertising to be a record for a midterm political year. We anticipate full-year political advertising to be at the midpoint between the last midterm year in 2018 and the last presidential election in 2020. We expect our full-year capital expenditures to be between $150 million and $160 million. And finally, we will continue to make significant progress towards our previously announced net leverage target of approximately 4x. I want to leave you with this: We are committed to ensuring that we have the right organizational structure and cost base in place to support our growing businesses today and into the future. We continue to maintain a rigorous allocation of capital and to work on identifying additional cost savings opportunities, utilizing new technologies to increase our efficiency and reducing our lower ROI discretionary spending. This focus enabled us to execute a savings program of approximately $250 million from 2020 to 2021, which represents a reduction to our historical annualized cost base of approximately 10%. And with that context in mind, we have targeted an additional $75 million of annual savings, some of which was executed at the end of the third quarter, with the remainder to be executed on in the fourth quarter, and we will see the full benefit of these actions in our 2023 results. There remains significant macro uncertainty in the marketplace, but we believe we have taken all appropriate actions to further bolster our financial position today in order to remain resilient and outperform through any potential economic downturn. We appreciate you joining our third-quarter earnings call. And again, I'd like to thank the entire iHeart team who continue to deliver for our communities, advertisers, and shareholders. Now we'll turn it over to the operator to take your questions. Thank you.

And thanks for the guidance detail. It doesn't sound like you're seeing much of a slowdown in the ad marketplace. Now that we're into November and most of the election political bookings are kind of behind you. Could you help us kind of just unpack the strength on an ex-political basis? Maybe you can talk a little bit about how digital and multi-platform are performing. I think we're all trying to get a handle as to what the trends look like as we get into next year. And so again, as a real positive outlier here, maybe you can just help us unpack a little bit of what you see for the rest of the year once that political tailwind ends next week? And then I'll have a quick follow-up.

Sure. Let me allow Rich to provide some specifics. Overall, this advertising year has not met our initial expectations. We don't believe it has the strength we anticipated. However, our business has not experienced a decline in audience. While some may have dropped off, it seems linked to audience erosion. Additionally, we are more focused on larger advertisers. Our recent analysis in Q3 revealed that our largest advertisers significantly outperformed smaller ones. We questioned the reasons behind this, and we believe that larger advertisers can maintain their spending even during economic slowdowns. The experiences from 2020, which we mentioned in the earnings call, showed a clear distinction between those who continued advertising during downturns and those who did not. Many of them likely learned important lessons, which is likely leading to fewer advertising cutbacks. Year-over-year data also indicates a revenue growth rate difference between large advertisers and smaller businesses. The fact that our advertising partners tend to be larger companies compared to smaller digital advertisers is likely a slight advantage in this uncertain period.

Steven, I'd like to add a few points to what Bob mentioned. Despite the challenges we've faced this year, we’ve maintained a remarkably resilient business. Although it hasn't been the year we initially anticipated, it's shaping up to be the second-best year we've had and likely our best year in terms of free cash flow. Based on the guidance we've provided, this quarter is set to be our strongest in terms of revenue and EBITDA in iHeart's history moving forward. Regarding the idea of being an outlier, I believe what we’re seeing is a combination of factors: our extensive reach, the resilience of our medium, its efficiency, and a diverse advertiser base. Notably, no single category accounts for more than 5% of our revenues, and no individual advertiser represents more than 2%. While operating in a tough environment is challenging, it also allows us to showcase strengths that might not be visible in other companies. On the political front, there’s really no change from what we've stated earlier. As Bob pointed out, this will be the best non-presidential political year we’ve experienced.

Great. And then just as a follow-up, I know it's too early to guide to 2023. You announced some of the incremental cost reduction, which is certainly going to support it. And again, it sounds like you have some real revenue strength as we head into the year. So should we just if nothing else think that you'll be able to continue to deleverage between either free cash flow or EBITDA generation in 2023 versus where you might end 2022 at? I know deleveraging is a consistent target. So curious your thoughts there?

Well, I think your first statement will guide my answer here that we haven't provided any 2023 guidance, and we're not going to provide that now. I think you see, as we highlighted in the earnings release, we came down into the mid-5s, we said $325 million to $350 million, I'm sorry, mid-5s in terms of leverage ratio. We talked about the free cash flow number for the year of $325 million to $350 million, which if you look at the conversion of EBITDA to free cash flow. And I think if you put us up against other companies in our industry, we feel good about that conversion. As Bob and I, along with Mike, always articulate with free cash flow, people through cash flow, management team, and that will continue to be our focus.

Yes, ended the quarter with a little under $300 million of cash. The guidance for free cash flow implies well over $200 million of free cash flow in the fourth quarter. So just maybe if you could talk about what you think is a good cash balance level here in an admittedly uncertain economic environment, and how much you'd be willing to sort of just let that cash build versus being as aggressive as you possibly can buying the debt back given it's being at a discount to par.

Well, it's Rich. I think the facts speak for themselves. We provided our guidance, and as you know, we're a fixed cost business. Q4 is typically our highest revenue quarter, and this year will be no exception. Therefore, it's not surprising that when you analyze the numbers, free cash flow will be strong, as it always has been during this quarter. Our general approach, which you have seen in Q2 and Q3, is to be opportunistic regarding our capital structure and to improve our cost of capital. We mentioned in our opening remarks that we repurchased around $180 million of the 83-ish note, which led to annual cash savings of $16 million. Considering any yield analysis, that's a solid return on our investment. This has been our focus since Bob and I took over the company, and it remains our focus today with Mike.

And let me add on your point about what kind of cash balance we need. 2020 was probably the swiftest and worst downturn either we looked through. And even in that year, we maintained positive free cash flow. So I think we feel confident that we will have plenty of cash and plenty of liquidity regardless of what we always see.

Great. Appreciate it. And one more if I could. Just if you could provide some color on what you're seeing specifically on the digital side, like after quarter end in the fourth quarter here, especially on podcasting. I think it would be obviously, the revenue growth decelerates lapping the tougher comps and the macro stuff. Just anything you can point to as far as podcast revenue growth in the fourth quarter?

Certainly. We confirmed that after the end of the quarter, preliminary results for October showed an increase of over 8%. Year-over-year comparisons reveal that while the digital industry was up 10%, we saw a growth of 15%. In podcasting, the industry grew by 22%, but we outperformed with a 42% increase overall. Our digital business remains robust with no anticipated changes, and we expect to return to 35% EBITDA margins in the digital audio group by Q4.

All right. The write-down, I was wondering about that a little bit. Certainly, it's noncash. But aside from discount rates, it does seem to have implications about revenue expectations for the industry and maybe station values? Or maybe you think it doesn't. I just wonder if you can comment on whatever implications you feel it has?

I believe that the current situation is largely influenced by the interest rate environment we are experiencing. Most of it is, as you pointed out, noncash, so I appreciate that clarification. It's essentially a mathematical calculation that is highly sensitive to interest rates. I don't think this has any bearing on the future value of our assets or our revenue-generating potential.

Okay. I'm curious about your economic expectations. If we were to enter a deeper recession, or if we are currently in one, would it be around 2, but hopefully not as severe as what you faced during the COVID situation? How do you think you would perform if the economy were to decline further?

I can't imagine things getting much worse than what we experienced in 2020 when businesses shut down, and consumers were stuck at home, leading to a shift from spending to saving. What’s interesting is that typically there’s a significant gap between downturns, usually seven to ten years, during which people forget and repeat the same mistakes. However, it's unusual to have another downturn just two years later. Regardless of how severe this situation may become, I believe that those who made advertising choices in 2020 and later realized the losses and the high costs of re-engagement will remember this experience. This awareness will likely moderate any potential downturn in advertising, which is crucial for our revenue. Therefore, no matter what occurs in the economy, our focus will be on how these conditions impact ad revenue.

I just want to add that if you look at our results this quarter, I’ve compared them to industry benchmarks and highlighted how we performed during the pandemic. You will all have your own analyses, and we don't have any clearer insight into the future of the economy than you do, and we can't influence it. However, there are aspects we can manage, such as our operations, cost control, free cash flow, and understanding what generates value for our shareholders.

This concludes today's conference call. Thank you for your participation. You may now disconnect.