iHeartMedia Inc (IHRT) 2021 Q1 法說會逐字稿

Ladies and gentlemen, welcome to the iHeartMedia Q1 2021 Earnings Call. My name is Bethany, and I'll be coordinating your call for you today. (Operator Instructions)

I'm now going to hand the call over to your host, Mike McGuinness, Executive Vice President, Deputy Chief Financial Officer and Head of Investor Relations at iHeartMedia. Mike, please go ahead when you're ready.

Good afternoon, everyone, and thank you for taking the time to join us for our first quarter 2021 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President, COO and CFO. At the conclusion of our prepared remarks, management will take your questions. Please note that in addition to our press release, we have an investor presentation you can use to follow along with our remarks.

Before we begin, let me quickly cover the safe harbor statements on Slide 2. During this call, we will make forward-looking statements, including the current and expected impact of COVID-19 on the company's liquidity, financial position and results of operations. These estimates are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ from these expectations and assumptions, and these risks and uncertainties are discussed in more detail in our filings with the SEC.

During this call, we will refer to certain non-GAAP financial measures. Reconciliations between our GAAP and non-GAAP financial measures can be found in our earnings release or in the investor presentation available on our website.

And now I'll turn the call over to Bob.

Thanks, Mike, and good afternoon, everyone. Thank you for joining our first quarter 2021 earnings conference call. Before I begin, I'd like to once again acknowledge our employees around the country for their steadfast resilience this past year. COVID has presented challenges, both professional and personal, and our employees' hard work, innovation, creativity, and dedication helped the company weather an incredibly challenging 2020 and continue to make a difference in the communities they serve. Our employees are behind the momentum and strong results we're announcing today, and they've set the stage for what we believe is a full recovery to 2019 levels by the end of 2021.

For iHeart, the first quarter of 2021 was a continuation of the positive trends we've seen in the business despite the continued negative impact of COVID, with the first quarter outperforming our expectations on all financial metrics. We continue to see positive trends in our diverse revenue streams. Our digital business, including podcasting, continues its strong growth trajectory, while our traditional broadcast radio business continued its sequential improvement, both aided by the recovery of advertising and the strategic investments we've made.

Before we get into the first quarter results, I want to touch on a few things. First, we all see the same headlines that you do. Audio is hot. Everything in audio is growing. In fact, over the past 2 years, streaming audio users are up 21%. Smart speaker ownership is up 50%. Voice assistant users are up 23%. Earbud headphone unit sales are up 90% and podcast weekly listeners are up 42% and high-growth companies like Amazon, Facebook and Apple have recently announced audio initiatives.

With that as a backdrop, I want to remind you that we are #1 in consumer reach across all key profitable audio platforms. We create more audio content than anyone else, and we have the largest sales force in the audio sector. Therefore, we expect to continue to benefit from these trends.

Now looking at how this impacts our financial performance, our business continues its sequential revenue and profit improvement, improving month-by-month since the low point of Q2 2020. Let me talk about our 2 big segments. The iHeart multiplatform group has the greatest reach of any media company in America, and we continue to transform our capabilities to monetize that huge consumer reach using analytics and technology. The multiplatform group using its unparalleled reach has been and continues to be the foundation for all our groundbreaking advancements in the audio space, including our high-growth digital business.

The iHeart Digital Audio Group, which has been the focus of much of our investments over the past few years and is led by our industry-leading podcast business, continues its strong revenue and profitability growth. Our Digital Audio Group revenue grew 70% in the first quarter, led by podcasting, which grew 142%. And importantly, excluding the impact of podcasting, digital revenues still grew 55% year-over-year, demonstrating the importance of our broad digital offerings. In the first quarter, the Digital Audio Group contributed 22% of the company's revenue and 39% of the company's adjusted EBITDA and importantly, did so while increasing its margins, with first quarter margins expanding by 750 basis points year-over-year.

These results are a continued validation of our multiplatform product and revenue strategy, our unique scale, the cost discipline we exercised in 2020 and continue to exercise today and the strategic investments we've made in our new growth areas, like podcasting, ad tech, and the continued expansion of broadcast radio on digital devices. We believe our resource allocation decisions are proving to be the right ones as we have built a high-growth digital business on top of our large at-scale stable multiplatform business. By leveraging our unique position in audio and taking advantage of shifting consumer behaviors, we are expanding our total addressable market or TAM beyond radio and are targeting the approximately $20 billion sponsorship TAM, the approximately $65 billion television TAM and the approximately $160 billion digital TAM in the U.S., which is the largest TAM and which is 10x the size of the broadcast radio TAM.

Our leadership position in both broadcast and digital audio enabled us to create the only complete audio ad technology stack in the industry for all forms of audio, on demand, broadcast radio, digital streaming radio, and podcasting. It not only generates value for all of iHeart, but it is becoming a valuable asset on its own, and the acquisition of Triton Digital, which closed on March 31, significantly enhanced this platform. I'll touch on this more in a moment.

Based on what we see now, we feel more confident than ever that we'll be back to 2019 adjusted EBITDA levels by the end of 2021, setting ourselves up for continued strong adjusted EBITDA growth. And with that, I'll turn to how the business performed in the quarter before Rich gets into the specifics of our financials.

We're encouraged by the strong results we delivered in the first quarter despite continued headwinds from the COVID-19 pandemic. Reported revenues were down 9.5%. You may recall that during our Q4 earnings call, we said we expected revenue to be down 11% to 13%, and this outperformance was primarily driven by our digital audio group. Excluding the impact of political, our trend of year-over-year sequential quarterly improvement continued from down 47% in Q2 to down 25% in Q3 to down 17% in Q4 and down 7% in the first quarter of 2021.

In the first quarter, we generated adjusted EBITDA of $102 million and generated free cash flow of $53 million, highlighting the strong free cash flow characteristics of our business. As we announced last quarter, beginning in Q1 2021, we now have 3 reportable segments: The newly created iHeartMedia Multiplatform and iHeartMedia Digital Audio Groups in addition to our preexisting Audio and Media Services Group.

The creation of these 2 segments has enabled us to strengthen the mission and tighten the focus of each group and accelerate our transformation into an even more nimble and digitally focused 21st century multiplatform media company. Additionally, this new disclosure provides improved visibility into the underlying performances, results and margin profiles of each distinct business, which we hope will help the investment community better understand the size and growth of our digital audio business as well as the value of the scale, stability and strong free cash flow characteristics of our multiplatform business.

Now let me provide some more specifics. The iHeartMedia Multiplatform group includes our Markets Group, the largest radio company in America with its more than 860 radio stations in over 160 markets, our national sales organization, our events business, our networks business and our BIN, Black Information Network, business. Our broadcast radio stations continue to lead the industry, and we're the #1 radio group in audience and according to Nielsen, for the 18 to 49 demographic, we are ranked #1 in 96 markets overall. That's more #1 markets than the next 2 largest radio companies combined, and we see that same level of performance in the top 50 markets as well.

Here's the most important fact, though. The iHeart Multiplatform group reaches more people every month than any other media company in America with its broadcast radio assets alone. Multiplatform Group revenues were down 21% in Q1 or down 19%, excluding political, continuing its sequential improvement as it recovers from the impact of the COVID-19 pandemic. Adjusted EBITDA margins were 21%, down only 310 basis points from the prior year, which was primarily a pre-COVID quarter.

The Multiplatform Group consists of several distinct revenue streams. Our broadcast revenues were down 22% year-over-year and have continued to recover as the macroeconomic environment improves. Within the broadcast line is SmartAudio, our data-infused programmatic platform. Although it uses the same inventory as the rest of broadcast radio, SmartAudio was down only 11% in Q1, highlighting the value of data and ad tech. Indeed, as we continue to add new technologies and data capabilities, our Multiplatform Group and broadcast stations will be able to play in the fast-growing digital TAM.

Our networks revenue was also negatively impacted by COVID-19, but were down only 14% compared to prior year. And within networks is our Premier Networks business, which was down only 6% compared to the previous year. Our sponsorship and events revenues continue to be impacted by the pandemic as we either postponed or canceled all of our in-person events following the COVID-19 outbreak. However, true to our commitment to be available everywhere our consumers are with the products and services they expect from us, when the pandemic hit, we worked quickly to create our virtual events business, and we're the first to bring the concert experience home to our listeners.

On March 29, 2020, only days after shutdown guidelines were put in place, we launched the iHeart Living Room Concert for America on Fox, and we continue to innovate and bring different kinds of virtual events to our listeners throughout the year, which mitigated some of the revenue lost from in-person events and helped reinforce our bond with our listeners. We intend to make some of these virtual events permanent as they are both profitable and drive high engagement across all social media and other relevant platforms, but we're also excited that we have begun to bring back in-person events.

As COVID-19 restrictions are being lifted, we have started the plan for in-person events on a case-by-case basis. The consumer demand is as strong as ever, and we expect our iHeartRadio Music Festival in September and the iHeartRadio Jingle Ball tour to be live and in-person this year.

Now let me move to our iHeartMedia Digital Audio Group, which includes our high-profile and high-growth podcasting business and the iHeartRadio Digital Service, the industry's #1 digital radio service with a 5x lead in digital usage over the next largest commercial broadcast radio company as measured by Triton. It also includes our websites and newsletters with our monthly audience of over 150 million unique users according to Omniture, our digital services and programs for both national and local partners and our digital ad tech companies. Plus we have a leading position in over 250 digital audio platforms and thousands of devices, including smart speakers, smart TVs, gaming consoles, and mobile devices as well as the social footprint that includes 233 million fans and followers, which is, by the way, 7x larger than the next largest audio player.

As we've talked about on these calls before, our digital businesses have continued their excellent track record of growth across all products despite COVID-19. As I mentioned, the Digital Audio Group delivered another strong quarter. On a consolidated basis, the Digital Audio Group's revenues were up 70% year-over-year, and adjusted EBITDA was up 141% year-over-year, and we expect the momentum to continue for the full year.

Our podcasting business continues its strong performance for listeners, creators and advertisers. iHeart remains the #1 podcast publisher, leading the entire podcast industry in downloads and unique listeners, further increasing our lead over the second and third largest podcast publishers according to Podtrac, the podcast industry's respected third-party measurement source. We're also #1 in podcast revenue and earnings. In March, we had 257 million downloads, and we became the first podcast publisher ever to surpass 30 million unique audience in a month. And podcasting has emerged as the newest mass market audio platform, with over half of Americans now reported to be podcast listeners.

We have a combination of unparalleled assets that are unique to iHeart in the podcast industry and that allow us to build hit show after hit show. Our broadcast radio reach acts as a megaphone to promote our podcast like no other company can, and our technology and platform assets make it easy for talent to create shows and for us to monetize them. All of this makes us the first stop for most podcast creators, and it's why we've been able to continue our output of high-profile podcast, including our ventures with Will Ferrell's Big Money Players Network, Malcolm Gladwell's Pushkin Industries, Bobby Flay, Hillary Bill and Chelsea Clinton's podcast, Shondaland from Shonda Rhimes, Black Effect Podcast Network with Charlamagne tha God and many others as well as building hit podcast from talented newcomers.

This past year, podcast audiences grew across an array of genres, from comedy to pop culture to true crime, to food and fashion, and of course, sports. In a year when it wasn't clear how athletes would compete and how fans could connect, iHeart put the listener in the front row, delivering the best sports coverage in the country with radio superstars like Colin Cowherd and Dan Patrick and launching multiple new hit podcast series like Drafted and the Dream Team Tapes.

Two weeks ago, we took that to another level with a game-changing partnership with the NFL. The multiyear exclusive partnership with the NFL is simple in spirit, and that's why it's successful. The NFL gives us the access, iHeart brings the audience, and together, we'll tell some of the greatest sports stories of all time. The fact that the NFL chose iHeart as their partner is further evidence of the unique position we have in the podcasting world, and we can't wait to keep you posted in the coming months as we roll out these exciting new podcasts. For those of you new to podcasting and who've been watching the recent news stories, I want to remind you that the economics in the podcast industry accrue to the publisher, not the distributor. And although we're a major distributor through the iHeartRadio app, our economics come from our publishing.

Additionally, we have yet to see any evidence that the subscription model will work in podcasting, except for perhaps in select niche products. For perspective, Netflix and other streaming video services are examples of lowering cost for consumers through a flat rate subscription versus on a la carte pricing, not increasing the cost. And in our experience as marketers, we've never seen a free product move to a pay product successfully. Having said that, we continue to watch the marketplace and as the #1 podcast publisher with our strong library and podcast output, we have the ability to successfully participate in almost any market opportunity no matter what it may be.

I would also like to update you on the progress in bringing our industry-leading audio ad tech platform to the market. As I mentioned earlier, we successfully completed the acquisition of Triton Digital on March 31, and our integration efforts are proceeding according to plan. This acquisition, combined with our Jelli, Radiojar and Voxnest assets, establishes iHeartMedia as the only company with a total audio advertising technology and data solution, providing both supply side and demand side services for all forms of audio; on demand, broadcast radio, digital streaming radio, and podcasting. Owning the advertising technology enables iHeart to lead the development and growth of the programmatic audio marketplace and ensures that we will be in control of the sale and yield of all of our audio impressions. It's also important to note that Triton currently provides ad tech and other services to the entire audio industry, and we'll continue to innovate using data and technology with the understanding that with iHeartMedia as its owner, broadcast radio will remain a priority for Triton into the future.

Additionally, we see an opportunity to provide our complete audio ad tech platform worldwide. Our scale in the U.S. and the sophistication of the U.S. ad market gives us the foundation to create and maintain a leading audio tech platform. We think the global market is an interesting new opportunity for us and allows us to build a new revenue stream over time for our ad tech platform.

Yesterday, we announced another exciting step for our podcasting business, the creation of a first of its kind private podcast marketplace for brands. This private programmatic marketplace offers advertisers access to premium audiences at scale across iHeartMedia's vast catalog of podcast, enabling them to distribute their marketing to audiences across the most diverse and comprehensive library of shows in the world from the iHeartMedia podcast platform. This new technology developed through iHeart's recently acquired Voxnest assets, allows brand advertisers to create their own unique tailored marketplaces, comprised of their individual targeted audiences and pricing to dial up and down across the year as their marketing needs require. We're excited to bring yet another paradigm-shifting product to the digital and podcast marketplace that capitalizes on our scale, our unparalleled content offerings and the new and exciting technologies that are unique to iHeart.

The scale, capabilities and growth of iHeart's many product offerings also mean that we are strategically positioned to take advantage of additional TAMs beyond the $15 billion radio addressable market. Our digital businesses, which continue to grow rapidly and bring new analytical capabilities to market, are well positioned to gain revenue in the over $160 billion digital TAM. At the same time, radio now outreaches TV. Advertisers who traditionally focused on TV are being confronted with a reach hole, a hole that can be filled by radio's unparalleled reach, giving iHeart access to some of the $65 billion TV TAM.

Additionally, our events business allows us to play in the $20 billion sponsorship TAM, and our virtual events business increases our ability to capture additional revenue there as well. While our sights are set high, gaining even a small share of digital, TV, and sponsorship TAMs can have a material impact on iHeart's revenue growth and earnings potential.

And finally, we also continue to successfully execute on our previously announced cost savings initiatives. Rich and I and the rest of the iHeart management team are excited about the success we're having in transforming iHeart into a true multiplatform company. The digital audio group is well on its way to becoming our most profitable segment. But importantly, it's not at the expense of our multiplatform group, a resilient and robust business that we expect to continue to grow, innovate, and through its new data and electronic trading capabilities, even play in the larger and faster-growing digital TAM. We continue to identify new opportunities across the audio, advertising, and data analytics sectors and using our unique scale one of kind platforms, we continue to innovate and develop new products and services for our consumers and for our advertising partners that will drive iHeart's growth.

And with that, I'd like to turn it over to Rich.

Thanks, Bob. We continue to see improving trends in the macroeconomic environment, and our financial results continue their sequential improvement. While our total revenues remain down year-over-year and as Bob mentioned earlier, we recognize there is still more hard work to be done. We continue to remain confident that our first quarter results have us firmly on the path to get back to 2019 adjusted EBITDA levels by the end of 2021, setting ourselves up for strong adjusted EBITDA and free cash flow growth in 2022 and beyond.

In terms of our first quarter results, if you can turn to Slide 9 of our investor deck. On a reported basis, our consolidated revenues decreased by 9.5% over the prior year period. As Bob mentioned, on our fourth quarter call, we indicated that we expected revenues to be down 11% to 13%. Excluding the impact of political spending, our first quarter revenues declined 7.2%. Direct operating expenses decreased 0.4%, driven primarily by lower employee compensation expenses resulting from our modernization and cost reduction initiatives taken in response to the COVID-19 pandemic, lower variable costs associated with low revenues and as a result of the postponement and cancellation of in-person events. These decreases were offset by higher variable costs in our digital audio group as a result of strong growth in digital revenue.

SG&A expenses decreased approximately 13%, driven by lower employee compensation, resulting from cost reduction initiatives take in response to the COVID-19 pandemic, along with lower sales commissions, which were lower as a result of the decrease in multiplatform group revenue. Trade and border expenses also decreased primarily as a result of the cancellation and postponement of events as did travel and entertainment expenses resulting from operating expense savings initiatives. These decreases, which primarily impacted our multiplatform group, were partially offset by higher expenses for our Digital Audio Group and other increases compared to the first quarter of 2020, including variable compensation across our business and corporate function.

Our first quarter GAAP operating was with $76 million compared to $1.7 billion in the prior year quarter, and our first quarter adjusted EBITDA was $102 million compared to $140 million in the prior year quarter.

If you turn back to Slide 5, I'll provide some additional color on the performance of our operating segments. The Digital Audio Group's revenues were up 70% year-over-year, and adjusted EBITDA was up 141% year-over-year. And as Bob mentioned, in the first quarter, the Digital Audio Group contributed 22% of the company's revenue and 39% of the company's adjusted EBITDA and importantly, did so by expanding its first quarter margins by 750 basis points year-over-year.

Within the Digital Audio Group is our podcasting business, whose revenues grew 142% year-over-year. And importantly, our non-podcasting digital audio revenues grew 55% year-over-year, demonstrating the importance of our broad digital offerings that are in high demand despite the economic downturn.

The multiplatform group revenues were down 21% in Q1, down 19% excluding political, continuing its sequential improvement with 21% adjusted EBITDA margins, down only 310 basis points from the prior year. Within the multiplatform group are our broadcast revenues, which were down 22% year-over-year, and our networks revenues, which were down 14%. Network revenues include Premiere, which were down only 6%. Our sponsorship and event revenues were down 24% year-over-year. The Audio and Media Services Group revenue decreased by 9% on a reported basis. Excluding the impact of political, and I'll remind you, that we saw material political spending in the first quarter of 2020, revenues were up 1%.

Turning back to our consolidated results and looking at the items below the line. Interest expense decreased $5 million compared to the same period in 2020 as we continue to improve our balance sheet and reduce our cost of capital.

On Slide 13, there's a summary of our debt. At quarter end, we had approximately $5.6 billion of net debt outstanding, which includes a cash balance of $529 million. As a reminder, the terms of our debt structure include no material maintenance covenants, and there are no material debt maturities prior to 2026. In the first quarter, we generated $53 million of free cash flow. As Bob mentioned, we also continue to successfully execute on our previously announced savings initiatives.

Our pre-COVID modernization initiatives remain on track to achieve a $100 million run rate by mid-2021. And in 2021, we expect to replicate the majority of the $200 million post-COVID savings. The pandemic forced us to transform the way we do business more rapidly than we could have ever imagined, and we continue to benefit from our experience in adapting quickly to these changes. The actions we have taken leave us well positioned for margin expansion as advertising activity continues to recover.

As we look ahead to the rest of 2021, I want to provide you with the following. Our April revenues were up approximately 85% compared to the prior year, keeping in mind that last April was the month that was hardest hit by COVID. For the second quarter, we expect revenue to be up approximately 65% year-over-year.

Our podcasting business continues its strong performance, with April up approximately 170% compared to the prior year. We expect our Digital Audio Group momentum to continue for the full year. We believe that we'll be back to 2019 adjusted EBITDA levels by the end of 2021. And a few things to note on our expectations for free cash flow in 2021, we will not be a cash taxpayer due to NOL carryforward that we'll utilize to offset taxable income. Interest expense will be approximately $335 million to $345 million. And in terms of capital expenditures, due to the significant real estate reductions we are working on to drive meaningful savings, our capital expenditures in 2021 will be $165 million to $185 million and then return to normal levels in 2022. Due to the timing of the real estate consolidation, capital expenditures will be more heavily weighted towards the second half of the year.

We continue to make steady progress in our recovery, benefiting from our strict course discipline, the resiliency of our high growth rate areas, and the gradual improvements of the macroeconomic environment. We believe that there is still real work ahead of us, but we're proud of the way our company and particularly our people navigated through this challenging period. We believe the decisions we have made over the past year leave us well positioned to take advantage of the improvements in the advertising ecosystem, driven by the innovation and diligence we have exercised this past year. We look forward to continuing our business recovery with the expectation that we'll be back to 2019 adjusted EBITDA levels by the end of 2021 and a resumption of our deleveraging activities, which was slow during the pandemic.

In closing, we would like to thank our employees who remain committed to serving our listeners and our communities. I would also like to thank our business partners who have stuck with us during this challenging time. We appreciate you joining our first quarter earnings call.

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

(Operator Instructions). The first question comes from Jessica Reif Ehrlich from Bank of America.

I have a couple. Can I just start with maybe the NFL? That seems like it should have been a very competitive fight to get that. Can you give us some color on the ramp-up, the magnitude of the impact? And when you say exclusive, do the teams have separate rights? Or do they all -- does every team fall under this deal?

Well, we haven't announced all the details of it yet, Jessica. So I don't want to step into it right here. But I think your comment is exactly right, that this was a competitive situation. And I think the NFL really looked to who could help them the most in terms of pulling the audience together for them. And as we said in our comments, it's sort of this interesting combination of we've got this audience. They've got this incredible content. And together, we're able to pull it together, I think, to do something no one else could do together.

And I think also the opportunity to monetize it efficiently and effectively is important to them and obviously important to us. And for us, we love the NFL because it sort of takes our sports programming and podcasting to one more level. And again, I think is an indication of the sort of unique position we're in, in podcasting, not just the NFL, but overall is that if you've got a big idea or you've got a big bet on podcasting, you'd really like to start with the biggest first. So we tend to get first look at almost everything. And not to say we do every deal, but we do usually have that first conversation just as you've seen in the entertainment business over years that the biggest usually gets first [love].

Jess, the only thing I might add to what Bob just said is that -- and we've said this before with other content deals is our position in podcasting and our ability to give somewhere the highest probability of being successful. And as I think when you look at it, you could assume it's right, and I think the NFL chose us for the probability of success.

Right. I mean I don't think you'd get any -- it's the highest level you can get to, I think. And then maybe I'll just ask the other 2 questions. You've had great cost management, obviously, with a great quarter. What expenses do you think could come back post-COVID? And then maybe a trickier question, but you've got a couple of suitors [as] for the company. Is there anything you could say about the status of either or both of them?

Let me talk about the cost is, clearly, we didn't pay bonuses last year. We're going to pay bonuses again. There will be some travel and entertainment that will come back. But

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that we had before. I think we have permanently altered how we think about travel and entertainment and some variable costs go up. Obviously, as revenue goes

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we have sales costs that go with that on a variable cost basis. But those, obviously, sort of are the major thrust in terms of that would come back.

Yes. And Jess, just maybe as a reminder for yourself and the audience, we are on track a 100% to take out the monetization issues of $100 million by the middle of this year on a run rate basis. And as Bob pointed out, yes, we have some costs coming back, but we expect to replicate the majority of the $200 million of post-COVID savings we had last year. And I think third, just to say to your comment upfront about our ability to manage cost. Again -- and those are already announced and on track to be implemented, but we're just always looking to be more efficient, always looking to take advantage of technology and drive more value to the bottom line.

And then on the suitors, is there anything you can say?

I don't think there's really anything we could probably say on the suitors that I think we've said whatever

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Yes. And Jess, the other thing I'd add is people recognizing the value of audio. But I think Bob's open comment was how hot audio is and people, from an investor standpoint, recognizing the equity value creation, which is great for all the people that buy our stock.

The next question comes from Steven Cahall of Wells Fargo.

I wanted to dig into digital audio a little bit more. So podcast growth accelerated, nonpodcast digital growth accelerated, and digital audio adjusted EBITDA growth accelerated. So it's all going great. Maybe help reign in our enthusiasm a little bit. I'm guessing you don't want us to model it up 70% on the revenue line each quarter at a mid-20% margin. So maybe just help us put the medium-term growth rate at digital audio into perspective a little bit.

Well, first, Steven, thank you. And thanks for recognizing the growth. And I think what we said, I don't think in both -- in Bob's opening remarks, that we expect to have continued strength in growth on digital as you go throughout the year. And look, you highlighted, we're up -- I think it's important for us to note, even though podcasting revenue is up 142%, and we've continued that. But we talked about digital being up 55%, I think it is ex podcasting in the 70%. And so I think saying anything more than that right now, we tend to not to giving more guidance. But I think we get a pretty strong indication that we expect growth to be strong throughout the rest of the year.

And then maybe just on SmartAudio. I think you said it was down just 11% in Q1. Curious if it's positive in April? And what percentage of multiplatform or terrestrial radio is now being sold on SmartAudio? And any sense of how much better you monetize when you sell through SmartAudio, like a CPM comparison or something like that?

Yes. We haven't broken out any of those numbers. And again, I think as Rich said, we don't want to give guidance here or provide that level of granularity. But I appreciate the interest in it. And obviously, we're excited about SmartAudio as transforming broadcast radio into a platform that can be used by digital buyers begin to

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digital TAM.

Yes. But maybe just one thing I might add to that, Steven, just to take a big step back and without getting into the specifics, again, you look at our overall first quarter results. You look at the -- what we talked about for the April results and with the guidance we gave for Q2. And you look at our general direction comments for the rest of the year. I think you could take each of your questions and say, I think we're doing -- while we remain widely under-monetized because of the efficiency of the medium, which is all great opportunity, we're clearly making great progress on that front.

Yes. And then last one, maybe just, Rich, a housekeeping one. Thanks for the free cash flow commentary. Do the NOLs extend past 2021? And as you're generating free cash flow this year, will you pay down some debts or just build some cash on the balance sheet?

Well, we'll continue -- so the NOLs pretty much run out by the end of this year. Just -- so good question. So thank you for that. So everybody is aware of that. Look, I think if you look at even last year, and probably the most challenging period of time, we generated over $130 million of cash, paid down debt. We'll continue to look to our free cash flow to pay down debt as we go into this year. We continue to be laser-focused on deleveraging, which I think we all agree, the deleveraging -- and the cash flow capabilities first of this company and the deleveraging capabilities create a lot of equity value.

And I might also just add just maybe for sense of completeness, so to your point, Steven, on housekeeping, if you look at other opportunities around the balance sheet, just to remind everybody, we've got the 8 3/8 debt at $1.5 billion that are coming up for refinancing. So we're also going to have the ability to improve our interest expense and cash flow attributes to the company in addition to the operating results.

The next question comes from Dan Day of B. Riley Securities.

I just wanted to start off and ask if you're seeing any specific advertising categories that are sort of leading the way here as you're seeing this dramatic recovery in ad revenues. And specifically, would like any commentary, some people have talked about radio being this ideal grand reopening advertising medium. So just any tailwinds from that and any ad categories that you've seen that have been particularly strong?

It's interesting compared to the downturn, the bottom, almost everybody is up. Entertainment was hit particularly hard, but it's also coming back really well. And so I think we -- and for us, we've got great diversity of categories, unlike many businesses that are heavily dependent on certain categories. There's no single category that's over 5% of our revenue, and there's no single advertiser that's over 2% of our revenue. So for us, having that diversity is a very important part of our revenue strategy. And again, it continues through this recovery period.

And you're exactly right, grand opening. There's no better way to get the message out for anything than radio. And I think also as people look to cost efficiencies, radio has always been perhaps one of the most efficient of all the media and especially compared to TV, which is getting more and more expensive on a per user basis relative to radio.

Dan, the one point I might add is that I think to Bob's point about, in terms of both our ability nationally and locally. Just as a reminder, everybody, we've got almost 2,000 feet on the street, 2,000 people selling advertising, I mean, we're all selling advertising, but 2,000 people kind of officially selling advertising all the time. And clearly, that's an advantage for us and a competitive advantage.

And then just -- I'll ask one specifically with the NFL partnership in line. Great job on that. Sports betting is a category. Your radio footprint isn't as sports concentrated as your peers, but you obviously have a lot of reach with the kind of millennials that they're to sign up for their [ads]. So just any commentary on growth in sports betting as a category for you guys?

Yes. It's actually a great growth category for us. We actually have a couple of stations dedicated to do sort of sports betting called The Gambler is the format. We do a lot of play-by-play sports on our radio stations. We are probably not as concentrated in sports because we're very diverse in terms of it. But given our large footprint and sort of 2:1 lead over anybody else just in footprint, even with that diversity, still this absolute numbers, a lot of sports opportunities, and we are seeing the sports-oriented advertisers very interested in the sports betting. So we're there playing it well, I think.

Just last one for me on podcasting. I mean you guys have made your strategy clear. You want reach as much -- make it as widely available as possible. Do you see yourselves rolling out something like Apple and Spotify have done where you allow content creators to sort of monetize their content via subscription option and then maybe you take a cut of that? Is that something that was on the table here?

Well, look, we could do anything that makes sense because we've got the big library, we've got this incredible output. What we found is that the content creators basically want to reach as many people as they can, and that appears to be, by far, the best economic model. We make profit there and make a lot of it. I think no one has yet proven that there's any subscription opportunity in podcasting. And by the way, a number of people have tried already before, just Spotify and Apple, have not succeeded yet. If they ever did, obviously, we've got the library to take advantage of it. But as I mentioned in my comments, if you look at this business, subscription is usually succeeded where you've been able to take something that was more expensive on an a la carte basis and make it cheaper through a subscription instead of buying 2 movies a month, you for Netflix for the month, then you save money. In the case of podcasting, it's free.

And now you're asking people to pay for something they got free, limits the size of the audience, which limits which creators want to do it. And two, I think it's going to be a very small pool of consumers that will do it. We'll see. But again, if we follow the trends of consumer behavior, we're not optimistic that there's anything there. But look, we're open-minded, and we're a publisher. So our goal is to maximize the value of these assets we have. But at the same time, we understand that the heart of creating any success is to make sure we have great creators and creators want to have a big success, meaning to reach as many people as they can.

And Dan, by the way, while we haven't spoken -- broken, excuse me, the specific podcasting revenue numbers or profitability. I think we've been pretty consistent and tried to give everybody a road map when you look at what we talked about podcasting revenue growth. When we look at the revenue growth on digital, which is the line that podcasting is in, without podcasting. And I think you've heard Bob and I say there's a number of times that podcasting is accretive to our overall margins. When you read about other companies, they talk about, gee, we're looking what's the path to profitability for podcasting. We've had that path since day 1, and that just continues and it continues to be accretive to our overall margins. So it's very profitable for us.

The next question comes from Sebastiano Petti of JPMorgan.

Just a quick follow-up on that, well, the subscription strategy, you've kind of outlined how you're viewing it. But longer term, if that is indeed successful because some of the folks playing in that camp have other revenue streams rising and maybe attach other services, et cetera, to that? I mean does that perhaps create potential for content wars for lack of a better term? And maybe you win by losing in terms of keeping content on the platform. Just maybe think of the content angle as it pertains to a subscription model? Any comments there?

Well, I think -- yes, what we've seen is we've seen in this business that distributed content strategy appears to win, gives people the most opportunities to get to the largest audience possible. That's what makes a hit. There are very few creators that are interested in anything other than the biggest audience they can because they want to have a hit. And so I think in terms of, when you talk about content wars, we're in pretty good shape on sort of by any scenario you want to run. We've got this secret weapon called broadcast radio, and we are able to build hit podcast by promoting them on broadcast radio. And putting that kind of firepower and the kind of reach and frequency we do in promoting it, we see show up in terms of downloads almost immediately.

And I don't think there's anybody else in this business who's got it. Apple has heretofore been the one that using the Apple promotion has been able to help podcast get started. But I think other than that, I don't see anybody that comes close to what we've got. So for us, we're able to both go out and get major stars, whether it's Shonda Rhimes or the NFL or Will Ferrell, but we're also able to build podcast from scratch with people you've never heard of, but that we think have potential. And I think that, again, gives us the opportunity to sort of continue to build scale. And if you look at the last year, we've continued to build our -- increase our share among the top podcasters, widening the gap between us and everybody else.

By the way, and Sebastiano, just -- I think this time, you may have not had a chance yet because we just posted it before the earnings call, that we actually go to the investor back. I don't remember what page it is offhand. We have the March -- to Bob's point, we have the March podcast Podtrac ranking, which is the third-party measurement standard for podcasting. So again, it just reinforces what number is our positioned. And I just want to go back to the first comment that Jessica opened with, which is, gee, it must have been a competitive marketplace for somebody like the NFL, to get no different than Will Ferrell or Shonda Rhimes out there, and they all chose us, which is phenomenal to be their partner because of the ability to give them the best shot at success.

And I think -- yes, I did see the 30 million uniques in March. It is a very impressive number. It seems to be accelerating, I believe, I mean, in April and it seems to be accelerating from March. Just one quick follow-up on the podcasting. Let me -- in light of your leading position in podcasting, I was just curious if there are any potential content holes as you would describe them, that you may -- that you think you may have?

It's interesting. We don't really -- if you look at actually across our array of categories, we're probably the only podcaster in the top 10. So therefore, anybody within the scale that plays in all the categories. And if you look back a year ago when the pandemic first hit, a number of podcast dropped, and we didn't, we went up. And the reason we went up is because we were just shifted. Some categories did worse, but other categories did better. And having that sort of diverse base allows us to be in a pretty good hedge position no matter what macro trends are going on in the marketplace. And that, again, I think, is one of the unusual aspects of our podcasting in addition to our scale.

And then one thing on the -- one last question on the broadcast segment. We've talked -- you've talked about in the past that there's a lot of pent-up demand there and as restrictions are lifted, meaning, you see a lot of demand coming through in the terrestrial segment. So has anything changed this quarter that the longer-term trajectory of that business can return to full -- return to a recovery over the next couple of years, call it? But just anything -- anything on the broadcast segment, particularly as you're looking out to 2Q and maybe the 65% revenue growth, how that perhaps plays into that? Any color there would be great.

Yes. Look, I appreciate it, Sebastian (sic) [Sebastiano], the question. It's really not a lot more we can say in terms of guidance. But I think what we tried to do is go back to Q2 of last year and show you the progress that we continue to make. And by the way, as we go into the future, the progress that we continue to make out there. And I think as Bob's pointed out, a number of different times, the reach medium that we have on the broadcast side, being in the last reach medium in the United States, and that just continues to get reinforced with the challenges that broadcast TV has had. So nothing's changed with that, and we're really incredibly pleased with the progress that we're making.

And I will just add, unlike TV, which has had an audience decline, we don't really have the audience issue. Ours is monetization issue. And we have felt and we've invested against it, that the issue has been that Facebook and Googles of the world really changed how advertisers want to interact with media companies. And we have built out that electronic platform. We've built out the suite of data and analytics services that they need, attribution, and having those pieces in place now allows our broadcast radio to play in that world as well.

Yes. I mean I think just one thing I'll also point everybody to the decking, if you get a chance to look at it, we put a slide in there that we had last quarter, that really highlights that we've got the only audio multiplatform solution. So whether you want to talk about digital, whether you want to talk about broadcast, whether you want to talk about events and sponsorships, and obviously, in digital, including podcast, that capability for advertisers to plan against informed targeted audience as Bob articulated. And then particularly with the Triton acquisition, then have the ability to deliver results and measure those results. Nobody else has that.

And look, I'm not going to drag it out, but I want to have one more point here, which is if you look at the macro picture, what are the advertising agencies doing and the advertisers? They're all trying to go to the unified buying platform. They've in the past, bought in silos, bought some radio, bought some of TV and bought some print, bought some digital et cetera and what they're trying to do, and they're building it now, is they're building platforms where they can plan across media, different kinds of media to put together the right plan in terms of the right impact, the right reach and the right cost. Radio, and I guess, probably outdoor are below probably the mean pricing. And so you would think that as you begin to plan all of these together that probably everything converges on the mean. So that should be advantageous to radio, just as a sort of a macro analysis.

The next question and the final question comes from Jim Goss of Barrington Research.

I guess more on the podcast notion. Given that you've said content creators want the greatest reach and that should provide some leverage to you. I'm wondering what kind of -- what is the nature of the financial arrangement that might be most common with your podcast publishers? And certain -- and another thought you brought up, using radio to promote the podcast makes a lot of sense since you have a lot of unsold inventory traditionally in radio. I'm wondering what share of your spot loads are used to promote podcast? And how do you account for that, by the way, (inaudible) way?

Well, let me take the first piece, is that I think as you look at podcasting and the reach we've got, I think that probably no one that comes close to the reach we have, which gives us that advantage to any podcast creator. I think on the second piece is, in terms of promotion, we promote podcast in commercial breaks. We promote them in promotional breaks. And we even sometimes run podcast episodes on the air, unlike TV, which has fixed inventory, radio has a very flexible and a variable inventory. We can create it on the fly, make more of it, make less of it. So we don't use podcasting to push out any paid advertising at all.

Yes. And the other thing I might add to it is we probably spent a little over $100 million last year about broadcast inventory, promoting our podcast product, again, our unique ability to create awareness of podcast out there because you've got the best podcast in the world in terms of content. But if no one knows it's there and you don't drive an audience to it, to find it and discover it, that's what we do so well. From an accounting standpoint, I'm not going to comment anything specific, but no different than all of our accounting in each of our operating segments, just as you should assume, and obviously, it's been reviewed by our orders is that we just have fair market value accounting between the 2 segments.

And maybe one thing about true core broadcast radio operation. Is there some path to get it back to that pre-COVID revenue level at any point? Or maybe it's been sliding before COVID ever occurred. And I guess it would be in terms of ad pricing and with all the competition that faces, what do you think is that ultimate future for that business? Is it monetizing your business in these ancillary ways, it will become more and more profitable? Or do you think there are some ways that the core business can come back either digitally or otherwise?

Well, I would disagree with you that it was sliding before COVID. I don't think that was the case. I think if you look back at our revenue that we did see increases in it. And we think, again, going back to some of the comments we made earlier, we think that, again, unlike businesses like newspaper print or advertisers supporting the TV where audiences decline, that we're seeing a very stable audience here in terms of the reach in radio. So for us, it's a matter of how we're monetizing it. And what we've identified as being the biggest opportunity for us is to be able to put data and analytics on it and be able to trade electronically. We've built out those capabilities now so that we have matched where the market is. And we think that's been the biggest impediment to robust growth in the broadcast radio business.

Yes. And I just think, to round that, just giving any more, Jim, your comments in terms of, other than we continue to expect to make progress. And as Bob said, the optimism in terms of going forward about the monetization would be more guidance than we've given.

Yes. And actually I was sort of thinking that the overall levels of radio dollars hadn't declined, but they had shifted to a mix of greater digital as a component, I think, so some of the traditional ad sales have declined for some years, but in favor of other areas, if I wasn't saying the whole business was declining. But that would never be the last thing then. Appreciate it.

Great. We -- by the way, we really appreciate everybody on the call, everybody, your questions focusing on iHeart and look forward to continuing our conversations. And Bob, myself, and Mike McGuinness are available whenever you need us.

Thank you, everybody.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect your lines.