iHeartMedia has announced “certain proactive initiatives in response to the currently weak economic environment resulting from the unfolding novel coronavirus pandemic” and also provided an update on the status of its business. iHeart says that these initiatives “will substantially expand the company’s financial flexibility, provide sufficient liquidity to operate effectively even in an extended period of economic weakness, and position the company for a solid growth trajectory when advertising demand returns to normal levels.”
The company notes that in addition to the in-year expected savings of approximately $50 million related to the modernization initiatives announced in February, it has also initiated an additional $200 million in operating expense savings for 2020 driven by:
- Reductions in compensation for senior management and other employees
- Furloughing of certain employees that are non-essential at this time
- Suspension of new employee hiring, travel and entertainment expenses and 401(k) matching program
- Major reduction of consultant fees and other discretionary expenses
Total direct operating expense savings in 2020 are expected to be approximately $250 million. iHeart also expects to see decreased variable sales expense and commissions associated with lower revenue.
“We moved quickly to respond to the economic downturn resulting from the COVID-19 pandemic in order to mitigate some of the business impact and to better position ourselves to take advantage of an eventual recovery when normalized demand returns,” said iHeart Chairman/CEO Bob Pittman. “To provide visible and aligned leadership through this downturn, our senior management team and other employees voluntarily agreed to take meaningful reductions in compensation. We want our shareholders to know that we have taken immediate and proactive steps to weather this crisis, and we expect to emerge even stronger given our sufficient liquidity, the continued strength of consumer listening, and our diversified multiple platforms, including digital and especially podcasting. In March, our podcast listening reached an all-time high as measured by number of downloads and monthly unique visitors according to Podtrac, maintaining our position as the #1 commercial podcaster in America. Additionally, listening increased across our other digital platforms including web, Smart TV, Smart Speakers and other connected devices. As we navigate the unprecedented challenges posed by this crisis, we remain confident in our business and focused on the health and safety of our employees.”
“In addition to the previously announced $350 million draw on our $450 million senior secured asset-based revolving credit facility, which provided us with a cash balance of $647 million as of March 31, 2020, we have also identified additional operating expense savings totaling approximately $200 million over the remainder of 2020,” said President/COO/CFO Rich Bressler. “These cost savings are in addition to the approximately $50 million of operating expense savings related to the modernization initiatives that we announced in February and will bring our total operating expense savings for 2020 to approximately $250 million, partially offsetting the revenue declines resulting from the COVID-19 pandemic. We believe that iHeart’s fundamentally strong cash-generation model, substantial current cash balances, incremental cash savings from the major proactive initiatives announced today, and a patient capital structure position our Company with substantial liquidity reserves and will enable us to build effectively on our audio-market leadership even in highly conservative macro-economic scenarios such as an extended, multi-year period of sustained US economic weakness. We believe this substantial financial flexibility will prove a further competitive strength for our Company should the current economic slowdown continue for a prolonged period. With our experienced management team and leadership position as the #1 audio media company in America, we are confident in our business and continue our focus on driving shareholder value.”
