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iHeartMedia announced to investors today a plan to cut up to $250 million from its expenses for 2020. Today’s $200 million plan comes after the company announced $50 million in savings early this year via “modern initiatives” that began in February, which saw a number of people being let go — which a company rep stressed were furloughs, not layoffs — including a number of popular on-air personalities as the company moves ahead into more automated programming.

In its overview, the company said its revenue has declined compared to last year “primarily driven by a downturn in traditional broadcast radio revenues in local, national and network advertising,” along with a sharp decline in its sponsorships business is being driven by the postponement or cancellation of a number of its live events. However, it noted that digital revenue continues to show healthy growth, driven by its podcasting business, and that sponsorships is the “smallest contributor to our revenue and earnings and has the lowest margin of any of our segments.”

In the statement, the company enumerated “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
  • The company also expects to see decreased variable sales expense and commissions associated with lower revenue

In a statement Tuesday, the company announced “certain proactive initiatives in response to the currently weak economic environment resulting from the unfolding novel coronavirus pandemic” and its initiatives include:

  • Cash Balance of $647 million as of March 31, 2020
  • Over 90% of iHeartMedia Debt Matures in 2026 or Later
  • Patient Debt Terms: No Maintenance Covenants for Term Loan or Notes
  • Fundamental Strengths of the Company’s Margin and Free Cash Flow Profile
  • Prior Modernization Initiatives Continue: Targeting $100 million in Run-Rate Savings by 2021; expect approximately $50 million in 2020
  • New Cost Actions: Targeting Further $200 million Savings in 2020
  • New Capex Actions: Reducing Capex by Expected $80 million in 2020
  • CARES Act Free Cash Flow Benefit: Estimating $100 million Cash Taxes Savings in 2020
  • Podcasting and Digital: Strong Audience and Revenue Growth Continuing
  • Political Advertising: Significant Profit and Free Cash Flow Contribution Expected in 2020

The company, which only recently emerged from a bankruptcy proceeding, said in the statement that it “believes that the major actions announced today – in combination with the Company’s highly resilient capital structure — 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.”

In the statement, the company said to “expect capital expenditures of approximately $75 million to $95 million in 2020 – a decrease of approximately $80 million from our previously announced guidance of $155 million to $175 million, which we believe will enable the Company to make key investments in our strategic initiatives related to Smart Audio and Digital, including podcasting,” and “an estimated $100 million reduction in cash taxes in 2020 from CARES Act.”

iHeart Chairman/CEO Bob Pittman (pictured above) said in the statement, “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. 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 Rich Bressler, iHeart’s President, Chief Operating Officer and Chief Financial Officer. “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.” The Company now has diversified products and revenue streams and no longer relies almost exclusively on broadcast radio revenue and it benefits from favorable growth trends in its emerging businesses, such as podcasting, and from a move of ad dollars to audio, including podcasting.