iHeartMedia, Inc. (Nasdaq: IHRT) today reported financial
results for the quarter and year ended December 31, 2019.
Financial Highlights
- Solid GAAP revenue performance in Q4 '19 and FY '19, flat in
the quarter and up 2.0% year-over-year; GAAP revenue excluding
political grew 4.3% in Q4 '19 and 4.2% in FY '19
- Q4’19 and FY 2019 GAAP earnings year-over-year comparisons
highly affected by one-time items related to bankruptcy and
emergence (completed in May 2019), resulting in a decrease in
Operating income of 36.5% and 26.6%, respectively
- FY 2019 Adjusted EBITDA1 increased 2.5% year-over-year
- Key actions initiated since emergence to improve the financial
performance of the Company include:
- The completion of three debt transactions that will reduce
annualized run-rate interest expense by ~$40 million2
- Modernization initiatives that are expected to deliver $100
million run-rate savings by the middle of 2021; expect to achieve
approximately 50% of run-rate savings in 2020
- FY 2020 guidance reflects significant growth in revenues,
Adjusted EBITDA1 and Free Cash Flow1, powered by multiple
drivers
Full Year 2019
- Revenue of $3,683.5 million, up 2.0% year-over-year; excluding
political revenue1, revenue increased 4.2%, driven by growth across
all revenue streams
- Digital revenue increased 32.2% year-over-year
- GAAP Operating income of $506.7 million was down from $690.1
million in the year ended December 31, 2018, driven primarily by
the impact of fresh start accounting and higher impairment
charges
- Adjusted EBITDA1 of $1,000.7 million, up 2.5%
year-over-year
- Strong cash generation in the fourth quarter resulted in
year-end cash balance of $400.3 million
Fourth Quarter
- Revenue of $1,026.1 million, flat year-over-year, excluding
political revenue1, revenue increased 4.3%, driven by growth across
all revenue streams
- Digital revenue increased 33.6% year-over-year
- GAAP Operating income of $165.1 million was down 36.5%
year-over-year, driven primarily by the impact of fresh start
accounting
- Adjusted EBITDA1 of $306.1 million, down (0.6)%
year-over-year
2020 Guidance
- Revenue Growth: up mid-single digits, driven primarily
by political and continued growth in Digital
- Adjusted EBITDA1: up high-single digits with margins
improving to 28% - 29% (vs. 27.2% in FY 2019) driven by:
- Contribution of high-margin political revenue from presidential
election year
- Continued Digital growth driven by podcasting
- Modernization efficiencies
- Free Cash Flow1 of $300 million to $330 million driven by
strong earnings growth and including investments in modernization
initiatives totaling ~$100 million; $400 to $430 million on a
normalized basis
1 See Supplemental Disclosure Regarding Non-GAAP Financial
Information.
2 Compared to the expected annualized cash interest payments
indicated by the terms of the debt structure originally issued upon
iHeartCommunications’ emergence from bankruptcy on May 1, 2019.
Statement from Senior Management
“We are extremely proud of all that iHeart and its employees
accomplished in 2019. After emerging from Chapter 11 in May with a
healthier capital structure and listing on the Nasdaq in July, we
continued to execute on our strategic plans to build our strong
operating business and drive shareholder value,” said Bob Pittman,
Chairman and Chief Executive Officer of iHeartMedia, Inc. “As the
number one audio company in the U.S. based on reach, we look
forward to expanding our unequaled multi-platform leadership
position and leveraging the investments that we have made to
modernize our infrastructure and become more efficient, effective
and competitive. The audio environment has never been more
exciting, and we look forward to leading - and capitalizing on it
in 2020 and beyond.”
“Our financial performance in 2019 was underpinned by the reach
and resilience of our traditional business, profitable growth in
our other platforms including our Digital businesses and proactive
improvement of our capital structure,” said Rich Bressler,
President, Chief Operating Officer and Chief Financial Officer.
“Through our innovation and thought leadership in areas like
podcasting and our SmartAudio suite of targeting, analysis and
attribution services for advertisers, we are at the forefront of
driving the audio revolution. We will continue to work to build
long-term shareholder value by maximizing our Free Cash Flow and
de-leveraging our balance sheet.”
Consolidated Results of
Operations
Full Year 2019 Results
Revenue for the year ended December 31, 2019 increased 2.0%, or
4.2% excluding the impact of political revenue year-over-year. Our
growth was driven primarily by our Digital and Networks revenue
streams, which grew 32.2% and 5.6%, respectively. Podcasting and
other digital revenue were the primary drivers of our Digital
revenue growth, while growth in our Networks business was driven by
both our Total Traffic & Weather network and our Premiere
network. Broadcast revenue declined by (1.4)% on a reported basis,
and grew 0.3% excluding the impact of political revenue. Audio
& Media Services declined (10.4)% on a reported basis and
increased by 3.2% excluding the impact of political revenue.
Sponsorship revenue increased by 4.4% year-over-year. On a
full-year basis, all of our revenue streams grew year-over-year
excluding the impact of political revenue.
Direct operating expenses increased 9.9% compared to the prior
year, driven primarily by higher compensation-related expenses,
including from the acquisitions of Stuff Media and Jelli in the
fourth quarter of 2018, as well as higher music license fees,
digital royalties and content costs from higher podcasting,
subscription and other digital revenue. Included in this increase
is the impact of updated estimates to music license fee expenses
primarily related to prior years for which payments were made under
interim agreements with performance rights organizations and that
are subject to ongoing negotiations. The increase in direct
operating expenses also includes a $6.3 million increase in lease
expense due to the impact of the adoption of the new leasing
standard in the first quarter of 2019 and the application of fresh
start accounting. SG&A expenses decreased (0.3)% for the year
ended December 31, 2019 driven by lower commissions as a result of
our revenue mix, lower bad debt expense resulting from improved
collections, and lower trade and barter expenses, primarily
resulting from timing. The decrease in SG&A expenses was
partially offset by higher third-party digital fees, driven by the
increase in digital revenue, along with higher employee costs,
primarily resulting from the acquisitions of Stuff Media and Jelli
in the fourth quarter of 2018.
Corporate expenses increased $7.1 million during the year ended
December 31, 2019 compared to 2018, as a result of higher
share-based compensation expense, which increased $24.8 million as
a result of our new equity compensation plan entered into in
connection with our Plan of Reorganization. This increase was
partially offset by lower employee benefit costs and lower
amortization of retention bonuses related to the bankruptcy for
which amortization ceased on the May 1, 2019 emergence date.
Operating income decreased 26.6% due primarily to higher
depreciation and amortization expense as a result of fresh start
accounting applied upon our emergence from bankruptcy in May 2019,
higher non-cash impairment charges, share-based compensation
expense in connection with our new equity incentive plan and the
impact of updated estimates to music license fee expenses related
to prior years.
Adjusted EBITDA for the year ended December 31, 2019 grew 2.5%
year-over-year to $1,000.7 million, with margins increasing to
27.2% from 27.0%.
Fourth Quarter 2019
Results
In the fourth quarter of 2019, total company revenue was flat
year-over-year on a reported basis and excluding the impact of
political revenue, total company revenue grew 4.3%. In our
traditional radio business, broadcast revenue declined by (2.7)% on
a reported basis and increased 0.8% excluding the impact of
political revenue, while Networks grew 2.2% year-over-year driven
primarily by growth in our Total Traffic & Weather network. Our
Digital revenue stream grew 33.6% primarily driven by growth in
podcasting as well as other digital revenue. Audio & Media
Services declined (19.9)% on a reported basis and increased by 4.5%
excluding the impact of political revenue. Sponsorship revenue
increased by 5.3% year-over-year. All of our revenue streams grew
year-over-year excluding the impact of political revenue,
demonstrating the continued momentum in our business.
Direct operating expenses increased 15.0% driven primarily by
higher music license fees, mostly related to higher podcasting,
subscription and other digital revenue. Included in this increase
is the non-cash impact of updated estimates to music license fee
expenses primarily related to prior years for which payments were
made under interim agreements with performance rights organizations
and that are subject to ongoing negotiations. Selling, General
& Administrative ("SG&A") expenses decreased (1.3)% driven
primarily by lower commissions as a result of our revenue mix and
lower bad debt expense. The decrease in SG&A expenses was
partially offset by higher revenue-driven third-party digital
fees.
Corporate expenses decreased $(1.3) million during the quarter
ended December 31, 2019 compared to the three months ended December
31, 2018, as a result of lower employee benefit costs, partially
offset by share-based compensation expense, which increased $5.8
million as a result of our new equity compensation plan entered
into in connection with our Plan of Reorganization.
Operating income decreased (36.5)% due primarily to higher
depreciation and amortization expense as a result of fresh start
accounting applied upon our emergence from bankruptcy in May 2019
and the impact of updated estimates to music license fee expenses
primarily related to prior years.
Adjusted EBITDA decreased year-over-year by (0.6)% to $306.1
million with a margin of 29.8%. Adjusted EBITDA was impacted by
comparisons against a mid-term political election year in which
revenue was weighted to the fourth quarter of 2018, as well as
changes in overall revenue mix.
We generated robust operating cash flow of $205.4 million, down
(8.9)% year-over-year and Free Cash Flow of $175.7 million, down
(6.4)% year-over-year. These year-over-year decreases were
primarily driven by an increase in cash interest payments of $103.4
million related to the debt issued upon our emergence in May 2019.
This compares to the prior year when our cash interest payments
were $1.2 million as the Company was in bankruptcy. The Operating
and Free Cash Flow that we generated during the quarter increased
our cash balance to $400.3 million at December 31, 2019.
GAAP and Non-GAAP Measures
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
%
2019
2018
Change
Revenue
$
1,026,072
$
1,026,295
—
%
Operating income
$
165,126
$
259,951
(36.5
)%
Adjusted EBITDA1
$
306,140
$
308,094
(0.6
)%
Net income
$
62,132
$
224,908
(72.4
)%
Cash provided by operating activities from
continuing operations3
$
205,363
$
225,506
(8.9
)%
Free cash flow from continuing
operations1,3
$
175,675
$
187,709
(6.4
)%
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined2
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
%
2019
2019
2019
2018
Change
Revenue
$
2,610,056
$
1,073,471
$
3,683,527
$
3,611,323
2.0
%
Operating income
$
439,636
$
67,040
$
506,676
$
690,144
(26.6
)%
Adjusted EBITDA1
$
775,549
$
225,149
$
1,000,698
$
976,655
2.5
%
Net income (loss)
$
113,299
$
11,165,113
$
11,278,412
$
(202,639
)
nm
Cash provided by (used in) operating
activities from continuing operations3
$
468,905
$
(7,505
)
$
461,400
$
741,219
(37.8
)%
Free cash flow from (used in) continuing
operations1,3
$
392,912
$
(43,702
)
$
349,210
$
655,974
(46.8
)%
Certain prior period amounts have been reclassified to conform
to the 2019 presentation of financial information throughout the
press release.
1 See the end of this press release for reconciliations of (i)
Adjusted EBITDA to Operating income, (ii) Adjusted EBITDA to net
income (loss), (iii) cash provided by operating activities from
continuing operations to Free Cash Flow from continuing operations,
(iv) revenue, excluding political advertising revenue, to revenue
and (v) Total Debt to Net Debt. See also the definitions of
Adjusted EBITDA, Free Cash Flow and Adjusted EBITDA margin under
the Supplemental Disclosure section in this release.
2 See Supplemental Disclosure Regarding Non-GAAP Financial
Information.
3 We made cash interest payments from continuing operations of
$104.5 million in the three months ended December 31, 2019,
compared to $1.2 million in the three months ended December 31,
2018. We made cash interest payments from continuing operations of
$187.6 million in the year ended December 31, 2019, compared to
$22.5 million in the year ended December 31, 2018.
iHeartMedia Modernization
Initiatives
In January 2020, the Company announced its modernization
initiatives, which will take advantage of the significant
investments we have made in new technologies to build an operating
infrastructure that provides better quality and newer products and
delivers new cost efficiencies. Our modernization is a
multi-pronged set of strategic initiatives that will position the
company for sustainable long-term growth, margin expansion and
drive shareholder value.
Key elements of our modernization initiatives include:
- Leveraging our investments in artificial intelligence and
technology to improve the efficiency of the business processes and
expand support for our content creators and sales force to make the
Company more competitive in today's digitally-focused media
environment
- Optimizing our real estate footprint
- Re-aligning our organizational model to emphasize operating
similarities, maximize performance and drive cost efficiencies
- Creating a more efficient and up-to-date workplace for our
employees
Our investments in these modernization initiatives are expected
to result in an increase in incremental capital expenditures
related to real estate optimization of approximately $40 to $50
million in 2020. While we expect some additional capital
expenditures impact from our modernization in 2021, the majority of
this investment in capital expenditures is expected to impact 2020
and to be weighted to the second-half of the year. Additionally, we
anticipate approximately $45 to $55 million of restructuring costs
related to achieving our cost savings. These combined investments
in modernization are expected to deliver annualized run-rate cost
savings from our modernization initiatives of approximately $100
million by mid-year 2021 and we expect to achieve approximately 50%
of our run-rate savings in 2020.
Liquidity and Financial
Position
As of December 31, 2019, we had $400.3 million of cash on our
balance sheet. For the year ended December 31, 2019, cash provided
by operating activities from continuing operations was $461.4
million, cash used for investing activities by continuing
operations was $112.1 million and cash used for financing
activities by continuing operations was $165.3 million. As of
December 31, 2019, our Net Debt to Adjusted EBITDA ratio was
5.4x1.
Capital expenditures related to continuing operations for the
year ended December 31, 2019 were $112.2 million compared to $85.2
million in the year ended December 31, 2018 as a result of
increased investment in our programmatic platforms and IT software
and infrastructure.
Our primary sources of liquidity are cash on hand, which
consisted of $400.3 million as of December 31, 2019, cash flow from
operations and borrowing capacity under our ABL Facility. As of
December 31, 2019, we had no borrowings outstanding under the ABL
Facility, a facility size of $450.0 million and $48.1 million of
outstanding letters of credit, resulting in $401.9 million of
availability, resulting in total liquidity of approximately $802
million.
On August 7, 2019, we completed the sale of $750.0 million in
aggregate principal amount of 5.25% Senior Secured Notes due 2027
in a private placement. We used the net proceeds from the notes,
together with cash on hand, to prepay at par $740.0 million of
borrowings outstanding under our term loan facility.
On November 22, 2019, we completed the sale of $500.0 million in
aggregate principal amount of 4.75% Senior Secured Notes due 2028
in a private placement. We used the net proceeds from the notes,
together with cash on hand, to prepay at par $500.0 million of
borrowings outstanding under our term loan facility.
On February 3, 2020, iHeartCommunications made a $150.0 million
prepayment using cash on hand and entered into an agreement to
amend the Term Loan Facility to reduce the interest rate to LIBOR
plus a margin of 3.00%, or the Base Rate (as defined in the Credit
Agreement) plus a margin of 2.00% and to modify certain covenants
contained in the Credit Agreement.
The prepayment and the 100 basis points reduction in interest
rate under the Term Loan Facility, combined with the refinancing
transactions completed in August and November 2019, are expected to
result in a reduction of approximately $40 million in annualized
cash interest payments compared to the expected annualized cash
interest payments indicated by the terms of the debt structure
originally issued upon iHeartCommunications’ emergence from
bankruptcy on May 1, 2019.
1 See Supplemental Disclosure Regarding Non-GAAP Financial
Information.
Update on FCC Petition for Declaratory
Ruling
On February 25, 2020, the Federal Communications Commission (the
"FCC") issued a notice seeking public comment on the petition for
declaratory ruling that we filed regarding foreign ownership. Our
current equity structure consists of our listed Class A common
stock and also Class B common stock and special warrants and was
designed to comply with the statutory prohibition on broadcast
companies having foreign ownership above 25%. The FCC petition for
declaratory ruling was filed to simplify this capital structure and
enhance the liquidity of our Class A common stock by facilitating
the conversion of the special warrants.
The FCC will act on the petition only after a group of
representatives from the executive branch, referred to as “Team
Telecom,” approves it. We expect the Team Telecom process to begin
shortly and have been working diligently - and will continue to
work diligently - with the government to obtain all necessary
approvals as quickly as possible.
Revenue Streams
The tables below present the comparison of our historical
revenue streams (including political revenue) for the periods
presented:
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
%
2019
2018
Change
Broadcast Radio1
$
611,794
$
628,487
(2.7
)%
Digital
112,495
84,177
33.6
%
Networks
160,072
156,683
2.2
%
Sponsorship and Events
71,856
68,266
5.3
%
Audio and Media Services1
66,882
83,479
(19.9
)%
Other
4,989
6,827
(26.9
)%
Eliminations
(2,016
)
(1,624
)
Revenue, total1
$
1,026,072
$
1,026,295
—
%
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined3
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
%
2019
2019
2019
2018
Change
Broadcast Radio2
$
1,575,382
$
657,864
$
2,233,246
$
2,264,058
(1.4
)%
Digital
273,389
102,789
376,178
284,565
32.2
%
Networks
425,631
189,088
614,719
582,302
5.6
%
Sponsorship and Events
159,187
50,330
209,517
200,605
4.4
%
Audio and Media Services2
167,292
69,362
236,654
264,061
(10.4
)%
Other
14,211
6,606
20,817
22,240
(6.4
)%
Eliminations
(5,036
)
(2,568
)
(7,604
)
(6,508
)
Revenue, total2
$
2,610,056
$
1,073,471
$
3,683,527
$
3,611,323
2.0
%
1Excluding the impact of the decrease in political revenue,
Revenue from Broadcast Radio, from Audio and Media Services and in
Total increased by 0.8%, 4.5% and 4.3%, respectively. See the end
of this press release for a reconciliation of revenue, excluding
political advertising revenue, to revenue.
2Excluding the impact of the decrease in political revenue,
Revenue from Broadcast Radio, from Audio and Media Services and in
Total increased by 0.3%, 3.2% and 4.2%, respectively. See the end
of this press release for a reconciliation of revenue, excluding
political advertising revenue, to revenue.
3See Supplemental Disclosure Regarding Non-GAAP Financial
Information.
Conference Call
iHeartMedia, Inc. will host a conference call to discuss results
on February 27, 2020, at 4:30 p.m. Eastern Time. The conference
call number is (844) 588-3850 (U.S. callers) and (825) 312-2273
(International callers) and the passcode for both is 9767198. A
live audio webcast of the conference call will also be available on
the Investors homepage of iHeartMedia's website
investor.iheartmedia.com. After the live conference call, a replay
will be available for a period of thirty days. The replay numbers
are (800) 585-8367 (U.S. callers) and (416) 621-4642 (International
callers) and the passcode for both is 9767198. An archive of the
webcast will be available beginning 24 hours after the call for a
period of thirty days.
About iHeartMedia, Inc.
iHeartMedia, Inc. (NASDAQ: IHRT) is the number one audio company
in America based on consumer reach. The Company's leadership
position in audio extends across multiple platforms, including
through more than 850 live broadcast stations; through its
iHeartRadio service, which is available across more than 250
platforms and 2,000 devices including smart speakers, smartphones,
TVs and gaming consoles; through its influencers; social; live
events; podcasting; and information services for local communities.
The company uses its unparalleled national reach to target both
nationally and locally on behalf of its advertising partners, and
uses the latest technology solutions to transform the company's
products and services for the benefit of its consumers,
communities, partners and advertisers. More information is
available at investor.iheartmedia.com.
Certain statements herein constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other important factors which
may cause the actual results, performance or achievements of
iHeartMedia, Inc. and its subsidiaries to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. The words or phrases
“guidance,” “believe,” “expect,” “anticipate,” “estimates,”
“forecast” and similar words or expressions are intended to
identify such forward-looking statements. In addition, any
statements that refer to expectations or other characterizations of
future events or circumstances, such as statements about our
expected costs, savings and timing of our modernization
initiatives, our business plans, strategies and initiatives, our
expectations about certain markets and our anticipated financial
performance and liquidity, are forward-looking statements. These
statements are not guarantees of future performance and are subject
to certain risks, uncertainties and other important factors, some
of which are beyond our control and are difficult to predict.
Various risks that could cause future results to differ from those
expressed by the forward-looking statements included in this press
release include, but are not limited to: weak or uncertain global
economic conditions; increased competition; dependence upon the
performance of on-air talent, program hosts and management;
fluctuations in operating costs; technological changes and
innovations; shifts in population and other demographics; impact of
our substantial indebtedness; impact of future acquisitions,
dispositions and other strategic transactions; legislative or
regulatory requirements; impact of legislation or ongoing
litigation on music licensing and royalties; regulations and
concerns regarding privacy and data protection; risk associated
with our emergence from the Chapter 11 Cases; risks related to our
Class A common stock, including our outstanding special warrants;
and regulations impacting our business and the ownership of our
securities. Other unknown or unpredictable factors also could have
material adverse effects on the Company’s future results,
performance or achievements. In light of these risks,
uncertainties, assumptions and factors, the forward-looking events
discussed in this press release may not occur. You are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date stated, or if no date is stated, as
of the date hereof. Additional risks that could cause future
results to differ from those expressed by any forward-looking
statement are described in the Company’s reports filed with the
U.S. Securities and Exchange Commission, including in the section
entitled “Item 1A. Risk Factors” of iHeartMedia, Inc.’s Annual
Reports on Form 10-K. The Company does not undertake any obligation
to publicly update or revise any forward-looking statements because
of new information, future events or otherwise.
APPENDIX
TABLE 1 - Comparison of operating
performance
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
%
2019
2018
Change
Revenue
$
1,026,072
$
1,026,295
—
%
Operating expenses:
Direct operating expenses (excludes
depreciation and amortization)
332,147
288,949
15.0
%
Selling, general and administrative
expenses (excludes depreciation and amortization)
368,313
373,203
(1.3
)%
Corporate expenses (excludes depreciation
and amortization)
64,148
65,433
(2.0
)%
Depreciation and amortization
94,972
36,405
Other operating expense, net
(1,366
)
(2,354
)
Operating income
$
165,126
$
259,951
(36.5
)%
Depreciation and amortization
94,972
36,405
Other operating expense, net
1,366
2,354
Share-based compensation expense
6,260
438
Restructuring and reorganization
expenses
12,200
8,946
Music license fees adjustment1
26,216
—
Adjusted EBITDA2
$
306,140
$
308,094
(0.6
)%
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined3
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
%
2019
2019
2019
2018
Change
Revenue
$
2,610,056
$
1,073,471
$
3,683,527
$
3,611,323
2.0
%
Operating expenses:
Direct operating expenses (excludes
depreciation and amortization)
807,409
359,696
1,167,105
1,062,373
9.9
%
Selling, general and administrative
expenses (excludes depreciation and amortization)
936,806
436,345
1,373,151
1,376,931
(0.3
)%
Corporate expenses (excludes depreciation
and amortization)
168,582
66,020
234,602
227,508
3.1
%
Depreciation and amortization
249,623
52,834
302,457
211,951
Impairment charges
—
91,382
91,382
33,150
Other operating expense, net
(8,000
)
(154
)
(8,154
)
(9,266
)
Operating income
$
439,636
$
67,040
$
506,676
$
690,144
(26.6
)%
Depreciation and amortization
249,623
52,834
302,457
211,951
Impairment charges
—
91,382
91,382
33,150
Other operating expense, net
8,000
154
8,154
9,266
Share-based compensation expense
26,411
498
26,909
2,066
Restructuring and reorganization
expenses
25,663
13,241
38,904
30,078
Music license fees adjustment1
26,216
—
26,216
—
Adjusted EBITDA2
$
775,549
$
225,149
$
1,000,698
$
976,655
2.5
%
Certain prior period amounts have been reclassified to conform
to the 2019 presentation of financial information throughout the
press release.
1 Music license fees adjustment represents the impact of updated
estimates to music license fee expenses primarily related to the
Predecessor periods, which was recorded in the fourth quarter of
2019 and is not representative of the Company's operations during a
normal business cycle.
2 See the end of this press release for reconciliations of (i)
Adjusted EBITDA to Operating income, (ii) Adjusted EBITDA to net
income (loss), (iii) cash provided by operating activities from
continuing operations to Free Cash Flow from continuing operations,
(iv) revenue, excluding political advertising revenue, to revenue
and (v) Total Debt to Net Debt. See also the definition of Adjusted
EBITDA, Free Cash Flow, Adjusted EBITDA margin and Net Debt under
the Supplemental Disclosure section in this release.
3 See Supplemental Disclosure Regarding Non-GAAP Financial
Information.
TABLE 2 - Statements of
Operations
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
2019
2018
Revenue
$
1,026,072
$
1,026,295
Operating expenses:
Direct operating expenses (excludes
depreciation and amortization)
332,147
288,949
Selling, general and administrative
expenses (excludes depreciation and amortization)
368,313
373,203
Corporate expenses (excludes depreciation
and amortization)
64,148
65,433
Depreciation and amortization
94,972
36,405
Other operating expense, net
(1,366
)
(2,354
)
Operating income
165,126
259,951
Interest expense
96,095
955
Loss on investments, net
(22,663
)
(9,833
)
Equity in earnings (loss) of
nonconsolidated affiliates
(254
)
209
Other income (expense), net
3,348
(252
)
Reorganization items, net
—
(42,849
)
Income from continuing operations before
income taxes
49,462
206,271
Income tax benefit (expense)
12,670
(23,664
)
Income from continuing operations
62,132
182,607
Income from discontinued operations, net
of tax
—
42,301
Net income
62,132
224,908
Less amount attributable to noncontrolling
interest
751
10,003
Net income attributable to the Company
$
61,381
$
214,905
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined1
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
2019
2019
2019
2018
Revenue
$
2,610,056
$
1,073,471
$
3,683,527
$
3,611,323
Operating expenses:
Direct operating expenses (excludes
depreciation and amortization)
807,409
359,696
1,167,105
1,062,373
Selling, general and administrative
expenses (excludes depreciation and amortization)
936,806
436,345
1,373,151
1,376,931
Corporate expenses (excludes depreciation
and amortization)
168,582
66,020
234,602
227,508
Depreciation and amortization
249,623
52,834
302,457
211,951
Impairment charges
—
91,382
91,382
33,150
Other operating expense, net
(8,000
)
(154
)
(8,154
)
(9,266
)
Operating income
439,636
67,040
506,676
690,144
Interest (income) expense, net
266,773
(499
)
266,274
334,798
Loss on investments, net
(20,928
)
(10,237
)
(31,165
)
(472
)
Equity in earnings (loss) of
nonconsolidated affiliates
(279
)
(66
)
(345
)
116
Other income (expense), net
(18,266
)
23
(18,243
)
(23,007
)
Reorganization items, net
—
9,461,826
9,461,826
(356,119
)
Income (loss) from continuing operations
before income taxes
133,390
9,519,085
9,652,475
(24,136
)
Income tax expense
(20,091
)
(39,095
)
(59,186
)
(13,836
)
Income (loss) from continuing
operations
113,299
9,479,990
9,593,289
(37,972
)
Income (loss) from discontinued
operations, net of tax
—
1,685,123
1,685,123
(164,667
)
Net income (loss)
113,299
11,165,113
11,278,412
(202,639
)
Less amount attributable to noncontrolling
interest
751
(19,028
)
(18,277
)
(729
)
Net income (loss) attributable to the
Company
$
112,548
$
11,184,141
$
11,296,689
$
(201,910
)
1See Supplemental Disclosure Regarding Non-GAAP Financial
Information.
TABLE 3 - Selected Balance Sheet
Information
Selected balance sheet information for December 31, 2019 and
December 31, 2018:
Successor Company
Predecessor Company
(In millions)
December 31, 2019
December 31, 2018
Cash
$
400.3
$
224.0
Total Current Assets
1,416.3
2,235.0
Net Property, Plant and Equipment
846.9
502.2
Total Assets
11,021.1
12,269.5
Current Liabilities (excluding current
portion of long-term debt)
658.5
1,201.5
Long-term Debt (including current portion
of long-term debt)
5,765.4
46.1
Liabilities Subject to Compromise
—
16,480.3
Shareholders’ Equity (Deficit)
2,945.4
(11,560.3
)
Included within the Predecessor Company's Consolidated Balance
Sheet as of December 31, 2018 were current assets, long-term
assets, current liabilities and long-term liabilities of $1,015.8
million, $3,351.5 million, $729.8 million and $5,872.3 million,
respectively, of the Company's Outdoor business classified as
discontinued operations.
Supplemental Disclosure Regarding
Non-GAAP Financial Information
The following tables set forth the Company’s Adjusted EBITDA for
the three months and years ended December 31, 2019 and 2018.
Adjusted EBITDA is defined as consolidated Operating income
adjusted to exclude restructuring and reorganization expenses
included within Direct operating expenses, Selling, General and
Administrative expenses, (“SG&A”) and Corporate expenses and
share-based compensation expenses included within Corporate
expenses, as well as the following line items presented in our
Statements of Operations: Depreciation and amortization, Impairment
charges and Other operating income (expense), net. Alternatively,
Adjusted EBITDA is calculated as Net income (loss), adjusted to
exclude (Income) loss from discontinued operations, net of tax,
Income tax (benefit) expense, Interest expense, Depreciation and
amortization, Reorganization items, net, Loss on investments, net,
Other (income) expense, net, Equity in earnings (loss) of
nonconsolidated affiliates, net, Impairment charges, Other
operating (income) expense, net, Share-based compensation,
restructuring and reorganization expenses and music license fees
adjustment. Restructuring expenses primarily include severance
expenses incurred in connection with cost saving initiatives, as
well as certain expenses, which, in the view of management, are
outside the ordinary course of business or otherwise not
representative of the Company's operations during a normal business
cycle. Reorganization expenses primarily include the amortization
of retention bonus amounts paid or payable to certain members of
management directly as a result of the Reorganization.
Adjusted EBITDA margin is calculated as Adjusted EBITDA divided
by Revenue.
The Company uses Adjusted EBITDA and Adjusted EBITDA margin,
among other measures, to evaluate the Company’s operating
performance. Adjusted EBITDA is among the primary measures used by
management for the planning and forecasting of future periods, as
well as for measuring performance for compensation of executives
and other members of management. We believe this measure is an
important indicator of the Company’s operational strength and
performance of its business because it provides a link between
operational performance and operating income. It is also a primary
measure used by management in evaluating companies as potential
acquisition targets.
The Company believes the presentation of this measure is
relevant and useful for investors because it allows investors to
view performance in a manner similar to the method used by the
Company’s management. The Company believes it helps improve
investors’ ability to understand the Company’s operating
performance and makes it easier to compare the Company’s results
with other companies that have different capital structures or tax
rates. In addition, the Company believes this measure is also among
the primary measures used externally by the Company’s investors,
analysts and peers in its industry for purposes of valuation and
comparing the operating performance of the Company to other
companies in its industry.
Since Adjusted EBITDA is not a measure calculated in accordance
with GAAP, it should not be considered in isolation of, or as a
substitute for, operating income as an indicator of operating
performance and may not be comparable to similarly titled measures
employed by other companies. Adjusted EBITDA is not necessarily a
measure of the Company’s ability to fund its cash needs. As it
excludes certain financial information compared with operating
income, the most directly comparable GAAP financial measure, users
of this financial information should consider the types of events
and transactions which are excluded.
We define Free cash flow from (used for) continuing operations
("Free Cash Flow") as Cash provided by (used for) operating
activities from continuing operations less capital expenditures,
which is disclosed as Purchases of property, plant and equipment by
continuing operations in the Company's Consolidated Statements of
Cash Flows. We use Free Cash Flow, among other measures, to
evaluate the Company’s liquidity and its ability to generate cash
flow. We believe that Free Cash Flow is meaningful to investors
because it provides them with a view of the Company's liquidity
after deducting capital expenditures, which are considered to be a
necessary component of ongoing operations. In addition, we believe
that Free Cash Flow helps improve investors' ability to compare our
liquidity with that of other companies. Since Free Cash Flow is not
a measure calculated in accordance with GAAP, it should not be
considered in isolation of, or as a substitute for, Cash provided
by operating activities and may not be comparable to similarly
titled measures employed by other companies. Free Cash Flow is not
necessarily a measure of our ability to fund our cash needs.
The Company presents revenue, excluding the effects of political
revenue. Due to the cyclical nature of the electoral system and the
seasonality of the related political revenue, management believes
presenting revenue, excluding the effects of political revenue,
provides additional information to investors about the Company’s
revenue growth from period to period.
We define Net debt as Total debt less Cash and cash equivalents.
We define the Net debt to Adjusted EBITDA ratio as Net debt divided
by Adjusted EBITDA. The Company uses the Net debt to Adjusted
EBITDA ratio to evaluate the Company's leverage. We believe this
measure is an important indicator of the Company's ability to
service its long-term debt obligations.
Net Debt to Adjusted EBITDA ratio is calculated by dividing Net
Debt by Adjusted EBITDA.
Since these non-GAAP financial measures are not calculated in
accordance with GAAP, they should not be considered in isolation
of, or as a substitute for, the most directly comparable GAAP
financial measures as an indicator of operating performance or
liquidity.
As required by the SEC rules, the Company provides
reconciliations below to the most directly comparable measures
reported under GAAP, including (i) Adjusted EBITDA to Operating
income, (ii) Adjusted EBITDA to net income (loss), (iii) cash
provided by operating activities from continuing operations to Free
Cash Flow from continuing operations, (iv) revenue, excluding
political advertising revenue, to revenue and (v) Total Debt to Net
Debt.
Predecessor - Successor Presentation
Our financial results for the periods from January 1, 2019
through May 1, 2019 and for the three months and year ended
December 31, 2018 are referred to as those of the “Predecessor”
period. Our financial results for the period from May 2, 2019
through December 31, 2019 and the three months ended December 31,
2019 are referred to as those of the “Successor” period. Our
results of operations as reported in our Consolidated Financial
Statements for these periods are prepared in accordance with GAAP.
Although GAAP requires that we report on our results for the period
from January 1, 2019 through May 1, 2019 and the period from May 2,
2019 through December 31, 2019 separately, management views the
Company’s operating results for the year ended December 31, 2019 by
combining the results of the applicable Predecessor and Successor
periods because such presentation provides the most meaningful
comparison of our year-to-date results to prior periods.
The Company cannot adequately benchmark the operating results of
the period from May 2, 2019 through December 31, 2019 against any
of the previous periods reported in its Consolidated Financial
Statements without combining it with the period from January 1,
2019 through May 1, 2019 and does not believe that reviewing the
results of this period in isolation would be useful in identifying
trends in or reaching conclusions regarding the Company’s overall
operating performance. Management believes that the key performance
metrics such as revenue, operating income and Adjusted EBITDA for
the Successor period when combined with the Predecessor period
provides more meaningful comparisons to other periods and are
useful in identifying current business trends. Accordingly, in
addition to presenting our results of operations as reported in our
Consolidated Financial Statements in accordance with GAAP, the
tables and discussion included within this press release also
present the combined results for the year ended December 31,
2019.
The combined results for the year ended December 31, 2019, which
we refer to herein as the results for the "year ended December 31,
2019" represent the sum of the reported amounts for the Predecessor
period from January 1, 2019 through May 1, 2019 and the Successor
period from May 2, 2019 through December 31, 2019. These combined
results are not considered to be prepared in accordance with GAAP
and have not been prepared as pro forma results per applicable
regulations. The combined operating results do not reflect the
actual results we would have achieved absent our emergence from
bankruptcy and may not be indicative of future results.
Reconciliation of Operating Income to Adjusted EBITDA
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
%
2019
2018
Change
Operating income
$
165,126
$
259,951
(36.5
)%
Depreciation and amortization
94,972
36,405
Other operating expense, net
1,366
2,354
Share-based compensation expense
6,260
438
Restructuring and reorganization
expenses
12,200
8,946
Music license fees adjustment
26,216
—
Adjusted EBITDA
$
306,140
$
308,094
(0.6
)%
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined2
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
%
2019
2019
2019
2018
Change
Operating income
$
439,636
$
67,040
$
506,676
$
690,144
(26.6
)%
Depreciation and amortization
249,623
52,834
302,457
211,951
Impairment charges
—
91,382
91,382
33,150
Other operating expense, net
8,000
154
8,154
9,266
Share-based compensation expense
26,411
498
26,909
2,066
Restructuring and reorganization
expenses
25,663
13,241
38,904
30,078
Music license fees adjustment
26,216
—
26,216
—
Adjusted EBITDA
$
775,549
$
225,149
$
1,000,698
$
976,655
2.5
%
Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
2019
2018
Net income
$
62,132
$
224,908
Income from discontinued operations, net
of tax
—
(42,301
)
Income tax (benefit) expense
(12,670
)
23,664
Interest expense, net
96,095
955
Depreciation and amortization
94,972
36,405
EBITDA
$
240,529
$
243,631
Reorganization items, net
—
42,849
Loss on investments, net
22,663
9,833
Other (income) expense, net
(3,348
)
252
Equity in (earnings) loss of
nonconsolidated affiliates
254
(209
)
Other operating expense, net
1,366
2,354
Share-based compensation expense
6,260
438
Restructuring and reorganization
expenses
12,200
8,946
Music license fees adjustment
26,216
—
Adjusted EBITDA
$
306,140
$
308,094
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
2019
2019
2019
2018
Net income (loss)
$
113,299
$
11,165,113
$
11,278,412
$
(202,639
)
(Income) loss from discontinued
operations, net of tax
—
(1,685,123
)
(1,685,123
)
164,667
Income tax expense
20,091
39,095
59,186
13,836
Interest (income) expense, net
266,773
(499
)
266,274
334,798
Depreciation and amortization
249,623
52,834
302,457
211,951
EBITDA
$
649,786
$
9,571,420
$
10,221,206
$
522,613
Reorganization items, net
—
(9,461,826
)
(9,461,826
)
356,119
Loss on investments, net
20,928
10,237
31,165
472
Other (income) expense, net
18,266
(23
)
18,243
23,007
Equity in (earnings) loss of
nonconsolidated affiliates
279
66
345
(116
)
Impairment charges
—
91,382
91,382
33,150
Other operating expense, net
8,000
154
8,154
9,266
Share-based compensation expense
26,411
498
26,909
2,066
Restructuring and reorganization
expenses
25,663
13,241
38,904
30,078
Music license fees adjustment
26,216
—
26,216
—
Adjusted EBITDA
$
775,549
$
225,149
$
1,000,698
$
976,655
Reconciliation of Cash provided by operating activities from
continuing operations to Free cash flow from continuing
operations
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
2019
2018
Cash provided by operating activities from
continuing operations
$
205,363
$
225,506
Purchases of property, plant and equipment
by continuing operations
(29,688
)
(37,797
)
Free cash flow from continuing
operations
$
175,675
$
187,709
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined2
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
%
2019
2019
2019
2018
Change
Cash provided by (used for) operating
activities from continuing operations
$
468,905
$
(7,505
)
$
461,400
$
741,219
(37.8
)%
Purchases of property, plant and equipment
by continuing operations
$
(75,993
)
$
(36,197
)
$
(112,190
)
$
(85,245
)
31.6
%
Free cash flow from (used for) continuing
operations1
$
392,912
$
(43,702
)
$
349,210
$
655,974
(46.8
)%
Reconciliation of Revenue, excluding Political Advertising
Revenue, to Revenue
(In thousands)
Successor Company
Predecessor Company
Three Months Ended December
31,
Three Months Ended December
31,
% Change
2019
2018
Consolidated revenue
$
1,026,072
$
1,026,295
—
%
Excluding: Political revenue
(13,654
)
(55,760
)
Consolidated revenue, excluding effects of
political revenue
$
1,012,418
$
970,535
4.3
%
Audio revenue
$
961,206
$
944,440
1.8
%
Excluding: Political revenue
(9,518
)
(32,329
)
Audio revenue, excluding effects of
political revenue
$
951,688
$
912,111
4.3
%
Audio & media services revenue
$
66,882
$
83,479
(19.9
)%
Excluding: Political revenue
(4,136
)
(23,431
)
Audio & media services revenue,
excluding effects of political revenue
$
62,746
$
60,048
4.5
%
(In thousands)
Successor Company
Predecessor Company
Non-GAAP Combined
Predecessor Company
Period from May 2, 2019
through December 31,
Period from January 1, 2019
through May 1,
Year Ended December
31,
Year Ended December
31,
% Change
2019
2019
2019
2018
Consolidated revenue
$
2,610,056
$
1,073,471
$
3,683,527
$
3,611,323
2.0
%
Excluding: Political revenue
(24,001
)
(4,777
)
(28,778
)
(102,970
)
Consolidated revenue, excluding effects of
political revenue
$
2,586,055
$
1,068,694
$
3,654,749
$
3,508,353
4.2
%
Audio revenue
$
2,447,800
$
1,006,677
$
3,454,477
$
3,353,770
3.0
%
Excluding: Political revenue
(17,787
)
(3,980
)
(21,767
)
(61,417
)
Audio revenue, excluding effects of
political revenue
$
2,430,013
$
1,002,697
$
3,432,710
$
3,292,353
4.3
%
Audio & media services revenue
$
167,292
$
69,362
$
236,654
$
264,061
(10.4
)%
Excluding: Political revenue
(6,214
)
(797
)
(7,011
)
(41,553
)
Audio & media services revenue,
excluding effects of political revenue
$
161,078
$
68,565
$
229,643
$
222,508
3.2
%
Reconciliation of Total Debt to Net Debt
(In thousands)
Successor Company
December 31,
2019
Current portion of long-term debt
$
8,912
Long-term debt
5,756,504
Total debt
$
5,765,416
Less: Cash and cash equivalents
400,300
Net debt
$
5,365,116
Year Ended December
31,
2019
Adjusted EBITDA1
$
1,000,698
Net debt to Adjusted EBITDA ratio
5.4
x
1 See Reconciliation of Operating Income to Adjusted EBITDA.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200227006007/en/
Media Wendy Goldberg Executive Vice
President and Chief Communications Officer (212) 377-1105
Investors Kareem Chin Senior Vice
President and Head of Investor Relations (212) 377-1336
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