Good afternoon, everyone, and thank you for taking the time to join us for our second quarter 2022 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.

In addition to our press release, we have an investor presentation that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our financial performance and operating results.

These statements are based on management's current expectations, and actual results could differ from what is deemed as a result of certain factors identified on today's call and in the company's SEC filings. Additionally, during this call, we will refer to certain non-GAAP financial measures.

Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, investor presentation and our SEC filings, which are available in the Investor Relations section of our website. And now I'll turn the call over to Bob..

Thanks, Mike, and good afternoon, everyone. Thank you for joining our second quarter 2022 earnings conference call. We're pleased to report another quarter of solid operating results for iHeart in Q2 in consumer usage, revenue and earnings growth. And I want to thank all of our team members who made this performance possible.

I also want to note that in Q2, we generated strong free cash flow of $127 million, with a Q2 adjusted EBITDA-to-free cash flow conversion rate of 54%. Free cash flow generation is more important than ever in times like this, and it's a financial metric that we continue to prioritize.

We believe that our ability to consistently generate such strong free cash flow with exceptional conversion characteristics sets us apart from other companies and is one of our most important financial attributes.

We also feel that the steps we've taken in the past to make the company leaner and more cost-efficient, even as we've invested in our high-growth businesses, are reflected in these results and help drive our margin improvements. Now, let me take you through some of the highlights of our performance.

In the second quarter, consolidated revenues grew almost 11% compared to prior year, within the guidance range we provided of up 10% to 14%. We generated adjusted EBITDA of $237 million for the quarter, slightly above the midpoint of our guidance range of $225 million to $245 million.

Our Q2 adjusted EBITDA grew 29% versus prior year, and our Q2 adjusted EBITDA margins improved by 345 basis points versus prior year to 25%. Looking at our operating segments individually.

We continue to deliver industry-leading growth in our Digital Audio Group, with revenues increasing 28% versus prior year, and our margin expanding to 31.2%, a 380 basis-point improvement from prior year.

Within the Digital Audio Group, our podcast revenues, which grew 60% versus prior year, outperforming the overall broadcast industry growth of 22% according to MAGNA, and our digital ex podcast revenues were up 15% versus prior year, also outperforming the industry growth of 11% according to MAGNA.

As a reminder, included in our digital ex podcasting business are our streaming products, third-party extension products, social, OTT, display advertising and our ad tech businesses, which you can see illustrated on Slide 14 of our investor deck.

This range of products allows us to offer holistic advertising solutions, leveraging our deep relationships with our consumers to our tens of thousands of advertisers.

All of this is powered by our sales strategy of any seller, anywhere, can sell anything, a unique iHeart capability that is enabled by the unparalleled ad tech we've built and acquired and enhances the power of the largest sales force in audio.

In March, according to Podtrac, iHeartRadio was again ranked the number one podcast publisher in the U.S., with more downloads than the next two largest podcast publishers combined. And as a reminder, downloads are the best approximation of ad inventory, which correlates to revenue potential.

As you can see on Slide 7 in the investor deck, publishing is by far the most profitable segment of the podcasting industry, and that's the reason it remains our focus.

That being said, not all podcast publishers are created equal, and we believe the fact that our podcast margin is accretive to our overall company margin, as evidenced of the success of our strategy to build or partner with creators to build our own podcast as opposed to buying content creators.

And as the largest podcasting publisher in the U.S., with the widest range of and highest ranked content, as measured by Podtrac, we believe our experience and capabilities as audio content creators, combined with our unique ability to promote and build audiences for our podcast, utilizing our broadcast radio assets that uniquely reach 90% of U.S.

consumers, gives us an important edge. And as a result, we believe we will continue to take share in this growing marketplace.

Our Multiplatform Group, which includes our broadcast radio, networks and events businesses, continues to demonstrate that even in uncertain times, it's also a growth engine for the company in both revenue and earnings as well as powering the creation of our new platforms.

Multiplatform Group revenues grew by 5% year-over-year, and adjusted EBITDA margins improved 80 basis points year-over-year to 30.7%.

Although our Multiplatform revenue is more sensitive to the current economic uncertainties than our Digital segment, we believe that the Multiplatform Group will continue its growth trajectory over the long term for 4 important reasons.

One, our broadcast radio assets have greater reach than any other mass media service, including Facebook and Google, and iHeart's broadcast reach is almost twice that of the largest TV network and almost 4x that of the largest streaming audio music service.

And since every marketer benefits from reaching more potential consumers with their message, reach has always been, and will continue to be, key, and we have an asset that no one else has. Two, our company's mission to get everyone in America a friend anytime, anywhere is even more relevant in turbulent times, as we've seen again and again.

We think that service to the community, when needed the most, creates not only large and loyal audiences, but it's the underlying reason why radio has twice the trust of social media and more than even TV and have seen an increase in listening, according to the latest Nielsen report.

Three, according to Miller Kaplan, we continue to take share from and outpace our competitors in the radio advertising space. And we expect that to continue as a meaningful vector of growth.

And finally, advertisers who've lived through challenging economic times like these know that materially cutting back their marketing today will result in them losing sales over the long term. Instead of pulling back entirely during times of uncertainty, these marketers often look for more efficient means of engaging with their customer base.

As radio is the least expensive medium with the largest reach, we believe iHeart is well positioned to continue to deliver significant and unique value to our advertising partners. Before Rich takes you through the detailed financials, I want to give you some insight into how we're navigating this period of economic uncertainty.

We believe that our current stock price, like most ad-supported companies, reflects the fear that a recession will hit our sector. Having said that, I want to remind you that our management team does have a long and successful track record of operating through times like these.

More importantly, I would like to point out that our business has a meaningfully different composition than it did even in 2020. Back then in Q1 2020, digital revenues represented just 12% of our total company revenues, while today, they represent 26% of our total revenues, and podcasting alone now represents almost 10% of our total revenues.

And as you evaluate our business, remember that back in 2020, even though there was a major advertising downturn, our total digital revenues actually grew 26%, and our podcasting revenues alone grew 91%.

So we feel the increased relative size of our digital and podcasting businesses has fundamentally changed the makeup of the company, and it puts us in a stronger and more resilient position than we've ever been in to weather any advertising downturns.

In summary, we started the year with the expectation that 2022 would be a robust advertising year, as did most of our clients. And the unfolding macro events, beginning with the Russian invasion of Ukraine, and its many secondary effects have added uncertainty to the advertising marketplace.

While there are certainly some pockets of advertising softness, given the strong positions of our Digital Audio and our Multiplatform Groups with both consumers and advertisers, our industry-leading unified ad tech stack for audio and our unparalleled reach, combined with our focus on necessary cost reductions and our disciplined capital allocation as well as the company's strong free cash flow characteristics, we believe iHeart is well positioned for the future.

And Rich will share with you some specific expectations, along with the details of our earnings.

Rich?.

Thanks, Bob. As I take you through our results, you'll notice that, as Bob mentioned, we performed well despite external factors that have been impacting the economy. Turning to Slide 19 of our investor deck. Our consolidated revenues were 10.7% year-over-year, within the guidance range we provided of about 10% to 14%.

Our direct operating expenses increased 14% for the quarter, driven primarily by the increase in revenue, which drives higher content and profit sharing expenses, third-party digital costs and expenses related to the return of local and national live events.

Our SG&A expenses increased 2% for the quarter, driven by increased compensation expense related to investments in key growth areas.

As discussed on our Q1 call, higher sales commission is due to higher revenue and increased bad debt expenses, partially offset by lower trade and barter expense and lower bonus expense compared to our over target performance from prior year.

Our second quarter GAAP operating income was $82.9 million compared to an operating income of $28.1 million in the prior year quarter. And our second quarter adjusted EBITDA was $237.2 million compared to $184.5 million in the prior year quarter.

If you turn back to Slide 4, I will provide you additional color on the performance of our operating segments. And as a note, there are additional slides in the investor presentation on our segment revenue performance. Digital Audio Group revenues were up 28% year-over-year, and adjusted EBITDA was up 45% year-over-year.

Within the Digital Audio Group are our podcasting revenues, which grew 60% year-over-year; and our non-podcasting digital revenues, which grew 15% year-over-year. As a point of reference, Slides 7 through 12 in our investor deck show in detail the podcast ecosystem dynamics and our leadership position in this high-value segment of publishing.

Looking again at the Digital Audio Group as a whole, margins expanded in the second quarter to 31.2%, up from 27.4% in the prior year quarter. Even with the incremental sales support investments we noted on our Q1 earnings call, we had significant adjusted EBITDA margin expansion in the second quarter.

This margin expansion reflects the success of our products and the previous investments we made in our digital business as well as the natural margin expansion we expect as a result of our operating leverage. Multiplatform Group revenues were up 5% year-over-year, and adjusted EBITDA was up 7% year-over-year.

Multiplatform Group adjusted EBITDA margins were 30.7%, up 80 basis points from 29.9% in Q2 2021. I'll remind you that, as we noted on last year's earnings call, in Q2 2021, we benefited from some COVID-related bad debt reversals, which makes our prior year expense comparisons challenging.

If we normalize this for bad debt reversal, our adjusted EBITDA flow-through in Q2 for Multiplatform would be in the normal range we expect of 70% to 85%. And as a reminder, the vast majority of our political spend occurs in the back half of the year, primarily in the fourth quarter. Audio & Media Services Group revenues were up 16% year-over-year.

And adjusted EBITDA was up 8% year-over-year. On Slide 23, there is a summary of our debt. At quarter end, we had approximately $5.3 billion of net debt outstanding, which includes a cash balance of $295 million.

We also continued to improve our net debt-to-adjusted EBITDA leverage, ending Q2 with net debt leverage of 5.9x, an improvement from 6.4x at the end of last quarter. As a reminder, the terms of our debt structure include no material maintenance covenants, and there are no debt maturities prior to 2026.

During the quarter, we also took a number of actions designed to fortify our financial position. We proactively repurchased $114 million of the principal balance of our 8 3/8 senior unsecured notes for $105 million in cash, below par value, which we expect to generate approximately $10 million of annualized interest savings.

And we entered into a new ABL facility, which is due in May 2027, replacing the previous ABL facility, which was set to expire in 2023. We will continue to actively monitor market conditions and work to improve and optimize our capital structure as opportunities arise.

As Bob mentioned, one of the company's most important financial attributes is our strong free cash flow generation. And we are pleased that in the second quarter, we generated $106 million of free cash flow, and this was with elevated levels of capital expenditures due to our real estate consolidation project.

When including the proceeds from real estate sales, our adjusted free cash flow was $127 million, resulting in a very strong adjusted free cash flow conversion of 54%. Our cash balance is $295 million, and our total available liquidity is $715 million.

We remain focused on free cash flow generation and are committed to utilizing that cash in a manner that creates the most value for our shareholders. As Bob mentioned, the rest of the year is characterized by advertiser uncertainty. So in that context, we'd like to provide the following guidance.

Starting with the third quarter, we expect our Q3 2022 revenues to be up approximately 3% to 7% year-over-year. We are still closing the month of July, but our preliminary July consolidated revenues were up approximately 4% compared to 2021.

As a reminder, the majority of our political advertising occurs in Q4, so it will have only a small impact on our Q3 revenues. We also expect to generate $240 million to $255 million of adjusted EBITDA in Q3 2022. As we're looking at full year adjusted EBITDA guidance, even with this uncertainty, we still think we'll be in the zone of $1 billion.

And I will remind you that the fourth quarter is always the biggest advertising revenue quarter for the year, and it will be enhanced with political advertising this year as well.

I also want you to understand that, while we're not calling out specific numbers today, we continue to maintain our rigorous allocation of capital and to work on identifying additional cost efficiencies, utilizing new technologies to increase our efficiencies, reducing our lower ROI discretionary spending and ensuring that we have the right organizational structure and cost base in place to support our growing businesses today and into the future.

Further, for the full year, despite being a full cash taxpayer, we expect to generate in the range of $350 million of free cash flow. Consistent with our previous guidance, we expect our capital expenditures to be between $150 million and $165 million.

And finally, we continue to make significant progress towards our previously announced leverage target of approximately 4x. We appreciate you joining our second quarter earnings call. And again, I'd like to thank the entire iHeart team, who continue to deliver for our communities, advertisers and our shareholders.

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

[Operator Instructions] We'll take our first question today from Daniel Day, B. Riley..

Just first of all, Bob, maybe just drill a little more down into the commentary around how July pacing up 4%. A lot of your other radio peers have reported national certainly appears to be weaker than local. So maybe just parse that out.

Are we looking at year-over-year declines in national, what with local holding up pretty well so far? Or what exactly are you guys seeing after quarter end?.

It's a little hard. You'll notice, we don't break out national from local because we think that, that distinction is sort of blurred in a company like ours, where any seller, anywhere, can sell anything. And so we look at it overall.

And again, as we've pointed out in the past, we've got no advertising category that's over 5% of our revenue, no single advertiser over 2%. So we have a remarkable diversity here. And even times like this, you've got some folks who are -- it's good for their business, as you find some people that are softer.

And I think that mix probably plays pretty well for us..

The only thing I might add is just, I'm not quite sure who you're putting the category of competitors. But at least, from a radio standpoint and a rodeo standpoint, nobody else has got the national footprint that we have also. So I'm not kind of looking at that mix for anybody else compared to ourselves.

It's probably a little bit apples and oranges just to the composition of our assets..

Understood. And then a follow-up for me. I know the focus with the free cash flow has been on debt reduction. You guys have done a great job and did a great job in the quarter with that.

Just when you look at where the stock is trading right now, is there a level where you think the buyback math just makes too much sense and you might switch to share repurchases before you get to that 4x net debt leverage goal, or is that just not something you're considering?.

Look, it's something that we're constantly challenging ourselves how we improve the balance sheet and the total capital structure of the company. We saw, and we highlighted on the call, that we bought back well over $100 million of [indiscernible]. This quarter is probably overall debt reduction, and we bought them back at an attractive price.

And you could do math, and it's got a great yield on there. At this point, we've made the decision to continue to stay the course. We may get, as we talked about, approximately 4x, and we think that's the best way to create shareholder value, especially in a levered capital structure, which I think you'd agree.

But it's something we're constantly challenging ourselves on and the Board..

[Operator Instructions] Next up is Steve Cahall, Wells Fargo..

Thanks for the 4% growth number for July. I would love to just kind of put that in context of a trend line. I think it feels like a lot of advertisers maybe slowed down proactively in June. So I would love to get your sense, did you start to see things improve in July? So any kind of inflection maybe on July versus June, whether upwards or downwards.

And then, Rich, just a couple of housekeeping ones. First, the $350 million in free cash flow. Does it matter if that includes or excludes the real estate sales? I know you kind of had them in free cash flow in the press release. And then also you said $1 billion in EBITDA would be kind of in the zone.

Is $900 million in the zone? Is $950 million in the zone? It's just kind of a new phrase, so sorry for that annoying one..

Well, let me just hit the one about the monthly. I think there's -- it's up and down a little bit. But we have seen a trend that we see more softness for the first month of the quarter than we do the other 2 months of the quarter.

And so our thesis is, that in times of uncertainty, first month of the quarter, everybody takes a beat and waits and looks and then continues to spend in the other months. So other than that, I can't give you much insight. And we continue to watch it. Again, having a diverse group of advertisers gives us some advantage there, I think..

Yes. And then, Steve, just to cover your second question. So on the free cash flow, just to be clear, we generated $106 million of free cash flow. That included about $20 million of proceeds from real estate sales. If you kind of adjust it, that free cash flow is $127 million.

So, -- and I think we also -- if you kind of look at the investor deck, from a transparency standpoint, it is well laid out there, and that's a 54% EBITDA free cash flow conversion. So we feel very good about that. . From the $1 billion EBITDA zone, look, and you're spot on, but we just want to make sure we reflect certain marketplace.

But let me give you or everybody a little bit of a road map that hopefully gives everybody some comfort. If you take our first 6 months EBITDA and then you combine the midpoint of our guidance range that we just gave you and articulated, you would get to $630 million of EBITDA for the first 9 months of the year. So that's just math.

First 6 months, take the midpoint of the Q3, and together you get to $630 million. So again, if you do the math, that would say we'd have to be approximately $370 million in Q4 overall. Just as a reminder, Q4 is by far our biggest quarter in the company. And just to be clear, it always has been our biggest quarter in the company.

I think last year, we did approximately $294 million of EBITDA in Q4. But again, this is a political year, so we expect the fourth quarter number to be significantly benefited by political spending out there.

And I think we highlighted this on the call, the majority of political spending comes in the second half of the year, and by far, the biggest piece of that comes in the fourth quarter of the year. So hopefully, that's helpful to yourself and everybody else, both in a road map and giving you comfort about how we're thinking about it..

At this time, there are no further questions. I'll hand the conference back to our speakers for any additional or closing remarks..

Well, we want to thank everybody for the questions. Thanks, everybody. Thanks, everyone, on the call for listening to the iHeart story, and thank you for your continued support. And Bob and I and Mike McGuinness and the team are always available for follow-ups, and we look forward to speaking to everybody soon. Thank you..

Thank you..

And everyone, that does conclude today's conference. Thank you all for your participation..