Ladies and gentlemen, thank you for standing by, and welcome to the iHeartMedia Q3 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

[Operator Instructions] I would now like to hand the conference to your speaker today, Mike McGuinnes, Deputy Chief Financial Officer & Head of Investor Relations. Thank you. Please go ahead, sir..

Good morning, everyone. Thank you for taking the time to join us on our third quarter 2020 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 that you can follow along with our remarks. Before we begin, let me quickly cover the Safe Harbor language on Slide two.

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.

In addition, as noted in our March 26, 2020 press release, due to the uncertainty surrounding the impact of COVID-19, we reiterate that the company will not be providing full year 2020 financial guidance on this call. 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 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 third quarter 2020 earnings conference call. I'd like to start by recognizing our employees who continued their strong performance despite what is the most challenging environment any of us have ever encountered.

Despite these challenges our employees continue to make great strides across the organization moving key initiatives forward, building out new products, testing new ideas and serving our communities and our clients.

We develop plans in accordance with the most up-to-date safety guidelines to open each of our markets when their individual local safety criteria met. And in fact, approximately half of our 160 markets have returned to the office. And we expect more to open in the coming months.

And it's encouraging to see that on average in Q3 markets whose offices are open are performing about 600 basis points better than markets that are not, providing us with even more confidence in our post-COVID growth opportunities. I want to mention a few headlines before I get into the third quarter results.

One, we are pleased that revenue continues to recover and improve sequentially. While revenue in the third quarter remain below prior year, it substantially improved when compared to the second quarter and continues to improve sequentially month-over-month.

Two, we feel our results this quarter clearly validate the value of our multiplatform product and revenue strategy and the investments we've made in our growth areas. Our revenue is now split approximately 50% broadcast revenues and 50% other revenues lines.

These revenue lines which include digital and podcasting and networks, all of which are businesses that have been the focal point of our growth efforts had meaningfully better revenue performance in a broadcast segment. For example, digital grew 17% year-over-year and were still up 8% excluding the impact of podcasting, which grew 74%.

Additionally, Smart Audio, which is a part of our broadcast revenue line also had superior revenue performance, down just 12% year-over-year, better than the entire broadcast line, which was down 29% year-over-year. Again, more validation of the transformation and modernization of this company and our growth potential.

Three, even in economic downturn we continue to invest in our strategic goals like podcasting to accelerate growth. For example, in October we completed the strategic acquisition of Voxnest or approximately $50 million. We believe this addition be another driver for increased monetization of our podcast business.

And that will strengthen our position as the number one podcast company is measured by Podtrac.

Also we continue to attract and collaborate with leading creators and creative talents, including the just announced partnership with Malcolm Gladwell's Pushkin industries, the Black Affect podcast network which re-create with one of our leading personality, Charlamagne tha God, a new Latino Podcast Network led by our own Enrique Santos.

13 days of Halloween produced a partnership with Blumhouse and Aaron Mahnke, Hillary Clinton's, You and Me Both, and much more coming from our growing partnerships with Will Ferrell, Alec Baldwin, Shonda Rhimes, Tenderfoot TV and others.

I know many of you are interested in our podcast business, and I will talk in greater detail about more exciting development there in a few minutes. Four, an important component of our growth strategy is modernization and the related cost savings. We continue to lead the industry and how advertising is bought and sold.

We've also developed the studio of the future utilizing cloud-based technology and AI, that helps us maximize the performance of each market.

And we have created centers of excellence across the organization that consolidate key resources that a whole company into one location, all this increasing quality, improving service and significantly reducing cost. And with that, I'll turn to a few specifics of how this business performed in the third quarter.

I'm pleased to report that we've seen strong signs of revenue recovery, with Q3 revenue improving significantly compared to Q2 revenue, with each month through October improving on a sequential basis. While Q3 revenue, up $744 million increased 53% over Q2.

Q3 revenue was down 22% year-over-year due to the challenges that we and most of the world continue to face as a result of the macroeconomic impact of COVID-19. We're seen encouraging signs across our markets in a multiple revenue streams vindicate the recovery of our business is gaining traction.

Since our low point, a $137 million in revenue in April, monthly revenue has more than doubled in September, increasing to $291 million. Looking to Q4 revenue performance, October increased 2% year-over-year, benefiting from a very strong political advertising cycle, as well as a stronger business environment.

While we don't believe that October results will be representative of the Q4 as a whole due to the heavy political spending in the month. We do expect Q4 revenue results to be better than Q3 and to be a continuation of the improving revenue trends.

Rich will speak to these monthly trends in greater detail during his prepared remarks based, but on what we see now, we expect Q4 revenue to be down in the low to mid teens. Let me start with political revenue. This year has been our best year on record.

And compared to the last presidential election in 2016 we expect political revenue to be up 67% for the full year.

If you compare our total revenues for the company for the just close month of October, which again were up 2% to the performance of our markets in battleground states such as Michigan, Florida and Wisconsin, you can see how strong the political impact was, with those markets up 25%, 14% and 12% in total revenue respectively.

While there was clearly unevenness in the political spin by geography, our results demonstrate the value of a broad distribution of markets, it positions us well to take advantage of geographically isolated trends and political spending. We remain committed to serving our diverse advertising partners with our barbell approach.

On one hand, we operate as high touch marketing partners, helping advertisers to craft and deliver a message to the customers. And on the other end, we offer products that allow our advertisers to get to market quickly using our data, targeting and technology capabilities.

We also continue to benefit from the diversity of our advertising base, with no category making up more than 5% of our total revenue, and no single advertiser making up more than 2% of our total revenue. Turning to adjusted EBITDA and liquidity.

After reporting a small loss in the second quarter, we're pleased to report that we return to profitability in the third quarter, generating adjusted EBITDA of $162 million, a $191 million improvement over the loss of $29 million in the second quarter, and positive free cash flows of $14 million, a $21 million improvement over negative $7 million in the second quarter.

Even as the revenue trajectory improves each month, I will note that the speed of the recovery and advertising revenue is still uncertain and unpredictable. With that in mind and out of an abundance of caution, we remain prepared for a wide range of possibilities through year end and beyond, including a more drawn out recovery scenario.

As Rich will discuss in detail, we proactively taken steps to reduce costs to fortify our balance sheet and to preserve liquidity. One of the great things about this company is its strong free cash flow generation characteristics. The foundation of our company is our unparalleled scale.

Our business model has always meant to build engaged consumer relationships by providing the best audio content by having the most trusted personalities, and by offering always available companionship to our consumers. We then monetize those relationships across each of our multi platform products and services.

Indeed, behind our return to profitability, our positive free cash flow and our steady progression toward full revenue recovery is the fact that we have a uniquely powerful media platform anchored on our broadcast radio business that we have successfully used as the foundation to build our other platforms.

Are broadcast radio business has the largest reach of any audio company in the country, and now extends across more than 250 platforms and 2000 devices. According to Nielsen, we're ranked the number one broadcast company in 97 markets in the 18 to 49 audience and we're ranked number one in 30 of Nielsen's top 50 metros.

In both cases, we have about three times more number one markets than our nearest competitor. In terms of consumer reach, broadcast radio remains the largest medium in the U.S. And iHeart has the largest broadcast audience in the country by a lot.

We are twice the size of the next largest company in broadcast listening, and five times their size in digital listening.

This scale also gives us the biggest platform to attract the best on air talent, including Ryan Seacrest, Charlamagne tha God, DJ Envy, Angela Yee, The Breakfast Club, Elvis Duran, Angie Martinez, Big Boy, Steve Harvey, Mario Lopez, Ellen K, Bobby Bones, Woody, Delilah, Enrique Santos, and many more who are big nationally, regionally and locally, as well as the biggest talk show hosts in America, and it attracts the best creative talent in podcasting as well.

We've also used the unparalleled scale of our broadcast radio platform, and our strong personalities and creators help build out our many other businesses, like our digital business, which includes our iHeart radio app and service, which has been downloaded over 2.9 billion times.

Our newsletters that reach almost 12 million subscribers, our social media following of 223 million fans, which is over seven times larger than the next audio player and social and our digital services associated with our stations and personalities that according to Comscore reach an average of 71 million unique visitors a month in Q3.

Additionally, our broadcast platform has helped build our number one podcast business and our events business, which although down this year for obvious reasons, has had great success with virtual events like our recent iHeartRadio Music Festival, and the iHeartRadio country Festival, which actually exceeded last year's live events, both in social impressions and live streams.

This platform has also helped make totally new businesses, like the black information network and immediate success. We launched BIN across 15 markets in the second quarter and have since expanded to 25 markets in Q3, including New York City.

And we're pleased to report that peak moments of audience engagement have coincided with major news stories, indicating that has established itself as a trusted go-to-source for breaking news and information in the black community. As I mentioned earlier, I know many of you are interested in hearing more about our podcasting business.

And I want to spend some time discussing this growing part of our company. Podcasting continues to be our strongest performing business line, reflecting the fact that we built iHeart into the number one commercial podcast publisher in America, with 252 million downloads a month as of September, which is up 71% year-over-year.

In Q3, as measured by Podtrac, we were number one in downloads each month. Our audience continues to be more than twice the size of the next largest commercial podcaster. And we extend that our lead over all other ranked podcasters. Let me share with you our model.

We partner with the best content creators in the world, some of who our very own radio talent, distribute their content to the largest audience possible without a paywall, and use the unparalleled scale of our broadcast radio business, As a built in marketing machine to drive engagement with our podcast shows.

We feel this is an important part of our secret sauce. It's how we continue to build, hit podcast after hit podcast, and how we continue to grow our leadership position.

According to Podtrac's latest data, not only are we number one overall, but we currently have the most shows featured across all categories, and we have ranked shows featured in all 19 possible categories, the most among all publishers.

Let me be clear, podcasting is already a profitable business for us, and has an EBITDA margin that is higher than the overall company margin.

Our podcast business is advertiser supported, it's not subscription based, and it's not behind a paywall, which enables our creators to share their passion with the widest audience possible, as we distribute their podcast not only on the iHeartRadio app, but across as many other distribution platforms as possible.

I want to point out that because podcasting is an adjacent business to our radio business, we've been able to use our broadcast radio assets to drive podcast usage, and build hit shows. If you think back to a similar situation that television faced, and how they missed an adjacent business, which is called Netflix.

By the way, we not only did not miss our chance, but we are currently the industry leader in our adjacent business. To further strengthen our position as the number one podcast publisher, in October, we acquired Voxnest to continue to increase our monetization capabilities. The Voxnest acquisition provides two crucial benefits to our podcast business.

First, it opens up meaningful additional targetable inventory to our podcast advertisers.

And second, it will allow for the more efficient monetization of our inventory by helping to connect the fragmented programmatic marketplaces that exist in podcasting and establishes the first at scale real time bidding podcast platform for non premium podcast inventory.

We believe the addition of Voxnest has the potential to be a significant contributor of growth for our podcast business, when combined with the audience, distribution and quality of content that iHeart can provide.

As a backdrop to podcasting all of our other growth opportunities, they are made possible because we have a deep connection to the communities we serve. We provide our consumers with the products and services they expect from us, regardless of where they are and what platforms they're using.

And as our consumers listening behaviors have changed, our leadership position across multiple devices has ensured that they have a multitude of ways for our consumers to engage with us.

Even now as certain areas of the countries have shown signs of returning to normalcy, and people have begun to resume many of their old habits and lifestyles, digital listing on home devices is still up.

Consumers continue to engage with our multi platform offerings at rates equal to and in some cases greater than they did in the second quarter lockdown. And our hope and expectation is that we will continue to benefit from consumers having learned to find and use our products across these many new devices.

Early indicators show consumers are sticking with these new habits. IHeartRadio, Digital Listening has seen double digit year-over-year growth across digital devices, like up 42% on smart TVs, and even up 11% on smart speakers.

Since our company reaches 90% of all Americans every month, listening to, understanding and integrating input from diverse voices and views are critical to our business success. As a company we value diversity and we respect all voices from both inside and outside our company.

At the beginning of 2020, we announced our company our latest steps to enhance diversity at iHeart with increased focus on recruitment, education, mentorship and accountability.

We remain committed to further increasing diversity of our organization, from more diversity to appointing a Chief Diversity Officer to requiring consideration of diversity candidates for all of our major hiring and promotion decisions.

Improve our interviewing process to include a wide representation of interviewers instituting a diversity, a equality and inclusion advisory board and on the content side, making diversity a real priority, including pledging that 50% of the new podcast we launch on the I heart Podcast Network will be from female and diverse creators, as well as a number of major programming initiatives on our stations designed to foster understanding through more diverse voices.

Serving our communities is more than a platitude. It's at the heart of our product strategy.

During the pandemic, we built a virtual events business from the ground up, producing virtual concerts and filling the void in people's lives left by missing events due to the pandemic like commencement, speeches for the class of 2020, our virtual commencement address podcast for graduates, our virtual homecoming celebration for HBCUs and the iHeartRadio Music Festival, which generated a total of 19.4 billion social impressions, up 20% over last year's event, and more than double the total live stream of last year's live and in person event.

The iHeartRadio Music Festival on-demand on social media with the hashtag iHeart Festival 2020 trending worldwide in 14 countries and 64 cities in the U.S. Post pandemic virtual events will certainly be a new category for us, and we expect it will be accretive to our sponsorship revenue line.

We also continue to pioneer new products and technologies like the Blumhouse and Aaron Mahnke produced 13 days of Halloween, a thrilling horror anthology, they use cutting edge, 3D audio and sets a new standard for podcasting.

If you haven't already, I highly recommend that you listen in order to experience and understand the power of this new audio technology. This is just one more example of our commitment to delivering the entertainment, the information and the companionship that our listeners see. Rich will take you through the details of our Q3 performance.

But I want to leave you with just these few points. First, scale matters. It bears repeating the broadcast radio remains the number one reach medium in the U.S.

that we are the number one audio company in America by wide margin, and that we have used that position to transform iHeart into a true multi platform company with diverse yet complimentary revenue streams, and the use our leadership position to build new businesses like the black Information Network, and our recently launched iHeartRadio Sports Network.

We're encouraged that revenue continues to improve sequentially, and that while there is still some uncertainty about the future, we believe that if current macro trends persist, we're on a path to full recovery.

Our performance this year has shown the value of our multi platform and investment strategies, as the parts of our business that have been the most resilient and perform the best during the downturn have been our newer, diverse offerings. Our relationship with a consumer has only grown stronger during this downturn.

In the past, we've seen consumers turn to us during times of crisis and need. The same has occurred during the pandemic, but on a national scale and for a longer duration. And we expect this strengthened relationship to continue after the pandemic ends.

We continue to be disciplined capital allocators with a focus on reducing cost and creating efficiencies. COVID hit everyone hard and quickly. But the economic downturn has continued to prove that one of the core strengths of the company is our free cash flow characteristics.

Even during the pandemic, we saw positive free cash flow of $14 million in the third quarter.

Finally, I want to remind you that before COVID hit, we had already taken steps to modernize the company, investing in growth areas and creating Centers of Excellence across the organization resulting in savings of $50 million in 2020 and a run rate of $100 million by mid 2021, both of which we're on target to achieve.

When COVID hit, we again took decisive action to further reduce our in-hear expenses helped mitigate the impact the economic downturn was having on our business. And to accelerate our modernization efforts by identifying another $200 million of savings.

We remain on track to achieve the $200 million of additional savings in 2020 and have plans to make the majority of the $200 million of savings part of our cost structure into 2021 and beyond.

This downturn accelerated our discovery of new ways to operate that will make us a leaner, more efficient organization with improved operating leverage that will carry forward into the future as revenue continues to recover.

Before I turn it over to Rich, I want to emphasize that while we're working hard on our recovery through COVID, we're also laser focused on ensuring that we are well positioned to take advantage of the growth opportunities post-COVID.

Rich?.

Thanks, Bob. The challenging macroeconomic environment, which began April has improved significantly. And while we've experienced the potential improvements in each of the months that have followed, and see multiple areas that give us reason for optimism, we continue to experience year over year revenue declines.

In terms of our third quarter results, if you turn to slide seven of our investor deck on a reported basis, our consolidated revenue decreased by 22% over the prior year period. Direct operating expenses decreased 13%, driven primarily by cost reductions associated with our modernization issues, as well as those taken in response to COVID-19.

In addition, variable operating expenses decreased 13% in line with lower revenue recognized during the period. SG&A expenses decreased 11% driven by cost reduction initiatives and lower sales commissions, which were driven by the decrease in revenue.

Corporate expenses decreased 41% during the third quarter, compared to the prior year quarter, primarily as a result of lower employee compensation, including variable incentive expenses, and employee benefits resulting from expense reduction initiatives.

The decrease also included the impact of an $11 million decrease in share based compensation expense compared to the prior year quarter.

The decline in our third quarter GAAP operating income to $39 million, compared to $140 1 million in the prior quarter, as well as declines in our adjusted EBITDA to $162 million, down from $275 million in the prior year quarter were driven by low revenue. Turning to slide nine. I'll provide additional color on the performance of our revenue streams.

In our broadcast business, revenue declined by 29% on a reported basis, while networks declined by 26% year-over-year. Our digital revenue stream grew 17% driven by continued growth in podcasting, which increased 74% year-over-year.

Audio and media services increased by 25% on a reported basis, driven by cats who benefited from extremely strong political spend, particularly in TV.

Sponsorship, and events revenue decreased by $27 million or 48% compared to the prior year period, primarily as a result of the postponement or cancellations of physical events, again, partially mitigated by the success on virtual events. Turning back to our consolidated results.

I look at the items below the line, interest expense decreased $15 million compared to the same period in 2019. On slide 12, there's a summary of our balance sheet.

At quarter end, we had approximately $5.3 billion of net debt outstanding, which includes our cash balance of $714 million, our net debt of $5.3 billion is down over $200 million from $5.5 billion at the same time in 2019.

Importantly, we generated $14 million of free cash flow in the third quarter after having negative free cash flow of $7 million in Q2 2020.

We took our way actions to focus on cost management, and have continued to analyze and adjust our cost base throughout the year in order to maximize liquidity to be prepared either there was a protracted recovery.

The fact that we've been able to quickly return on the cash generation has proved our strict cost controls of our sequentially improving revenue trends, and most importantly, of the company's strong free cash flow characteristics.

As a reminder, the terms of our debt structure include no material maintenance covenants, and there are no material debt maturities prior to 2026. As we look ahead to the fourth quarter, we expect that revenue remain challenge given the impact that COVID-19 continues to have on the macro economic environment and advertising trends.

However, we are cautiously optimistic as we continue to see improvements in the rate of year over year revenue declines. July, August and September declined 27%, 21% and 18% respectively. And we just closed the month of October and finished plus 2% year-over-year.

Although we recognize that there is still some uncertainty, right now we project Q4 revenue will be down better achievings on a year-over-year basis. I also want to provide an update on the modernization and cost initiatives that we announced earlier in the year.

Together, these initiatives remain on track to deliver the expected $250 million of expense savings in 2020. As we have said previously, we expect our modernization initiatives to deliver $50 million of savings in 2020 and $100 million of annualized run rate savings by mid 2021. We are fully on track to achieve these settings.

We are also on track to achieve all of $200 million of post COVID savings in 2020. Further, we have developed detailed plans to make the majority of the $200 million of post COVID savings permanent, as we have developed long term structural expense savings within our cost structure.

These savings include continued optimization of our real estate footprint, the adoption of technology solutions that will drive increased efficiency and effectiveness in our operations, the centralization of resources into centers of excellence, significant reductions in TV, consulting fees, discretionary spending and employee hiring and continued monetization for organization.

The pandemic forced us to transform the way we do business more rapidly than we could ever have imagined. And the action we have taken leave us exceptionally well positioned for margin expansion as advertising activity continues to recover. Our full year of capital expenditures guidance remains unchanged at approximately $75 million to $95 million.

But we'll come in on the higher side of the range as we expand capital on Q4 to drive operational efficiencies. We continue to expect minimal cash taxes in 2022 during the Cares Act.

As a reminder, the provisions of the act that protect us result and our ability to build up 100% about 2020 interest expense, as well as a portion of interest from prior years that was disallowed and the deferral and potential avoidance due to certain credits [ph] we may qualify for a 2020 payroll tax payments.

We also want to update you on the company's FCC petition with respect to the foreign ownership of our equity. On November 5th, the company received the declaratory ruling from the FCC, granting the company's request to up to 100% of the company's equity and voting stock to be on by Non U.S.

persons subject to individual hold of foreign ownership and media cost [ph] ownership limitations which continue to apply.

This really will allow for the simplification of the company's capital structure, and enhance the liquidity of the company's Class A common stock by facilitating the conversion of the warrants, which currently represents a little over half of the company's equity. Warrant holders will receive the instructions through U.S. mail from computer sharing.

The company's warrant agent will ahead and participate these change of warrants. And wrapping up, we believe that our previously announced modernization initiatives and cost savings actions in combination with our resilient capital structure will provide us with financial flexibility and ample liquidity.

We are confident in our ability to drive shareholder value through operational discipline and continued investment in the areas of our business that will position us for growth as advertising demand continues its return.

And again, we'd like to thank our employees who have committed to serving our listeners, our communities, and our business partners during this challenging time. We appreciate you all joining our third quarter earnings call. And now we will turn it over to the operator to take few questions. Thank you all..

[Operator Instructions]. Your first question comes from line as Jessica Reif Ehrlich of Bank of America. Your line is open..

Thank you. You guys talked a lot about the cost savings and the continued benefits and that you've been streamlining. How are you thinking about opportunities to invest in growth as you continue on this path of recovery? And so all the news clearly, its been really good news. So hopefully, sequential -- we'll see sequential improvement.

But how do you think about the size investments growth in areas like podcasting versus like de-leveraging the balance sheet? So, it seems like you'll have great operating leverage.

And then secondly, can you just talk a little bit about the -- you mentioned, and it's in the press release the agreement with Pushkin industries to distribute, monetize content? Is this something that we should expect more of? Can you talk about the economics of a deal like this? How its structured? What are the benefits to co producing shows? How does it affect you, you producing your own podcasts? Thanks..

Yes. Let me just -- let me start with the second one, and I'll let Rich jump in on the first part of that. I think on the agreement, we announced today with one of the major podcasters, Pushkin industries, which is Malcolm Gladwell, and Jacob Weisberg who are the founders.

I think that what we got and gets into this whole area about the talent wars and podcasting is we probably have the best weapon anyone does, which is we have the biggest platform. And if you've got a podcast, or you think you're going to have a big podcast, you really want it on the biggest platform.

You want to be able to use the power we've got of our radio promotional platform behind it. And we've got the largest sales force in audio and podcasting to maximize monetization.

So as opposed to us having to go by people, we're able to offer them something that's very healthy, which is an opportunity to have the biggest return on their investment, creative investment and dollar investment by joining our platform.

And I think if you look at the podcast we have today, we make some completely ourselves with absolutely no profit participants. We have some like this is like doing television show or movies. We have some that have small profit participation, some that have larger, some that we do in partnership, some we co produce, and it's the full range of it.

But for us, we're very cognizant of profitability. And we're very cognizant of margin. And we want to make sure we keep our podcast margin higher than the overall margin of the company. So this indeed is a growth business in every way.

Rich, do you want to add to that?.

Yes. Thank Bob. And Jess, thanks for the questions. I mean, just one thing, I'll end with one on Bob's point on podcasting maybe I'll point on cost.

As Bob noted in his opening remarks, the people that not just Pushkin, so we kind of look back at factors, as opposed to what people say to iterate Bob's point factually, whether it was Will Ferrell that we all know that or Hillary Clinton or Bobby Brown, or Charlamagne, and committing to us for Black Effects Network, which is our partnership with Charlamagne, Enrique Santos that Bob talked about in his remarks.

Everybody could say a lot of words. But I think the proof is in the facts as our people that are both committed to us and re-committed to us because of our asset base, and the ability for both of us to make money in partnership with all of our talent.

On the cost side, again, we highlight in the opening remarks, and I think I highlighted in my remarks that we expect a substantial piece of the cost savings that we announced this year, the $250 million to be permanent.

I'm not going to give you an exact number on that, because that would really be tantamount to give a guidance and we're not giving guidance for the rest of this year.

Other than Bob's comments, they talked about on revenue for Q4 for going into next year, but I think like a lot of companies in America, we've learned to be honestly just wildly more efficient are we've been in the past.

And I'd say we'll all as a management team, Bob myself or Mark [ph] can you hear us on this call and the rest of our leadership and by the way, also in podcasting. And on the investment front, again, I would just point to the facts over the last couple of years.

If you look at the investment, that we just announced and Bob highlighted in his remarks of Voxnest.

If you look at Jelli that we did about a year and a half ago or a little longer than that, which again is a reminder, was the foundation that makes our broadcast inventory look like digital and gave us some foundation for a lot of other technology advancements.

If you look at stuff works, each of those investments were not significant to the company's overall capital structure. Bob mentioned in his remarks about Voxnest and that $15 million, approximately $50 million in total.

We own the small piece of the company before we add Jelli and stuff works to that like both three in total or maybe $150 million approximately. But I think the key is that they all make they the rest of the iHeart base that much more valuable in terms of the ability to generate a EBITDA, and most importantly, to generate free cash flow.

And just the final thing I'll add is that I think also the highlight, if you can have free cash flow, its' in the investor day I got to handle pages on towards the end. But even in the toughest operating environment, and any of us have ever seen, we generated approximately $75 million $77 million in operating free operating free cash flow this year.

So I think that just reiterates whatever environment we're in, the real great free cash flow generation ability at this company..

Okay. And I have one thing to it. Two, is that I think going to your point, Jessica, when we look at our future and where our growth opportunities are, we look at the pieces that are necessary to make it happen. And we look at do we make, buy a partner, and when we buy, we want to buy efficiently.

We try and buy something that has what we need, but that can benefit from what we can add. So that we don't have to pay outrageous prices for it. We're able to buy the piece, and then we add a lot of value by putting our scale to it. And I think you've seen this do that as rich mentioned with Jelli.

You've seen this do that with stuff, media, where we bought less than $5 million unique users. Today, I think our podcast number is over 27 million. So we really added 22 million on top of the five organically.

And those are the kinds of acquisitions we go for ones that we think we get enormous leverage out of and that we think are the most efficient way, and the most effective way to get the value creation, as opposed to making it ourselves or partnering for it..

Thank you. Your next question comes from line of Steven Cahall from Wells Fargo. Your line is open..

Thanks. I just wanted to dive a little more into podcasting. So maybe first. Where did the inventory for Voxnest primarily come from? And, we've seen some similar ad tech investments from SiriusXM, from Spotify.

And I was just wondering if you think about that as competition at this point, or is it kind of everybody growing the pie and getting advertisers to commit more funding to this? So is it a market share battle? Or is it kind of good for the whole industry right now as everyone invests in an ad tech?.

We're seeing a huge expansion of the pie. So I think for the foreseeable future, we're all benefiting from a growing marketplace. I think when you look at Voxnext, what it really allows us to do, in simple terms is having an electronic trading platform for our non premium inventory.

We've done extraordinarily well selling the big premium inventory for our -- this very high profile, a big podcast we have, but there's always a piece of it that remains unsold. It's not premium inventory, in the sense of what podcasting will get on the premium level.

And so by putting an electronic platform together, being able to combine that with data, being able to combine these fragmented podcast marketplaces that are out there, and being able to deliver it as a real time bidding platform, I think give us a tremendous way to add additional value to what we already have, and becomes important to us.

And then there's some secondary benefits. There's some tools, there's some ad serving capabilities, et cetera. But I think the marketplace and going after any unsold inventory, or getting more efficient with unsold inventory is a great way to help the bottom line of the company and the top line..

Thanks. And then on ad sales, I was wondering if you could maybe give us what political ad sales dollars were in Q3, and maybe also in Q4.

And just as we think about the core trend, is it possible for you to help us think about how core advertising is improving excluding what the impacts of political might be, since that can shifted around on those months pacing that you gave?.

Sure.

Rich, you want to hit that?.

Sure. So, first of all, we said, in terms of political this will be by far the biggest political year that we've ever had. And just as a reminder, we also benefited not just from the core, the iHeart business, but we also benefited from the fact that we have cats. Remember cats again, the TV app business is one of the largest TV app firms out there.

But if you look at it, we were in Q3 political revenue. We were probably $40 million. October was up -- and we about $55 million in October, and then, as you look forward we'll continue to benefit from political. But I say November, much less than extent that we did in October. But, we'll still get some significant benefits here in total.

But just to be clear. So 40 million in October was 55. And then we'll get some benefit in November, which will be less than October out there. And then we continue to see, as Bob, I think, pointed out in his remarks, maybe just a reminder, we do have all the same inventory here. So, clearly we're getting a benefit from political.

We're getting a benefit both within the company and the tightening of the inventory in the advertising market. And then we'll talk about the only thing I'll say about going forward in terms of the value is the guidance we gave that for Q4 would be low to mid teens digit down in revenue.

But we continue to expect to see sequential improvement on the Q4 compared to Q3, even as we leave the benefits of political as we talk today..

Yes. Let me just add to it to be clear. Without political, we still have seen the sequential improvement of ad revenue. I think I think you're asking..

Yes, great. That's perfect. And then last one for me. Rich, you have the cash tax benefits this year, which you called out as we just think about how you might convert adjusted EBITDA into cash flow next year. Anything else, I mean, he talked about maybe some CapEx stepping up, and you'll, I guess, become a full cash tax payer.

Anything else we should be thinking about in terms of your cash generation?.

No. I mean, looking at again, we haven't given any guidance, but I would as you go through the 10-Q. And again, none of us know what the tax landscape is. We can all speculate. But never think that you're going to have to speculate, but none of us can know what the tax landscape may or may not look like that surely changes.

But just as a reminder, everybody kind of goes through the 10-Q today. We sell some pretty significant tasks actually started with NOL and NOLs, excuse me, that we can utilize for the company going forward, obviously, including 2021.

And so the bottom line is, you're just going back to what I said earlier, the attributes of this company on the ability to generate free cash flow. I think we've demonstrated this year and expect to continue to demonstrate going forward..

Great. Thank you..

Your next question comes from line of John Janedis from Wolf Research. Your line is open..

Thanks. Maybe a quick follow up to Steve's question on podcasting. You talked about the EBITDA margins and monetization along with Voxnext. Given the current margins and cost of the content, is there meaningful upside on the margin front in podcasting from here? And I think you lived to this a little bit.

But from an advertising perspective, does that pocket of money coming from a different part of the client budget away from traditional broadcast? Thanks..

Yes. I mean, the good news about podcasts is it is sort of the shiny new thing. And I, look, I'm an old guy, so I go back all the way to an cable networks came about. And what's interesting is, every time there's been a big economic downturn, the advertiser decided to take a chance on something new.

In good times, when you say, hey, I've got a great new idea, these cable networks, they say, sounds great, but my business is doing well. I don't want to rock the boat. When things are not so great. They say, okay, I'll try that new thing.

If you look in the recession of 1988, that was really the time in which the advertisers began to give cable networks a shot. You saw a big upturn in revenue there. In the later 90s, you saw 97, the downturn there. You saw them get a chance to be internet, internet advertising. The turn of the new century. We saw search emerge in 2008, 2009.

We saw social emerge. And we're seeing podcasting as that now.

And what's interesting to us that we really love about podcasting is we're bringing some advertisers into podcasting, who were not major advertisers, and anything in audio, much less just radio, and they are pulling the money from wherever they pull it from, presumably TV or digital budgets.

I think it's probably more lined with digital budgets in their minds. And they are making this a priority spent and then things fall behind podcasting, all really good news for us. And I show a see no signs that abating. If anything, I think it is increasing. What it also does, it's one more door to get people to do business in audio.

We've had some advertisers that have started in podcasting and then decided they wanted to use rate they liked that and want to use some radio too. At first associated with the podcast. Second to just say, I like the way it works, I'm getting an understanding of audio and the impact it can have. And so we spread them across our other assets.

So if we think about all of our platforms as separate doors to bring advertisers and by the way, we brought some major advertisers into the company, initially, through events.

They did not think they wanted to buy radio, didn't think they want to buy audio, they just wanted to be associated with an event, and eventually became a huge advertisers on radio as well. So we see podcasting as that and probably stronger than we've seen with any other platform. So we're very encouraged by that..

Hey, if I could just add one thing. I just want to maybe just come back on one point back to maybe each of the three questions so far on Bob point. I think we enforcing our views.

So you have another -- I think it's objective third party view, is the point that Bob made only maybe announcement today with Malcolm Gladwell, and all the other podcasts that remain, I got to repeat them.

We don't know that factually, that you can assume that each of these individuals or teams that chose to come to iHeart or have many, many, many other choices. And when they were choices to go behind the paywall. Other, very appealing financial characteristics that maybe had more appealing guarantees. Not knowing anything.

Each of the ones we named, obviously chose to come with us. And they chose to come to this for all the attributes that Bob said. So I just think it's another validation and confirmation not just in the medium, but iHeart place in that medium as you emerges..

And Rich, I think, going to that point, to hit it head on. We've got the number one platform. And so we don't think we have a need to and we don't intend to go by share. We're looking for everything we do. We're looking to be profitable. We're looking to be a nice profit contributor. We put it through a pretty tough screen of economics for us.

Now, presumably, using our platform and our monetization engine, we probably can get more revenue out of any podcast than we think anyone else can.

So it gives us the ability to perhaps reach a little farther, just like with air talent, we have the ability to spread talent across multiple markets or to put them in a situation where they have a bigger platform, therefore, the economics are better for them and better for us. So we see that in podcasting. And we are so far had been successful that.

We continue to do the deals we've done is help people build hits, which by the way, the more people we help build hits, the more people want to come to this platform for us to build them their hit..

That's helpful. Rich, maybe a quick one. The release mentioned potential reduction in real estate footprint.

I'm wondering if that includes potential asset sales?.

Now, look, let me take one step back. So we have nothing -- there's nothing that's planned. In terms of any asset sales, I think we do have one job in this company and you heard Bob and I say time and time again, which is the focus on driving the equity value of this company, driving value for our stakeholders.

So we're constantly challenging ourselves on as to what the right asset base is, today. Again Bob hitting head on and put a very fine point on it. We don't simply reach 93% of Americans, when you look at all of our stats, whether it's podcast or digital, all of our attributes, we don't seem to add anything.

And at the same time, we go back over the last couple of years period of time right down to the towers sale leaseback we did a couple years ago. We're saying Gee.

What's the best financial transaction to do that gives us and maintains our strategic footprint drives EBITDA, but constantly keeps this unique asset base together in terms of size and scale on reach and uniqueness. So I don't see. That a little bit of a long winded answer, but it combines both.

But the filter we have, I think Bob use the term filter a number of different times, whether it's capital allocation, however you think about the term filter, the sales are in that same filter, but I don't I don't see anything out there today that's going to come onto the market first..

Let me also talk about real estate point. Rich, back to the real estate, I think that when we said it before, I just want to say it again, that we've learned a lot through COVID.

And our people if you think about it, hey, they've had 10 years of technology learning in three or four months, and as a result, we envision operating differently in terms of how we operate our space.

I think they're going to be -- although I think everyone will probably come to the office some, I don't think we're going to have the need for the same amount of space, even with the same number of employees.

Understanding that some people can get a lot more of their work done outside the office and don't have to be in the office 100% of the time, and how they work and where they want to work in the office is also changed as a result of COVID.

And I think we're taking that into account, and we're going to move aggressively on downsizing our footprint to accommodate that..

Thank you..

Your next question comes from the line of Jim Goss from Barrington Research. Your line is open..

Thanks.

In terms of downsizing your footprint, do think because that involves station sales, for example, my two that need to be in some of the smallest markets, for example?.

Let me l hit that head on. When I said footprint, I mean, in each location, we'll make do with less space than we have. We have no intention of walking away from any of our locations. And I think you see, one of the real strategic values of this company that makes it different from everybody else, is how many locations we're in.

We're in 160, markets, with owned stations, there's no one in America that comes close to that radio or TV. And having that kind of distribution and that kind of control, lets us offer things to advertisers no one else can. It lets us develop these the value of scale.

And indeed, you saw it in this political season, is if we're everywhere, and we're this kind of footprint, no matter what states are hot, or cities are hot, we probably got a product there to take advantage of it. So we like that. We think it's one of our strengths.

We don't see a need or a value in reducing that because we think that's one of our strongest strategic differentiators. I mean, in radio, we're the only radio player that really offers national coverage with our own stations in addition to our networks. And I think that makes us very unique..

Yes. And Bob, just Jim, I want to just add one thing to what Bob just covers. I think if you actually go back to Bob's opening remarks with that four points that are highlighted in this company that are feature and then I'll come on to growth strategy. One of those points was monetization. And we said end related cost savings.

So it's a lot more than just cost savings. It's also developing the studios of the future that we talked about you utilizing cloud based technology.

And really taking advantage of AI, as Bob noted as the number of years of investment and the experience of our team, that really helps us maximize the performance, not just on advertising, but quite frankly, on a listener front on a programming front in each of our markets.

And we've created Centers of Excellence across the organizations that really consolidate key resources for the whole company to take advantage of increasing quality and improving costs and improving service, I'm sorry, cost reduction happens to be a benefit of that, and a byproduct of that.

But we are improving quality and service at the same time for our listeners. And so I don't think, Bob and I really need to emphasize that when we talk about the footprint in efficiencies, it really is on both sides..

And Rich, if I can just add to that, because I think that's an important point that we should make sure to get out is, we talked about how many markets were number one in. And I think the reason we have that kind of an audience advantage is because of the quality of the programming we do.

And we've made great investments in tools to help our programmers. And one of the things we have today is I think we have my memory serves me correct something like 3000 data inputs into music selection, music balance, understanding how the flow goes. At that level of data inputs, a human mind can absorb it, but AI can't.

So we built AI over time, that can assist power that people making those choices, so they can make higher quality choices. And those kinds of things we've been building over the years are I think paying dividends, and you can see it in the performance of the company. And we content. So yes, it will save money. Yes, it'll make us more efficient.

But I think primarily, it makes better..

I was thinking of asking whether you were doing additional multicasting using the top tier talent that you have.

But now I'm wondering if with the AI that you've mentioned, I think this past calls if instead you might look at spot loads, and maybe have fewer, but perhaps more expensive ones and try to address a revenue situation that way, maybe not just now, but going forward as the economy begins to improve, hopefully with the new vaccine?.

Look, we look at everything, and I will say that we have not found spot loads to be an issue, since the cassette player went into the car decades ago, radio has not been the place you go, if you want no commercials. Radio has been the place you go if you want companionship, and you want to find out what's going on in the world.

And I actually think that if you've ever listened to a radio station with no commercials on it, you feel a little lost. Because those commercials actually tell you an awful lot about what's going on, that people are not coming to us for music, for the primary goal, because probably 25% of our stations don't even play music.

They come to us for companionship, we're keeping people company. And what do people do when they have a relationship, they often play music for each other. So that's the reason we play music. We talk about it a lot. We have the people on the air who make it to talk about it. And part of our mix are commercial.

So again, if that's not a problem we're trying to solve for. We're trying to make sure that when people tune to us, that they indeed are engaged. They bond with us, and it becomes a habit for them..

Okay. Maybe lastly. With this more optimistic look at a potential vaccine or multiple vaccines.

What impact do you think that would have? And maybe trends accelerating anything with your business model?.

It's a really good question. And one we've been talking a lot about before today, and certainly today, that I think the vaccine certainly encouraging news for society, but certainly for our business, too. They've been harder hit categories, which haven't come back much.

From Q2 to Q3, a lot of our growth came from categories that were down a lot in Q2, and are just beginning to come back, like food and beverage, auto, restaurants, retail.

But if we get a vaccine, we can see the return of some big spenders, like movies, concerts, some of the retail that has not come back so much, local businesses like the local restaurants. So we think it's has a tremendous, can have a tremendous impact on our business and are watching it carefully..

Alright. Thank you very much..

So maybe we have time for one more question, operator..

Yes. One moment please. Unfortunately, we do not have any further questions. At this time, I turn the call back over to Rich Bressler..

Well, first of all, I want to thank everybody on behalf of all of us for taking the time today. Thank you for listening to the iHeart story. One thing I will just add in closing, is that because I know for the last couple years Bob and I have met and talked to a lot of you.

We had constantly gotten the question about where we will get to get approval from the FCC. And I know it was in our press release and in my opening remarks. But I just want to reiterate that the FCC has approved the ability for our warrant holders can convert into Class A. There's a process they need to go through, which is on the website.

We don't need to -- you don't need to go through right here. But it's a fairly automatic process that will allow people to convert in the beginning of January, which will double, approximately double the public float of our market capitalization out there.

So again, that's been -- I think over some period of time, close to the number one question we've gotten from people. So I just want to proactively reiterate that before we close. And thank everybody again..

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