Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the iHeartMedia Q3 2024 Earnings Call. [Operator Instructions] I would now like to turn the call over to Mike McGuinness, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for taking the time to join us for our third quarter 2024 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 earnings presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings, including today's recent 8-K filing. Additionally, during this call we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, earnings presentation and our SEC filings, which are available in the Investor Relations section of our website. And now I'll turn the call over to Bob.

Thanks, Mike, and good morning, everyone. Before we discuss the company's third quarter operating results, I want to provide 2 important and positive updates. The first is about our capital structure. As you may have seen in our 8-K filed this morning, we're pleased to report that we have entered into a Transaction Support Agreement with a group of debtholders representing, on an aggregate basis, approximately 80% of the company's outstanding debt. We've agreed to pursue and the supporting debtholders have agreed to support exchange offer transactions that will be offered to all holders of the company's existing debt. The exchange offers will accomplish 3 things: one, they will extend the majority of our debt maturities by 3 years; two, our current consolidated annual cash interest expenses will remain essentially flat; and three, they will provide for some overall debt reduction. We expect the exchange offers to close prior to the end of the year. The high levels of support from our debtholders demonstrates the confidence they have in the future of our business, for which we are extremely appreciative. The Transaction Support Agreement marks an important step in our commitment to optimize our balance sheet, and it provides the company with the flexibility to remain focused on continuing iHeart's transformation. The second is an update on our ongoing modernization initiatives and the associated cost savings. As a reminder, iHeart is a high operating leverage business. Technology is the key to increasing our operating leverage, and it is a constant focus for us. It allows us to speed up processes, streamline legacy systems, and it enables our folks to create more, better and faster. We've now taken another significant step in our modernization journey: flattening our organization, eliminating redundancies and breaking down silos. It will be easier to do business…

Thank you, Bob. As I take you through our results, you'll notice that our third quarter 2024 EBITDA results were in line with our revenue and adjusted EBITDA guidance ranges. Our Q3 2024 consolidated revenues were up 5.8% year-over-year, in line with the guidance we provided of up mid-single digits. Our consolidated direct operating expenses increased 7.8% for the quarter. This increase was primarily driven by higher variable content costs related to the increase in digital revenues. Our consolidated SG&A expenses increased 6.4% for the quarter. The increase was driven primarily by the timing of higher noncash marketing expense due to the 2024 Summer Olympics and the iHeartRadio Music Festival as well as costs incurred in connection with the cost savings initiatives implemented in the third quarter. We generated third quarter GAAP operating income of $76.7 million, compared to income of $69 million in the prior year quarter. Our third quarter adjusted EBITDA was $205 million, within the guidance range we provided of $200 million to $220 million, and compared to $204 million in the prior year quarter. Turning now to the performance of our operating segments. And as a reminder, there are slides in the earnings presentation on our segment performances. In the third quarter, the Digital Audio Group's revenues were $301 million, up 12.7% year-over-year, and they comprised approximately 30% of our third quarter consolidated revenues. The Digital Audio Group's adjusted EBITDA was $100 million, up 6.8% year-over-year, and our Q3 margins were 33.2%. Within the Digital Audio Group are our podcasting revenues of $114 million, which grew 11% year-over-year, and our nonpodcasting digital revenues of $187 million, which grew 13.6% year-over-year, reflecting the investments we have made in building out our more diversified digital capabilities, even though some of those incremental revenues came in at a slightly…

[Operator Instructions] Your first question comes from the line of Stephen Laszquez, with Goldman Sachs.

Two, if I could. Maybe first on the '25 guide. Bob, your guidance for next year for revenue implies some nice growth in the underlying business, ex political. I'm curious if you could just talk a little bit more about what you're hearing or seeing from your advertising partners that give you confidence in the ad market improving heading into next year, what verticals do you see recovering or outperforming going into next year. And then maybe one for Rich on the EBITDA guide. Your guidance for adjusted EBITDA up $20 million year-over-year for next year, even with $150 million in cost efficiencies. Just curious why more of that isn't flowing down to the bottom line. Could you perhaps help us think about the margin profile of the underlying business and how we should think about the puts and takes of margin next year?

Thank you, and let me hit -- look, I think at the end of the day we feel good about next year because I think it's continuation of what we're feeling this year, which is a recovery year. It's a little bit of a backup here waiting to see what happened in the election, and I think the sense you hear from the election regardless of your political belief is people think this is very good for business, and we're hearing that from sort of Main Street on up. So I think that's good as sort of an overall complexion about what's going on. And then I think from our standpoint, it starts with consumers use our products. We have more listeners today on our broadcast radio than we had 10 years ago. And I think there's an increasing realization, pendulum swing, an increasing realization that reach is key. Remember, the marketing formula is basically how many people hear a message times the response rate equal the result. There's been a lot of attention on response rate, and reach got a little forgotten. Given the size we have and the unique scale we have, we think that plays to our strength. I think the second thing to think about is really what ad tech is doing for us. And it is allowing us to take that broadcast revenue -- broadcast radio inventory and put it into digital buys. And we are increasing that. Obviously, we talked a lot about technology in terms of cost savings, but technology is key in terms of our ad tech and allowing us to participate in that, and I think we'll make great progress on that next year as well.

And Steve, just to go to your second one and pick up here a little bit in terms of back to the bottom line, I'd just say a couple of things and just to level set, make sure everybody is [indiscernible]. If you look at it, we said net that we're going to reduce our overall cost base by $150 million in 2025 compared to 2024. And just as a reminder, which we all know, next year is a nonpolitical year, and we've indicated that our political revenue, which is slightly higher than the highest we ever had, which is about $170 million. So with all that, we projected out our EBITDA. And I'm not sure everybody has had a chance to look at the Transaction Support Agreement that we filed this morning, but just for everybody's benefit, we announced that our projected number is $770 million of EBITDA. And I would say for context, I think I'm sure most people are surprised that we're projecting an up year after coming off of a presidential election cycle year. And when we announced the cost programs this morning, as Bob highlighted, and the benefit in terms of that we're getting out of technology and still be able to continue to grow revenue, and if you do the straight-up math, you'd say, gee, shouldn't more be falling to the bottom line? But we also -- Bob highlighted in his remarks that we did see a slowdown in some advertising going into the election, like I think many companies did, due to the uncertainty. We are hopeful that that's going to come back very soon, and Bob alluded to that in what he just said in terms of the way people are feeling. But at the same time, I would say that we want to make sure that we're not overly optimistic or, therefore, we're conservative a little bit as we look out into next year's numbers, that that doesn't take away. I think if you look at the, again, Transaction Support Agreement, you'll see that we've got Multiplatform Group growing in the low single digits and DAG growing in the mid-single digits out there. So just a lot of puts and takes there, but we just wanted everyone to have a high level of confidence, as we do, in hitting those numbers, going forward.

And if I could just add something, too, it's I think there's a misperception when looking at our company that our fixed costs are static and can only go up. The truth is a company like iHeart will benefit enormously from technology. And I think this cost-cutting and restructuring of the company and how we do business is an example of that. We will -- we expect it to continue, technology to continue, to fundamentally alter the cost structure of our company. And if you think about that, it allows us to bring down costs, improve margins. And you couple that with our high-growth digital business and what we've said before we believe to be in the long term the low-growth, but still growth, Multiplatform business, and you get some understanding about why we're so excited about our future and the role technology will play in delivering that for us.

Your next question comes from the line of Jim Goss, with Barrington Research.

It was interesting that you noted you have more broadcast listeners than 10 years ago. You also -- well, Radio Ink yesterday carried some articles about, I think, some of the consolidation changes you were making, aiming to save millions. And in the past, you have stressed that radio is companionship. I was wondering to the extent that you're making cuts in management, maybe the AI aspects can address that. But in terms of the on-air talent, I wonder if that continues to erode the value of the quality of the offering to listeners and whether that is a potential risk you're facing? Or is --? And how do you do this? Because I think it's all attempted to maintain the profitability of that broadcast sector. So maybe you can discuss that, if you would. And then I have a couple of others.

Sure. Look, I think that article got it completely wrong. I think what we're doing is not getting rid of air talent. What we're able to do now because we've got technology is we can take talent we have at any location and put them on the air in another location. So it allows us to substantially upgrade the quality of our talent in every single market we're in and allows us to project talent into the situations in which they're going to have the best impact. You're 100% right, it's all about companionship. And they -- the great talent are great talent because people all want to be their friends. When you look at Ryan Seacrest, he's America's favorite friend. Everybody wants to be his friend. Or Charlamagne tha God or Bobby Bones or Steve Harvey, et cetera. So we are increasing our relationship with the consumer, and we're using technology to do it. Now unfortunately, what that means is that there's not a slot for everybody. Just because somebody is willing to live in the market doesn't assure them that they're the best person for that slot. Before we had this kind of technology, that was the criteria. You had to be willing to live in Hattiesburg, Mississippi, or Jackson, Mississippi, 2 of my old hometowns, in order to be on the radio. Today, technology frees us of that constraint, and our programmers can now make the decision about who's going to be the best talent in that time slot on that radio station, regardless of where they live. In the old days, it cost an enormous amount of money to try and broadcast from another town. It's not an issue today. So I think what we're -- the moves we're making is we're breaking down silos, we are speeding up processes, we're streamlining these legacy systems. And we believe what it does is enable our folks to create more, better and faster. We should be easier to do business with us, easier to get our business done and accelerate not only the listenership, but the revenue growth that comes from that as well.

Okay. And a couple of others that might be somewhat related. You outlined your mix between Multiplatform, Digital Audio sales and AMS. 2020, 81% Multiplatform, 12% Digital Audio, to 62% Multiplatform, 31% Digital Audio now. What would that look like in a few years? Do those lines start to cross? And sort of in a related area, you also outlined podcast versus radio in terms of the complementary nature of in-home versus out-of-home. I'm wondering, is there an ability to cross-sell these opportunities, where you can address the people who are interested in in-home in both ways at the same time versus the out-of-home? How do you approach that?

Let me start with your second question, is, yes, absolutely. We are -- the question is, how did we get to be so big in podcasting? We're bigger than the second- and third-largest publishers combined. Why? We use radio? We use radio to promote the podcast, but often the podcasts are actually radio-on-demand. I mean, there's an argument, if you sort of think about what is podcasting, that it is sort of the Netflix of the audio business, that if you believe Netflix is sort of TV-on-demand, then podcasting is radio-on-demand. And actually, many of the big podcasts are actually radio shows. The Breakfast Club, one of our biggest podcasts, also a radio show. So yes, the idea of combining the two in terms of appealing to the audience and also combining the two in terms of reach for advertisers, that if an advertiser goes, ;I love this podcast, but I need more reach from it, we go, ;Great. We've got that audience on broadcast radio. So we can now -- now that you know this is it, we've got the looks-like on radio, and we can push that out for you as well. So it works on both the consumer level and also works on the advertising level. And it's really at the heart of our secret sauce about why we've been able to build the podcasts so big. And also, you're right, just having those big podcasts also reflects well on the radio shows, which I think strengthens their appeal as well.

The only thing, and I'll come to your first question, I might add, just as a reminder, we have a strategy in the way we operate the company, that any of our almost 1,000 advertising salespeople can sell anywhere, anytime, any place in the country, whether you're a national salesperson or a local salesperson. And when we talk about our audio tech stack and everything we've built out in terms of technology, that supports that strategy. So it's not -- I think this is not theoretical. We've been doing this for a number of years. If you look at in terms of your first question, growth rate, again, I just -- we did put out projections for a number of years. And you'll see in those projections, and I think everybody can then do the math, that we are projecting out Multiplatform, as we've stated previously, we've now just put numbers to it, to be, as Bob mentioned earlier, a low single-digit revenue growth. Again, just remember, tremendous financial characteristics, tremendous conversion into free cash flow, low CapEx, favorable working capital. And then with Digital, we expect the overall DAG Group, which includes podcasting, to be in the mid- to upper single-digit revenue growth, going forward. And you also -- I'll just take a second to comment, because we normally get the question in terms of margins. We tell people on DAG to project out mid-30 type percent margins on an annual basis. Don't look at these quarterly. And again, I think you'll see that for 2024, for this year, that we expect to achieve that goal.

[Operator Instructions]

Operator, why don't we wait for a few seconds, just to make sure everybody has a chance to ask any question they'd like to. Any other questions out there? I want to make sure everybody has a chance.

There is a question from David Hamburger, with Morgan Stanley.

So I'm curious, just with regard to the Transaction Support Agreement, how much cash are you allocating to debt reduction? It looks like it's kind of well below your cash balances as they sit today and your expectation for free cash flow of $200 million next year as well. And so can you talk a little bit about, as you think about the leverage and the deleveraging that you'll undertake, how much of that will be attributable to, like, actual gross debt reduction? And to the extent that you have excess cash sitting on the balance sheet, what's your expectation on how you're going to utilize that cash?

Thanks for the question. Look, we haven't -- what we stated publicly, let me just go back, in terms of the Transaction Support Agreement and the agreement with, at this point, 80% of our existing term loan holders and note holders, again, I'm not sure everybody has had a chance to read through it and see everything this morning, we're very pleased with the outcome that we're going to extend our maturities to 2029, 2030. I think probably the most-often asked question we've had in the last year or so is, ;Are you going to be able to keep your cash interest expense flat, going forward? And we've essentially done that, and we've captured some debt discount. We haven't gone into any more details other than that. I will point out that today our net leverage is about 7.2x, as we reported. We expect to be down to about 6x. And again, as a reminder, that's EBITDA to net debt. We expect to be at about 5.5x by the end of '25. And if you look at what, again, was filed this morning, we expect to improve to about 3.2x when you get to the end of 2028. So again, very pleased with the progress that we're making. Any other questions? Well, then we want to thank everybody, Bob, myself, the rest of the management team, for listening to the iHeart story. And we are, as always, available for questions once we get off this call. But thank you all for taking the time.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.