Ladies and gentlemen thank you for standing by. Welcome to the iHeartMedia 2019 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will be given at that time. [Operator Instructions]. As a reminder, today's call is being recorded.

I would now like to turn the conference over to your host Kareem Chin. Please go ahead..

Good morning everyone. Thank you for taking the time to join us for our second quarter 2019 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President, COO, and CFO.

Please note that in addition to our press release, we have an accompanying slide presentation that you can follow along with our remarks. I want to refer you to Slide number 2 in the presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties.

These statements include management's expectations, beliefs, and projections around the company's performance and represent management's current beliefs. There can be no assurance that management's expectations beliefs or projections will be achieved or that actual results will not differ from expectations.

These risks and uncertainties are discussed in more detail in our filings with the SEC. Today's remarks will focus on adjusted results which do not conform to generally accepted accounting principles.

Reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or in the presentation available on our website. And now I'll turn the call over to Bob..

always there, always available, something everyone can use when they wanted. In contrast, 73% of Spotify's listening comes from just 3% of their audience and 72% of Pandora's listening comes from just 5% of their audience. That's the music collection experience.

That kind of concentrated usage by a small consumer segment is exactly what happened to the brick-and-mortar music space, whereas radio's reach and usage is well distributed and as you can imagine that resonates with our advertisers.

In the podcasting space, we're the increase number one commercial podcaster in America, measured by monthly downloads and unique listeners as measured by Podtrac, the industry's third-party standard. We run neck and neck with NPR every month and the two of us have a big lead over the increase number three podcast provider.

We also carry more than 250,000 podcast on our iHeartRadio platform from our own iHeartRadio original shows and other major podcast publishers.

In addition to our strong leadership as the increase number one commercial podcast publisher where the economics are since the publishers sells and keeps the advertising, we've seen growth of more than 300% in podcast listeners on the iHeartRadio app in the last year. You heard me right, that's three times.

That's an indication of the increasing popularity of podcasting. We've not only built brand-new podcasts like the Ron Burgundy Podcast and Chelsea Handler's Life Will be the Death of Me but we've also been able to substantially increase the performance of existing podcast using our unique radio promotional capabilities on our platform.

For example, Disgraceland went from 100,000 downloads in the last month it was published on its former platform to two million. That's right two million in the first month that it was published on iHeartRadio after we used our broadcast radio platform to promote it and introduce it.

This is one of the core reasons why we're doing so much better than all the other commercial podcasters. Our radio reach and engagement is a powerful platform-building tool. We've also built podcast around some of our big radio shows and personalities like Bobby Bones and The Breakfast Club, which is basically radio on-demand.

And we'd be remiss if we didn't mention that we do have the biggest podcast of all time Stuff You Should Know, which just had over 1 billion downloads and always remains in the top of the charts week in and week out over the years.

On the advertiser front, we continue to build branded content podcast for our advertising partners like Songland with NBC, which is a companion podcast for their TV show and we're on the second season of the highly successful SPIT podcast with 23andMe.

We've also been able to use podcast advertising for major traditional brands like Procter & Gamble as well as to help build some new brands like fare.com, the successful pre-owned car leasing app. We're also seeing exciting new developments at our other platforms. We have a strong social presence.

Our 194 million fans and followers are more than seven times Spotify's. That strength has allowed us to create unparalleled social engagement with our consumers and significant social amplification for our live events as well.

Our radio personalities engage with their listeners and fans across every major social platform, extending their deep listener connection and that relationship.

We also have 13 million monthly unique visitors on Snapchat and 23 million unique monthly visitors on YouTube, which we believe are significantly higher than any other audio players on these platforms. I want to turn to some additional operating highlights, but again I want to put them in context.

If you look back in time as cable TV was building out major cities in the 1970s, there was a real need for unique cable-only networks and the broadcast TV networks were offered the opportunity to develop their own cable networks. And at that time, they chose not to.

That decision resulted in the birth of Nickelodeon, MTV, ESPN, CNN and other successful cable networks. It was a real missed opportunity for viewership, financial rewards and building new assets for the TV networks. That changed the future for those broadcast TV networks that chose not to play.

Basically, the same thing happened again with the television industry more recently. This time with Netflix, the growth of Netflix represents the lost opportunity for existing TV and cable networks to create an on-demand service based on their own content and content like theirs that they don't have room to carry on their linear networks.

And they missed it, choosing many cases to sell their programming to Netflix, which then built a major content and distribution brand. Today, those same television operators are developing their alternatives to Netflix, but they are significantly behind. In our case, we've learned from those examples.

Rather than ceding a major new opportunity back in 2011 we created our own digital radio platform called iHeartRadio to expand our services. And today, it's one of the four major listening platforms for us AM, FM, digital and now podcasting.

In the quarter, we continued to grow our digital listening and as of June posted our 12th consecutive month of year-over-year growth in total listening hours. We are the clear number one streaming broadcast radio app and we now have over 130 million registered users.

We've created our own on-demand network which is our newest listening platform it's our podcast platform. This platform serves a number of purposes. It's our platform for big radio shows on-demand as well as shows that we can't put on the radio, but in many ways are like radio shows called podcast. They're companionship. They're interesting.

They're informative. All the things radio is. And we're uniquely positioned to promote those podcasts on our broadcast radio stations to hundreds of million of consumers letting them know what they are, where to find them, and how to listen. In many cases, we're actually putting some of the broadcasts on broadcast radio to get a larger audience hooked.

We think of the relationship between broadcast and podcast as very fluid in both promotion and actually in content as well. And indeed, we just announced last week Sunday night podcast where we'll be carrying podcast on our broadcast radio stations every Sunday night.

Podcasting has been a very important strategic move for our company and this quarter iHeart's podcast network's unique monthly podcast audience is up 277% year-over-year faster than any other major company.

And we're continuing to examine our company and our business model to find new and interesting opportunities to use our existing scale at audio and our unique creative capabilities to expand the company. Now let me talk about our business model.

We're in the business of creating engaged consumer relationships and monetizing them by renting that engaged relationship to marketers. And I think you'll see through the statistics that, we're in a strong leadership position in creating those relationships.

Given that radio produces a superior ROI to television, and most of digital our greatest financial opportunity as a company is to simply monetize our listeners better. We've been working with all the major advertising holding companies in the continuation of our efforts to enhance the value of audio, at the major agencies.

In this quarter alone, we announced with WPP the world's largest advertising holding company, a new effort called Project Listen in which WPP is making audio a very important part of their play and are also beginning to think not only of the importance of audio, but also of us as one of their data and analytics partners.

As we monetize our users, there are three revenue pools that we focus on and that are tie to our growth strategy which we'll discuss later at more detail, increasing our share of radio revenue, tapping into the revenue pools of TV and digital, and building the new revenue opportunities coming from podcast and sponsorship.

To start with the traditional broadcast radio pool of revenue, we have outperformed the broadcast radio industry by over 350 basis points this year alone according to Miller Kaplan, and we expect to continue to outperform the radio marketplace.

We believe part of the reason, we lead the market is because we're bringing money that wasn't previously designated as radio into the denominator of the radio sector.

Important thing to do and further evidence of the success of our unique sales approach, which is to work with advertisers on goal-oriented marketing solutions that happen to include audio and radio specifically rather than solely focusing on allocated radio ad dollars.

Unlike other media companies, we've moved from a traditional sales organization that just negotiates per share of radio advertising dollars to also include marketing solutions, which give us relationships with marketers, clients, and other parts of agencies than just their buying organizations.

These integrated marketing solutions let us work directly with these parties on opportunities that will connect them to their consumers, and enhance the value of their brands and deliver superior ROI and often unique advantages over their competitors. Our second revenue opportunity is the pool of revenue committed to TV.

TV is effective, but it's also expensive, and its reach has been declining tremendously as has its viewership. In fact, TV's reach has declined to 86% of the U.S. adult population from 95% and a reach of just 74% with millennials, whereas radio has held steady in the low 90s for the past 50 years and remains above 90% for both adults and millennials.

By the way, this steady reach is a demonstration of the enduring power and appeal of companionship. On top of that, as Nielsen pointed out, 40% of TV viewers are light TV viewers and therefore hard to reach with any amount of TV advertising.

The advertising industry has been focusing on how to reach those light TV viewers and the two options you find are online video, which reaches about 50% of those light TV viewers and radio, which reaches about 90% of them. We think there's a big opportunity for us to help in the mix of TV, not replace TV, but add to its effectiveness.

Advertisers today are hyper-focused on optimizing their media buying. As Marc Pritchard legendary Chief Brand Officer of Procter & Gamble said in a recent speech to the Association of National Advertisers, we're exposing substantial opportunities and reducing wasteful spending to reinvest into better performing media including TV, radio and outdoor.

Yes, what's old is new again. Since P&G has realigned its media mix and increased its radio spend substantially going from one radio's smallest major advertisers to one of its largest major advertisers they've had record results.

According to a recent Advertising Age article P&G delivered the best quarterly and fiscal year sales growth it's had in a decade. This is one example, but a very powerful example of how advertisers can benefit from increasing radio in the media mix.

Technology and data and the major digital players have forever changed the way media companies interface with advertisers.

We've embraced that change with the addition of our iHeart SmartAudio proprietary data and analytics platform, which enables us to make our broadcast inventory look like digital inventory and allows us to tap in the digital pools of revenue and further separated ourselves from other broadcast radio and TV companies.

iHeart SmartAudio allows us to replicate services that were heretofore available only from big digital players and that's a major focus for us going forward. These capabilities address the market demand for more effective targeting, measurement and attribution, transaction platforms and self-serve for small and medium businesses.

And importantly, it will enable us to tap into the $80 billion digital ad market and improve our performance across this pool of revenue as well. Also iHeart is the only audio company with a master brand, similar to what Pixar does with movies.

Just as you think an animated movie is better, when you know it's a Pixar film, our consumer quality perception of radio station increases 20%, if they know it's an iHeartRadio station.

The iHeartRadio master brand ties together under one umbrella our radio stations, digital platforms, social presence, podcast and live events in a unified matter that reflects the quality and compelling nature of our listener experiences.

Consumers of both our local radio station brands and our national platforms trust in the uncompromising commitment to excellence that's associated with our national iHeart brand and which is expressed through each of our local broadcast stations each of which refer to themselves as an iHeartRadio station.

One of the new growth areas that resulted from our master brand strategy is our sponsorship category. We now have eight iHeart-branded national marquee events each year, which lead our sponsorship revenue opportunities in addition to the 20,000 local live events we also do. In the last year, we added yet another event the iHeartRadio Podcast Awards.

We've been talking about the businesses that operate under the iHeartRadio brands, but we also own Cats Media which is the leading national advertising representation firm for the audio business and includes other radio broadcasters and even Spotify and it's also one of the major rep firms for the TV business as well.

This is another way for us to benefit from the increased value and attention of the audio sector. Now let me turn to the financial performance of our quarter. iHeartMedia had a solid quarter showing revenue, operating income and adjusted EBITDA growth against the backdrop of a non-election year and Rich will take you through the financials.

He will talk in more detail about iHeartMedia's strong margins and free cash flow generation, which are driven by the operating leverage inherent in our business model. But first, let me summarize our growth strategy and how we intend to delever our balance sheet, which we view as critical to delivering shareholder value.

First on the revenue side, we intend to increase our share of radio advertising spend. Second, we will continue to capture advertising spend from TV and digital pools of money. Third, we will extend our leadership in podcasting and driving sponsorship revenue.

Fourth and finally, we operate our business with extreme cost discipline continuously looking to find efficiencies. Now I'm going to hand it over to Rich.

Rich?.

Thanks, Bob. I'd like to start by providing the financial highlights for the quarter. As Bob mentioned, we made important progress in the quarter to position iHeartMedia for continued profitable growth.

Our financial performance reflects the resilience of our broadcast and networks revenue streams and the strong growth in our digital revenue all of which benefit from a largely fixed cost base coupled with low capital expenditures and minimum working capital requirements that result in strong operating leverage and free cash flow generation.

Now let's turn to slide 12 and review our key financial results. As you have seen in our earnings release and Form 10-Q, our reported results for the quarter are split between the predecessor period and the successor period as a result of our emergence from Chapter 11 bankruptcy during the quarter.

In order to provide a meaningful comparison, I'll be discussing the combined predecessor and successor period in the second quarter of 2019 compared to the second quarter of 2018. Our consolidated revenue, increased by 2.4% over the prior year.

Comparability of our year-over-year results is impacted by the fact that 2018 was a mid-term congressional election year. Excluding the impact of political revenue in the prior year quarter, revenues grew by 3.9%. Adjusted EBITDA grew 3.2% over the prior year with margins improving to 28.8% in the quarter. Operating income increased slightly.

Our Q2, 2019 adjusted EBITDA and operating income were impacted by fresh start accounting adjustments, arising from our emergence from bankruptcy. The net impact of the fresh start adjustments was not material and favorably impacted adjusted EBITDA in Q2 by less than $1 million.

The impact on operating income was more significant with depreciation and amortization increasing approximately $30 million as a result of writing off our long-lived assets to estimated fair values. Turning to slide 14. I'll provide additional color on the performance of our key revenue streams.

The growth in our consolidated revenue is attributed to increases in our digital and networks businesses, partially offset by lower broadcast revenues. Digital revenue growth of 32.8% was primarily driven by a growth in podcasting as well as our other digital offerings. Broadcast revenue declined by 1.4% driven by a decline in political revenue.

For reference, most of our political revenue is in the broadcast line and audio and media services. Given that 2019 is a nonelection year excluding the impact of political revenue, broadcast revenue was up slightly.

We believe that our continued outperformance of the broadcast radio industry is driven by the fact that we are the only true multi-platform audio company coupled with the scale and strength of our broadcast radio stations and our industry leading on-air personalities.

We combine this with the investments we have made in developing our data and analytics capabilities to begin to deliver the kind of advertising solutions that our advertising and marketing partners expect today. Moving on to our networks business.

Revenue increased by 6.4%, reflecting strength of both premier networks and total traffic and weather network. The year-over-year decrease in revenue of 4.7% at audio and media services was related to the impact of political revenue attached to TV. Excluding the impact of political revenue, audio and media services would have increased by 2.1%.

Sponsorship and event revenue increased 2.8% driven by the growth of our iHeartRadio Wango Tango and iHeart Country Festival events. Direct operating expenses were up 5% in the quarter, primarily driven by higher variable expenses including digital royalties and content cost from higher podcasting and digital subscription revenue.

This increase includes the $1.2 million impact from fresh-start accounting I mentioned earlier in addition to a $1.2 million increase as a result of the adoption of the new lease accounting standard. SG&A expenses increased by 0.8%, driven by a higher employee cost related to our acquisition of Stuff Media and Jelli in the fourth quarter of 2018.

These increases were partially offset by lower commissions as a result of our revenue mix and the impact of fresh start accounting adjustments discussed earlier. Turning back to our consolidated results and looking at the others below the line. Interest expense increased by $57.9 million.

As you may recall, we did not record any interest expense on our pre-petition debt while we were in bankruptcy. Upon emergence on May 1st, we began incurring interest expense on our new debt. On slide 17, there is a summary of our balance sheet.

At quarter end, we had approximately $5.76 billion of gross debt outstanding and a cash balance of approximately $127.2 million. We are continuously looking for ways to optimize our capital structure. After our listing on NASDAQ on July 18th, we immediately turned to the credit market.

On August 1st, we issued $750 million of new senior secured notes, the proceeds of which we used to refinance $740 million of our existing term loan facility. This facility call for quarterly principal payments of $8.75 million in addition to semiannual interest payments at LIBOR plus 4%.

As a result of our $740 million prepayment, no such principal payments are required on the prepaid amount for the remaining life of the term loan facility, resulting in a $35 million annual reduction in required debt service payments.

In addition, annual cash interest payments are expected to be approximately $7 million lower than before the refinancing transaction. And we will continue to look for additional efficiencies within our capital structure as market conditions permit.

As Bob stated earlier, our number one capital allocation priority is to use our free cash flow to pay down debt. We intend to prioritize deleveraging until we get to around four times leverage, at which point we'll reevaluate our capital allocation priorities and decide what course of action will deliver maximum value to our shareholders.

If you turn to Slide 11 of our investor deck, you will see how our business model facilitates the robust free cash flow generation that will drive our deleveraging. Our attractive revenue mix, cost discipline and operating leverage drive industry leading margins.

These translate to high free cash flow conversion given our highly efficient and scalable capital expenditures, modest network and capital needs and constant attention to manage our balance sheet. Taxes in 2019 will be immaterial as we will not be a federal taxpayer.

However, we expect to be a full cash taxpayer by 2020, and we'll provide more detailed guidance on future earnings calls.

All of this is expected to result in free cash flow generation of approximately $250 million to $275 million in the second half of 2019, which will result in cash available for debt repayment of approximately $375 million to $400 million by the end of 2019.

Again, by continuing to generate free cash flow at these levels, we are confident in our ability to delever at a steady pace. Historically, we provide a point-in-time revenue advertising pacing, but we have found that not to be particularly helpful or predictive.

As you know, if you follow the advertising business pacing has not had a strong correlation to overall results, and has been replaced by more sophisticated techniques. With that said, we have and will be continuing to provide full year financial guidance on key metrics going forward.

In addition to our robust free cash flow that will drive our deleveraging, I want to touch upon our full year guidance. As noted in our 8-K filed on July 15, we continue to see total company revenue growth in the low-single-digits on a reported basis for the full year 2019.

Again, 2019 is a non-election year, and we are pleased with our projected year-over-year growth against this backdrop. And we expect 2020 to benefit from the typical uplift, we see in election years.

Our growth in 2019 will be driven by continued growth in our digital, networks and sponsorship revenue and outperforms of the broader market and our broadcast revenue. Additionally, we now expect full year 2019 adjusted EBITDA margins to be in the 27% to 29% range, tightening the range from the prior 26% to 29% that we provided.

Bob and I and the entire management team of this company understand our mission very clearly, to create equity value for our shareholders through improving operations and by proactively managing our capital structure.

And we are doing that daily by aggressively seeking ways to accelerate growth, expand our margins and convert free cash flow at a high rate resulting in deleveraging.

In wrapping-up, we are proud of all that iHeartMedia has accomplished and we are excited about the future of our company, which we believe is well positioned to continue to lead the audio revolution. We are grateful to our people who have built this company and continue to build it.

They and we are here at iHeart, because of the tremendous growth opportunities we all see ahead. And now we will turn over to the operator to take your questions..

Thank you. [Operator Instructions] Your first question comes from the line of Jessica Reif Ehrlich from Bank of America. Please go ahead..

Thank you. Good morning. A couple questions, the market is so focused on recession.

Just wondering, can you give us the things that you look for or indicators where you would see kind of a turn in the business model? And what shows do you have now to offset a potential downturn in broadcast advertising that you may not have had in the past?.

Thanks, Jess for the question. Just – so let me take the second one first just in terms of tools and everything else. A couple different things, I mean, if you look at page 11 in the deck we talk about the generation of free cash flow. First and foremost, we have the ability our capital expenditure is $110 million to $120 million a year.

Only about $30 million of that is maintenance capital expenditures, and we can clearly turn that down and the rest is really what I call growth capital expenditures. So we have the ability to deliver that.

And also, when you look at the rest of our cost base, yes, we do have a fixed cost base, but we've been pretty good over the years in terms of margin expansion even when we haven't had significant revenue growth. And to that ability to go out and continue to cut costs there on – the variable costs that we have will also give us some benefits..

Well, I think also Jessica I just want to add in sort of a perverse way and we're certainly not praying for a downturn, our biggest issue is getting advertisers to try radio to give it a shot. And when times are good and business is good people tend to do the same thing they've been doing, when ain't broke don't fix it.

But when things turned down, they're much more willing to give things a shot. And so we think in a downturn given the price of radio and the efficiency and the superior ROI that I think we may find as an opportunity to get people to try it and to try some major media mix changes like – by the way like P&G did.

And by the way, if you look back to 2008, 2009 that's the time social and digital really took off. And I think it was because business was in a rough shape and people were willing to try some new things. So, although again, we're not looking for it we do think there are some unique opportunities there as well..

Your next question comes from the line Sebastiano Petti from JPMorgan. Please go ahead..

Hi. Thanks for taking the question. Just a quick follow-up to Jessica's question.

Just can you drill into maybe some of the areas of cost savings for the year just in the context of your adjusted EBITDA guide particularly as it is a pretty sizable political comp in the back half? And then related to that, any color perhaps you could give? Obviously, broadcast was up, I think, you called out ex-political, but just any color on local versus national trends?.

Well, let me start with and I'll let Rich get into some of the details, but I think if you look at the business overall, we're continuing to look at technology to provide efficiency, not only does it provide I think better service, more speed and often more reliability. It also reduces cost.

And if you look at some of the investments we've made in IT over the past number of years, we've been building toward that kind of efficiency and we'll continue to drive that.

I think on the -- even on the programming front, we're finding the use of technology assist for our programmers to improve their decision making, speed things up and again provide more cost efficiency as well..

Yes. And the only other piece I'd build upon that and add, as we've talked about getting back into the 30s on our EBITDA margins, if you look this quarter, we got to I think 28.8% some slight increases than we've had in the past and we'll continue to make improvement on that.

And part of the way we're getting that improvement in addition to revenue growth on a fixed-cost base is, as Bob articulated, investing capital expenditures for efficiency.

And actually, if you kind of think about our long-term plans and look at our long-term plans and the capital spending, you can almost track the increase in the EBITDA margins to the capital that we're putting in and therefore reducing our overall cost..

I also think when you start talking about slowdowns or how you can control costs there are things we're working on that will provide future value to the company and they're embedded in the OpEx. Should we hit a downturn, we do have the opportunity to pause those efforts and put that money on the bottom line as opposed to investing there.

Obviously, you lose a little bit of timing in terms of getting it -- getting the benefit for the future, but we think obviously in a downturn that becomes the priority..

Thank you, guys..

Your next question comes from the line of Stephen Kehoe [ph] from Wells Fargo. Please go ahead..

Thanks. I got a couple for Bob and then maybe a follow-up for Rich. Bob maybe just first off at the top level. I mean, you've been running the company through Chapter 11, I imagine that's not an easy process to manage your corporate strategy through.

So what do you feel like you all can do now that you've emerged and kind of have the shackles off, that makes your job a little easier, or your growth a little more effective? So what are you kind of excited about to do over the next couple of years?.

Well, it's interesting. I think going through that process, the worst thing that we had to deal with was just negative press. Negative press affects clients, it affects employees it affects partners. And just getting rid of that that cloud has been great for us.

In terms of efficiencies, I think, we've already -- we managed even with all of that to build out SmartAudio to build the podcast platform.

We made two acquisitions during bankruptcy for HowStuffWorks, which turns out to be a very strong acquisition and Jelli which was really on the tech stack, core to our making our broadcast inventory look like digital inventory.

So I think from our standpoint, we are excited about having a future that doesn't have the blemishes on it, doesn't have the worries on it on an important constituencies, and being able to drive it through and obviously having this ability to generate this kind of free cash flow gives us pretty good feeling..

And Stephen, it's Rich. Let me just add one other point and -- I probably should have -- we probably should have mentioned earlier, starting with Jess's question.

When you think about, if the economy hit some headwinds and Bob and I have both run companies during recessionary periods of time, but nothing prepares you more for running a company in tough times to be more scrappy, to be more resourceful than the period of time that we've gone through with iHeart, where prior to this restructuring, we had $1.8 billion of cash interest expense every year that was staring us in the face.

And yet, we managed to have 20, 21 consecutive revenue growth quarters. We imagined -- we were able to figure out how to invest for the future, as Bob just articulated, so we could be talking to you about all these opportunities that we have here today.

But you could see at the start, you see like our digital line increasing by well over 30% for this quarter. So, again, there's a theoretical experience about running a company with some headwinds in the economy and then there's the practical experience that the two of us have done in the last six to seven years..

Any time you're making a decision, you have several solutions; one of them is spend money. Going through the period Rich and I have lived through spending money was the worst solution for us and the one we came to last.

Now that we have some financial flexibility, we intend to keep that same discipline though as we developed before we had that opportunity. And we still want to find smarter solutions, more efficient solutions than just spending money..

Okay. And then, maybe a follow-up on podcasting. I think your digital revenue is up like 30% year-to-date through the first half. Maybe you can just help us disaggregate a little bit of what the inorganic versus organic component was, just to help us model that out. And then relatedly, we've seen some M&A around podcasting.

Spotify and INTERCOM have also done some acquisitions. I think your platform is a little unique, because you do a lot of coproduction with a talent like Will Ferrell and Chelsea Handler. So I'm guessing valuations are getting pretty rich for some of the studios.

How do you kind of think about how you scale that, or it's already at scale, or I guess grow the platform in terms of inorganically buying stuff versus just continuing to kind of let the talent come to you from a platform basis?.

Well, let me start with the last question and I'll let Rich take the first one. I think on the podcast side, we are the only podcaster that really is significantly multi-genre. We got great true crime monster series, the line of monster and then Zodiac. We've got comedy with Will Ferrell. We've got the radio on-demand with Charlemagne and Bobby Bones.

We've got business, we've got all these ways to hit the consumer and that's very important to us. We also have the capability because we've got this tremendous promotional machine to bring people to us. And I think as we're talking to people coming aboard.

I think their first goal is not what kind of split you're going to give me or how much will you pay me, but the first question is can you make my podcast a hit? And I think, the Disgraceland, example is really an eye-opener when you had this fantastic music storytelling podcast.

And it was doing about -- I think the last month, it did 100,000 downloads on its previous platform, moved to our platform it did two million. And I think again that's the biggest selling point we have to people is look, there's nothing like success and we have the best opportunity for success.

And I think, it's telling that even with the acquisition Spotify has made, they're still not in the top 10 podcast publishers. And so I think, it is not just having a podcast presence, but it's having all the tools to build it. If you think about HowStuffWorks and look at the numbers, we were barely the number one commercial podcaster.

We bought HowStuffWorks which is about almost our size and sort of doubled. And then, we organically grew another -- what 30% to 50% above that.

So, you begin to see that once you've got the platform built and once we've got this promotional tools built in, how we're able to build on those platforms in ways that I think others really don't have available to them..

Yes. And just -- and then I'm going to address the first question. Again, it's no mistake as Bob pointed out in his opening remarks that our unique audience were up over 260% year-over-year more growth than anybody else. And also no mistake that by far the two biggest podcasters are the two biggest broadcasters ourself and NPR.

In terms of the digital number, we don't break out the pieces of the digital number in terms of podcasting, but let me just give you some operating stats. They're really driving our overall TLH, our total listening hours which is driving our revenue.

We continue again the multi-platform things like proliferation of -- in addition to podcasting by the way proliferation of smart speakers. Live radio listening on smart speakers grew 150% Q2, 2019 to Q2, 2018.

Bob mentioned a couple of our bigger podcasts and Ron Burgundy, but we also have over 2,000 locally produced podcasts including our on-demand radio shows. And we also have other things like our third-party assets which we take to market something called the SLATE banner. And then we've got some minor revenue from international licensing and so forth.

So you kind of look at all, there's no one piece that's dominating the digital line. Clearly podcast is leading that, but we're really benefiting from all the listening trends and our strategy being where the listeners are..

Great. And then last one for me just on leverage. That free cash flow slide in the deck is really helpful, so thanks for that. I'm kind of back on the envelope getting to deleveraging of kind of one to 1.5 turns by the end of 2020.

I know you put in there that you're trying to get to four times as your stated target, just wondering if you could comment if I'm kind of in the ballpark on the pace of that deleveraging over the next 18 months? Thanks..

Yes. I mean look, you're definitely within the ballpark. And I think just to be clear we haven't really kind of formally given out a target. What we've said is when we get to around four times leverage and by the way we picked that just looking at other media sites out there well-traded media sites in terms of how the equity trades.

But then, when we get to about four times leverage, we would look to other uses of our free cash flow. But at that time, Bob and myself and the Board will make the decision that -- in terms of what's the right way to allocate capital to drive the shareholder and equity value of this company..

Thank you..

And I think we'll take one more question if we can..

Okay. That question comes from the line of Marci Ryvicker from Wolfe Research. Please go ahead..

Thanks. I have a couple of clarifications from the Q2 release. In terms of podcasting just dialing down a little bit, you say that with Stuff Media podcast grew.

So excluding Stuff Media, did podcast grow in the quarter?.

Yes. But I also think again, I think the most important thing is that we have fully integrated HowStuffWorks now. So there are not two podcast groups there's one. As you know Conal Byrne came over who is the CEO of HowStuffWorks and we brought him over and basically put he and his management team in charge of our entire podcast network.

And the goal was think of it as one, use all the assets of the radio and think of this as one company no silos. So yes, I mean we've -- the growth of broadcast have been so tremendous that everything is growing..

Yeah. Marci and just a final point on the last sentence that Bob just stated is the numbers were so insignificant on a relative basis last year whether it was the HowStuffWorks number on their own or even our numbers again on relative basis that there was significant growth on an apples-to-apples basis, I think that's what your question is..

Yeah.

And then you called out programmatic, which was up, so just curious how big that's become as a percent of revenue and what is the I guess the market there the market potential?.

Let me hit the last one first then I'll let Rich talk about it. I think what's important to think about programmatic is, if you think about the company and the use of inventory, this is not like TV where sort of all your inventory is sold, there are slots cut in and they're finite. Even in our primetime, I would say probably our sellout is under 80%.

Now it's under 80% sort of like concerts, don't get sold out, because you got a few tickets here and a few tickets there and you can't put groups together. Using programmatic allows us to fill in those holes. Again, I use that old analogy of, we've got a bunch of rocks in a jar, I can't put any more rocks in, but I can pour a lot of sand around it.

And we think a programmatic is being able to use those audience impressions as opposed to selling specific time-based spots on specific stations to really fill that in.

And to us we think that's looking at our sellout levels tremendous opportunity and probably the only logical way to really use that unused inventory to improve the performance of the company. And obviously, it allows us to play in the digital pool now where people are beginning to look for that as the way they do business.

When you look on the digital side, they don't think cost per point they think CPM, they're looking at impressions, not spots. So it's an entirely different mentality of how they buy and plan. And now we're able to play in that world as well as the traditional broadcast way..

Yeah. And Marci in terms of a couple points. In terms of the absolute number, we don't break out separately. It's safe to assume from an annual basis, it's not a significant piece today of our total revenue base, but it is growing very rapidly for all the reasons that Bob talked about.

And then the only thing I'd add to that is again, when you look at things like our out performance on the Miller Kaplan compared to the rest of broadcast radio industry of 360 points and 200 basis points, since 2010, it is multi-platform approach, it's no one item out there.

And programmatic which allows us to play as Bob pointed out in the $80 billion digital pool of money out there is another tool we have to drive the overall results. Just as a reminder. We don't really care when the revenue comes. We don't really care where it starts. We're looking at the multi-platform to drive our total top line growth.

We have one cost base out there which is why we have such high margins and drive efficiently more profit and free cash flow at the bottom line..

Yeah. One of the ways to think about multi-platform is not only is it a way to stay better connected to the consumer through all these different touch points.

It's also a way for us to let advertisers come into our company through any one of these doors, and we have examples of people who have come, because they wanted they were interested in the big event we did.

And over time, they became very big broadcast radio advertisers or they come through podcasts and then they again spread to some of the other platforms. So we're using that I think in new ways. And clearly, SmartAudio is an important component of that and something that unifies them all..

Thank you very much..

Thank you, Marci..

Well, thanks everybody. Thanks everybody for taking the time for the call. Kareem will be available the rest of the day until -- the rest of the day and going forward for questions. We are here.

And by the way also I'd say, I think on behalf of Bob and I any thoughts comments since this is our first call with all of you in terms of our coming out with our new equity security in terms of the presentations or the style of the call we welcome any input..

Thank you all..

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect..