iHeartMedia Inc - Ordinary Shares - Class A New Aktie

Good afternoon, and welcome to iHeartMedia's First Quarter 2026 Earnings Call. [Operator Instructions] 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 first quarter 2026 earnings call.

Joining me for today's discussion are Bob Pittman, our Chairman and CEO; 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, and good afternoon, everyone. In the first quarter, our consolidated revenue was $884 million, up 9.6% compared to the prior year quarter and in line with our guidance of up high single digits. Excluding the impact of political, our consolidated revenue was up 9.3%. We generated adjusted EBITDA of $93 million in the first quarter, slightly below our previously provided guidance of approximately $100 million compared to $105 million in the prior year. The timing of the noncash marketing expenses that we discussed in the last few earnings calls drove the majority of our slight underperformance relative to our EBITDA guidance as we recognized more of this noncash expense in the period than previously anticipated due to timing of some of our partnership campaigns. This was also driven in part by our March advertising revenues coming in a little lower than anticipated, and we believe this correlated with advertiser and consumer uncertainty resulting from the impact of current macroeconomic issues.

Before I go into the details of this quarter's results, today, we're announcing a new cost reduction initiative that will generate an additional $50 million of annualized savings, which we will begin realizing in the second half of the year. As a reminder, this is in addition to the $100 million of in-year 2026 savings that we have previously announced. As you know, we continually reevaluate our organizational structure, flatten layers of management and push the adoption of new technologies and tools, including AI to improve our operating efficiency, and this latest announcement is further evidence of that commitment. I also want to add, as a result of the implementation of changes to the tax code, we expect our cash taxes for 2026 to be effectively eliminated and for the next few years as long as the current tax laws remain in effect. This will materially improve our free cash flow generation moving forward.

Rich will speak to all of this in a bit more detail, and now I'd like to turn to our individual operating segments. The Digital Audio Group generated first quarter revenues of $327 million, up 18% versus prior year and slightly ahead of our previously provided guidance of up mid-teens. Within the Digital Audio Group, our podcast revenue momentum continues and was $147 million for the quarter, up 26.9% compared to prior year of $116 million, above our guidance of up low 20s, and approximately 50% of our podcasting revenue was generated by our local sales force. Our podcasting EBITDA margins remained accretive to our total company EBITDA margins, which we achieved by applying rigorous financial discipline, and we believe we have the most profitable podcasting business in the United States. In fact, we're the #1 podcast publisher as measured by both Podtrac and Triton, and we're also the podcasting industry's #1 podcast sales network.

And one more thing to note, a major key to our success in building our podcast business has been our broadcast radio assets. If Netflix is, in essence, TV on demand, then podcasting is radio on demand. And as the #1 radio company in America, that gives us a great advantage. In the first quarter, digital ex-podcast revenue grew 11.6% compared to prior year. The Digital Audio Group generated first quarter adjusted EBITDA of $87 million, flat to prior year. The Digital Audio Group's adjusted EBITDA margins were 26.5%. And as a reminder, Q1 margins are always the lowest of the year, and we expect to see DAG's full year adjusted EBITDA margins in the mid-30s as they were for the full year 2025.

Turning now to the Multiplatform Group, which includes our broadcast radio, networks and events businesses. First quarter revenue was $493 million, up 4.3% versus prior year and slightly below the midpoint of our guidance range of up mid-single digits. Excluding the impact of political advertising, Multiplatform Group revenue was up 3.9%. The Multiplatform Group's adjusted EBITDA was $47 million compared to $70 million in the prior year. Despite this quarter's Multiplatform Group adjusted EBITDA performance, we remain confident we can return the Multiplatform Group to adjusted EBITDA growth during this year. And to reach that goal, in addition to our continuing efforts on cost, we're focused on 4 major drivers: Number one, Programmatic. We have built the ad tech infrastructure and systems to make our broadcast inventory available through programmatic buying platforms. These partnership agreements with Amazon DSP, Yahoo DSP, Google, DV360 and others will enable our broadcast radio inventory to participate alongside our digital inventory in the same growing programmatic TAM.

Second, integrated sales. By positioning ourselves as a true marketing partner for our clients and agency partners, we focus on bringing all of our advertising assets to bear, including continuing to bundle broadcast radio with other platforms for the benefit of our advertising partners.

Third, increasing share of the broadcast radio TAM. In Q1, we outperformed the radio industry's revenue performance by 5.8 percentage points according to Miller Kaplan, and we expect this to continue given the unique scale of our audience, our ad tech platforms and the fact that we have the largest sales force in audio.

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 the revenue eventually follows consumer usage. We continue to see our partnerships with companies like Netflix and TikTok as validation of the unique power of our broadcast radio assets. We continue to premiere new music with our TikTok partnership with a broadcast radio. And following on the tremendous success of our Bruno Mars album preview earlier this year, we have nationwide programming campaigns coming up to launch new music by Madonna and Sabrina Carpenter. And if you're looking for further validation of the power of our broadcast radio assets and our radio personalities, out of all the video podcasts that appear on Netflix in the first quarter, one podcast got over 40% of all their podcast views according to Samba TV, and that's our own Breakfast Club with Charlamagne. Why? Because they talk about it on the radio every morning, one more way we're quantitatively proving the value of broadcast radio to advertisers and marketers.

And before I turn it over to Rich, I want to give you our view on the current macro environment. Our internal corporate insights group does weekly updates on consumer sentiment to help our on-air talent and programmers stay in touch with the issues that are important to our listeners. This week, one of the studies showed that 61% of U.S. consumers said the economy is getting worse and 31% list inflation or price of goods as their most important issue, which is the highest since 2022. And we believe this has probably created some softness in what we feel is a reasonably healthy advertising marketplace. And with that, I'll turn it over to Rich.

Thank you, Bob, and good afternoon. Our Q1 2026 consolidated revenue was in line with our guidance of up high single digits and was up 9.6% compared to the prior year quarter. As Bob mentioned, we saw some softness in March that appeared to correlate with the start of the conflict in the Middle East. Having said that, we still believe that 2026 will be a significant year in terms of adjusted EBITDA and free cash flow generation for iHeart.

I want to repeat 2 key updates that Bob gave. The first is the update on our cost reduction work and our new savings initiative that will generate an additional $50 million of annual savings, which we will begin realizing in the second half of the year. As a reminder, this is in addition to the $100 million of in-year 2026 savings that we have previously announced.

The second is update to our cash taxes. As a result of changes to the tax code, we now expect to have minimal cash taxes over the next 3 years, assuming the current tax laws remain in effect. As we think about our free cash flow generation, this will preserve approximately $150 million to $200 million of cash from 2026 to 2028.

Let me provide you with some additional detail on our advertising revenue performance in the first quarter. As a reminder, one of our strengths is our diversified advertising revenues. There is no advertising category that is greater than about 5% of our total advertising revenue and no individual advertiser that is about more than 2% of our total advertising revenue. In the first quarter, the largest category gainers in terms of absolute dollars were health care, financial services, computers, electronics and appliances and political. And the 4 categories that declined the most in terms of absolute dollars were entertainment, beauty and fitness, government and telco. And in the first quarter, our 5 largest advertising categories in terms of absolute dollars were health care, financial services, auto and homebuilding and improvement.

Our consolidated direct operating expenses increased 5.3% for the quarter. This increase was primarily driven by higher variable content costs associated with the revenue growth of our digital business. Our consolidated SG&A expenses increased 11.9% for the quarter. This increase was primarily driven by expenses related to our noncash co-marketing partnerships, partially offset by a decrease in employee compensation costs. We generated first quarter GAAP operating income of $1.5 million compared to an operating loss of $25 million in the prior year quarter. We generated adjusted EBITDA of $93 million, slightly below our previously provided guidance of approximately $100 million and compared to $105 million in the prior year. As Bob mentioned, this performance below guidance was driven primarily by the timing of noncash marketing expenses recognized earlier in the year than expected and some softness in the advertising marketplace in March as a result of uncertainty correlated with the conflict in the Middle East.

As we previously discussed, some of the investment in our proprietary audience database, which is the foundation of our broadcast programmatic offerings takes the form of co-marketing partnerships to drive engagement with the iHeartRadio digital services. We continue to view these marketing activities as critical for the success of our broadcast programmatic initiative. And as a reminder, this is all in support of our efforts to make our broadcast inventory as easy for our advertising partners to transact as our digital inventory. This is one of the important steps in returning the Multiplatform Group back to EBITDA growth. We will continue these partnerships in Q2, and they will start tapering off in the second half of the year. As you know, all the revenue and expense associated with each partnership has net 0 impact on adjusted EBITDA over time. And as a reminder, the majority of this revenue and expense impacts the Multiplatform Group segment. I think it's important to also tie this noncash marketing activity to our focus on reducing costs and conserving cash.

If you go back 10 years, this company spent approximately $100 million a year on cash marketing in support of driving listeners to our stations. And since then, we have replaced most of this cash marketing expense with these noncash marketing partnerships and have focused those marketing efforts on driving our broadcast programmatic initiatives in addition to radio listenership.

Turning now to the performance of our operating segments. In the first quarter, the Digital Audio Group's revenue was $327 million, up 18% year-over-year and slightly ahead of our guidance of up mid-teens. The Digital Audio Group's adjusted EBITDA was $87 million, flat to prior year, and our Q1 adjusted EBITDA margins were 26.5% compared to 31.4% in the prior year. Within the Digital Audio Group, our podcasting revenue was $147 million, which grew 26.9% year-over-year and above the guidance we provided of up low 20s. Our first quarter digital ex-podcast revenue grew 11.6% year-over-year to $180 million.

Turning now to the Multiplatform Group. Revenue was $493 million, up 4.3% compared to prior year, slightly below the midpoint of our previously provided guidance range of up mid-single digits. Adjusted EBITDA was $47 million, down from $70 million in the prior year quarter.

Turning to the Audio Media Services Group. Revenue was $67 million, up 12.2% year-over-year, driven primarily by the continued growth of its digital revenues. Excluding the impact of political revenue, the Audio Media Services Group revenues were up 13%. Adjusted EBITDA was $24 million, up 54.7% compared to the prior year. In the first quarter, our free cash flow was negative $114 million compared to a negative $81 million in the prior year quarter. This was driven by an increase in our interest expense.

As a reminder, in Q1 2025, we recognized lower interest expense due to the acceleration of a portion of our interest payments into Q4 2024 related to our refinancing. This drove the year-over-year increase in interest expense of approximately $40 million. Adjusted for that shift, our free cash flow improved slightly compared to prior year. At quarter end, our net debt was approximately $4.7 billion, our total liquidity was $495 million and our cash balance was $135 million, which included $50 million borrowed under the ABL facility. Our quarter ending net debt to adjusted EBITDA ratio was 6.9x. At the end of April, we drew down $75 million from our ABL, which now has an outstanding balance of $125 million. We fully expect to pay down that balance by the end of 2026 with our free cash flow generation.

As a reminder, we typically have negative free cash flow in the first half of the year and then generate meaningful free cash flow in the second half of the year. And remember, 80% of political advertising comes in the back half of the year and helps drive free cash flow. On May 1, we repaid $51.2 million remaining balances of our 6.38% notes as well as the term loan and incremental term loan, fully retiring those stub facilities.

Let me now turn to our guidance for the second quarter and the full year within that context that Bob discussed regarding the current economic environment. For the second quarter, we expect to generate adjusted EBITDA between $140 million and $160 million. We expect our consolidated revenue to be up low single digits compared to prior year. We're still closing April, but it is pacing up low single digits year-over-year.

Turning to the individual segments. We expect the Digital Audio Group's revenue to be up approximately 10% year-over-year, with podcasting revenue expected to grow in the low 20s and digital ex-podcasting to be up low single digits. We expect the Multiplatform Group's revenues to be approximately flat compared to prior year. We expect the Audio Media Services Group's revenue to be up low teens year-over-year.

Turning to the full year. We are reaffirming our full year adjusted EBITDA guidance of $800 million and our free cash flow guide of $200 million. Embedded in our adjusted EBITDA guidance are the following: We expect to generate approximately $200 million of overall programmatic revenue in 2026, up approximately 50% from $135 million in 2025. And as a reminder, we expect our broadcast programmatic revenue trajectory to be similar to that of the growth we experienced in podcasting revenue. We expect podcasting revenue to continue its strong momentum. We expect this to be a robust midterm election year in terms of generating political revenue. And as a reminder, the vast majority of our political revenue occurs in Q3 and Q4. And our guidance also includes the benefit of our cost savings programs.

Let me provide some of the inputs embedded in our free cash flow guidance. Interest expense will be approximately $440 million. As we discussed earlier, due to tax planning actions taken in response to changes to the tax code, we now expect to have minimal cash taxes this year and for the next few years as long as the current tax laws are in effect. As I said before, this is a great outcome and will help us avoid approximately $150 million to $200 million of cash taxes over the next 3 years. Capital expenditures are expected to be approximately $90 million. Cash restructuring expenses will be approximately $50 million. We expect our net leverage ratio at the end of 2026 to be in the mid-5s, which would be more than a full turn improvement year-over-year.

And before we open the line for Q&A, I want to remind you that our company does not comment on rumors or speculation. And now we will turn it over to the operator to take your questions. Thank you.

[Operator Instructions] Our first question comes from Aaron Watts from Deutsche Bank.

A couple of questions, if I may. First, you're affirming your full year guidance. Is the right way to think about that as being a balance between the macro headwinds that you -- that the whole industry is experiencing balanced against kind of the incremental cost savings you've introduced? And on the political side, I know you refocused your efforts there. Can you give us your latest thoughts on how this year is shaping up for you relative to the last election and how much political is baked into that full year guide you've given us?

I think that's probably an accurate assessment of where it is. I think we also obviously have the political revenue coming in. And I think you read the same headlines we do and talk to the same people. I think everybody thinks it's going to be a very big political spend year. And as a reminder, most of that comes Q3, Q4.

Yes. And Aaron, it's Rich. I would just add a couple of things to what Bob said about confirming the full year guidance. I mean, obviously, we're sitting here in May. Again, not Nostradamus, you all read the same things we do. We have a lot of moving pieces. And also as a reminder, Q1 is by far the smallest quarter we have of the year. That's nothing new. It always has been. Q2 and Q3 are about the same from a financial standpoint. Q4, just with the rest of the advertising industry is our biggest quarter out there. And we expect this to be a strong -- no reason we don't think it will be another strong political year. And then we announced the last savings program today, which actually is in Page 7 of the investor deck. We tried because we know there's a lot of moving pieces, try to do even a better job of laying it out and how it hits on the individual quarter. So you take that all together, and as we sit here today, based on everything we see, that's what comprises reaffirming our $800 million EBITDA guidance.

Okay. Great. And then secondly, on your noncash marketing, I believe I heard you say it came in a bit heavier than you anticipated in this quarter, but that it would moderate as the year kind of progressed. Did I hear that correctly? And are you extracting from these efforts? Or are you getting from these efforts what you expected? And can you give us an update on how it's translating into kind of your ability to sell programmatically, especially your broadcast inventory?

Well, maybe I'll just start, and Bob will chime in. Just a couple of things. Yes, on timing, you heard exactly correctly with its impact. Again, lot of small numbers in Q1. Nothing changes in terms of the way to think about the full year. It just doesn't change anything. It's just a slight timing difference as I said earlier. When you think about from building up from a programmatic standpoint, we reiterated that we expect programmatic to be up 50% year-over-year. We -- I think Bob noted in his remarks, and we've talked about that we are in, if you want, in terms of the measurement of that in addition to the dollars, we are -- look at the DSPs that we talked about in terms of Yahoo, DV360 being in the -- from a broadcast standpoint, the Amazon DSP in the second half of this year, we said previously. So we continue to be pleased about that, and it continues to be an important part as we noted when we gave guidance of returning the Multiplatform Group back to EBITDA growth.

And I think as you look at the whole programmatic, we've said in the past that we expect the trajectory of the growth to be somewhat like podcasting. So we anticipate some healthy growth moving ahead. And again, going to the point on noncash marketing expense, any time we can use noncash instead of cash is a good thing. And if you go back 10 years, this was a substantial cash expenditure for the company when we needed to attract users. And obviously, being able to do it this way has a very positive benefit for the company.

Yes. I think, Aaron, I would just -- Aaron, I would just add -- this is Mike. In terms of the timing, we did say that we will continue this into Q2, and we feel we have enough of a media bank to drive those efforts, and then we'll taper down through the back half of the year. That's all embedded in the guidance and obviously evens out over time.

Okay. Very helpful. If I could sneak one more in and again, thank you for the time. It sounds like you attacked some of your stub maturities post quarter, and you have a series of debt maturities to address beginning in earnest in 2028. Can you remind us how you're thinking about that? And also, if you could just confirm your flexibility to address those maturities within the confines of your various covenant packages?

Yes. Well, first of all, we're going to continue -- you saw we reiterate our guidance for the generation of $200 million of free cash flow for this year. And we also mentioned, and I want to reiterate the importance of our tax planning and the tax synergies that we expect to generate $150 million to $200 million over the next 3 years or so a period of time on that. So I think between the operations of the business, the generation of that free cash flow, we're very comfortable with our paying off from free cash flow of the upcoming stub maturities there. I'm sorry, what was the second question?

Framework of the debt documents. Yes, so the answer is within the framework of the debt documents, we believe we will do that with free cash flow generation, and we have the ability to do that within the debt documents.

Our next question comes from Stephen Laszczyk from Goldman Sachs.

Bob, Rich, maybe just to unpack advertising a bit more. I would just be curious if you could dive into the ad market today, what you're seeing in terms of ad categories, what's been more resilient, less resilient or more sensitive against this macro backdrop? And then I guess as you look into the second quarter and ultimately out to the full year for the guide, what's implied in terms of some of either recovery or still some sensitivity in the macro impacting top line in the guide?

Look, I think we've got a reasonably healthy ad market, especially considering all the macro factors at work. But I will say, I think we watch it closely. I gave you a little bit of our internal numbers, which we use to work with our on-air talent and our programmers so they understand the mood of America. I think when you see high gas prices and you see inflation, you're probably going to have more of an impact on lower income groups. But -- and the bigger spenders, higher income appear to be not as affected by it. But we watch it closely. And again, I don't think anybody is heading for the hills, but I do think we have to be cognizant of the fact that it has some moderating effect on the ad market.

And by the way, Steve, just in terms of categories, I covered a number of areas in my remarks. Also, I'll just point everybody to Slide 12 in the deck that was attached to the presentation, which kind of goes through the top category gains, decliners and in terms of total revenue. And in terms of the rest of the year and the advertising marketplace, Bob covered that. I would just continue to point out with that aspect of uncertainty, just the continued resiliency of the medium that we have. And we expect that will play well as we go through the rest of this year and into the future.

Yes. Also just to add, remember, political does eat up a meaningful piece of the inventory, which has a positive effect on the entire marketplace.

Got it. That's very helpful. And then maybe just one on the programmatic opportunity. You mentioned the $200 million target growth of 50%. Just curious if you could talk more about the drivers of programmatic this year so far in the first month of the year, what's been executed against that opportunity? And then if we think about longer-term unlocks on programmatic, if there's any pieces that still need to come together over the course of the next couple of quarters or years to unlock further revenue upside past $200 million?

Well, I think you look at in terms of what's driving it has been our digital and podcasting strong with our broadcast radio beginning to come on. And obviously, we think the big growth driver in the long term will be broadcast radio getting into the digital TAM. Right now, unlike video, if you try and plan a digital audio campaign, you really have a hard time getting, I'm sorry, broadcast, you have a hard time getting reach without broadcast radio. So we are very cognizant of that. I think that's the reason that DSPs are anxious to get us into their buying platform so that these campaigns can deliver the reach that they're accustomed to getting when they do a video campaign.

And by the way, just to go back and Bob point this out because he talked about the future. Again, I just -- Bob mentioned it, but I think it's worth repeating when we look at broadcast and thinking about that similar to the podcasting revenue trajectory. We did about $550 million in podcasting revenue in 2025. If you go back about 5 years before that, we did about $50 million overall. So we're just trying to -- in terms of context of how to think about that. And then I would say also in addition to all the DSPs out there or as part of it, everything we're all reading about what's happening with agentic AI and the relationships we'll have not just with the DSPs but direct with the advertising holding companies is also going to be a continued driver there. So again, all to be optimistic in terms of our thinking about our future there.

Our next question comes from Sebastiano Petti from JPMorgan.

I guess just thinking about the business portfolio over time and I guess, how you're evaluating it? I mean, Bob, you talked about the importance of one of the major success or one of the major drivers of the success in podcasting has been your broadcast radio assets. But we're increasingly getting the question on whether or not -- do those 2 assets need to stick together long term? Or is there an opportunity for perhaps synergy, value unlocked by some sort of separation? Is that something you guys have contemplated in the past you're looking at going forward?

Yes, we haven't looked at it because we do think they go together well. Having said that, we're always open to maximizing the value of the company. And for us, we have been, I think, pretty smart in how we use broadcast radio, not only to build podcasting, but to build the iHeartRadio app, to build the iHeart brand name, to build the iHeartRadio Music Festival, the award show, et cetera, et cetera, that is at the base. Why? Because we have this extraordinary reach and we have very high engagement. I mean I go back to look at what happened with Netflix. They put all these video podcasts on the air and one of them got 40% of all the views. Which one? It's a big morning radio show, Charlemagne and The Breakfast Club because they were talking about it on the radio. That kind of power allows us to propel and build a lot of the future of the company.

Sebastian, the other thing I might just point out because you talked about the assets -- all the assets we have -- and Bob mentioned this, I think, in his remarks, is that remember, broadcast radio listening is at a high it's been in 10 years. It's in 20 years, it's high, it's been 10 years out there. And if you think about the platform that Bob talked about with broadcast, in addition to the absolute performance of our Multiplatform Group, by the way, just as a reminder, financially, 75%, 80% of the incremental dollars of broadcast revenue dollars dropped to the bottom line. So it's an incredible financial performing asset, great free cash flow generator. Bob touched upon Netflix and everything we're seeing out there with the Netflix deal. Remember, that was born off of looking at the impact we have and the reach we have. And so the attraction, whether it's Netflix, I don't think we've mentioned on this call, but you're aware of the deal we did with TikTok, which affects not just influencers and podcasting, but also our broadcast radio assets. And we've said 1 or 2 times in this call about the importance of all the DSPs and being in the Amazon DSP for broadcast in the second half of the year. So I think you've got to think about all these assets working together.

And then finally, as you think about the revenue side, as a reminder, we have 1,000-plus ad salespeople that can sell anything anywhere anytime. That's a deliberate strategy across the company. So they're selling all of our assets. So think about it, we have 1,000-plus people also selling podcast both nationally and locally on a daily basis. And I think we touched upon, it's great that almost half of our podcasting revenue now is originated locally. So I think you got to think about it as all the assets working together. It's hard to pick out any one piece.

If I could quickly follow up there. You talked about the Netflix deal. So just a reminder, is that now at full run rate as we think about the revenue contribution to the digital business? Or is there some like stubbed or a partial quarter? And as we think about incremental opportunity from Netflix, is that a -- any contextualizing, you don't need to get into the fixed versus variable, but is it at scale and as we kind of think about going forward?

Well, I think the way to think about it, let's take it up a level. There's a new thing called video podcast, which appeared to be incremental to audio podcast. It's not the same usage case. It's another time at which people are doing it, and now we're able to get the video podcast in there. So it opens up a new revenue stream for this business called podcasting. And Netflix, I think, is the first example of that. But are there others that would like to carry our video podcasting? And by the way, the iHeartRadio app, we are now carrying -- just beginning to roll it out this month, beginning to carry video versions of audio podcast too. And you're seeing the same with Spotify and Apple. And certainly, YouTube has been doing it. So I think that's the big concept here is that you found yet another market that we can play in.

Our last question comes from Patrick Sholl from Barrington Research.

Just following up on programmatic and the flow-through of incremental revenue to the MPG Group. I was just wondering if there was like any sort of difference between the programmatic sales efforts and your traditional ad sales efforts on that flow-through to EBITDA.

What you mean in terms of the margin on the business? Is that the question?

Yes, yes.

I think it's relatively the same.

Okay. And then just on like just the macro uncertainty, any extent to which that's helping contribute to people buying advertising later and maybe switching their buys from direct to programmatic?

I don't think it will -- I don't think it's that. I think you're finding some players are saying, look, we're sort of automating our process. Some advertisers are buying directly using programmatic. Agencies are using it a lot. I think they've got one platform there. They're able to put almost all the players on one platform, make it easy to buy, easy to coordinate. And I think that's the basic appeal of it. And by the way, I think you get a whole lot fewer people to do it, and it happens faster. So I think it's more of that trend than anything that has to do with the macroeconomics in the world.

And remember, I might just add one last piece was the agentic programmatic and putting our broadcast inventory to be bought and sold as easy as digital. This is the way the advertising industry is transacting. And just to be clear, we're talking about ourselves and again, as a reminder, on digital, we're already in all the programmatic buying systems. And programmatic and agentic a little bit different, but along the same lines. But this has been going on for some period of time, not in broadcast, but in the video world. So this is not a new way to transact. It's the way the advertising industry has been transacting, and we're just making sure with all of our assets, starting with uniqueness of broadcast and digital is already there that we meet the industry, the agencies, our advertisers the way they want to do business.

Great. Well, if there are no other questions, we really all appreciate everybody taking the time. Thank you for the interest in the iHeart story. Bob, myself, Mike, Andrey are always available for follow-ups and to answer any questions.

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

Good afternoon, and welcome to iHeartMedia's Fourth Quarter 2025 Earnings Call. [Operator Instructions] 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 nonpolitical 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. Now 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. And 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 in addition to our strong national sales force.

And 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 measure 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 and we achieved this by continuing to apply rigorous financial discipline to building, partnering and even renewing our podcast relationships. And one more thing to note. A key to our success in building our podcast business has been that podcasting is, in essence, radio on demand.

For us, it's a truly 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, and we have the unique assets and expertise, including programming, production and distribution at scale, which power our strong podcast momentum in an expanding podcast marketplace. In the fourth quarter, our non-podcast digital revenue grew 6.8% compared to 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. And 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 and to reach that goal, in addition to our continuing efforts on cost, we're focused on 4 major drivers: number one, programmatic. We're the first radio company whose broadcast inventory is available through the existing programmatic buying platforms, enabling our Broadcast Radio inventory to participate in the growing programmatic TAM.

And as a reminder of the progress we've already made in this effort, we have partnership agreements with Amazon DSP, Yahoo! DSP and others to include our Broadcast Radio inventory and 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.

Second, integrated sales. We serve as a true marketing partner for our Broadcast Radio clients and agencies. This marketing approach, which focuses on bringing all of our advertising assets to bear and not treating each campaign as a stand-alone transaction increasingly allows us to develop complex media and marketing plans utilizing the unique power of radio to drive the results our partners are looking for, including enhancements of the nonbroadcast components of their other media.

Third, our broadcast outperformance. In 2025, we outperformed the radio industry revenue performance by 500 basis points according to Miller Kaplan. And given the unique scale of our audience, our ad tech platforms and the fact that we have the largest local sales force and audio, we expect to continue to increase our share of the radio TAM 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 the revenue always follows consumer usage, even if it sometimes takes a while. As the percentage of Broadcast Radio usage among consumers is far greater than the share of the advertising revenue that Broadcast Radio enjoys, we remain encouraged about this upside potential. We also see some important partnership announcements as validation of the power of Broadcast Radio with important companies like Netflix and TikTok, coming to partner with us and our Broadcast Radio assets.

We're now 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 and demonstrates the unique power of iHeart and TikTok working together to help artists achieve their goals. And it's also interesting to note that if you look at our video podcasts that are on Netflix today, some of the most popular ones are actually derived directly from our radio shows, including the Breakfast Club and Bobby Bones, more evidence of the unique power of our radio personalities and assets.

And finally, before I turn it over to Rich, let me give you our view of the current advertising marketplace. Last year, we successfully navigated an uncertain ad market, and although there was definitely some disruption to the advertising marketplace in this quarter due to major weather events, and there still remains some macro uncertainty as well as clearly evidenced by the events in the Middle East over the weekend we view the advertising marketplace as reasonably healthy, and we still expect a year of meaningful EBITDA and free cash flow growth for iHeart, and Rich will provide you with those details.

And with that, 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 was up 0.8% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 7.7%. Let me provide you with some additional detail on our advertising revenue performance this quarter. As a reminder, one of our strengths is our diversified advertising revenues. There is no advertising category greater than about 5% of our total advertising revenue and no individual advertiser that is 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, and the 4 categories that declined the most in terms of absolute dollars were political, government, restaurants and food and beverage. And in the fourth quarter, our 5 largest advertising categories in terms of absolute dollars were health care, homebuilding and improvement, financial services, retail and entertainment. Our consolidated direct operating expenses increased 2.4% for the quarter.

This increase was primarily driven by higher variable content costs associated with the revenue growth of our digital businesses partially offset by a decrease in costs incurred in connection with our cost savings initiatives as well as decreased employee compensation costs.

Our consolidated SG&A expenses increased 4.6% for the quarter. This increase was primarily driven by expenses related to our noncash co-marketing partnerships, partially offset by a decrease in costs incurred in connection with our cost savings initiatives, as well as decreased employee compensation costs.

We generated a fourth quarter GAAP operating income of $86 million compared to an operating income of $105 million in the prior year quarter. We generated adjusted EBITDA of $220 million at the midpoint of our previously provided guidance range of $200 million to $240 million, and compared to $246 million in the prior year.

As a reminder, Q4 of 2024 benefited from approximately $80 million of political advertising revenue. Before I turn to our segment performances, I want to give you an update on our cost savings initiatives. We are currently implementing $50 million of new in-year cost savings, which will start to benefit from beginning in Q2. This is in addition to the $50 million of cost reductions we announced on last quarter's call, which will bring our 2026 in-year cost savings to a total of $100 million. And as a reminder, we achieved the previously announced $150 million of net cost savings in 2025, and we continue to work on the efficiency of our operating structure, including using technologies like AI-powered tools and services.

Turning now to the performance of our operating segments. In the fourth quarter, the Digital Audio Group's revenue was $387 million, up 14.1% year-over-year and above our guidance of up high single digits. The Digital Audio Group's adjusted EBITDA was $132 million, up 10.7% year-over-year and our Q4 adjusted EBITDA margins were 34.1%, compared to 35.1% in the prior year.

Within the Digital Audio Group, our podcasting revenue was $174 million, which grew 24.5% year-over-year, and above the guidance we provided of up mid-teens. Our fourth quarter non podcasting digital revenue grew 6.8% year-over-year to $213 million.

Turning now to the Multiplatform Group. Revenue was $665 million, down 2.8% compared to prior year, in line with our previously provided guidance range. Excluding the impact of political revenue, our Multiplatform Group revenue was up 2.3%.

Adjusted EBITDA was $129 million, down 14.2% from $150 million in the prior year quarter. As a reminder, the Multiplatform Group's prior year Q4 adjusted EBITDA benefited from approximately $40 million of political advertising revenue. The Multiplatform Group's adjusted EBITDA margins were 19.4%, compared to 21.9% in the prior year quarter, which, as a reminder, was a political year quarter. As we have previously discussed, some of the investment in our proprietary audience database, which is the foundation of our broadcast programmatic offerings take the form of co-marketing partnerships to drive engagement with the iHeartRadio Digital Services.

In Q4, these relationships, again, drove an increase in our noncash partner marketing revenues and expenses. We will continue to experience some quarterly mismatching of these noncash marketing campaigns in both directions in subsequent periods, and we believe that obtaining these critical marketing resources for our broadcast programmatic initiative on a noncash basis is a prudent way to optimize capital and to achieve our goals.

Turning to the Audio & Media Services Group. Revenue was $79 million, down 19.3% year-over-year. Q4 of the prior year benefited from approximately $35 million of political advertising.

Excluding the impact of 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, due almost entirely to the impact of political advertising in the prior year quarter.

In the fourth quarter, our free cash flow was $138 million, or $158 million when including the 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% and demonstrates the company's high free cash flow conversion characteristics and gives us confidence in our ability to generate meaningful free cash flow in 2026 and thereafter.

At year-end, our net debt was approximately $4.5 billion. Our 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.

Let me now turn to our guidance for the first quarter and the full year. Within the context that Bob discussed regarding the health of the current advertising marketplace. For the first quarter, we expect to generate adjusted EBITDA of approximately $100 million. We expect our consolidated revenue to be up high single digits compared to prior year. Our January revenue was up approximately 1% year-over-year, and as a reminder, January 2025 was a strong comp, up 5.5%.

Turning to the individual segments. We expect the Digital Audio Group's revenue to be up mid-teens year-over-year with podcast revenue expected to grow in the low 20s. We expect the Multiplatform Group's revenue to be up mid-single digits year-over-year. We expect the Audio & Media Services Group revenue to be up high single digits year-over-year. We are continuing to invest in our important broadcast programmatic efforts that Bob discussed and our guidance includes the impact of those incremental expenses, and the good news is that the majority of this asset building expense is noncash.

And for the full year, we expect adjusted EBITDA to be approximately $800 million and our free cash flow to be approximately $200 million. Embedded in our adjusted EBITDA guidance are the following. We expect the Multiplatform Group to get back to adjusted EBITDA growth during 2026. We expect to generate approximately $200 million of overall programmatic revenue in 2026, up approximately 50% from $135 million in 2025.

And as a reminder, we expect our broadcast programmatic revenue trajectory to be similar to that of the growth we experienced in podcasting revenue. We expect podcasting revenue to continue its strong momentum. We expect this to be a robust midterm election year in terms of generating political revenue. And as mentioned before, 2026 will benefit from $100 million of in-year cost reductions, which will help to offset investments we're making to build out our future technological capabilities.

Let me provide some additional inputs embedded in our free cash flow guidance. Interest expense will be approximately $440 million. Cash taxes will be approximately 5% of adjusted EBITDA. Capital expenditures are expected to be approximately $90 million. Cash restructuring expenses will be approximately $50 million. Working capital is expected to be a source of cash this year, driven by political revenue, which is paid upfront.

We expect our net leverage ratio at the end of 2026 to be in the mid-5s, which would be more than a full turn improvement year-over-year. We are looking forward to 2026 being a year of significant adjusted EBITDA and free cash flow generation for iHeart, driven by the return of the Multiplatform Group to EBITDA growth, the continued strong momentum of our podcasting revenue and audience, our growing programmatic revenues and our continued focus on efficiencies as evidenced by our cost savings initiatives.

Now we'll turn it over to the operator to take your questions. Thank you.

[Operator Instructions] 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 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. You don't see that same dynamic as you go through the full year. I think as you can look at our overall guidance for the full year. The second thing is just as a reminder, our first quarter numbers are so small compared to the rest of the year.

Again, if you look historically in 2025, '24, you look at 2026, what we got for Q1 and what we're guiding for the full year. And also because, again, with the land of small numbers coming out of the quarter of Q4, which is a land of much larger numbers, and are continue to build up on our total critical programmatic offerings that we have, we continue to do copartner and noncash in Q4 as a way to support that and ramp up.

And I think we started to talk about that in Q3, so it was kind of a natural build. And then some of that about prepaid marketing that's in Q4 and that built up throughout the year, is getting deployed in Q1. So it comes back as expected. So it's just a lot of moving pieces, but it just gets really accentuated because of the land of small numbers in Q1. But as you go throughout the year, you won't see that same kind of effect.

Okay. Great. That's helpful. And then thinking about your costs, and I apologize if I missed this, but how should we think about the cadence of the now $100 million of cost savings that you're targeting as we move through the year across like first quarter, second quarter, third quarter, fourth quarter? And then are there cash costs we should model in to achieve those that you could help us with? .

Yes. So just on the cost, just doing the math, if you take the program we already announced at Q4 for 2026, take what we're announcing today, which starts to be implemented in Q2, but it's a full year $100 million of cost, in 2026. Think about it just the math, $12.5 million, let's say, to Q1 and about $28 million of the quarter after that.

Okay. Perfect. And then, on the political side, we've heard robust expectations for political spend this year, and it sounds like a few races, including Texas are off to a really fast start. As we look at your $800 million of EBITDA guidance for the full year, what political assumptions are you baking into that to help us get our mind around kind of what upside there could be from that number?

Yes. I mean we've always said, and I continue to say is that we expect 2026 to be a strong nonpresidential cycle political year, and we're seeing obviously all the same signs.

Okay. All right. Great. And if I could ask one last question, and I appreciate the time. From the outside, as we sit, what benchmarks or milestones should we be looking for with regards to your programmatic efforts as well as some of your recently announced partnerships, including Netflix and are those partnerships adding to the strength in your podcast forecast?

Well, I think in terms of the programmatic, programmatic obviously benefits everything we have, podcast digital streaming and broadcast radio. Broadcast radio is obviously the harder one to get into programmatic because the programmatic systems have really been built for digital inventory. But as we announced, we are going into the Amazon DSP with broadcast, also the Yahoo! DSP, both major DSPs and continuing to add more to that. So that's encouraging on that front. I think in terms of how we think it all fits together and how it helps us, obviously, there's a piece of the revenue pie out there that is programmatic. People want to buy programmatically. And if you can't offer programmatic, you're not going to get any of the money.

So having that kind of capabilities for our podcast and broadcast radio in particular, is very important to us and certainly is behind why we're investing what we have in it and why we're seeing the kind of growth we are I think in terms of the video podcast talking about Netflix and those opportunities, we've got this wonderful expansion of the marketplace from just audio to video podcast.

Now most people still want to listen to a podcast. The use case is generally in a place where you can't use your eyeballs. But there are people who do want to watch it and -- or we'll watch it occasionally, and we're seeing that market beginning to open up. And for us, that is sort of unforeseen revenue opportunities. And I think Netflix is -- I probably give credit. YouTube probably opened that up -- people's eyes to that, and Netflix, I think, has taken it to a whole other level. And we expect that to be a continued expanding market for us as well.

And by the way, just one last item close. As we said in terms of our guidance that we expect total programmatic revenue to be approximately $200 million in 2026, up 50% from our total revenue in 2025. So I think that's a pretty good benchmark in terms of benchmarking our total programmatic progress.

Our next question comes from Stephen Laszczyk from Goldman Sachs. .

Bob Rich, I was curious if you could talk a little bit more about the underlying drivers of growth in the podcasting business, continued strong performance to finish 2025. Just curious if you could unpack a bit more what you expect to see in '26? And then also too, if you look further out in '27 and beyond, just the drivers of adding new content, improving engagement, improving monetization, where you see the most opportunity for growth on that front. And then I guess related to that, Bob, I think you might have mentioned margins in the mid-30s is continuing to have opportunity to move higher. Just curious what you see as the key drivers on that front as well.

Well, look before Rich jumps in, I just want to say, I think on podcasting, what's great is you have so many vectors of growth. You not only have more people using podcast but you have them using more podcast each year. And obviously, we're seeing inventory opportunities continue to grow as well. And as we look at getting podcast, from our standpoint, we have this incredible flywheel effect because we are the largest podcast publisher by a pretty good margin.

We tend to get first look at everything. So if we don't take it, it's because we could figure out how the economics work and we are -- have pretty strong financial discipline in terms of making sure that we have podcasts that are legitimately good businesses for us. And we also have the ability, because we mentioned in the call, we have this incredible array of assets for our broadcast radio that we can apply to podcasting and allows us to build pocast from sort of scratch.

And if you look at the major podcast players, we're probably the only ones that have built podcast as opposed to just buying podcast packages from others.

Yes, and look, the only thing I'd add on the margin front, and you've heard Bob myself and Mike talking about what our goal was on the annual podcasting margins, EBIT margins, I'm sorry, to be clear, and with respect to DAC, I would just put the overall context and the overall umbrella and you see, if I believe, continue to demonstrate not just in words, is us striving just to become more efficient in every revenue stream and in every support in our business. So when we talk it to me, and I think you all agree, it's a natural outflow that, yes, we're at what we had talked about getting to the mid-30s on EBITDA margins for DAG but we're never going to stop trying to improve those and take advantage of technology and continue to improve upon our risk of in terms of capital allocation, you can bring more to the bottom line. .

That's great. And then just a quick follow-up. Within that, I'm curious how big of an opportunity you think video broadcasting is perhaps over the next 12 to 24 months? Is this something that can move the needle revenue wise? Or would we need to see maybe an expansion of the Netflix agreement to get it to the point where it starts moving the needle on growth and margins higher?

Well, look, I think you've got 2 major video players who really pretty much signaled that they want to play in video podcasting, YouTube and Netflix I suspect we're seeing, and you hear talk from others that they're also interested in it. I think that's probably what's going to drive the expansion of it. We certainly know that we can promote these podcasts in a way that not -- that other streaming shows are not promoted because we're able to utilize our broadcast radio where you've got 90% of Americans listening every month to our broadcast radio. And if you listen to Charlotte Maine the got or Bobby Bones or some of the people that are on Netflix you hear that they're again promoting their appearance there and their podcast there. So I think it gives them a pretty strong showing. .

Next question comes from Sebastiano Petti from JPMorgan.

I guess, Rich, first, I just wanted a follow-up. You did call out the anticipated growth rate in programmatic for the year. I mean, can you just help us maybe give us the 2024 programmatic revenue growth rate was just as we can kind of think about the glide path there? And then relatedly, talking about the DAG margins, obviously, still you have remain healthy, but I think the fourth quarter 2025 DAG margins were, I think, down year-over-year and I think the lowest fourth quarter since fourth quarter of -- anything driving that?

You talked about some of the noncash partnerships kind of going back and forth. I wasn't sure if there's anything maybe any in the quarter? And then lastly, bringing broadcast to -- back to EBITDA growth or MPG rather back to EBITDA growth. Should of incremental savings coming through in '26 are kind of concentrated back towards MPG and hence, the flex you're going to see there?

Well, let me start. I'll take a couple and then Bob and might chime in. On DAG, as we've always said, there's so many moving pieces on a quarter-to-quarter basis and understand we report on a quarter basis in terms of the margins and understand the questions. But we are -- that's why we have focused people for years and years in terms of if you really look at the annual margin base because there's just so many moving pieces that can affect the individual quarters. And again, look at the rhythm of our business, Q1 is the smallest 2 or 3 as a general relatively similar. And then Q4 is the biggest, which I don't think is anything different than any other ad-supported business out there. When it comes to MTG and getting back to EBITDA growth this year, I think we did a pretty good job of outlining what the underlying factors were I don't have anything addition to add to that that we outlined in the remarks, all the different pieces there, ranging from whether it's continuing to take market share, as Bob talked about, and Miller Kaplan and right down to just looking at our overall revenue growth, including our total programmatic revenue growth as you kind of go into this year out there. So not -- I don't have anything different to add to that.

And then in terms of 2024 to 2025. I'm seeing -- Michael, listen, I don't have the 2024 number and the total programmatic revenue growth. But I would I would -- I don't want to speculate, but it will be substantially less than it was in 2025. But we can circle back and get you that number.

Yes. And if I could just add 1 thing on just open and what Rich said. I think on MPG, there's really 2 vectors. One is cost out. You're absolutely correct. It is a business that we've been able to apply technology to to get more and more efficient, and I think make the product better and better. And the second is advertising is -- and there are multiple reasons why we think and why we see the advertising opportunity from programmatic if you want to do an audio buy, you can't get reach without broadcast radio.

And video, you can get reached without broadcast television. They're no longer the reach medium. We're the reach medium and audio. So as people get more and more into audio and really get -- they have to get the results, there's no way to make the plan without it. So we know it's going to find its way there. And it's just a question of how and when. And finally is pushing the client direct marketing capabilities we have is pretty powerful. When you consider these on-air personality we have on radio, there's nothing like it. They're probably the most powerful influencers today, and when they talk about something people notice.

And 1 last point is just as a reminder, which we've talked about in previous question, 2026 is a nonpresidential election cycle, which we expect the great greatly benefit from as a company.

Our last question comes from Patrick Sholl from Barrington Research.

If I could ask another question on programmatic. You talked about the kind of mismatch of revenues and expenses as you kind of build up your capabilities there. I'm just wondering like how much of a drag you expect that to be on EBITDA for the full year?

I think it's built in the numbers we're talking about everything you've got there. So I think, again, we've been pretty prudent and how we've built programmatic. So it's not a big impact on earnings. And we found some ways to build it out using primarily noncash marketing expense as well, which we think has a tremendous benefit to us.

There are no other questions. Thank you all again for listening to the iHeart story on behalf of all of us. And we are available, as always, for follow-up questions, myself and Mike and repeat. Thanks very much.

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

Good afternoon, and welcome to iHeartMedia's Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Mike McGuinness, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone, and thank you for taking the time to join us for our third quarter 2025 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO and 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 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, Mike, and good afternoon, everyone. In the third quarter, even though 2025 is a nonpolitical year, we generated adjusted EBITDA of $205 million, slightly above the midpoint of our previously provided guidance range of $180 million to $220 million and flat to prior year. Our consolidated revenue for the quarter was at the high end of our guidance of down low single digits and was down 1.1% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 2.8%.

Turning to our individual operating segments. The digital audio Group generated third quarter revenue of $342 million, up 13.5% versus prior year, above our previously provided guidance of up high single digits. The Digital Audio Group generated third quarter adjusted EBITDA of $130 million, up 30.3% versus prior year and the digital audio Group's adjusted EBITDA margins were 38.1% compared to 33.2% in the prior year. And we're making continued progress towards our stated goal of achieving full year adjusted EBITDA margins in the mid-30s.

Within the digital audio group, our podcast revenue was in line with our guidance of up low 20s, it grew 22.5% compared to prior year as we continue to feel the flywheel effect of our #1 audience position in podcast publishing according to Podtrac. We believe we have the most profitable podcasting business in the United States. And importantly, our podcasting EBITDA margins remain accretive to our total company EBITDA margins.

In Q3, approximately 50% of our podcasting revenue was generated by our local sales force, up from about 11% in Q3 of 2020 demonstrating the unique advantage of having what we believe is the largest local sales force and media with a presence across 160 markets in addition to our strong national sales force.

In the third quarter, our non-podcast digital revenue grew 8% compared to prior year. Earlier today, we announced an exciting new partnership with TikTok that will bring TikTok creators in iHeart's ecosystem. This partnership will include a slate of podcast from TikTok creators, a dedicated broadcast radio station available across the country, and expanded access to our live events starting with a 2025 Jingle Ball Tour, which will deepen creator engagement across audio and video platforms, open new monetization opportunities through integrated sponsorships and cross-platform distribution and reinforce iHeart's unique position at the intersection of culture, content and scale.

Turning now to the multi-platform group, which includes our broadcast radio networks and events businesses. In the third quarter, revenue was $591 million, down 4.6% versus prior year and in line with our previously provided guidance range of down mid-single digits. Excluding the impact of political advertising, multi-platform group revenue was down 2.5%. And the multi-platform Group's adjusted EBITDA was $119 million, down 8.3% versus prior year.

As we mentioned last quarter, historically, we've seen that the largest advertisers and advertising agency groups are a good indicator of what's to come and we continue to see growth in the performance of the top 50 advertisers and the 4 largest advertising agency groups for both the multi-platform group and the total company. These results give us confidence that our plan to return the multi-platform group to revenue growth is on the right track. And what gives us further confidence in our ability to get the multi-platform group back in the growth mode is that it all starts with the audience. We have more broadcast radio listeners today than we had 10 years ago and even 20 years ago.

Our challenge is one of monetization, a key component in meeting that challenge is to make our broadcast inventory transact like digital, unlocking a significant monetization opportunity for the company and which will greatly benefit our broadcast revenues.

On last quarter's call, we announced the hiring of Lisa Coffey as our Chief Business Officer, and I'm happy to report he's already making real progress.

Including last week's announcement of our programmatic audio partnership with Amazon, which provides advertisers using Amazon DSP access to iHeart's fast audio portfolio. Our non-podcast digital inventory will be available immediately, and our podcast and broadcast radio inventory will follow in 2026.

One of the essential components of our programmatic capability is the digital iHeart Audience database, which includes the radio simulcast listing on our digital services. This enables our targeting, measurement and attribution tools to bridge between broadcast impressions and digital identity, enabling broadcast inventory to transact in DSPs alongside streaming, video and display.

In essence, making our broadcast radio inventory look like digital inventory. It's important that we continue to grow and improve the proprietary audience database and part of our investment in this initiative includes partnering with third parties through noncash marketing plans aimed at increasing our digital audience and engagement. And in turn, we provide meaningful marketing for those partners as part of this relationship.

Looking at our cost structure, we're still on track to generate $150 million net savings in 2025. Rich will get into more detail. But I want to take this opportunity to announce that we have taken actions that will generate an additional $50 million of incremental annual savings beginning in 2026. As a reminder, we run the company with a relentless focus on maximizing the efficiency of our operating structure, including using new technologies like AI-powered tools and services.

Now let me share with you what we're currently seeing in the ad market. We're feeling similar momentum to what the other ad supporting companies have discussed. Right now, spending is holding up in discussions with advertisers a positive. At the same time, the government shutdown does add a level of uncertainty. This year continues to be an important one for iHeart. The company continues to make significant progress in the growth of our digital business. We're seeing important signs of improvement in our broadcast business, specifically in the strength of our holdco and our biggest national advertising partners. We're making progress on our sales monetization efforts, which we expect to have wide-ranging implications for iHeart, and we remain committed to our culture of innovation and efficiency. And now I'll turn it over to Rich.

Thank you, Bob, and good afternoon, everyone. Our Q3 2025 consolidated revenue was at the high end of our guidance of down low single digits and was down 1.1% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 2.8%.

Let me provide you with some additional detail on our advertising revenue performance this quarter. As Bob mentioned, the continued strong performance of our largest clients and advertising agency partners is encouraging. And as a reminder, we have diversified advertising revenue. There was no advertising category, greater than about 5% of our total advertising revenue, and no individual advertiser that is more than about 2% of our total advertising revenue.

As you can see on Slide 11, in the third quarter, the largest category gainers in terms of absolute dollars were health care, telecom, professional services and retail. And the 4 categories that declined the most in terms of absolute dollars were political, financial services, food and beverage and entertainment. And in the third quarter, our 5 largest advertising categories in terms of absolute dollars for health care, home building and improvement, financial services, auto, and entertainment. Our consolidated direct operating expenses decreased 2.6% for the quarter. This decrease was primarily driven by a decrease in employee compensation costs in connection with our modernization initiatives taken in 2024, partially offset by higher variable content costs associated with the revenue growth of our digital businesses.

Our consolidated SG&A expenses decreased 1.1% for the quarter, driven primarily by our modernization initiatives, including decreased employee compensation costs, partially offset by increased employee health and benefit expenses. We generated a third quarter GAAP operating loss of $116 million, which includes the impact of a $209 million impairment charge directly related to the value of FCC licenses compared to an operating income of $77 million in the prior year quarter. We generated adjusted EBITDA of $205 million, slightly above the midpoint of our previously provided guidance range of $180 million to $220 million and flat to the prior year. As a reminder, Q3 of 2024 benefited from political spend related to the presidential election cycle.

Before I turn to our segment performances, I also want to reiterate Bob's statement on our cost management work. We remain on track to generate $150 million of net savings in 2025. And as a reminder, our Q3 results included the benefit of $40 million of net savings. In addition, this quarter, we took new actions that will generate $50 million of additional annual savings beginning in 2026, and the majority of these savings will benefit the multi-platform group.

We have again included slides in our investor presentation, Slide 5 and 6 that provide more details on our core savings.

Turning now to the performance of our operating segments. And as a reminder, there are slides in the earnings presentation on our segment performances. In the third quarter, the digital audio Group's revenue was $342 million, up 13.5% year-over-year and above our guidance of up high single digits. The digital audio Group's adjusted EBITDA was $130 million, up 30.3% year-over-year and our Q3 adjusted EBITDA margins were 38.1%, up from 33.2% in the prior year.

Within the Digital Audio group, our podcasting revenue was $140 million, which grew 22.5% year-over-year and in line with our guidance we provided of up low 20s. Our third quarter non-podcasting digital revenue grew 8% year-over-year to $202 million.

Turning now to the Multi Platform Group. Revenue was $591 million, down 4.6% compared to the prior year and in line with our previously provided guidance range. Excluding the impact of political revenue, our multi-platform group revenue was down 2.5%. Adjusted EBITDA was $119 million, down 8.3% from $130 million in the prior year quarter. PAUSE The multi-platform Group's adjusted EBITDA margins were 20.2% compared to 21% in the prior year quarter.

Turning to the Audio & Media Services Group. Revenue was $67 million, down 26% year-over-year. As a reminder, Q3 of the prior year benefited materially from political advertising. And excluding the impact of political revenue, the Audio & Media Services Group revenue was down 3.4%. Adjusted EBITDA was $23 million, down 49.1% compared to the prior year, again, due almost entirely to the impact of political advertising in the prior year quarter.

As Bob mentioned in his remarks, investment in our proprietary audience database is a key component of our sales modernization efforts, and some of that investment takes the form of marketing partnerships to drive engagement with the iHeartRadio digital services. In Q3, those relationships drove an increase in our noncash marketing revenues and due to the timing of our marketing campaigns, some of the corresponding expenses relating to those agreements will be recognized in subsequent periods. While we may continue to experience some quarterly mismatching of these noncash partnership marketing campaigns in both directions, we believe that obtaining these critical marketing resources for our sales modernization initiative on a noncash basis is a prudent way to preserve capital.

In the third quarter, our free cash flow was a negative $33 million compared to $73 million in the prior year quarter. This year-over-year variance has 3 main drivers. Q3 of last year benefited from approximately $40 million of political revenue, which is the only advertising category that is paid in advance of the advertisement. Second, as I mentioned earlier, we generated revenue from new marketing partnerships on a noncash basis as part of our sales modernization initiatives. And third, we were negatively impacted by the timing of working capital items that will positively impact Q4. We expect to generate meaningful free cash flow in Q4.

At quarter end, our net debt was approximately $4.7 billion. Our total liquidity was $510 million, and our cash balance was $192 million, which includes $100 million borrowed under the ABL facility, which we intend to pay back by year-end. Our quarter ending net debt to adjusted EBITDA ratio was 6.6x.

Let me now turn to our fourth quarter guidance. We expect to generate fourth quarter adjusted EBITDA in the range of $200 million to $240 million compared to $246 million in the prior year quarter. As a reminder, the fourth quarter financial results of last year benefit from the presidential election cycle, which generated $83 million of political revenue for us. We expect our consolidated Q4 2025 revenue to be down low single digits compared to prior year and up mid-single digits, excluding the impact of political revenue. We are still closing the books for October, but we expect our total revenue to be down mid-teens at approximately flat, excluding the impact of political revenue from Q4 2024.

Turning to the individual segments for Q4. We expect the digital audio Group's revenue to be up high single digits with podcasting revenue expected to grow in the mid-teens. That would mean for the full year, we expect our podcasting revenue to grow in the low 20s. We expect the multi-platform group revenue to be down low single digits and up low single digits, excluding the impact of political revenue. And we expect the Audio & Media Services Group revenue to be down approximately 20% and up approximately 15%, excluding the impact of political revenue.

Now we will turn it over to the operator to take your questions. Thank you.

[Operator Instructions]

Our first question comes from Aaron Watts from Deutsche Bank.

I've got a few questions, if I can sneak them in here. Rich, if I heard you correctly on the free cash flow, there were some timing items in there that skewed this year compared to last year. Fourth quarter is going to you're going to see that reverse. As cash flows in, after you repay the ABL, how do you think about using your excess cash towards whether it's front-end maturities or perhaps attacking some of the some of your debt that's trading at a larger discount in the market.

Aaron, thanks for the question. So just a couple of things, yes. I think you've captured it correctly. Deploying in terms of negative free cash flow for Q3 and the fact that we expect to generate meaningful cash flow and also to reiterate our plan on paying that the ABL in Q4 this year. In terms of the maturities, look, I think we've always done a pretty good job historically in the company, we're looking to reduce the overall cost of our capital structure. And we're going to be opportunistic and continue to have that one goal amount to create a more efficient capital structure for all of our stakeholders.

Okay. And in your MPG group, I believe your third quarter revenues, excluding political, came in a little bit light relative to your expectations. That looks like it's trending better at 4Q overall, though I imagine crowd-out is helping there. Can you just talk a little bit more about the underlying ad environment, what's balancing the large -- the momentum you're seeing with your large clients? And then maybe relatedly, as you turn the corner into '26 how we should be thinking about political and the upside you see there perhaps versus past cycles for you?

Well, maybe I'll just start on a couple of points. Actually, I think in terms of multi-platform group and the trends and everything that came in pretty much as we expected in the Q3 out there. So -- and obviously, Bob talked about in terms of our future, we'll talk about more about our confidence and continued strengthening of that group.

Just to take your last question, second, on political, we're not going to talk anything about specifics of political going to the 2026 election cycle. The only couple of things I would say is we expect it to be a strong revenue cycle for us on the political front, without giving any details on any numbers. And again, when you look at our capabilities, including the build-out of our audio tech stack and and all of our recent announcements on things like with Amazon and broadcast and in the DSP, we're just going to continue to be better and better equip to take more dollars as we go forward as a company out there.

But I think overall, it should be a good election year cycle based on everything we know today. And you guys are all seeing the same things on the phone that we know. Maybe Bob comment on the advertising environment.

Yes. Look, I think the advertising environment pretty good. We look at the looked at our big advertisers, our largest advertisers and our biggest advertising agencies, the big holdcos. And the trends are very good. I mean, obviously, sort of no one knows what the impact of government shutdown is. But right now, we're not feeling anything on it and continue to feel good about it.

Okay. That's helpful. If I could just sneak one last one in. You mentioned and we've seen a couple of announcements this past week around advancing your programmatic initiatives, including with Amazon, Stack adapt I thought the inclusion of broadcast radio inventory was particularly interesting. Can you remind us where you stand with the other major DSPs now? Should these agreements be incremental to the current revenue base? And what's the time line for this to be a material mover for the P&L?

I think as we look at the DSPs, we are PAUSE -- and we have agreements with all the major DSPs for at least part of our inventory. And in the case of Amazon, we announced we'll be adding a broadcast inventory next year in the case of D360. We do have our broadcast inventory in there, Yahoo! as well. And so we're looking at the major DSPs. We have the relationships in place, and it's really building out. And as we think about programmatic PAUSE very rough terms, Rich and I think about it as really we're building another podcast business. That we think it probably has that kind of flow through.

And if you remember, I think it was 2020, we did about $50 million in podcast revenue, and you see how it's grown. So our expectation is that programmatic also grows. It's roughly sort of that same trajectory. And we think it's got the same kind of potential for us in terms of developing new incremental revenue sources for the company. And so for us, we think it's a very big positive for us, and it's the reason we've invested so much in building out that programmatic platform.

Aaron, the one thing I just might add in terms of what Bob built upon it. And you mentioned about Amazon and Bob mentioned it in his opening remarks and the announcement that we made this morning with TikTok, the way and Bob gave the part of the analysis with respect to podcasting, the way we think about it is we've got, as Bog commented on our unparalleled audience and the value of that panel audience. And we've got all of our platforms and what we are constantly focused on and continue to be monetization of our existing platforms is how do we continue to look at looking at are there potential new revenue streams off of those platforms on new revenue streams, podcasting, is an interesting one point. Bob pointed out what the numbers were. We just -- I just mentioned TikTok, we've talked about programmatic for broadcasting. So I think you should think about it as our constant focus to take the unique engaged audience we have and how do we continue to get new revenue from that revenue stream.

Next question comes from Sebastiano Petti from JPMorgan.

Maybe just starting with podcasting for a minute there. Both Bob and Rich. Third quarter numbers kind of came in a little bit better than expected. I feel like this has been a common theme with you guys. I mean anything to think about why the growth rate in podcasting might slow to the mid-teens level? It seems like you have a relatively easier comp as you look at the prior year's growth rate relative to the first 3 quarters of 2024? And also, if you kind of look at it on like a 2-year stack basis, seems to be yes, it seems to be a little conservative there. Is there anything that may be particular call out?

And then relatedly, obviously, Netflix deal also announced to TikTok take take. Any way to perhaps unpack not necessarily looking for forward guidance related to those deals. But just maybe the phasing and the cadence and how long -- how that kind of comes on, how we should be thinking about that phasing into the P&L over time and what that could mean?

Yes. Thanks for the question, Sebastian. Look, no surprise. We're not going to comment in terms of phasing of anything going forward in terms of that. And just Back to the question I just answered before with Aaron,I think the whole bucket of things does come under that bucket of the focus of generating new revenue streams. From our unique audience sets out there. If you look at podcasting, just for a second, if you look at the first 3 quarters, the guidance Q4. Again, we look at everything in a couple of different ways. That gives you about a 23% growth rate on revenue for podcasting, but also it's a little misleading because you get numbers and percentages sometimes could be misleading.

If you kind of take the guidance we've given for Q4 and compare it to the actual number we just reported on for Q3, the absolute dollars in podcast revenue growth is bigger in Q4 than Q3. And again, I think it could be a mine. You just do percentages because you -- obviously, it's math, you're going on a bigger base and the numbers are getting bigger. But if you look at the dollars that are there, I think Q3, we're up about $25 million in podcasting revenue sequentially. And if you kind of do the kind of range or middle of the range, we'd be about $30 million in terms of Q4 out there for podcasting. So again, what counts is follow the money, the money, the money, not the percentages. And so does it show slowing down.

And by the way, just to add, last year, it was a lower percentage in Q4 than earlier in the year, but it was just like this year, a higher number in terms of absolute dollars added in terms of just the way we see podcasting and the way we see opportunities growing, we do think as talk about video podcasting, I don't think there's any evidence that it's a transformation of audio to video, but what it is, is an opportunity to add video podcasting on top of the audio podcasting we have today. So again, our constant quest to find new revenue streams for our existing products. And so -- and if you sort of look at where that big pool of money, everybody is shooting for these days, is YouTube's got a lot on their video. And so I think it's -- if you look at the industry, there's a lot of discussion about that, and we sort of see it that way, not as a threat to audio, but as an...

Rich, if I could follow up with a phasing question you might be willing to answer. On the $50 million cost-cutting program that's going to be more hitting the numbers in 2026. Any way to perhaps think about the phasing of that in terms of when we kind of hit full run rate? Is that a full run rate out the gate since you guys are kind of announcing it a couple of months in advancing here? I mean, just maybe a way to think about the $50 million as it pertains to MPG Group's financials next year?

I would -- it's a good question. I would think about it exactly in terms of the rhythm of coming in. Let me go back. Yes, it is a full run rate at the beginning of the year action. Very similar to where we had a $150 million program we did last year. If you look at the slides in the deck where we broke down this year's numbers on the cost program, I would look at taking the new program of 50 and both think about it phasing in. The same way in terms of a little smaller in Q1 and more evenly Q2, 3 and 4. And I would look at it when you look at the percentages, I think there's actually a slide on page 6. In there. It actually kind of breaks out you in the investor deck, which shows about 61% to MPG. And I don't have to read through it, but it goes through all the different lines, and it's right behind the slide on the $150 million program.

Our next question comes from Stephen Laszczyk from Goldman Sachs.

Maybe just a follow-up on broadcast a little bit longer term. But just curious as you look out into '26, '27, you think these levels of growth that we're seeing in the podcast business, north of 20% is sustainable based on the pipeline of new content or visibility you might have into certain renewals that could potentially be up for grabs in terms of bringing new content on or the monetization levers you think could come into focus as some of these digital capabilities and inventory scale.

I'd just be curious on your thoughts on the sustainability of either high teens or 20-plus percent revenue growth in that side of the business?

Well, look, I don't want to do any projections for the future. But I will say that if you look at the trends, what you're finding is, more people are listening to podcast today than ever. And the people who are listening are listening to more episodes than ever. So we got 2 vectors of growth there. And of course, we're bringing more and more advertisers to podcasting as well. It's probably the hottest category in media right now. And so you're seeing the net impact of that, too.

And Stephen, just one point. I think to build upon past advertisers because the 1 point you didn't say just to hit that head on is there is the demand out there, and I would use the word, the effectiveness of the advertising. There's a reason you're seeing the growth in podcasting revenue out there in terms of consumer use and by the way, the stickiness of it. I think it's something like approximately, I don't know, 75%, 80% of all podcasts are listened all the way through, and you can fast forward and you can do every desk, you can do it online video. out there.

And just as a reminder, it's only been a relatively small number of years that big advertisers, to Bob's point, have really come to podcasting. Prior to that, I mean, Clay advertise it, but it was much more a DR direct response medium. And the reason why big advertisers coming to podcasting is so important. is because it brings big dollars. And then the last point, just to close off that we started to talk about last quarter in Q2 and now Q3, now about 50% of our podcasting advertising revenue is originated locally. And if you go back, I don't know, 3, 4 years ago, about 10% of our podcasting revenue was originated locally.

I just think you look at all those data points and from our standpoint and you look at projections by these third parties that talk about the growth whether it goes to $4 billion, $5 billion, whatever, over a period of time, significant growth in projected revenue for U.S.-based advertising podcasting revenue, no surprise because of the effectiveness of it. And you look at us continuing to take market share because of the position we have in podcasting. So I think it sets up very well.

I want to just add one other thing. We talked about our ad tech platform, and we talked about programmatic. And we sort of focus on how that's going to help broadcast radio. But remember, it's also a vector of growth for podcasting as well, to get podcasting in the programmatic DSPs as well.

That's helpful. And then maybe just one on the broadcast side, if I can. I'm curious, Bob, as you look at the competitive environment for advertising more holistically. There's been a lot of AVOD inventory coming on over the last year or 2, was just curious if you could speak to the visibility you have into that competitive intensity, where we are and really that playing out? And if you think that impairs maybe some of the monetization points you would make on terrestrial radio, you're recovering from a monetization perspective over the next year. So how much of a headwind that is?.

I don't think it's a headwind at all. As a matter of fact, I think if you talk to people in the advertising business, radio has sort of got a little bit of a renaissance here. And people are talking about all the studies coming out, one just came out from WPP, major study, which if you not looked at is probably worth looking at, which makes the point that adding radio early in a campaign preconditions to the consumer and the best way to get more money is to add radio to the campaign. That's WPP saying that from their study. And we've got a number of other studies, which are showing the same thing. We're showing that if you add radio to a social campaign, the response rate, I think, is up like 83% -- so as you think about -- as you're an advertiser, you say, okay, I need more business. Well, I can either spend more money on the increasing my social spend or I can spend money on radio to get more response rate out of my existing social spend. And I think they're finding that, that latter is a much more economic choice.

And also at the same time, they get the added benefit of getting brand building as well on top of their performance marketing. So actually, we're quite encouraged about what's going on. I think sort of the final frontier for us is that you've got people who are planning and buying advertising almost all of it is on this 1 platform and on this 1 screen of digital, and then radio is over to the side, and it's a lot of extra work to buy it. We think and we indeed talking to experts, all are encouraged by it, that as you move that to the same screen, they can easily buy radio and buy on the same criteria, they're buying their other digital, I think, breaks down the biggest hurdle because you say, when you've got the big reach you've got the impact. Almost every study shows radio has better engagement than almost any other medium. The results are great. You got more radio listeners today being had 10 or 20 years ago, why isn't it performing as it should -- and we think it's a structural issue, and we've invested heavily in fixing that structural issue..

Yes. And can I just mention very quickly, just bring back, Stephen, because of your question your question then Bob's point, and then I'm just going to go back and repeat what we said a couple of times on this call. And here you have all within the last couple of days, Amazon, the Amazon announcement you saw and talking about getting our broadcast inventory into the DSP and the TikTok announcement that was made this morning with ourselves and it in addition to other aspects of the announcement and podcasting and everything else, you'll see that there's also goes into our broadcast radio with the rollout of a TikTok radio, which will be a new iHeart radio station that will be done with TikTok. So to me, all the data points from an iHeart standpoint, talk about the potential upside in the future and the recognition of the capabilities of broadcast radio to deliver results.

And to be clear, one of our major goals is to get our multi-platform group back to revenue growth.

Our next question comes from Patrick Sholl from Barrington Research.

Just another question on podcasting. I was kind of curious on how you view the longer-term opportunity within in podcasting to bring in political dollars, like how you think that's currently being monetized versus where you think it can go longer term with the increased ad sales from local at that help maybe by is that higher? PAUSE.

Well, it's a really good question. And if you look at all the chatter from last year's political spend, it's clear that people said, wow, one of the real variables what's podcasting. And so we think it is a very positive for political advertising moving to podcasting as well.

Okay. And then just in the ad market, is there any sort of variance across some of the local markets and how that is trending? Any local headwinds? Or is it more broad-based?

Yes. I don't think we've seen any big...

Nothing unusual.

Our last question comes from Ken Silver from Stifel.

Bob, lot of my questions branded. So let me just ask you to I guess the first one is on the Sponsorship and events revenue line. I mean, I know it's a small line. It was down almost 10% in the third quarter, and it's down almost 6% year-to-date. How -- like maybe help us understand that a little better? And like what's the outlook for '26? Is that going to sort of revert back to sort of stable or up? Or is there sort of something that's going on that's sort of going to continue to put pressure on this line item?

Yes. Look, I would just -- it's really small numbers. PAUSE in terms of some ups and downs. And remember, we've got all the large events that you guys all know about. We do 20,000 events in total as a company. So I think the small is just some -- not really small timing issues. And as you think about it going forward, your question, again, we're not going to talk about anything specific going forward. but I think you can continue to expect the events business to be -- play the same role it has with iHeart.

Both from an absolute dollar and from a promotional standpoint and very importantly, one of our key multi-platforms. And again, I think if you -- again, another endorsement looking at our announcement this morning with TikTok and the connection that we're going to bring and step up even more between artists, creators and our community with the Power story telling, this is going to be another really great ability to continue to demonstrate PAUSE to artists and to the advertising community and our listeners what we can do.

Yes, let me just add on the vents too, is if you look at the brand attributes of anybody doing music or audio or anything. The one where iHeart goes bunkers in terms of consumer is they identify us as the brand that has the big events. PAUSE It has been tremendous for us in building the iHeart Radio brand. And now you think about not only are we building the iHeartRadio brand, but we're making a profit on it.

And the second issue, which is probably not fully captured in the numbers, is that when we do the big event to bring advertisers into them, and we use it as a marketing opportunity for us. And we often package together the events with other advertising as well, which show up on other lines.

Okay. That's helpful. And so just to be clear, like you haven't lost any significant partner sponsors for your event?

No. And that talent question, log no. Yes. Okay. And then the follow -- the other one I wanted to ask you was this quarter, and I think last quarter, you started showing like the incrementals on margins on the digital and the decremental margins on the terrestrial -- the multi-platform group. And I think you're showing 90% decremental margin for multiplatform. I'm just trying to get a sense, is there a way to like meaningfully improve that.

Well, again, if you remember to the multi-platform group, exact specifically your question. I would say 2 things. If you look back from a trending standpoint, we've continued to make improvement on that. And I think in terms of the flow, the improvement on that, for lack of a better term, negative flow through of the flow-through. If you track that, we're happy to take you through that. And then the second piece and most important is continue to show the progress we're making on the revenue side. Because remember Mopiplatform has got a fixed element more than our other platforms in it, and the incremental flow-through is 75% to 80% EBITDA margin close to dollars even 85%. I highlighted political last year, which is our highest flow-through business. So it's a combination of continuing to get back to making improvement on revenue, then positive revenue growth. And as we just announced today, with a $50 million in terms of monetization program and taking more cost out continue to make sure we're taking advantage of all technologies, AI and all the other investments to bring more down to the bottom line.

Yes. I mean, in summary, revenue growth is great because we got high operating leverage on the multi-platform group and then add that to cost reductions. And we think it's the responsible way to impact that line.

With that, I'd like to thank everybody on the call and all of our shareholders and stakeholders for taking the time listening to the call. And Bob, myself, Mike and the rest of the iHeart team are available at any time to answer any questions. Thank you.

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

Good afternoon, and welcome to iHeartMedia's Q2 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Mike McGuinness, Head of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone, and thank you for taking the time to join us for our second quarter 2025 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 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 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, Mike, and good afternoon, everyone. Our second quarter performance was solid and slightly ahead of our initial expectations as we continue to execute on key initiatives while navigating a still uncertain macro environment. In the second quarter, we generated adjusted EBITDA of $156 million at the upper end of our previously provided guidance range of $140 million to $160 million and 4% above prior year.

Our consolidated revenue for the quarter was above our guide of down low single digits and was up 0.5% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 1.5%. Turning to our individual operating segments now. The Digital Audio Group generated second quarter revenue of $324 million, up 13.4% versus prior year, slightly above our previously provided guidance of up low double digits. The Digital Audio Group generated second quarter adjusted EBITDA of $108 million, up 17.1% versus prior year.

And the Digital Audio Group's adjusted EBITDA margins were 33.2% versus 32.2% in the prior year, making continued progress toward our stated goal of achieving adjusted EBITDA margins in the mid-30s. Within the Digital Audio Group, our podcast revenue was above our guidance of up low 20s. It grew 28.5% compared to prior year as we continue to feel the growing flywheel effect of our strong leadership in podcast publishing and the benefit of our unique complementary assets that help to build podcasting.

Our podcasting financial discipline and our focus on the high-margin podcast publishing sector continue to fuel what we believe is the most profitable podcasting business in the United States. Importantly, our podcasting EBITDA margins remain accretive to our total company EBITDA margins. And in the second quarter, our non-podcast digital revenue grew 4.7% compared to prior year. We often talk about the tremendous advantages this company has in building out the #1 podcast audience.

But I want to point out that we also have an advantage on the ad sales side of podcasting. iHeart has the largest local sales force in audio. We probably have the largest local sales force of anyone in media as well, and you can see that advantage in our revenue performance. In Q2, about 50% of our podcasting revenue was generated by our local sales force, up from about 14% in Q2 of 2020. Our unparalleled local sales organization gives us an important and unique advantage for both our current and future revenue growth.

Turning now to the Multiplatform Group, which includes our broadcast radio, networks and events businesses. In the second quarter, revenue was $545 million, down 5.4% versus prior year and at the upper end of our previously provided guidance range of down mid- to high single digits. Excluding the impact of political advertising, revenue was down 4.8%. The Multiplatform Group's adjusted EBITDA was $96 million, down 7.6% versus prior year. Historically, we've seen that the largest advertisers and advertising agency groups are a good indicator of what's to come in the future.

With that context, I want to share 2 data points with you. First, our top 50 Multiplatform Group advertisers for Q2 were up in revenue by 4% year-over-year. And second, the 4 largest advertising agency groups were up in revenue by 7% year-over-year in Multiplatform Group advertising. These results give us added confidence that our plan to return the Multiplatform Group to revenue growth is on the right track. We also continue to make progress on our ad tech platform, specifically building capabilities to allow our broadcast radio inventory to be bought and sold like digital advertising and to be a part of the key integrated buying systems.

And today, we announced that Lisa Coffey is joining the company in the newly created role of Chief Business Officer to drive those efforts. Lisa has a long history in ad tech and digital and mobile advertising, including leading the team that introduced Amazon advertising to the U.S. agency marketplace. In summary, the company's second quarter performance is important evidence of our ability to generate positive financial results even though the marketplace remains a little uncertain.

Additionally, our podcasting momentum continues to build with both consumers and advertisers, and we continue to make meaningful progress to reignite the revenue growth of our Multiplatform Group. And finally, cost management remains a major focus. We are still on track to generate $150 million net savings in 2025, and we continue to look for additional cost savings opportunities in both our structure and our operations using the power of AI and our unique scale.

And now I'll turn it over to Rich.

Thank you, Bob, and good afternoon. Our Q2 2025 consolidated revenue was above our guidance of down low single digits and was up 0.5% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 1.5%. Let me provide you with some additional detail on our advertising revenue performance this quarter. And as a reminder, we had diversified advertising revenue. There is no advertising category greater than about 5% of our total advertising revenue and no individual advertiser that is more than about 2% of our total advertising revenue.

As you can see on Slide 10, in the second quarter, the largest category gainers in terms of absolute dollars were financial services, telecom, professional services and healthcare. And the 4 categories that declined the most in terms of absolute dollars were restaurants, political, media and publishing and entertainment. Ended the second quarter, our 5 largest advertising categories in terms of absolute dollars were financial services, homebuilding and improvement, healthcare, auto and entertainment.

Additionally, Bob gave you some information about the top 50 Multiplatform Group advertisers and the 4 largest advertising agency groups revenue performance for the Multiplatform Group. Now let me share with you the performance for the total company. First, in Q2, the top 50 advertisers for the total company were up 9% year-over-year. And second, the 4 largest advertising agency groups for the total company were up 14% year-over-year. As we think about uncertainty in the marketplace, the performance of our largest clients in advertising agency groups is encouraging.

Our consolidated direct operating expenses increased 2.4% for the quarter. This increase was primarily driven by higher variable content costs associated with the revenue growth of our digital businesses, partially offset by a decrease in employee compensation costs in connection with our modernization initiatives taken in 2024. Our consolidated SG&A expenses decreased 4.3% for the quarter, driven primarily by our modernization initiatives, including decreased employee compensation costs, partially offset by an increase in noncash trade and barter expense as well as an increase in employee health and benefit expenses.

We generated second quarter GAAP operating income of $35.4 million compared to an operating loss of $909.7 million in the prior year quarter. And as a reminder, in the prior year quarter, we recognized a $920 million impairment charge related to FCC licenses and goodwill. We generated adjusted EBITDA of $156 million at the upper end of our previously provided guidance range of $140 million to $160 million and 4% above prior year. Before I turn to our segment performances, as Bob stated, we are still on track to generate $150 million of net savings in 2025.

Our Q2 results included the benefit of $40 million of net savings. And as a reminder, our Q1 results included the benefit of $27 million of net savings. This quarter, we have again included a slide in our investor presentation, Slide 5, that provides a few different ways of identifying the cost savings, including by segment, function and type. Hopefully, this level of detail is helpful as you update your models.

Turning now to the performance of our operating segments. And as a reminder, there are slides in the earnings presentation on our segment performances. In the second quarter, the Digital Audio Group's revenue was $324 million, up 13.4% year-over-year and slightly above our guidance of up low double digits. The Digital Audio Group's adjusted EBITDA was $108 million, up 17.1% year-over-year, and our Q2 adjusted EBITDA margins were 33.2%, up from 32.2% in the prior year.

Within the Digital Audio Group, our podcasting revenue was $134 million, which grew 28.5% year-over-year and well above the guidance we provided of up low 20s. Podcasting's strong Q2 revenue performance with its high adjusted EBITDA flow-through helped expand the segment's Q2 adjusted EBITDA margin by about 100 basis points compared to the prior year. Our second quarter non-podcasting digital revenue grew 4.7% year-over-year to $190 million.

Turning now to the Multiplatform Group. Revenue was $545 million, down 5.4% compared to the prior year and at the higher end of our previously provided guidance range. Excluding the impact of political revenue, our Multiplatform Group revenue was down 4.8%. Adjusted EBITDA was $96 million, down 7.6% from $104 million in the prior year quarter. The Multiplatform Group's adjusted EBITDA margins were 17.7% compared to 18.1% in the prior year quarter.

Turning to the Audio & Media Services Group. Revenue was $68 million, down 3.3% year-over-year, and adjusted EBITDA was $24 million, flat to prior year. Excluding the impact of political revenue, the Audio & Media Services Group revenue was up 3.8%. At quarter end, our net debt was approximately $4.6 billion. Our total liquidity was $527 million, and our cash balance was $236 million, which includes $100 million borrowing under the ABL facility. We intend to pay back the ABL in the second half of the year as our free cash flow builds in its normal cadence.

Our quarter ending net debt to adjusted EBITDA ratio was 6.5x. In the second quarter, our free cash flow was a negative $13 million compared to $6 million in the prior year quarter. Let me now turn to our third quarter guidance. Given the uncertainty in the marketplace, we are providing a slightly wider range of adjusted EBITDA guidance than we normally do. We expect to generate third quarter adjusted EBITDA in the range of $180 million to $220 million compared to $205 million in the prior year quarter.

As a reminder, the third quarter financial results of last year benefited from the presidential election cycle, which generated $44 million of political revenue for us. We expect our consolidated Q3 2025 revenue to be down low single digits compared to prior year and up low single digits, excluding the impact of political revenue. Our July pacing was down 1.8% compared to prior year and down 0.3%, excluding the impact of political revenue.

Turning to the individual segments for Q3. We expect the Digital Audio Group's revenue to be up high single digits with podcasting revenue expected to grow in the low 20s. We expect the Multiplatform Group's revenue to be down mid-single digits and approximately flat, excluding the impact of political revenue. And we expect the Audio & Media Services Group revenue to be down approximately 30% and down mid-single digits, excluding the impact of political revenue.

As we look ahead to the full year, as we discussed on our Q1 earnings call, our full year 2025 guidance didn't contemplate the current macro volatility we all continue to see. Therefore, to achieve our full year guidance, we still need to see some positive movement in the macro and an easing of the advertising market's uncertainty. And as a reminder, Q4 is our and the advertising industry's largest revenue quarter for the year.

Now we will turn it over to the operator to take your questions. Thank you.

Our first question today will come from Patrick Sholl from Barrington Research.

Just maybe a quick follow-up on the guidance that you provided. You mentioned the categories of growth in Q2. I was just wondering if there was -- if that was kind of consistent with what you're seeing in Q3 or some other categories picking up.

Pat, it's Rich. Thank you for the question. No, we really haven't talked about going forward in terms of categories out there. But I think one of the things we did highlight on this call for the first time is how our top 50 advertisers are doing individually and the top advertising agency relationships we have, holding companies, how they're doing for both the MPG Group and the total company. And so I would -- less so categories, but I would look to that as a pretty good indication of the future that, that's kind of a leading indicator that we're comfortable with the guidance we provided and reinforced by what we see for our big advertisers and big agencies. But I haven't given anything specific on the categories.

Okay. And then just on the Digital Audio Group side, could you just maybe talk about the different -- any differences in growth trends between digital streaming and podcasting. And if there's any differential within audience or data around that, that you could -- maybe just talk about the different growth rates there and what advertisers are looking for.

We have not provided that level of granularity, but you can see from the numbers that podcasting is just roaring. And I think we're happy with the rest of it. But I think podcasting in terms of consumer acceptance and advertiser acceptance is -- that momentum is continuing.

And by the way, the only thing I may add, I just also remember is we've got our multiplatform, right, in terms of the company. So we've got everything we've talked about in terms of broadcast, networks, podcasting, as Bob said, is roaring and then our digital non-podcasting in terms of things like streaming extensions and the rest of our digital assets. And I wouldn't think about them per se as much like in terms of audiences, but I would think about the full impact of iHeart and the way they all work together from an advertising standpoint. And those always are -- tend to be our best advertisers with the deepest relationships that have the best retention and best experiences as opposed to trying to think about the individual audience sizes.

[Operator Instructions] Our next question comes from Ken Silver from Stifel.

Just a few questions. First, on the EBITDA guide with the range being $40 million. I mean if revenues are going to be down low single digits, you're sort of very specific on that number, but there's still a pretty big EBITDA range. So is there sort of some uncertainty about things on the expense side?

No. No, we're just looking. And again, for context, we widened the range a little bit here. But remember, when you look at a couple of things are coming down to EBITDA and first and foremost, you look at revenue mix, too, as we talk about where the revenue in terms of coming in, whether it's coming from Multiplatform or the products in Multiplatform or the Digital Audio Group and the products within the Digital Audio Group. So that's really all you're seeing in terms of that range out there.

And I think we also -- yes, they have a little broader range because there is still uncertainty in the marketplace, and I think we're recognizing that.

Okay. Just a couple more. On the EBITDA bridge chart, which is helpful on Slide 12, just 2 questions. One is this net cost savings bar of $40 million, should we expect that number to be similar or higher in the third quarter?

You should expect it to be the same. And I just think for a little bit of context or some context, I believe we mentioned this on last quarter's call, we said just as you think about it, we had, I think, $27 million in Q1, our expense savings. And then we said at that point, think about the remaining 3 quarters to be equal at $40 million a quarter. And I think as Bob stated in his opening remarks and I stated, we are on track 100% to achieve the $150 million net cost savings. And I think this quarter in Q2 on the implementation following up on what we did in Q1 is tangible evidence that we're on track to achieve the numbers.

Okay. And then the last bar before the $156 million, this negative $10 million, like can you maybe just say what that was and if that's going to repeat?

It's just [indiscernible] -- it's higher benefits. And again, I think like most companies, as we go through a year and we close out a quarter and we see what the -- actually is happening with our employees, we just true up. We've kind of been around that number, I think, for most quarters. So not saying what the numbers are going to be in the future, but it's something that's not material. And -- but we don't really know if we trued up. But it's not going to be outside that zone very much based on at least all past experience we have.

Okay. Great. And the announcement today about your hiring Lisa is definitely encouraging. Have you -- is there any more to report on programmatic? Are you on any more demand-side platforms? And if I missed the announcement, I apologize.

Well, we've got -- and I'm sorry, I don't have right in front of me all the ones we've announced, but we've made great progress in getting on. And I think what Lisa is coming aboard, who's an absolute expert on this, as you can tell from her credentials, is -- although we've been building the technology platform, Lisa is coming in to really bring the advertisers to the platform and be responsible for generating the money on the platform and sort of the last piece of the puzzle. And obviously, her needs will also guide the final bit of development on the platform as well.

Operator, maybe we'll just pause for a few seconds just to make sure that there are no additional questions or if someone would like to ask a question. I just want to make sure we capture all the questions that are out there. Okay. If there are no more questions, first of all, thank you all on behalf of Bob, myself and the rest of the management team for listening and taking the time to listen and talk to us about the iHeart story. And Bob, myself and Mike McGuinness and the rest of the team are available any time to do follow-up and answer your questions. But thank you very much.

This concludes today's conference call. You may now disconnect.