iHeartMedia (IHRT)

Global media and entertainment company iHeartMedia (NASDAQ:IHRT) reported Q2 CY2025 results topping the market’s revenue expectations, but sales were flat year on year at $933.7 million. The company expects next quarter’s revenue to be around $982.9 million, close to analysts’ estimates. Its GAAP loss of $0.54 per share was 98.1% below analysts’ consensus estimates.

Company Overview

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 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.

Competitors in the audio and radio broadcasting industry include Sirius XM (NASDAQ:SIRI), Cumulus Media (NASDAQ:CMLS), and Townsquare Media (NYSE:TSQ).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, iHeartMedia’s 3.6% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer discretionary sector and is a rough starting point 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 trend. iHeartMedia’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Multiplatform, Digital Audio, and Services, which are 58.3%, 34.7%, and 7.3% of revenue. Over the last two years, iHeartMedia’s Multiplatform revenue (broadcasting, networks, events) averaged 4.1% year-on-year declines, but its Digital Audio (podcasting) and Services (media representation) revenues averaged 9.5% and 5.3% growth.

This quarter, iHeartMedia’s $933.7 million of revenue was flat year on year but beat Wall Street’s estimates by 2.4%. Company management is currently guiding for a 2.5% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and indicates its newer products and services will not catalyze better top-line performance yet.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

iHeartMedia’s operating margin has risen over the last 12 months, but it still averaged negative 7.9% over the last two years. This is due to its large expense base and inefficient cost structure.

This quarter, iHeartMedia generated an operating margin profit margin of 3.8%, up 101.7 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although iHeartMedia’s full-year earnings are still negative, it reduced its losses and improved its EPS by 27.8% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q2, iHeartMedia reported EPS at negative $0.54, up from negative $6.50 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 1.2%, lousy for a consumer discretionary business.

iHeartMedia burned through $13.18 million of cash in Q2, equivalent to a negative 1.4% margin. The company’s cash burn increased meaningfully year on year and is a deviation from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

iHeartMedia’s five-year average ROIC was negative 4.9%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, iHeartMedia’s ROIC has unfortunately decreased. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

iHeartMedia burned through $44.71 million of cash over the last year, and its $5.14 billion of debt exceeds the $235.9 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the iHeartMedia’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of iHeartMedia until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

It was encouraging to see iHeartMedia beat analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its EPS missed and its EBITDA guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 2.5% to $1.56 immediately after reporting.

Updated: August 17, 2025 at 11:03 PM EDT

Before making an investment decision, investors should account for iHeartMedia’s business fundamentals and valuation in addition to what happened in the latest quarter.

iHeartMedia falls short of our quality standards. To begin with, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its cash burn raises the question of whether it can sustainably maintain growth.

iHeartMedia’s EV-to-EBITDA ratio based on the next 12 months is 0.5x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $1.58 on the company (compared to the current share price of $2.30).