iHeartMedia (NASDAQ:IHRT) Misses Q1 Revenue Estimates, Stock Drops

Global media and entertainment company iHeartMedia (NASDAQ:IHRT) fell short of analysts' expectations in Q1 CY2024, with revenue down 1.5% year on year to $799 million.

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“We’re pleased to report our first quarter of year-over-year Adjusted EBITDA growth in five quarters, driven by the substantial sequential year-over-year improvement in the performance of all our segments: the Multiplatform Group, the Digital Audio Group, and the Audio and Media Services Group – with the Digital Audio Group hitting its best Q1 EBITDA margin ever,” said Bob Pittman, Chairman and CEO of iHeartMedia.

Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ:IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.

Broadcasting

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Sales Growth

A company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. iHeartMedia's revenue was flat over the last five years. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Just like its five-year revenue trend, iHeartMedia's revenue over the last two years has been flat, suggesting the company is in a slump.

We can better understand the company's revenue dynamics by analyzing its three most important segments: Multiplatform, Digital Audio, and Services, which are 61.8%, 29.9%, and 8.7% of revenue. Over the last two years, iHeartMedia's Multiplatform revenue (broadcasting, networks, events) averaged 3.3% year-on-year declines, but its Digital Audio (podcasting) and Services (media representation) revenues averaged 10.8% and 4.4% growth.

This quarter, iHeartMedia missed Wall Street's estimates and reported a rather uninspiring 1.5% year-on-year revenue decline, generating $799 million of revenue. Looking ahead, Wall Street expects sales to grow 5.8% over the next 12 months, an acceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, iHeartMedia has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 4.8%, subpar for a consumer discretionary business.

iHeartMedia burned through $80.86 million of cash in Q1, equivalent to a negative 10.1% margin, increasing its cash burn by 39.3% year on year.

Key Takeaways from iHeartMedia's Q1 Results

We struggled to find many strong positives in these results. Its operating margin missed and its Services revenue fell short of Wall Street's estimates. On top of that, next quarter's revenue guidance fell short. Overall, this was a bad quarter for iHeartMedia. The company is down 7.8% on the results and currently trades at $2 per share.

iHeartMedia may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.