iHeartMedia, Inc. Class A Common Stock 2026 Q2 Earnings Call

Good afternoon, everyone, and thank you for taking the time to join us for our second 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. Now I'll turn the call over to Bob.

Thanks, Andrey, and good afternoon, everyone. In the second quarter, our consolidated revenue was $977 million, up 4.7% compared to the prior year quarter and above our guidance of up low single digits. Excluding the impact of political, our consolidated revenue was up 3.5%. We generated adjusted EBITDA of $152 million in the second quarter, slightly above the midpoint of our previously provided guidance range of $140 million-$160 million. We generated $46 million of free cash flow in the quarter compared to a negative $13 million free cash flow in the prior year quarter. Significantly, our work in building our digital assets, including podcasting, continues to pay off. This will be the sixth quarter in a row in which the Digital Audio Group adjusted EBITDA is larger than the Multiplatform Group adjusted EBITDA.

Even when we get the Multiplatform Group back to growth, we expect this trend to continue. Additionally, we continue our drive for efficiencies in all areas of the company using AI and other technology tools. Turning to our individual operating segments, the Digital Audio Group generated second quarter revenue of $364 million, up 12.4% versus prior year, and ahead of our previously provided guidance of up approximately 10%. The Digital Audio Group generated second quarter adjusted EBITDA of $123 million, up 14.5% versus prior year. The adjusted EBITDA margins were 33.8%, and as a reminder, we expect to see the Digital Audio Group's full-year adjusted EBITDA margins to be in the mid-30s. Within the Digital Audio Group, our podcast revenue momentum continues and was $162 million for the quarter, up 20.7% compared to prior year of $134 million and in line with our guidance of up low 20s.

Ending Q2, approximately 50% of our podcasting revenue was again generated by our local markets sales force, which provides an additional vector of growth for podcast revenue and sets us apart from our podcast competitors. Our podcasting adjusted EBITDA margins remained accretive to our total company adjusted EBITDA margins, and we believe we're the most profitable podcasting business in the United States, driven by both having the number one audience in podcasting, as measured by both Podtrac and Triton Digital, and by applying rigorous financial discipline. We built and continue to build our podcast audience by using our unparalleled audience reach in broadcast radio. In addition to driving the audio-only podcast marketplace, those radio assets have also allowed us to develop and drive the new video podcast marketplace, a new and meaningful growth opportunity.

As the number one podcast publisher, we're now producing video versions of many of our own podcasts and distributing them on our iHeartRadio service, as well as on a number of other select podcast platforms. We're also expanding the distribution of our video podcasts into streaming video services, including Netflix and others. In fact, iHeart has become the most successful video podcaster on Netflix, and we're expanding that relationship to now include podcasts from Kate Hudson and Oliver Hudson, Lele Pons, and Martha Stewart, as well as The Breakfast Club with Charlamagne becoming the only live daily show on Netflix. We announced this morning that we're bringing six iHeart titles to Disney's Hulu streaming video service, including video episodes of Hey Jonas! and Pod Meets World. In the second quarter, digital ex-podcast revenue grew 6.6% compared to prior year, above our previously provided guidance of up low single digits.

Turning now to the Multiplatform Group, which includes our broadcast radio networks and events businesses. Second quarter revenue was $536 million, down 1.6% versus prior year and slightly below our guidance range of approximately flat. Excluding the impact of political advertising, Multiplatform Group revenue was down 2.8%. The Multiplatform Group's adjusted EBITDA was $59 million compared to $96 million in the prior year. Like many other companies, we're not immune to macroeconomic uncertainty and in particular gas and diesel prices, which have an impact on the entire economy. We believe the revenue of the Multiplatform Group, and indeed the whole company, was impacted in Q2 by this uncertainty. On the expense side, the non-cash marketing expenses that we discussed in the last few earnings calls drove the majority of our lower Multiplatform Group adjusted EBITDA in this quarter.

On the consumer side of the Multiplatform Group business, the company continues to do well. Unlike other traditional media, we have more users of broadcast radio today than we did 20 years ago. Indeed, our broadcast radio now has two times the audience of the largest TV network and four times the audience reach of the largest digital-only ad-supported audio service. As I've said before, we don't have a broadcast radio audience challenge, we have a broadcast radio monetization challenge, which seems counterintuitive given radio's strength with the consumer. We recognize that the reason for this is that advertisers are giving preference to services that are within their digital buying platforms.

In response, we're now adding our broadcast radio inventory to DSPs, including Amazon, Google, and Yahoo, as well as developing offerings for other digital planning and buying platforms through our AudioGraph and programmatic offerings, and we feel confident that our broadcast radio participation in these digital platforms will significantly improve our radio revenue performance and will help the entire radio industry as well. Turning to the Audio & Media Services Group, revenue was $80 million, up 18.8% year-over-year, driven primarily by the growth of the digital audio and video revenues. Excluding the impact of political revenue, the Audio & Media Services Group's revenue was up 10.6%. Adjusted EBITDA was $37 million, up 54.6% compared to the prior year.

This segment includes our Katz TV, Katz Radio, and RCS businesses and has continued to grow adjusted EBITDA over time with a focus on an increasingly meaningful digital business and operating efficiencies. I also wanted to briefly touch on political advertising, which will be a major driver of adjusted EBITDA and free cash flow for this company in the back half of the year. As a reminder, historically, the vast majority of our political revenue comes in the back half of the year, and the majority of that is in Q4. We continue to believe that this will be a robust midterm election year in terms of generating political revenue. With that, I'll turn it over to Rich.

Thank you, Bob, and good afternoon. Our Q2 2026 consolidated revenue was up 4.7% compared to the prior year quarter and above our guidance of up low single digits. Although we saw some softness that appeared to correlate with the conflict in the Middle East and the associated economic impacts, we were able to slightly beat our Q2 revenue guidance and the midpoint of our adjusted EBITDA guidance. Let me provide you with some additional detail on our advertising revenue performance in the second 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, no individual advertiser that is more than 2% of our total advertising revenue. In the second quarter, the largest category gainers in terms of absolute dollars were political, gambling, computers, electronics and appliances, and professional services.

The four categories that declined the most in terms of absolute dollars were telecom, financial services, auto, and food and beverage. In the second quarter, our five largest advertising categories in terms of absolute dollars were home building and improvement, financial services, healthcare, auto, and professional services. Our consolidated direct operating expenses increased 2.4% for the quarter. This increase was primarily driven by higher variable content costs, including higher third-party digital costs related to the increase in digital revenues. Our consolidated SGA expenses increased 11.8% for the quarter. This increase was primarily driven by expenses related to our non-cash co-marketing partnerships. We generated second quarter GAAP operating income of $35.5 million, compared to GAAP operating income of $35.4 million in the prior year quarter.

We generated adjusted EBITDA of $152 million in the second quarter, slightly above the midpoint of our previously provided guidance range of $140 million to $160 million. As we have previously discussed, some of the investment in our proprietary audience database, which is the foundation of our broadcast, programmatic, and AudioGraph offerings, takes the form of non-cash co-marketing partnerships to drive engagement with the iHeartRadio digital service. We continue to view these marketing activities as critical for the success of our AudioGraph and broadcast programmatic initiatives, 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 adjusted EBITDA growth.