iHeartMedia, Inc. Q4 FY2025 Earnings Call

Good afternoon, and welcome to iHeartMedia's Fourth Quarter 2025 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Andrey Hart, Senior Vice President of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone, and thank you for taking the time to join us for our fourth quarter 2025 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President and COO; and Mike McGuinness, our CFO. At the conclusion of our prepared remarks, management will take your questions. In addition to our press release, we have an earnings 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, including our recent 8-K filing. 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, earnings presentation, and our SEC filings, which are available in the Investor Relations section of our website. And now I'll turn the call over to Bob.

Thanks, Andrey. Good afternoon, everyone. We're pleased with our overall performance in 2025, especially given it was a non-political year. In the fourth quarter, we generated adjusted EBITDA of $220 million at the midpoint of our previously provided guidance range of $200 million to $240 million, compared to $246 million in the prior year, which, as a reminder, benefited from approximately $80 million of political revenue. Our consolidated revenue for the quarter was $1.1 billion, up 0.8% compared to the prior year quarter and above our guidance of down low single digits. Excluding the impact of political, our consolidated revenue was up 7.7%. Turning to our individual operating segments. The Digital Audio Group generated fourth quarter revenue of $387 million, up 14.1% versus prior year and above our previously provided guidance of up high single digits. The Digital Audio Group generated fourth quarter adjusted EBITDA of $132 million, up 10.7% versus prior year. The Digital Audio Group's adjusted EBITDA margins were 34.1%, and we finished the full year at 34.4%, up from 32.5% in the prior year, which is consistent with our stated goal of achieving full year adjusted EBITDA margins in the mid-30s, and we see further upside from here. Within the Digital Audio Group, our podcast revenue momentum continues, and grew to $174 million, up 24.5% compared to prior year, which was above our guidance of up in the mid-teens. In Q4, approximately 47% of our podcasting revenue was generated by our local sales force, up from about 13% in Q4 of 2020, demonstrating the unique advantage of having what we believe is the largest local sales force in media, with a presence across 160 markets alongside our strong national sales force. Not only do we have the #1 audience in podcasting as measured by both Podtrac and Triton, the podcast industry's primary measurement services that track actual downloads and users, we believe we also have the most profitable podcasting business in the United States. Our podcasting EBITDA margins remain accretive to our total company EBITDA margins, achieved through rigorous financial discipline in building, partnering, and renewing our podcast relationships. A key to our success in building our podcast business has been that podcasting is, in essence, radio on demand. For us, it's an adjacent and complementary business. We operate Broadcast Radio stations across the country, 24 hours a day, 7 days a week, with almost 90% of the U.S. population listening every month. Our unique assets and expertise, including programming, production, and distribution at scale, power our strong podcast momentum in an expanding podcast marketplace. In the fourth quarter, our non-podcast digital revenue grew 6.8% compared to the prior year. Turning now to the Multiplatform Group, which includes our Broadcast Radio, Networks, and Events businesses. Fourth quarter revenue was $665 million, down 2.8% versus prior year and in line with our previously provided guidance range of down low single digits. Excluding the impact of political advertising, Multiplatform Group revenue was up 2.3%. The Multiplatform Group's adjusted EBITDA was $129 million. As a reminder, the prior year benefited from approximately $40 million of political advertising revenue. We remain confident we can return the Multiplatform Group to EBITDA growth. To reach that goal, in addition to our continuing efforts on costs, we're focused on four major drivers: first, programmatic. We're the first radio company whose broadcast inventory is available through the existing programmatic buying platforms, allowing our Broadcast Radio inventory to participate in the growing programmatic total addressable market. As a reminder of the progress we have already made in this effort, we have partnership agreements with Amazon DSP, Yahoo! DSP, and others to include our Broadcast Radio inventory on their programmatic platforms. In the case of Amazon, we expect our Broadcast Radio inventory to be included in their programmatic platform in the second half of the year. Secondly, integrated sales. We serve as a true marketing partner for our Broadcast Radio clients and agencies. This marketing approach focuses on bringing all of our advertising assets into play, avoiding treating each campaign as a stand-alone transaction. It increasingly allows us to develop complex media and marketing plans that leverage the unique power of radio to drive the results our partners desire, including enhancements of the non-broadcast components of their other media. Third, our broadcast outperformance. In 2025, we outperformed radio industry revenue performance by 500 basis points according to Miller Kaplan. Given the unique scale of our audience, our ad tech platforms, and the fact that we have the largest local sales force in audio, we expect to continue to increase our share of the radio total addressable market moving forward. Fourth, our resilient radio audience. There are more broadcast radio listeners today than there were 20 years ago, and one constant in advertising is that revenue always follows consumer usage, even if it sometimes takes a while. Since the percentage of Broadcast Radio usage among consumers is far greater than the share of advertising revenue that Broadcast Radio enjoys, we remain encouraged about this upside potential. We also see important partnership announcements as validation of the power of Broadcast Radio with companies like Netflix and TikTok seeking to partner with us and our Broadcast Radio assets. We're premiering new music with TikTok and radio, including last week's preview of Bruno Mars' new album, which set a new bar for the largest album preview, showcasing the unique synergy of iHeart and TikTok in helping artists achieve their goals. Furthermore, it's noteworthy that some popular video podcasts available on Netflix today are derived directly from our radio shows, including the Breakfast Club and Bobby Bones, further evidence of the unique strength of our radio personalities and assets. Finally, before I turn it over to Rich, let me provide our perspective on the current advertising marketplace. Last year, we successfully navigated an uncertain ad market, and while there was some disruption this quarter due to major weather events, we still view the advertising marketplace as reasonably healthy. We expect a year of meaningful EBITDA and free cash flow growth for iHeart, and Rich will provide you with more details on that. Now I'll turn it over to Rich.

Thank you, Bob, and good afternoon. Our Q4 2025 consolidated revenue was above our guidance of down low single digits and up 0.8% compared to the prior year quarter. Excluding the impact of political revenue, our consolidated revenue was up 7.7%. Let me provide some additional detail on our advertising revenue performance this quarter. A reminder: one of our strengths is our diversified advertising revenues. No advertising category exceeds about 5% of our total advertising revenue, and no individual advertiser constitutes more than 2% of our total advertising revenue. In the fourth quarter, the largest category gainers in terms of absolute dollars were financial services, retail, entertainment, and beauty and fitness. Conversely, the four categories that declined the most in absolute dollars were political, government, restaurants, and food and beverage. Our five largest advertising categories in absolute dollars during the fourth quarter were health care, homebuilding and improvement, financial services, retail, and entertainment. Our consolidated direct operating expenses grew 2.4% for the quarter, primarily driven by higher variable content costs related to the revenue growth in our digital businesses, partially offset by a reduction in costs incurred from our cost savings initiatives as well as decreased employee compensation costs. Our consolidated SG&A expenses rose 4.6% for the quarter, largely due to expenses associated with our noncash co-marketing partnerships, also partially offset by reduced costs linked to our cost savings initiatives and lower employee compensation costs. We reported a fourth quarter GAAP operating income of $86 million, down from $105 million in the prior year quarter. Our adjusted EBITDA for the quarter was $220 million at the midpoint of our previously provided guidance range of $200 million to $240 million, compared to $246 million in the previous year. As a reminder, Q4 of 2024 benefited from approximately $80 million of political advertising revenue. Before we delve into segment performances, I would like to update you on our cost savings initiatives. We are currently working on $50 million of new in-year cost savings, which will start to take effect beginning in Q2. This is in addition to the $50 million in cost reductions announced during last quarter's call, bringing our total cost savings to $100 million for 2026. As a reminder, we achieved the previously announced $150 million of net cost savings in 2025, and we continue to enhance the efficiency of our operating structure, including the adoption of technologies like AI-powered tools and services. Now, turning to our operating segments. In Q4, the Digital Audio Group's revenue reached $387 million, up 14.1% year-over-year and exceeding our guidance of up high single digits. The Digital Audio Group's adjusted EBITDA stood at $132 million, up 10.7% year-over-year, with Q4 adjusted EBITDA margins at 34.1%, compared to 35.1% in the prior year. Within the Digital Audio Group, our podcasting revenue was $174 million, growing 24.5% year-over-year and surpassing our guidance of mid-teens growth. Our fourth quarter non-podcasting digital revenue rose 6.8% year-over-year to $213 million. In the Multiplatform Group, revenue amounted to $665 million, down 2.8% year-over-year, in line with our previously provided guidance. Excluding political revenue, our Multiplatform Group revenue increased 2.3%. The adjusted EBITDA was $129 million, down 14.2% from $150 million in the prior year quarter. This decline can be attributed to the prior year's Q4 benefiting from around $40 million from political advertising revenue. The Multiplatform Group's adjusted EBITDA margins were 19.4%, down from 21.9% in the year-ago quarter, which was influenced by the political year. Regarding our proprietary audience database investments, which underpin our broadcast programmatic offerings, in Q4, these partnerships drove an increase in our non-cash partner marketing revenues and expenses, which we expect will continue to experience quarterly inconsistencies. However, we believe obtaining these crucial marketing resources for our broadcast programmatic initiatives on a non-cash basis is a prudent capital optimization strategy. Now, turning to the Audio & Media Services Group. Revenue was $79 million, down 19.3% year-over-year. The previous year's Q4 benefited from approximately $35 million of political advertising. Excluding political revenue, the Audio & Media Services Group revenue was up 21.8%. Adjusted EBITDA was $31 million, down 35.7% compared to the prior year, again primarily due to the prior year’s political advertising impact. In the fourth quarter, our free cash flow was $138 million, or $158 million including proceeds from certain real estate asset sales, compared to a negative $24 million in the prior year quarter. Our Q4 2025 EBITDA to free cash flow conversion was approximately 70%, reflecting the company's strong free cash flow generation capabilities and instilling confidence in our ability to produce meaningful free cash flow in 2026 and beyond. As of year-end, our net debt stood at around $4.5 billion, total liquidity was $640 million, and our cash balance was $271 million, which includes $50 million borrowed under the ABL facility. Our year-end net debt-to-adjusted EBITDA ratio was 6.6x. Now, let me turn to our guidance for the first quarter and the full year. In the context that Bob discussed regarding the advertising marketplace's health, for Q1, we anticipate achieving adjusted EBITDA of approximately $100 million, with consolidated revenue expected to rise by high single digits compared to the prior year. January revenue increased approximately 1% year-over-year, with January 2025 being a strong comparison, having increased 5.5%. For our segments, we anticipate Digital Audio Group revenue to be up mid-teens year-over-year, with podcast revenue expected to grow in the low 20s. We expect Multiplatform Group revenue to rise by mid-single digits year-over-year. Lastly, we project the Audio & Media Services Group revenue to increase by high single digits year-over-year. We continue to invest in significant broadcast programmatic efforts as Bob discussed, with our guidance accounting for those incremental expenses, most of which are non-cash. For the full year, we expect adjusted EBITDA to be approximately $800 million, with our free cash flow forecasted to be around $200 million. Embedded within our adjusted EBITDA guidance are the expectations that the Multiplatform Group will return to adjusted EBITDA growth during 2026. We anticipate generating approximately $200 million of overall programmatic revenue in 2026, up approximately 50% from $135 million in 2025. Additionally, our broadcast programmatic revenue trajectory is expected to mirror the strong growth we have experienced in podcasting revenue. We foresee podcasting revenue maintaining its upward momentum. We anticipate a robust midterm election year in terms of political revenue. As mentioned, 2026 will benefit from $100 million in in-year cost reductions, aiding in offsetting investments for future technological advancements. Further details concerning our free cash flow guidance indicate interest expense will amount to approximately $440 million, cash taxes will be roughly 5% of adjusted EBITDA, capital expenditures are set at about $90 million, and cash restructuring expenses at about $50 million. We project working capital to be a source of cash this year, driven by upfront political revenue collection. We expect our net leverage ratio at the end of 2026 to be in the mid-5s, reflecting a more than full-turn improvement year-over-year. We're looking forward to 2026 being a year of considerable adjusted EBITDA and free cash flow generation for iHeart, fueled by the Multiplatform Group's return to EBITDA growth, the ongoing robust momentum of our podcasting revenue and audiences, our expanding programmatic revenues, and continuous operational efficiencies reflected in our cost-saving initiatives. Now we will transition to the operator for questions. Thank you.

Our first question comes from Aaron Watts from Deutsche Bank.

I've got a couple of questions, if I may. Encouraging to see the growth in core MPG revenues in 4Q and continued strength on the digital side. I thought it was interesting to see Digital EBITDA larger than MPG in the quarter as well. But as I look ahead, I appreciate it if you could help me understand why you're seeing high single-digit revenue growth in the first quarter but a small decline in year-over-year EBITDA despite all the costs you're taking out, and perhaps how to think about those same factors impacting first quarter as we think more about the full year performance, too.

Sure. It's Rich. Let me start. First of all, again, I don't think you see that same dynamic as you go through the full year. You can look at our overall guidance for the full year. Secondly, just as a reminder, our first quarter numbers are small compared to the rest of the year. Again, if you consider our historical performance for Q1 in 2025, '24, and expectations for 2026, and the fact that January of 2025 was a strong comp with a growth rate of 5.5%. Some of that prepaid marketing, which built up throughout 2025, is being deployed in Q1. There are a lot of moving pieces, but the smaller scale in Q1 accentuates the effects. As you progress through the year, that dynamic should even out.

Okay. Great. That's helpful. And then thinking about your costs, and I apologize if I missed this, but how should we analyze the $100 million in cost savings as we move through the year across first quarter, second quarter, third quarter, and fourth quarter? Additionally, are there cash costs we should model to achieve those savings?

Yes. So just on cost, you can think of it as approximately $12.5 million in Q1 and $28 million in Q2, counting the previously announced costs. We will provide more specifics as we track the progress.

Perfect. Thank you. On the political side, we've heard robust expectations for political spending this year, and it sounds like a few races, including Texas, are off to a fast start. As we look at your $800 million EBITDA guidance for the full year, what political assumptions are you incorporating into that number to understand the upside potential?

Yes. We've always said, and I continue to say, we expect 2026 to be a strong political year, even in a non-presidential cycle, and we're observing the signs already.

Great. If I could ask one last question, and I appreciate the time. From the outside, what benchmarks or milestones should we monitor regarding your programmatic efforts and partnerships, including Netflix? Are those partnerships contributing to the strength in your podcast forecast?

In terms of programmatic, it benefits everything we have, including podcast, digital streaming, and broadcast radio. However, the hardest aspect to integrate into programmatic is Broadcast Radio, as programmatic systems were built for digital inventory. As we announced, we're entering the Amazon DSP and Yahoo DSP, among others, with broadcast, which is encouraging. There is a revenue opportunity in programmatic purchases people want to make. If we can’t offer that, we risk losing business. Video podcasts present new revenue streams, and the surge from platforms like YouTube and Netflix is promising for us. We expect that to be a growing market.

And just to add, we expect total programmatic revenue to reach about $200 million in 2026, showing strong growth over 2025, which would serve as a significant benchmark for our programmatic progress.

Our next question comes from Stephen Laszczyk from Goldman Sachs.

Bob, Rich, I was curious to delve deeper into the drivers of growth in the podcasting business. We have seen strong performance in 2025. Can you also provide insights into your expectations for 2026? Looking beyond that to 2027 and beyond, what opportunities for growth do you see regarding new content, audience engagement, and monetization? Additionally, I recall margins in the mid-30s was mentioned; can you elaborate on the key drivers behind achieving that goal?

Regarding podcasting, growth is fueled by more listeners and deeper engagement, as we field increasing inventory opportunities. Our position as the largest podcast publisher gives us a distinct advantage; we get offers for new content first. We decline certain offers only if the economics don't align with our business model. We have extensive resources through our broadcasting that we can leverage for podcast development, as opposed to merely acquiring others' content.

On the margin aspect, we discuss our podcasting EBITDA margins and the overarching goal is continual improvement in efficiency across all revenue streams and company segments. Although we reached our goal in the mid-30s for EBITDA margins for the Digital Audio Group, we will persist in pursuing further enhancements and optimizing our return on investment while increasing our profitability.

That's great. A quick follow-up. Within that, what size of an opportunity do you believe video podcasting presents over the next 12 to 24 months? Could this move the revenue needle significantly, or might it require something like an expanded Netflix agreement for that to happen?

Both YouTube and Netflix are significant players indicating interest in entering the video podcasting arena. This could drive an expansion of the market, with potential interest from other platforms as well. We can uniquely promote these podcasts using our broadcast capabilities since we reach 90% of Americans through radio. If listeners hear about their favorite radio hosts appearing on Netflix, it generates considerable interest.

Next question comes from Sebastiano Petti from JPMorgan.

Rich, looking back, you mentioned anticipated growth in programmatic revenue for the year. Could you share the growth rate of programmatic revenue for 2024 to better illustrate the growth trajectory? Additionally, I noticed that DAG margins have decreased year-over-year, which seems to be the lowest fourth quarter since 2022. Is there something specific driving this trend? Also, in terms of restoring MPG to EBITDA growth, are we expecting those incremental savings to concentrate in MPG?

On DAG, there are many moving parts each quarter, which is why we emphasize annual averages for margins. The rhythm of our business usually sees Q1 as the smallest quarter, while Q4 is the largest. We don't currently have additional insights beyond what we mentioned in our remarks. For MPG, we’ve outlined their various factors impacting growth. I don't have the exact programmatic revenue growth for 2024, but it's significantly lower than 2025. We can follow up on that later.

Speaking on MPG, there are two main factors: cost reduction and advertising dynamics are critical for us. It's imperative to apply efficiency-enhancing technology and capitalize on increasing ad opportunities as radio continues to be an essential reach medium. We are already witnessing more demand from advertisers for audio placements, and it's only expected to grow.

Lastly, it's a non-presidential election cycle this year, which we anticipate will greatly benefit our company.

Our last question comes from Patrick Sholl from Barrington Research.

I want to inquire about programmatic. You mentioned discrepancies between revenues and expenses. How much of a drag do you expect that to have on EBITDA for the full year?

It's accounted for in the projections we're discussing. We've approached programmatic growth prudently, limiting its impact on earnings. Additionally, we’ve explored noncash marketing options that provide substantial benefits to us.

If there are no further questions, thank you all again for listening to the iHeart story. On behalf of all of us, we are available for follow-up questions. Thank you very much.

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