Global media and entertainment company iHeartMedia (NASDAQ:IHRT) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue flat year on year at $929.1 million. It made a GAAP profit of $6.50 per share, improving from its loss of $5.93 per share in the same quarter last year.
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iHeartMedia (IHRT) Q2 CY2024 Highlights:
- Revenue: $929.1 million vs analyst estimates of $916 million (1.4% beat)
- EPS: $6.50 vs analyst estimates of -$0.31 (2,186% beat)
- EBITDA guidance for the full year is $780 million at the midpoint, below analyst estimates of $802.3 million
- Gross Margin (GAAP): 58.9%, down from 61.4% in the same quarter last year
- EBITDA Margin: 16.2%, down from 20.8% in the same quarter last year
- Free Cash Flow of $5.56 million is up from -$80.86 million in the previous quarter
- Market Capitalization: $215.8 million
“Our second quarter results mark the first quarter that our consolidated revenues increased year-over-year since Q4 2022. We continue to see strong momentum in our podcast business, our Digital ex. Podcast business, and have seen sequential improvement of our Multiplatform Group’s year-over-year revenue performance,” 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 give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. iHeartMedia's demand was weak over the last five years as its sales were flat, a poor baseline for our analysis. 
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Just like its five-year trend, iHeartMedia's revenue over the last two years was flat, suggesting it is in a slump.
iHeartMedia also breaks out the revenue for its three most important segments: Multiplatform, Digital Audio, and Services, which are 62%, 30.7%, and 7.5% of revenue. Over the last two years, iHeartMedia's Multiplatform revenue (broadcasting, networks, events) averaged 4.3% year-on-year declines, but its Digital Audio (podcasting) and Services (media representation) revenues averaged 8.5% and 3.2% growth.
This quarter, iHeartMedia's $929.1 million of revenue was flat year on year but beat Wall Street's estimates by 1.4%. Looking ahead, Wall Street expects sales to grow 4.4% 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.
iHeartMedia has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.5%, lousy for a consumer discretionary business.
iHeartMedia broke even from a free cash flow perspective in Q2. The company's cash profitability regressed as it was 3.1 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren't a big deal because investment needs can be seasonal, but we'll be watching to see if the trend extrapolates into future quarters.
Key Takeaways from iHeartMedia's Q2 Results
We liked that iHeartMedia beat revenue and EPS expectations this quarter. However, full year EBITDA guidance was below, which is weighing on shares. The stock is down 3.5% to $1.39 immediately following the results.
So should you invest in iHeartMedia 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.