Good day and thank you for standing by. Welcome to the iHeartMedia Q2 2021 Earnings Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mike McGuinness, Head of Investor Relations. Please go ahead..

Good afternoon, everyone, and thank you for taking the time to join us for our second quarter 2021 earnings call. Joining me for today's discussion are Bob Pittman, our Chairman and CEO; and Rich Bressler, our President, COO and CFO. At the conclusion of our prepared remarks, management will take your questions.

Please note that in addition to our press release, we have an investor presentation that you can use to follow along with our remarks. Before we begin, let me quickly cover the safe harbor statements on Slide 2.

During this call, we will make forward-looking statements, including the current and expected impact of COVID-19 on the company's liquidity, financial position and results of operations. These estimates are based on current expectations and assumptions that are subject to risks and uncertainties and.

Actual results could materially differ from these expectations and assumptions, and these risks and uncertainties are discussed in more detail in our filings with the SEC. During this call, we will refer to certain non-GAAP financial measures.

Reconciliations between our GAAP and non-GAAP financial measures can be found in our earnings release or in the investor presentation available on our website. And now I'll turn the call over to Bob..

listeners, advertisers and creators. Each stakeholder comes to the table with unique needs. For example, listeners want to find a show on their favorite topic, advertisers want to connect with an audience they're trying to reach, and creators want to enjoy the creative freedom and support to tell their story to the largest possible audience.

And each stakeholder is dependent on the other 2 for success. Underlying it all is the tech stack, from publishing platforms to the monetization tools supported by our Triton and Voxnest acquisitions that help connect each stakeholder to the other and ensure critical and financial success.

iHeart is the only podcast publisher that has success with all 3 stakeholders, and we have the only unified ad tech stack for digital audio.

We continue to have success attracting talent and creating partnerships with creators of all shapes and sizes, from major brands like Bloomberg, Sports Illustrated, the NFL and the NBA to celebrity creators like Will Ferrell, Shonda Rhimes, Jason Blum and Jada Pinkett-Smith.

And we continue our commitment to develop new talent in the major players in the space as well, like How to Money, Missing in Alaska and almost 30 shows that are now part of our Black Effect Podcast Network.

We also think we have the most valuable library in podcasting, a bedrock of established podcast hits, many of them being published for over a decade, with audiences that continue to grow year after year, like Stuff You Should Know, the first podcast ever to pass more than 1 billion downloads.

No matter their size or topic, we have the tools and support that podcast creators need for success. And our best indication of that success is the audiences we generate. We are the #1 podcast publisher in the world.

And according to Podtrac, the industry standard for third-party podcast measurement, we're the #1 podcast publisher, with 252 million global monthly downloads and streams and 32 million U.S. unique monthly listeners.

Not only did we generate an audience 1.5x larger than the second largest publisher in the space, it was 3x larger than the next largest commercial podcaster. Across the 19 categories that Podtrac ranks, iHeart has 137 ranked shows and 51 shows ranked in the top 10, both of which are at least 3x more than the next largest podcast network.

And we have the most shows with over 1 million listens, more than doubling our nearest competitor. This underlies the diverse nature of our content, and we're beginning to feel the flywheel effect of the success with our audiences.

The more successful podcast we have with large audiences, the more effectively were able to promote new podcast and new episodes, helping to drive engagement and success for creators and advertisers.

For advertisers, we continue to build out the tools and data they need to best leverage the podcasting space, which continues to be the highest growth area in all of advertising. Advertisers know that they can come to us and find almost any target audience they need in the podcast arena.

Moreover, with our SmartAudio products, they know that they can extend those audiences into our other digital offerings and even into broadcast radio as well. This is something that no other company is capable of. And we do all this while ensuring that our podcasting EBITDA margin is accretive to our company margin.

We have both the intent and discipline to make sure our exceptional revenue growth is coupled with healthy margins. I hope this has helped frame the podcast ecosystem and explain why we're able to deliver unparalleled financial performance in the podcasting space.

Rich and I and the rest of the iHeart management team are excited about the tangible results we're seeing in the transformation of iHeart into a true multiplatform media company.

We have both a high-growth Digital Audio business as well as the resilient and stable Multiplatform Group, which also has growth potential as we continue to build out our data and ad tech capabilities, which we expect will unleash more growth as we expand into the digital TAM.

Critical to the growth of our Digital Audio Group as well as the successful entry of the Multiplatform Group into the digital TAM has been our ad tech stack. And as we've mentioned before, not only can this tech stack unlock value for our assets directly, we believe it also has value onto itself as a platform.

In this past week, we announced deals with TuneIn and with NRJ, a major French broadcaster, that will use our Triton platform.

These are some examples of our expansion into other platforms, our growing relationships with international partners and the success of our strategic acquisitions like Triton, which continues to increase revenues and sign new advertising and publishing clients.

As a company, we continue to identify new opportunities across the audio, advertising and data analytics sectors. And using our unique scale and one-of-a-kind platforms, we innovate and develop new products and services for our consumers and for our advertising partners that will drive iHeart's growth for the rest of 2021 and beyond.

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

Thanks, Bob. We continue to see improving trends in the macroeconomic environment, and our financial results continued their sequential improvement, reflecting both this general improvement in economic trends as well as the strong performance of our businesses.

Our consolidated revenues were up 77% over the prior year period and continued their sequential improvement against our 2019 results.

So while we recognize there is still more hard work to be done and the ongoing uncertainty as a result of the increasing COVID cases across the country, we continue to remain confident that we are firmly on the path to be back to 2019 adjusted EBITDA levels by the end of 2021, setting ourselves up for adjusted EBITDA and free cash flow growth in 2022 and beyond.

In terms of our second quarter results, if you turn to Slide 11 of our investor deck, on a reported basis, our consolidated revenues increased by 77% over the prior year period, which is above the guidance we provided on our first quarter call of approximately up 65%.

Direct operating expenses increased 31%, driven primarily by the significant increase in revenue, which drives higher talent and profit sharing expenses, third-party digital costs, music license fees and performance royalty fees. Variable expenses related to events also increased as a result of the return of certain live events.

The increase in direct operating expenses was partially offset by lower employee compensation expenses resulting from our modernization initiatives and cost reduction initiatives we began in 2020 and continued into 2021.

SG&A expenses increased 27%, driven by increased employee compensation expenses due to higher variable compensation, resulting primarily from higher bonus expenses based on financial performance and higher sales commission expenses as a result of higher revenue. As a reminder, last year, the vast majority of our employees did not get paid a bonus.

And as a result, you'll see our corporate expenses increase. In addition, increased headcount from the investments in our digital businesses contributed to the increases in SG&A. Trade expenses also increased, primarily as a result of the return of live events.

These increases were partially offset by the impact of cost reduction initiatives taken in response to the COVID-19 pandemic and lower bad debt expense.

Our second quarter GAAP operating income was $28.1 million compared to an operating loss of $159.1 million in the prior year quarter, and our second quarter adjusted EBITDA was $184.5 million compared to a negative $29.3 million in the prior year quarter.

If you return back to Slide 4, I'll provide additional color on the performance of our operating segments. Multiplatform Group revenues were up 70% in Q2, with 30% adjusted EBITDA margins, a significant improvement after posting negative EBITDA in Q2 of 2020.

On a sequential basis, margins improved 890 basis points from Q1 2021, showing the operating leverage our Multiplatform Group has as revenue recovers. Within the Multiplatform Group are our Broadcast radio revenues, which were up 85% year-over-year, and our Networks revenues, which were up 28%, and includes Premiere, which was up 13%.

Our Sponsorship and Event revenues were up 93% year-over-year, reflecting the return of in-person events and the continued success of our virtual events. The Digital Audio Group revenues were up 112% year-over-year, and adjusted EBITDA was up 188% year-over-year.

And importantly, these results were achieved while expanding second quarter margins by over 700 basis points year-over-year. Within the Digital Audio Group is our podcasting business, whose revenues grew 152% year-over-year. Our non-podcasting digital revenues continued their strong performance, growing 101% year-over-year.

The Audio & Media Services Group revenue increased 56% on a reported basis. Excluding the impact of political, revenues in this segment were up 64% year-over-year. On Slide 17, there is a summary of our debt. At quarter end, we had approximately $5.4 billion of net debt outstanding, which includes a cash balance of $583 million.

These figures do not include the voluntary prepayment of $250 million of our term loan or the concurrent repricing, which will have a positive impact on our interest expense on a go-forward basis. We provide a debt schedule adjusted to reflect this prepayment on Slide 18.

As a reminder, the terms of our debt structure include no material maintenance covenants, and there are no material debt maturities prior to 2026. We also remain committed to achieving our previously announced leverage target of 4x.

After just ending the second quarter with a net leverage of 7.6x, a significant improvement from 10.9x at the end of Q1 2021, you can see why we are confident that we are on the path towards achieving that target of 4x. In the second quarter, we generated negative $3 million of free cash flow.

As Bob mentioned previously, capital expenditures will be elevated this year and will be higher in Q2, primarily due to the proactive streamlining of our real estate footprint, part of our previously announced cost savings initiatives.

This program has succeeded in making certain real estate assets redundant, enabling the company to sell such assets in order to partially offset the initiative's gross capital expenditures. Taking those proceeds into account, our cash flows for the second quarter would have been approximately $9 million.

The real estate program is a company-wide effort to leverage new technologies and adopt new best practices to make our office spaces more efficient and help our employees deliver better results. At the conclusion of this project, we expect to reduce our occupied square footage as well as our rent and related expenses by approximately 50%.

We continue to successfully execute against our previously announced savings initiatives. Our pre-COVID monetization initiatives achieved a $100 million run rate by mid-2021, and we remain on track to replicate the majority of the previously announced $200 million post-COVID savings in 2021.

The pandemic forced us to transform the way we do business more rapidly than we could have imagined, and we continue to benefit from our experience in adapting quickly to these changes. The actions we have taken leave us well positioned for margin expansion as advertising activity continues to recover, and we saw this occur in the second quarter.

Consolidated margins were 21%, up from 14% in Q1 2021 and up 2,740 basis points from a negative 6% in Q2 2020. Multiplatform Group margins were 30%, up from 21% in Q1 2021 and up 3,390 basis points from a negative 4% in Q2 2020. Digital Audio Group margins were 27%, up from 25% in Q1 2021 and up 720 basis points from 20% in Q2 2020.

As we look ahead to the rest of 2021, I want to provide you with the following. Our July revenues were up approximately 26% compared to the prior year. And for the third quarter, we expect consolidated revenue to be up approximately 20% year-over-year. We are actively monitoring the impact of increasing COVID cases to each of our markets.

While we haven't seen anything yet in our Q2 results or our Q3 pacing that would indicate a deviation from our current trajectory, we believe it is still too early to forecast longer-term trends given this uncertainty. That being said, we believe we'll be back to 2019 adjusted EBITDA levels by the end of 2021.

And a few things to note on our expectations for free cash flow in 2021. We will not be a cash taxpayer due to NOL carryforwards that we will utilize to offset taxable income. Interest expense will be approximately $335 million to $345 million.

And in terms of capital expenditures, due to the significant real estate reductions we are working on to drive meaningful operating savings, our CapEx in 2021 will be $165 million to $185 million and then return to normal levels in 2022.

We continue to make steady progress in our recovery, benefiting from our strict cost discipline, the resiliency of our high-growth areas and the gradual improvements to the macroeconomic environment.

We look forward to continuing our business' recovery, with the expectation that we'll be back to 2019 adjusted EBITDA levels by the end of 2021 and a continuation of the significant deleveraging activities we made so far, as evidenced by the fact we improved our leverage by 3.3 turns since the end of the first quarter 2021.

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

[Operator Instructions]. Our first question is from Jessica Reif Ehrlich with BofA Securities..

Three questions. I guess, Bob, you went so fast. So I mean audio is a really hot advertising category, and you kind of went through your suite of services and strengths, but -- you may have sort of touched on this, so I apologize in advance.

But now that you have -- you've made some acquisitions, are there still opportunities from here for -- and your revenue was great. I'm not saying anything, but it was great.

Are there still opportunities for better monetization with Triton? Can you kind of walk us through how your suite of -- how your product suite differs from competition and what the opportunities are for you here? So that's kind of that. And then second, on an advertising question, just on the quarter, I mean, the numbers really are phenomenal.

So can you kind of parse out like pricing versus sellout, local versus national and whatever you can say about outlook? And then on that, Rich, you gave guidance for revenue, which -- thank you. But operating expenses obviously have to go up as everything starts to open up.

Can you give us any comments on the operating expenses trajectory from here?.

Sure. Let me start, Jessica. I think in terms of -- and I assume you're talking digital with the Triton and actually, it's Voxnest as well, the other [indiscernible], Jelli, Radiojar and the other pieces we have of that ad tech stack. When we look at podcasting, for example, and digital, we really lean heavily on the big sales force we have.

We have the biggest sales force in digital audio by a lot, the biggest sales force in audio by a lot. And that's been it. But the other side, think of that sort of as a barbell, that side of it is high touch, probably bigger, more known advertisers that are sort of looking for a big marketing idea that involves these assets.

The area that we think we have a lot of growth potential on and opportunity to -- one of the reasons we've invested heavily in the tech stack is that probably 1/3 of the inventory will go unsold in some fashion because it's a little bit here, a little bit there, it's on smaller podcast, it's on reruns, et cetera.

But with that group, we are building out the marketplace so people can buy audiences and can buy impressions. And then for us, what becomes even better for us is once they find the audience they want, we can let them extend that same audience from podcasting to digital audio.

And of course, nirvana is into broadcast radio where they can get this phenomenal reach and where we also have always some unsold inventory and allows us to fill that inventory.

And if you think about sort of from a sales point, it's about the barbell of big marketing ideas versus, "I'm looking for media, I'm looking for impressions." Adding the Triton piece of it allows us to focus more on that second part.

But what it also does in terms of managing inventory, the way things have been set up in sort of a manual marketplace and the way media has traditionally been bought is people buy a station or time periods or a podcast -- and so the inventory that doesn't quite fit that is available.

And by thinking -- again, we used the analogy before of you've got a jar filled with rocks. The jar may be filled, but there's plenty of room around the rocks for sand. Think about these impression-based selling and these impression-based marketplaces as the opportunity to fill the sand in and better utilize our inventory..

Jess, one -- just -- let me just add one thing before we go on to the second question with the advertising environment because you know -- and you and I, we've all talked about this a little bit before.

If -- I always think about it, knowing that everybody on the phone has to do a model, is that with the tech stack we have and for all the reasons Bob just said, there's a reason why our revenue was up 112% this quarter compared to 70% the last quarter. And even digital ex podcasting was up 101%, and podcasting was up 152%.

And knowing that you're all going to project those numbers out as you go forward as you build your model, I think, first of all, we've got about the highest growth rate of any major digital players but also the confidence, I think, people should have in terms of projecting out numbers based on whatever your assumptions are about the digital TAM and the digital marketplace out there and our ability to participate in that is what, I think -- these should all take -- manifest themselves into your models.

I'm sorry, Jess, what was your second question on advertising?.

If you could parse out like -- if you'd just kind of parse out pricing versus sellout, local versus national in the quarter. And whatever you could say that outlook, I mean, you did give a 20% revenue guidance. So not sure there's more that you could say on outlook. But just how -- kind of what you're seeing in the market today..

We have avoided those. And by the way, we don't think they're particularly the best metrics because for us, it's all -- if I've got unsold inventory, will I -- if I can put it wherever I want it, will we sell at a lower CPM? You bet you.

On the other hand, if I've got a great program that everybody wants, should I be driving up the rates on it? Absolutely. So it's so many different pieces. It's not sort of a broad averages, I think, don't tell the story in that, which is why we don't parade those out as important metrics for us..

Right. And also understand that some of the distinctions between national and local, those lines blur and some of the definitions on those lines blur. And then....

I might want to add on that, Rich. One that we didn't talk about in the earnings this time, but we often do. I just want to remind you that one of the big innovations we've had is the ability, and you've seen us build out the infrastructure.

So that any seller anywhere can sell anything as opposed to having silos of sellers, so that's a podcast seller, that's a local seller that's a national seller. But if we find one of our sellers and Jackson, Mississippi finds a national advertiser, they can sell it.

The question is, is that local or is that national money? And so we -- that's Rich's point, it gets very, very blurry, and these distinctions are becoming less and less meaningful..

And then Jess, I think your last point in terms of that we gave some revenue projection cycles for Q3, but we did not give EBITDA projections. We're not going to give EBITDA projections.

But what I would look at, if you look at all the activities we're taking both on the revenue side and you look at our cost initiatives, and one of those cost initiatives, the real estate optimization and one of the reasons you've seen our -- to this year an increase in capital expenditures, which are going to drive significant OpEx savings, whether it's our modernization issues that we spoke about many times previously that we get $100 million run rate of savings by mid-2021.

Just as a reminder, whether it's the fact that we took $200 million out in the during the COVID pandemic. And post that, we expect to keep a majority of those within the company. Again, it manifests itself in the numbers. And as you think about EBITDA going forward, it is -- just look at our margins.

And I know we've had lots of questions, Bob, myself, Mike and the team, Jay, when are we going to start to see margin expansion. And we've talked about as revenue grows because of the fixed cost base, the incredible flow-through you get to this business and the cash free nature of the business and the percent that drops to the bottom line.

And I think you see evidence of that quite frankly in this quarter, whether it's our consolidated margins up to 21% from 14% in Q1 of this year or the multiplatform margins getting back to 30% from 21% and the digital group margins getting to 27%. Again, all that we covered already. But I think it helps you think about projecting out EBITDA numbers..

And our next question is from Steven Cahall with Wells Fargo..

Maybe first on the Q3 guidance, I think it implies the third quarter will be down about 6% below the third quarter of 2019. Your Q2 revenue was also down about 6% on '19, and that was a nice improvement on Q1, which I think was down about 11%.

So it seems like you've got this sequential trend behind you, and the pacing you gave for July seems pretty good. So just curious to kind of suggest that things get worse in August and September.

Is that because you're seeing anything getting worse? Or you just want to be cautious at this point given the Delta variant, et cetera?.

I think it's more comps than anything else on that. And Rich, I don't know if you want to....

No. No. I think it's just more comps. I wouldn't have used the word -- honestly, I wouldn't have used the word getting worse. I mean I think we gave kind of factually the numbers out there with, I think, just a view.

Look at our results and look at how we're talking the results for the year and you look at the approach we gave everything in terms of what we look forward in terms of our leverage ratios and guidance and every other data point. So I wouldn't say worse.

I would just say just kind of basing where we see the business for the third quarter at this point in time..

Yes. Yes. And then as we just think about -- you've got that guidance out there of returning to EBITDA levels by the end of the year. You mentioned the $200 million you've taken out. I know a cost that is. I know you're not guiding to next year at this point.

But for those of us that assume you'll be back to a previous level of run rate next year, is the EBITDA as simple as $200 million better than your previous level of EBITDA at the same revenue? Or is there anything like a mix shift that's going on in there like more digital being a little lower margin? What else should we think about as those building blocks?.

We haven't announced anything yet, and I don't want to get too much into it. Clearly, there always are different mixes. There's also what have we invested in to build the company and what do we choose to invest in.

I think we proved during the pandemic that we have a lot of control over -- even though it's a fixed cost business, we do have a lot of control over it, but I think it's good times we continue to build for the future. And I think you've seen the benefit of it in these numbers from what we've done in the past, and we'll continue that..

Yes. And then the only thing I might add, Steve, is just a little bit like yes to all of your above question, right? Yes, I think we've -- we have initiatives to cost savings. I just articulated -- I don't have to go over them again. I don't think I need to go over them again. And yes, you see us make some real progress on margins.

And yes, audio -- I think as Bob said right up front in the beginning of our remarks, audio is hot.

And you look at just both the growth of our digital businesses and all the components and you look at the strong recovery of our multiplatform business and you just look at all the consumer habits that are happening out there in terms of us following the consumer and the ability to monetize those.

So we have no predictions about what we're going to get to in 2022. But I -- and yes, we have product mix like every business always has product mix evolving and changing.

But just to go back to one thing, what we're focused on is how do you create the most value? How do you -- we know -- as I already said, we're not confused, how to create the right value to drive the stakeholder value of this company..

Maybe one more yes question for you, Rich. You paid down a little bit of debt in the quarter. It seems like a signal of confidence now to do that.

Should we expect more of that in the quarters ahead?.

Well, I'm not going to commit to anything in terms of what we're going to pay down. But again, I think in terms of our debt, it is a sign of confidence that we prepaid the $250 million of the term loan, which are not in the numbers you see as we reported as of the end of the second quarter.

And I think the significant progress we made in net leverage like just as a reminder, and we covered it in the remarks, we were like close to 11, 10.9x at the end of Q1. Then at the end of Q2, it was 7.6x. So a 3.3 turn improvement out there.

So it doesn't mean we don't have a long way to go in getting to our target leverage, but the same thing, look at all the progress we made during Q2, and we are committed to getting to that 4x leverage ratio..

The next question is from Sebastiano Petti with JPMorgan..

Just wanted to drill into the digital segment a little bit here. Obviously, a lot of time discussing just addressability and how that's a huge driver, particularly in podcasting. Obviously, huge revenue growth you're seeing obviously continues to accelerate. Just wanted to see if first, you can break down what you're seeing in podcasting.

Is it higher CPMs? Is it just more engagement? What are you hearing from the bigger brands in terms of adoption? And then separately, regarding digital, the digital ex podcasting has just been a phenomenal growth.

How durable are these trends? Can you unpack some of the underlying drivers of that digital ex podcasting above and beyond your iHeart app and other drivers?.

Yes. Look, the biggest driver in the world is that the digital TAM is what, $160 billion now. So there's a lot of money chasing digital advertising. That's really good for us. It's good for us at several levels. One, podcasting is the hottest category within digital advertising. So it's the hottest of the hot, and we have a great hand.

We're number one by quite a lead in podcasting. Two, we built out the ad tech stack, which allows us to, we think, more efficiently go after that. And the third area, which really is an important area of growth for us, is we've invested in making our broadcast radio look like digital for the advertiser.

And heretofore, people said, you don't have -- it's great. You've built out these cohorts. You've built out these artists. But you've got this last piece of one-to-one. But one-to-one is going away with the mobile ID issues and the cookies. Even Google has said they're going to cohorts as well.

So that's becoming the new standard, and we can play in that world and play quite well.

And when you look at the unique reach we have in broadcast radio, the ability to make that digital, put it in a digital buy improves the performance of every digital buy because you can add fresh reach to that -- to the buy and to those campaigns at a very efficient price. So we think we benefit from it in 3 levels, yes, podcasting.

And by the way, that's the tip of the spear. People often come talk to us about that first.

As they talk more and more about the marketing, they realize, "Oh, I can do some other digital with you as well." And then, of course, they realize, "Wait a minute, if I can do your broadcast like digital, SmartAudio, then it takes me to another level." So I think the investments we've made in the years, we've taken in building out our data capabilities and our tech capabilities are really beginning to bear fruit, and we're beginning to see the benefit of it.

And we expect that to continue..

And Sebastian, [indiscernible] not to go through, repeat or go through it again, but everybody on the phone gets a chance to clear this up.

Take a look at our investor deck, we have some of the same slides in terms of our audio tech stack in terms of the rich and depthness of the audio tech stack and why we say we are the only ones that have that type of audio tech stack full stop, period.

But we also added some other slides, quite frankly, in response to discussion like this in terms of -- including like the history of how we got here in podcasting.

So again, to give people confidence about the sustainability of it, there's a slide which I think is particularly interesting, [indiscernible] Slide 9, which shows how deep we are in podcasting, our ranking in terms of the most shows in Podtrac, the most top 10 shows in Podtrac, the most shows with 1-plus million listeners.

Again, I think what that proves out is, getting to your question, how sustainable is this in terms of the growth? Well, it's deep and widespread. So that helps on the sustainability point.

And the last thing I might say is I know when we came off of Q1, where we had a 70% revenue growth overall in the digital line, one of the often-asked questions that Bob and I and Mike got from investors we see, is this an aberration? Or are you going to be able to continue to have strong performance on digital? And again, without giving any predictions going forward, I'm saying here's another data point that this is not an aberration in terms of our digital growth for the quarter..

Yes. And let me just quickly add to that, that you asked about, are the CPMs better in podcasting? Yes. The CPMs in podcasting look like OTT. Why? Because it's very hot, and people are seeing superior engagement. We are seeing superior click-through, et cetera.

And remember, today, podcasting reaches more people than the big streaming digital services, music services like Spotify or Apple, and it shows no signs of stopping. So I think we've got a great future ahead of us there on podcasting. And podcasting to us is really an adjacent business to radio. It is companionship. It's host-driven.

It is more of sort of think radio and stories on demand, but it is the same user experience. We're the only group besides other radio people doing podcasting that have that kind of benefit. And when you get our scale and our size behind that, puts us in a, we think, a unique position.

And obviously, digital to us is -- to the consumer, they don't know the difference between digital and broadcast radio. They know they like Z100 or KIIS FM, and it's coming in on their phone or an FM radio. They don't care about the technology or know about it. And we have been pretty agnostic about it as well.

We're now, in addition to AM/FM, on another 200-plus platforms, 2,000-plus devices. So we are pretty ubiquitous in terms of ability for the consumer to find us. And that is probably the most important thing underlying the trends. We do have reach.

And as TV's reach goes down substantially -- ad-supported TV, I mean, we've become even more important there..

And just a quick follow-up. What -- I'm not thinking of anything that could perhaps be confidential or competitively sensitive.

But obviously, announcing podcasting deals with very world-class brands in the MDA, NFL, Sports Illustrated, I mean, do the economics of these in terms of the content and rev sharing, et cetera, are they vastly different than perhaps what's currently embedded within the numbers? Just go-forward kind of stuff..

One of the beauties of being number one is most people that come to us for the podcast that we're doing in partnerships, one is successful podcast. And our size advantage and our success with making hit podcasts gives us a tremendous advantage. And I would say that's the #1 reason they come to us.

It allows us to be pretty picky about which ones we'll do. In success, there's plenty of money for everybody. And I think people realize they've got their biggest chance of success with us. And we have enormous discipline on the economics of our deals. We're not interested in profitless prosperity. We don't need to buy our way into anything.

We are number one, and we've been widening that gap. So we're going to continue to run our business that way. You see the earnings coming out of our digital group. We put a great emphasis on converting revenue to earnings. And I know that's a little different than some digital players. But it's the way in which we run the business.

And we think, ultimately, going back to Rich's point earlier, it's the best way to assure that we create shareholder value..

Your next question is from Jim Goss with Barrington..

I was wondering about if you could identify the value of the radio ad spot sales dedicated to your podcast promotion. And I was wondering how you assign the transfer prices to your own imagery for the -- on behalf of those podcast promotions..

I don't think -- that's sort of not the way we really look at it. The way we look at it is we are -- we have plenty of people who are doing both radio and podcasting, take The Breakfast Club, for example, one of our biggest podcasts, also one of our biggest morning shows on our hip-hop radio stations.

Naturally, they -- there's enormous synergy there, and we look for that synergy at every step. But I think podcasting promotes radio. Radio promotes podcasting. They all promote digital. It's very hard to draw a line around any of it. By the way, when were on the Fox TV network with our iHeartRadio Music Awards, we helped Fox build awareness.

They helped iHeart build awareness. So that's, I think, sort of the standard in the business, and we're sort of much following that standard..

Yes. I mean the simple way I'd think about it, just by -- is just about the cost of all the revenue just as a general guideline. And we've been -- of course, we file the revenue before we broke things out into operating segments and just -- and continues to file the revenue. So just simply put, that's what I think about it..

Okay. So there's no geographic targeting or size of market issue. It's just....

No, no, no..

Okay. Then one other question. It seemed like the Broadcast radio group did quite well and better than I was expecting, but it seemed like Networks did not follow and track the same way at this time.

Is that a comp issue? Or was there something going on there?.

Yes. More of a comp issue. If you remember last year, in the downturn -- the sharp downturn, the Networks group, Premiere especially, did much better than everything else in broadcast radio. So you're comping to a different number this year versus the rest of Broadcast radio..

Our next question is from Ben Swinburne with Morgan Stanley..

One question, one just clarification on the guidance. Bob, as you've mentioned a number of times, there's tremendous advertiser interest in [indiscernible] and your numbers are really impressive. You talked about 1/3 of the inventory isn't sold. And I'm just -- that surprises me a little bit, given the demand.

Maybe you could just talk about how you close that gap and drive sellout. Because it would seem like these numbers could be even higher. Kind of what the drivers are there? Go ahead, sorry..

Sure. I mean, one, depends upon time of the year, too. There are certain months of the year we don't have as much. There are certain months of the year, like January, we got a lot. And a lot of it appears in small podcasts, small shows, small radio stations. It is overnight dayparts on radio that the way radio has been bought.

People on morning drive or afternoon drive -- nobody wants overnight for no good reason, I might add, because the CPM is actually cheaper and the engagement is probably even higher in the overnight audience.

But if we -- in a traditional way of buying advertising, people have decided these are good times to buy and these are not the great times to buy or, "By the way, I don't want a little station. I don't want the big stations.

I want the big markets, the little market." Once somebody, which is the beauty of digital, decides, "I'm looking to -- for x number of impressions of this group." And by the way, we can now do cohorts of auto intenders, people who -- new mothers, we can find groups other than just Nielsen demographic groups.

And once we can find that and serve impressions, now we're free to use all of our inventory. So these -- in the magazine business or newspaper, you always look at your RIM inventory. If somebody bought 3/4 of a page, where is the other 1/4 going? We now have the ability to fill that in.

And that is really what's behind building out this ad tech platform all the way from Jelli, which allows us to take our broadcast radio and make it look like digital, and we, by the way, have servers in all the radio stations so we can control it centrally, to Voxnest and Triton and even through our Radiojar acquisition, which really help us put the pieces together.

So putting that together allows us to have an electronic marketplace for this product and allows us to fill the holes. And we feel confident that this was -- been one of a good investment and that we'll see the returns from it..

By the way, Ben, just one thing to tie things. It goes back to Jessica's first question in terms of getting value out of the tech sector, just to kind of tie those two together. Put aside what the percentage is for a second. Having that tech stack just allows you to more efficiently monetize all of your inventory. That's what I think about it..

Yes. And then just on the guidance, Rich, just to clarify, the July guidance but also the third quarter 20%, is that a reported number? Or is that excluding political? I think by the time you get to the end of the quarter, you're probably comping some political revenue..

No. That's a recorded number..

Your next question is from Stephen Laszczyk with Goldman Sachs..

Two, if I could. Just as a follow-up on the MDA and as I -- I was wondering if you could talk maybe more broadly about your sports content strategy.

What are the white spaces that you and the leagues are going after? What are the types of content in the sports arena? Are you looking for -- and sort of what opportunities on the advertising front do you think these types of content will open up for you?.

Yes. That's a great question. Clearly, we're a major player in sports and broadcast radio, podcasting and in digital. We carry team sports. We are play-by-play in a lot of our stations in across all the leagues. And we have sports-only stations. We have The Gambler. We have something that specialize in sort of sports betting.

And we have -- now we also have sports new segments, which run even on music radio stations. So we're able to aggregate these huge audiences for specific content. And we think it's a nice growth area for us.

And given our size and scale, we find that folks who are big in that area, Tom Castro, Colin Cowherd, Dan Patrick, et cetera, are part of our ecosystem and part of our family, and we're able to monetize that, I think, in ways others can't. And we're able to attract players because of the uniqueness of what we know..

Got it. And then just one more if I could. On TuneIn, I was wondering if you could maybe expand a little bit more on your decision to partner with them.

I'm curious, what benefits are you seeing from distributing your digital stations with them? And then on the ad sales representation piece of the agreement, how big does this platform-type business get for you guys?.

I think you've hit it. It's a platform play, and TuneIn's got a nice product. We hope it provides additional opportunities for listening. As you know, we have a strategy of distributed listening. We're not just our AM/FM radio stations. We're in over 250 other platforms.

In the case of podcasting, we make our podcasts available to Apple, Spotify, everyone else. We distribute it for the maximum audience. I think TuneIn is an extension of that strategy. And I think for TuneIn, they're looking at being able to use the kind of resource we have in terms of ad sales monetization.

And for us both, I think we both can benefit from the use of the technology platform. We've said early on when we did the Triton acquisition, we talked about how this tech stack not only has value for our properties, but it has value onto itself as a platform.

There is no -- in audio, no one has done the plate as they've done in display advertising and other forms of digital advertising in terms of a platform everyone can use. And we've set out to build that. And I think this is another step along that way..

Yes. And just one thing. It's really -- Stephen, I'm sorry, it's really a great question because if you think about it, it just kind of like -- hopefully, everything else we announce and do and when you hear and listen to it, you say, "Okay, this is their strategy." This is just how that fits in.

Just like the context that Bob put this in compared to podcasting around the other -- and you said the right word, how do we partner with them well, and that's what we're about..

And look, I would just also -- I think of another macro view of things. Companies either partner well or don't partner well. And I think -- I would like to think that one of the hallmarks of iHeart is we partner extraordinarily well, that we don't think we have to own everything.

Every time we look at something, should we make, buy or partner? And often partner turns out to be the best way to do it, especially if we find deals where it's beneficial to both parties equally. And those are the kind of deals we try and build, and those are the kind of partnerships we look for..

And our final question is from Dan Day with B. Riley Securities..

Just to go back to the balance sheet and the debt real quick. You talked about getting to that 4x target or better. Just any thoughts on -- your share price is trading well above that from a couple of years ago.

Just using that as a lever to bring down your debt? Or do you think you're pretty much offset with just kind of free cash flow generation and chip away at it over time?.

Well, right now, I think we have, as I think you've seen -- and we've been able to demonstrate that we've been able to grow our earnings, which is probably the best way in the world to improve our leverage. And we're -- that has been our primary focus..

Yes. And if you think about it, and hopefully I remember because we've been very consistent on this message, that we think with the capital structure we have, you just create tremendous stakeholder value, equity value by taking the cash and paying down the debt.

And by the way, just as a reminder to everybody, in terms of refinancing, we've got $1.5 billion 8 3/8% notes [indiscernible] next May. And so looking closely at that situation, again, is another way to create value because it is about 1/3 of our interest payments per year.

And then -- back on in terms of leverage, and then when we get to about 4x, we will talk to the Board, Bob and I will -- and Mike will talk to the rest of the Board and our independent Board of Directors with this single objective is, "Okay, how do we continue to pay stakeholder value? How do we continue to create equity value?" And then we'll make a decision at that time in terms of what to do with the free cash..

But I think until we get to that level, we are pretty single-minded on our focus..

Got it. Got it. Appreciate it. Just to follow up, any commentary on ad categories that are specifically affected by things like supply chain constraints, for example, auto dealers, labor shortages, like restaurants and bars? Just -- I'm assuming they've lagged a bit. If you could just provide what you're seeing out there for those.

And then any other categories that have outperformed your expectations sort of as we covered here?.

We usually don't talk about the sectors because we're so diversified. No single sector is a big impact on us. But -- and no single advertiser is a big impact on us.

But yes, we -- I mean, the good news is right now, I think even in sectors like auto, where there are clearly shortages and the chip shortage is affecting them, I think many of those auto companies, even dealers have decided, "Look, I still got to keep the demand there. Because when I do have supply, I want pent-up demand and go.

I don't want to have to start all over from marketing." And I think a lot of advertisers that cut back during the pandemic are looking out -- they're almost having to restart at a higher price.

So even the ones that are -- still know they've got growth ahead of them and they're not able to fulfill their demand yet also are continuing to advertise so that they continue to hold on to that brand relationship and that relationship -- overall purchase relationship with the consumer..

Great. All right. Thank you, everybody. Really appreciate -- we all appreciate, Bob, myself, Mike and the team, everybody tuning in to the iHeart story. And Mike and the team and all of us will be accessible and available after if you have any follow-up questions, but thank you very much..

Thank you..

Thank you again for joining us today. This does conclude today's presentation. You may now disconnect..