iHeartMedia Beats Q2 Revenue Outlook as Digital Audio and Podcasting Accelerate
iHeartMedia (NASDAQ: IHRT) topped its second-quarter revenue outlook as digital audio and podcasting continued to lead the company's growth, even while the broadcast-heavy Multiplatform Group remained mired in a soft advertising environment and absorbed non-cash marketing costs tied to iHeartRadio promotions.
Consolidated revenue rose 4.7% to $977 million, above the low-single-digit growth the company had guided to. Excluding political advertising, revenue was up 3.5%. Adjusted EBITDA came in at $152 million, just above the midpoint of the $140 million to $160 million guidance range, and free cash flow improved to $46 million from negative $13 million in the same period last year.
The results illustrate a decisive shift in iHeartMedia's earnings mix. For the sixth consecutive quarter, adjusted EBITDA from the Digital Audio Group exceeded that of the Multiplatform Group, a segment that includes broadcast radio networks and live events. Chairman and CEO Bob Pittman said the company's digital investments are changing the financial profile of the business.
Digital Audio Group revenue grew 12.4% to $364 million, ahead of the roughly 10% growth forecast. Segment adjusted EBITDA rose 14.5% to $123 million, translating to a 33.8% margin. Management reiterated its expectation that full-year digital audio EBITDA margins will land in the mid-30% range.
Podcasting was the standout category, with revenue jumping 20.7% to $162 million. Pittman said about half of that revenue now comes through iHeartMedia's local-market sales force, a sign that the company is successfully packaging podcast inventory for regional advertisers as well as national buyers.
Video podcasting is also becoming a bigger part of the strategy. Pittman said iHeartMedia is producing video versions of many podcasts for iHeartRadio and partner platforms, and is pushing more of that content into streaming video services. The company has expanded its Netflix relationship to include podcasts from Kate Hudson and Oliver Hudson, Lele Pons and Martha Stewart. Netflix, according to Pittman, will also make The Breakfast Club with Charlamagne its only live daily show. Separately, six iHeartMedia titles, including video episodes of Hey Jonas! and Pod Meets World, are headed to Disney's Hulu.
Digital Audio Group revenue excluding podcasting climbed 6.6% to $202 million. Pittman said video podcasting adds to the core audio business by broadening audiences, creating the potential for premium video advertising pricing and requiring much lower production costs than traditional television.
The Multiplatform Group, in contrast, continues to battle headwinds. Revenue fell 1.6% to $536 million and was slightly below the roughly flat growth guidance. Excluding political advertising, revenue declined 2.8%. Segment adjusted EBITDA dropped to $59 million from $96 million a year earlier. Pittman attributed the revenue softness partly to macroeconomic uncertainty, including the impact of gas and diesel prices, and said non-cash marketing expenses accounted for most of the EBITDA decline.
President and COO Rich Bressler said consolidated direct operating expenses rose 2.4%, driven by higher variable content costs and third-party digital costs tied to digital revenue. Selling, general and administrative expenses increased 11.8%, largely because of non-cash co-marketing partnerships designed to increase engagement with the iHeartRadio digital service. Those partnerships, Bressler said, support iHeartMedia's proprietary audience database, AudioGraph and programmatic advertising tools. They will begin to taper in the second half of the year and will have no net impact on adjusted EBITDA over time.
Pittman framed broadcast radio's problem as a monetization challenge, not an audience one. The company is adding broadcast inventory to demand-side platforms including Amazon, Google and Yahoo, while developing new planning and buying options through AudioGraph and programmatic tools. “We think the AudioGraph and programmatic will give us that,” he said, referring to advertisers' preference for digital buying systems.
Elsewhere, the Audio & Media Services Group, which includes Katz TV, Katz Radio and RCS, posted revenue of $80 million, up 18.8% year over year. Excluding political revenue, the segment grew 10.6%. Adjusted EBITDA rose 54.6% to $37 million, supported mainly by digital audio and video revenue.
Political advertising is expected to provide a significant lift in the second half and especially in the fourth quarter. Pittman said early indications point to a substantial midterm cycle, with some observers expecting activity comparable to a presidential-election year. Bressler said the largest ad-category gains in the quarter were political, gambling, computers, electronics and appliances, and professional services. The biggest declines were in telecom, financial services, auto, and food and beverage.
For the third quarter, iHeartMedia expects consolidated revenue to rise in the mid-single digits year over year and adjusted EBITDA to be between $180 million and $220 million. Digital Audio Group revenue is expected to grow in the low teens, including podcasting growth of about 20%. Multiplatform Group revenue is expected to be roughly flat, while the Audio & Media Services Group is expected to rise about 20%.
The company reaffirmed its full-year adjusted EBITDA target of $800 million and free cash flow target of $200 million. Bressler said the outlook assumes some improvement in macroeconomic and advertising conditions, particularly in the fourth quarter, along with a strong political advertising performance.
On the balance sheet, net debt stood at approximately $4.7 billion at quarter end, with liquidity of $457 million and cash of $174 million, including $125 million drawn on the company's asset-based lending facility. iHeartMedia said it expects to repay that borrowing by the end of 2026 using free cash flow. It also amended and extended its $450 million ABL facility to Jan. 30, 2029, from May 17, 2027, giving the company more room to complete its digital transition and reduce leverage.
From an investor's perspective, the quarter reinforces that iHeartMedia is no longer just a traditional radio story. Digital audio now accounts for more than a third of consolidated revenue and has become the main margin engine, while the Multiplatform Group's EBITDA remains sensitive to macro conditions and non-cash expenses. The key question will be whether political ad strength in the fourth quarter can translate into free cash flow and faster deleveraging. The ABL extension reduces near-term refinancing risk, but the broader test is whether AudioGraph and programmatic can close the monetization gap between broadcast inventory and digital buying platforms.
iHeartMedia, founded in 1972 as Clear Channel Communications and rebranded in 2014, operates more than 860 full-power AM and FM radio stations across the United States, along with the iHeartRadio streaming platform, podcasts and live events. The company's challenge, and its opportunity, is making sure the digital business that now drives growth can eventually carry more of the earnings weight as broadcast stabilizes.