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Edited Transcript of IHRT earnings conference call or presentation 23-Feb-17 1:30pm GMT

Thomson Reuters StreetEvents

Q4 2016 iHeartMedia Inc, Clear Channel Outdoor Holdings Inc and iHeartCommunications Inc, Earnings Call

SAN ANTONIO Feb 23, 2017 (Thomson StreetEvents) -- Edited Transcript of iHeartMedia Inc earnings conference call or presentation Thursday, February 23, 2017 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eileen McLaughlin

iHeartMedia, Inc. - VP of IR

* Rich Bressler

iHeartMedia, Inc. - President, COO & CFO

* Brian Coleman

iHeartMedia, Inc. - SVP & Treasurer

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Conference Call Participants

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* Avi Steiner

JPMorgan - Analyst

* Marci Ryvicker

Wells Fargo Securities - Analyst

* Jason Kim

Goldman Sachs - Analyst

* Lance Vitanza

Cowen and Company - Analyst

* Aaron Watts

Deutsche Bank - Analyst

* David Phipps

Citigroup - Analyst

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Presentation

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Operator [1]

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Welcome to the 2016 fourth-quarter and full-year earnings conference call for iHeartMedia and Clear Channel Outdoor Holdings Inc.

(Operator Instructions)

I will now turn the conference over to your host Eileen McLaughlin Vice President of Investor Relations. Please go ahead.

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Eileen McLaughlin, iHeartMedia, Inc. - VP of IR [2]

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Good morning and thank you for joining our 2016 fourth-quarter and full year earnings call. On the call today are Rich Bressler, President, Chief Operating Officer and Chief Financial Officer; and Brian Coleman Senior Vice President and Treasurer. We will provide overview of the fourth-quarter and full-year 2016 financial and operating performances of iHeartMedia Inc and its subsidiaries, iHeartMedia CapitalOne LLC, iHeartCommunications Inc, Clear Channel Outdoor Holdings Inc, and Clear Channel International BV.

For the purposes of this call, when we describe the financial and operating performance of iHeartMedia Inc, that also describes the performance of its subsidiaries iHeartMedia CapitalOne LLC, iHeartCommunications Inc, and Clear Channel Outdoor Holdings Inc. After introduction and review of the quarter we will open up the lines for questions.

Before we begin I would like to remind everyone that this conference call includes forward looking statements. These statements include Management's expectations, beliefs, and projections about performance and represent Management's current beliefs. There can be no assurance that Management's expectations, beliefs, or projections will be achieved or that actual results will not differ from expectations. Please review the statements of risks contained in our earnings press releases and filings with the SEC.

Pacing data will also be mentioned during the call. For those of you not familiar with pacing data, it reflects orders booked at a specific date versus a comparable date in the prior period and may or may not reflect the actual revenue growth rate at the end of the period.

During today's call we will provide certain performance measures that do not conform to generally accepted accounting principles. We will provide schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of earnings press releases and the earnings conference call presentation which can be found on the investor section of our website www.iheartmedia.com and www.clearchanneloutdoor.com.

Please note that our two earnings releases and a slide presentation are available on our website www.iheartmedia.com and www.clearchanneloutdoor.com, and are integral to our earnings conference call. They provide a detailed breakdown of foreign exchange and non-cash compensation expense items as well as segment revenue operating income and OIBIDAN among other important information. For that reason we ask that you view each slide as Rich comments on it.

Please note that the information provided on this call speaks only to Management's view as of today February 23, it may no longer be accurate at the time of replay with that I now will turn the call over to Rich Bressler.

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [3]

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Thank you Eileen and good morning everyone. Thanks for joining us.

We are pleased with our performance in 2016. Our consolidated revenues, operating income and OIBDAN were all up in the quarter and full year.

Over the past five years our iHeartMedia segment has successfully transformed from a broadcast radio company into a multi-platform 21st century media entertainment, evidenced by our achieving 15 consecutive quarters of year-over-year revenue growth. We believe very few US media companies have come close to that benchmark.

In addition both operating income and OIBDAN at our iHeartMedia segment were up in the fourth-quarter and the full year. At Americas and International Outdoor our results were impacted by the sale of certain markets and businesses. Excluding the impact of these sales and foreign exchange rates revenues and OIBDAN for both America's International Outdoor were up in the fourth quarter and the full year.

As you can see from these top line results we are continuing to drive strong momentum across the Company by investing in new digital technologies, creating innovative new products, focusing on data as a key asset of our business, interacting with our advertisers in new ways and aligning our industry leading assets around our most promising opportunities. To our investments in our broadcast outdoor mobile, social, digital, live events, data, and programmatic platforms, we're building the scale necessary to compete in a world that is more and more defined by how advertisers do business than the digital age. We are well positioned to benefit from the favorable trends in consumer media usage and advertiser demand for mass market reach, especially with the reach of television continuing to decline.

In addition consumers continue to spend more and more time out of home which strengthened both our radio and outdoor businesses. It often surprises people that radio the number one consumer reached media in the US. Reaching 93% of adults over 18 compared to TVs reach of 87% and radio has maintained that rate for almost half a century.

The story stays basically the same with younger audiences including Millennials. In fact among Millennials ages 18 to 34, radios reaches 92% followed by smart phones at 89%, and TV lagging and third place at 77%.

Radio's reach among teens ages 12 to 17 is 95% versus what live television which has declined 86% and more than doubled Facebook at 43%. This reach among teens and Millennials is a great indication of the promising future of radio in contrast to the traditional media. Total broadcast radio usage is still growing, up 7% in 2016 year over year.

iHeartMedia our broadcast radio stations reach over 0.25 billion people or the age of 6 and the US each month or greater than Google, greater than Facebook. As well as TV or any other media app. That is because radio is in the companionship business.

Whether it is music talk, news or sports all of which include strong on-air personalities who connect with listeners we are building the kind of close personal relationships with our listeners that no other media can match. In a time of enormous fragmentation brought about by technology and social media, radio is one of the few ways that bring people together as a community.

To build on the power of this community experience we deeply integrate our broadcast radio with its massive reach with our other media platforms including iHeartRadio's 96 million registered users, our social media with its 143 billion social impressions in 2016 and our more than 20,000 advanced annuals. In fact our national tent pole events have taken on an iconic status, such as the iHeartRadio music awards, the iHeartRadio music Festival and the iHeartRadio Jingle Ball tour presented by Capital One.

For the second straight year we partnered with Capital One to present the 2016 Jingle Ball tour. Through this partnership Capital One leveraged the full range of iHeartMedia's assets from national and local radio to digital promotions and on-site event branding and capitalized on our iconic on-air personalities and social media to amplify all of the pop-culture norms.

So we connect all of the dots for our consumers as well as our advertising marketing partners. Last month we officially expanded iHeartRadio, our all in streaming music and live digital radio service to include two new on-demand subscription services iHeartRadio plus and iHeartRadio all access powered by Napster. This is an example of how we can add on additional products of small incremental costs and participate in new revenue streams.

With a iHeartRadio Plus and iHeartRadio All Access you can now just push a button to instantly replay songs from our live radio stations and save those songs directly to play list. These are the only services that bridge the gap between radio discovery and music collections.

Both of these new on-demand services are built around real radio music discovery while other music services are based on a music collection experience, descended from recorded music formats such as LPs and CDs. The answers for our services is radio.

Turning to more of our industry first initiatives. iHeartMedia and our Outdoor businesses are building out our data rich analytics capabilities while programmatic add buying solutions. These platforms simplify and enhance the add buying process for our advertisers making it look and feel like buying digital advertising to them.

Last spring iHeartMedia started offering automated and data infused add buying across our broadcast radio stations through Soundpoint, our programmatic solution that enables planning and buying at the scale of broadcast radio with the targeting and ease of digital. In June launched the first programmatic private market place for digital radio in the US that allows agencies and brands to access iHeartRadio's inventory with the same capabilities for both our digital and broadcast platforms which most important for advertising partners is that they cannot buy specific audiences using our new smart audio data products. And we built and launched programmatic network marketplace for the broadcast radio industry Expressway from Cats for other radio companies to use.

We have also been leading the development of data rich analytics capabilities and programmatic ad buying solutions for our outdoor business. As you know America's Outdoor rolled out our data and analytics tool RADAR in early 2016.

Then in the fourth quarter we launched the industry's first programmatic out of home buying solution in the US. Our new programmatic buying platform taps into RADAR's mobile data driven audience insights to give marketers the unique ability to buy digital out of home inventory with the same sophisticated buying solutions they've come to expect.

Earlier this week, AdWeek named America's Outdoor as one of the top mobile innovators of 2016 recognizing our groundbreaking work to launch RADAR and integration into our new private marketplace programmatic buying solution. Just last month International Outdoor became Europe's first out of home media company to deliver full programmatic ad buying solution. The initial launch was in Belgium, an international outdoor plan to continue the roll out of its programmatic capabilities across Europe including a March launch in the UK.

Now let's turn to slide 4 and review our key financials. Before we get started I want to remind you that as part of our GAAP results discussion, I will also talk about results adjusting for foreign exchange and excluding the impact of the markets and businesses that we sold in 2016, we believe this improves a comparability of our results to the prior year. I'll refer to these results as adjusted revenues and adjusted OIBDAN and I'll refer to the direct operating and SG&A expenses as expenses.

Overall our businesses perform well during the year benefiting from our transformation into a digital and data rich company built on the strength and power of our broadcast radio and outdoor assets. Starting with the fourth quarter consolidated revenues increased slightly as compared to the prior year with growth at iHeartMedia partially offset by declines in Americas Outdoor and International Outdoor as a result of the markets and businesses we sold in 2016.

Adjusted revenues increased 5% with iHeartMedia up 4.5%, Americas Outdoor up 3.1%, and International Outdoor up 6.2%. Operating income increased 41.1% and adjusted OIBDAN grew 6.4%. For the full year consolidated revenues increased slightly while adjusted revenues grew 3.4% with iHeartMedia up 3.6%, Americas Outdoor up 3.2%, and International Outdoor up 2.2%.

Operating income increased 30.9% and adjusted OIBDAN grew 6.1%. I'll provide additional detail on these results as we discuss each segments financial performance later in this presentation.

Moving to slide 5 iHeartMedia's key non-financial highlights. As noted earlier iHeartRadio hit a new milestone of 96 million registered users at years end, an impressive 21% increase of 2015. Our total listening hours increased 11% year-over-year, this is an addition to the increase in our broadcast radio usage mobile listening accounted for 74% of total iHeartRadio listening.

iHeartRadio's cumulative download surpassed 1.3 billion including updates as of December 31. We also announced the coming integration of iHeartRadio to more devices across in-home connectivity including Google home and Samsung family hub in addition to Amazon's Alexa. As I mentioned we launched iHeartRadio Plus and iHeartRadio All Access as add-ons to our free iHeartRadio service.

As you know iHeartRadio has achieved this exceptional growth in registered users faster than and other radio or digital music service and even faster than Facebook. The growth was built on the strength of our more than 850 broadcast radio stations across the country that strength is due in large part to the connection our listeners have with our industry-leading personalities. Ryan Seacrest for example makes his broadcast radio presence on Kiss FM in LA the cornerstone of his extensive entertainment presence. Other iconic personalities from Elvis Durran on Z100 and the breakfast club on power 105.1 FM in New York, to Big Boy on real 90.3 station LA, Enrique Santos on 294.9 in Miami and Bobby Bones on Nationals WSIX FM connect personally every day with millions of listeners.

On our talk stations last year's dramatic presidential campaign drove to of listeners to personalities like Rush Limbaugh and Sean Hannity increasing their respective radio my 20%. All of these amazing good talents are also syndicated reaching audiences nationwide to further extending their reach there other media platforms like podcasts, social media, and endorsements to build even stronger bonds with both our audiences advertisers.

Our temple events continue to contribute to our revenue growth as I will highlight later in the presentation. In addition to providing great promotion and brand building opportunities for our station, we are able to leverage these events as a significant differentiator from the sales, branding and promotion perspective to drive audience.

During the fourth quarter we hosted the iHeartRadio Jingle Ball tour which included events in 12 cities and the tour generated 11 billion social impressions, almost 3 times the number of social impressions around this months gave big game halftime show. At the end of January we hosted the second annual iHeartRadio 80s party, it celebrates some of the most beloved music icons of the '80s and was broadcast live on iHeartMedia as mainstream AC, hot AC, and dealt hits radio stations nationwide.

On March 5 will be hosting the iHeartRadio music awards in the forum in Los Angeles. We will be televised live across Turner networks on TNT, TBS and TrueTV as well as simulcast on iHeartMedia stations nationwide and iHeartRadio.

We now set the iHeart country Festival will once again been be held in Austin May 6, bringing together country music's biggest superstars for the fourth straight year. It will be aired over iHeart country's 145 broadcast radio stations nationwide, that reach more than 98 million listeners age 12 and over monthly. That makes iHeart country's station the largest country broadcast radio group in America.

Turning to outdoor on slide 6. Our digital must continue to be a key driver revenue growth for both Americas outdoor and international outdoor. We installed a total of 82 digital billboards in our North American markets over the full-year for an end of your total of 1113 across 28 markets in North America.

In our international markets, we installed almost 3600 digital displays over the full year for an end of your total of more than 9600 digital displays across all of our international markets. As I pointed out earlier we continue to expand our programmatic platform with Americas outdoor's most recent announcement of the first automated programmatic out of home buying solution in the United States. In the pilot campaigns, digital marketers and media buyers were able to target distinct audience segments and bid on digital outdoor advertising space making the boards smarter and easier to buy.

As I mentioned earlier add weekly and Americas outdoor as one of the top mobile innovators of 2016. This incredible honor for the team recognizes the first market launch of RADAR our third-party mobile analytics for planning, attribution, measurement and retargeting. Further ad week honored how Americas outdoor has integrated RADAR into its private marketplace programmatic solution that makes target audience segment buying possible on digital out of home near real-time.

In addition at America's Outdoor we extended our contract at the National International Airport and at the Austin Bergstrom International Airport. At international outdoor we became the first out of home media company in Europe to deliver full programmatic ad buying capabilities with the launch of our new service in Brussels in January. Their first iteration focuses on trading is digital inventory on automated guaranty basis giving media buyers the ability to reserve fixed buying of inventory at a fixed price.

By offering solutions based on audience and using buying tools and technology with which media buyers are already familiar, international outdoor programmatic solutions greatly simplifies the process of buying out of home. The next international outdoor market to offer automated buying capabilities will be the UK where we're able to use our programmatic platform to leverage our extensive digital inventory.

And international outdoor businesses in France has renewed its contract in the city of Leon for seven years to operate out of home advertising across the city's buses, bus shelters, tramway and Metro. Leon's Metro system is the second largest in France after Paris.

Now let's review our segment financials. Starting with iHeartMedia on slide 7. As I noted earlier this is the 15 consecutive quarter of year-over-year revenue growth for iHeartMedia an exceptional accomplishment given the overall radio industry's performance as well as other media companies over the same time period. It a clearly demonstrates the success of iHeartMedia transformation into leading 20% multi-platform leading entertainment company.

During the fourth quarter iHeartMedia revenues increased 4.5% up over 2% excluding political. Once again we outperformed the radio market as measured by Miller Caplan. Growth in our broadcast radio and digital advertising business were driven primarily by political ad revenues.

As we noted last quarter although political spending was a significant contributor to revenue growth it continued to be at levels substantially below 2012 due to lower presidential campaign spending. Other contributors to revenue growth in the quarter included trade and barter as well as mix.

As I just mentioned are temple events are an important and better part of our sales strategy. The success of these events continue to drive revenues as they did this quarter with the iHeartRadio fiesta Latina and the iHeartRadio jingle ball tour. The advertising category with the strongest year-over-year dollar growth in the quarter included; in addition to political, homebuilding improvement, entertainment media and autumn.

Expenses increased 6.2% during the quarter driven in large part by increased programming and content force of assets, international digital sales capabilities, as well as advertising and promotion. Operating income increased 2.1% and OIBDAN grew 2% in the fourth quarter for the full-year revenues increased the 3.6% excluding political revenues, revenues were up 2.5%. In addition to political revenues growth in our broadcast radio and digital advertising was driven primarily by our traffic and weather businesses and events as well as trade and barter.

Expenses were up 2% for the full year. As you may recall our third-quarter expenses including the 33.8 million benefit resulting from the renegotiation of certain contracts. Operating income was 7.4% and OIBDAN increase 6.3% for the full year.

Now lets review our first quarter pacing for 2017. As you've heard me say before these pacings are just a snapshot in time and certainly don't include everything we do as a company. iHeartMedia's first quarter 2017 pacings through the end of last week were up 2% compared to the first-quarter 2016 that included political advertising.

Now onto slide 8 Americas outdoor financials. In the fourth quarter revenues were down 4.7% due to the nine nonstrategic markets we sold the first quarter. Adjusted revenues were up 3.1% with our local businesses continuing to deliver a strong performance.

Our investments and digital boards continue to be significant contributor to our growth in the quarter, as well as new airport contracts in our Latin American operations. The categories that continue to the most to this business services, travel and transportation, banking, auto and tech. Some of the largest as well as emerging tech companies have been using out of home to reach the allusive millennial audience.

Expenses were down 2.8% in the fourth quarter due to the sales of the nonstrategic markets. Adjusted expenses were roughly 4.2% due primarily to higher variable site lese expenses from the new airport contracts. Operating income is down 3% and adjusted OIBDAN adjusted 1.6%.

For the full year revenue were down 5.2% resulting from the sale of the nonstrategic markets and foreign exchange. On an adjusted basis revenues were up 3.2% with a growth attributed to digital boards as well as new airport contracts and higher revenues and Latin America.

Expenses were down 4.2% for the full year to the sale of the nonstrategic markets. Adjusted expense increased 3.4% resulting primarily from higher site lease expenses attributed to increased revenues. Operating income was down for 5.4% for the full year and adjusted OIBDAN increased 2.8%.

In addition to the nine nonstrategic markets we sold in the first quarter of 2016 we recently closed the sale of our Indianapolis market $41 million in cash in certain assets in Atlanta. As for first quarter pacings for 2017, which again reflect one point in time and are adjusted for the sales of the nonstrategic markets foreign exchange, they were up 1.2%.

Turning to slide 9 and our international outdoor financials. As you know in October Clear Channel Outdoor International sold its interest in Australian out of home media company Adshel to our joint venture partner APN News and Media. Our reported result in a fourth quarter impacted by the sale with revenues declining 7%, but adjusted revenues increased 6.2%.

The increase in revenues was driven in large part by investments we have made in our digital network combined with new contracts in Spain, China, Sweden, Italy and Belgium. This was somewhat offset by low revenues in the UK due to the London bus shelter contract not being renewed. Expenses during the quarter were down 10.8% on a reported basis and up slightly on an adjusted basis.

As you may recall the fourth quarter of 2015 we recorded a $14 million corrections to our results in the Netherlands. Excluding this correction our adjusted expenses would have been up about 6% due primarily to higher site lease and production expenses related to higher revenues. Operating incoming increased 12.6% during the fourth quarter and adjusted OIBDAN grew 25.2%.

Excluding the adjustment in 2015 I just mentioned adjusted OIBDAN would be up about 7%. On a full-year basis revenues declined 2.3% as a result of the sale of our businesses in Turkey and Australia as well as foreign exchange. Adjusted revenues increased 2.2% due to growth across most markets including China, Italy, Spain, Sweden, France and Belgium resulting primarily from new digital assets and new contracts, this growth was partially offset by the London bus shelter contract.

Expenses for the full year were down 3.4% and adjusted expenses were up less than 1%. Operating income increased 21.8% and adjusted OIBDAN grew 8.4%. As I noted the full year 2015 results were affected by an adjustment rate of prior periods and the amount of $11 million.

Our of 2017 first quarter pacings for International Outdoor were up 4.5%. Once again pacing are at point in time metric. As you would expect there's an inherent level of volatility week to week. The pacing debt has been adjusted to exclude the businesses we sold in 2016. Included in our appendix on page 24 are the revenues expenses for each quarter of 2016 for the businesses we sold in 2016.

Before we go on to the rest of the slides I would like to make if you comments on CCIBVs results. For the fourth quarter CCIBVs consolidated revenues totaled $340 million. The impact from foreign exchange rates was $16 million.

CCIBV's operating income in the quarter $168 million as compared to $39 million in the prior year's quarter. For the full year CCIBV's consolidate revenue is $1.169 billion. The impact from foreign exchange was $35 million. CCIBV when operating income for the full year was $101 million as compared to $24 million in the prior year.

Onto slide 10. This slide highlights the items impacting comparability of our results. I won't read through all of the numbers, but as you can see our International Outdoor operations were affected by foreign exchange fluctuations of about 5% for both revenues and expenses in the fourth quarter and about 3% for both revenues and expenses in the full year.

As I have said both our Americas and International Outdoor businesses were impacted by the sales of certain markets and businesses over the year. In addition political revenues had significant impact on the revenues reported by iHeartMedia and Cats media.

Turning to slide 11. Capital expenditure's for 2016 totaled $315 million, slightly higher than last year's $296 million. As you can see on this slide the majority of the capital was invested in our Outdoor businesses, and primarily in the International markets to fund our investments in digital and new contracts. In 2017 we expect capital expenditures to be in the range of $300 million expect capital expenditures to $325 million.

Moving to debt on slide 12. While staying focused on maximizing the value of our business we continue to explore opportunities to strengthen our capital structure. As we have said previously our overarching objective is to position the Company for long-term growth and success. We're working deliberately to advance a number of initiatives to help us achieve this goal.

Earlier this month we completed our exchange offer to holders of iHeartCommunications 10% senior notes in 2018 to the newly issued 11.25% priority guarantee notes due in 2021. We have exchanged $476.4 million notes including $241.4 million held by iHeartCommunications subsidiaries.

As of December 31 iHeartMedia Inc's debt was $20.4 billion, $356 million lower than year end 2015. The decline is due in large part to the purchase of $383 million aggregate principal amount of iHeartCommunications 10% senior notes in 2018 for $222 million and July 2016.

IHeartMedia's consolidated weighted-average cost of debt was 8.5% as of December 31 consistent with the prior year. Cash interest expense for the full year 2016 was $1.8 billion and we expect cash interest expense in 2017 to be $1.7 billion.

Now we will turn to our balance sheet information and the debt ratios on slide 13. iHeartMedia's consolidated cash totaled approximately and $845 million at December 31. Our secured leverage ratio was 6.6 times with total leverage of 11.4 times. Clear Channel Outdoor ended the year with $542 million in cash with its senior leverage ratio of 4 times on a consolidated leverage ratio of 7.8 times.

The largest use of cash by iHeartMedia 2016 was interest expense which totaled $1.8 billion. Clear Channel Outdoor used cash of $368 million for interest and payed dividend totals of $756 million.

Before opening up for questions I want to thank you again for joining us this morning. We continue to build our momentum as a leading Twenty First Century multi-platform media entertainment company.

We made great progress and developing industry leading data rich analytics capabilities and programmatic ad buying solutions for both our iHeartMedia and Outdoor businesses and we continue to create new products for both consumers and are advertising partners such as adding our new on-demand services to iHeartRadio. And throughout 2016 both Americas and International Outdoor focuses on winning new contracts from our core markets by building comprehensive digital solutions for our marketing and advertising partners.

As we've told you before with radio's strong and consistent performance with the consumer and Outdoor's continuing leadership as a mass reach vehicle, we believe that both radio and Outdoor underutilized and undermonetized. We continue to reach out to advertisers agencies and brands to show them how they can engage with the right audiences, at the right time, with the right messages and the right tools.

Our unique mass market reach gives our advertising partners a great advantage in a world of fragmenting media options and our new digital and data tools just increase the value of that reach. In an additional platforms and our ability to integrate them and provide our advertising partners with more opportunities to connect with consumers better than any other media company.

iHeartMedia uses a master brand strategy of increase the value of the radio stations and other brands. Pixar is a great example. The Pixar brand works with its movie brands like Toy Story and the Pixar master brand and answers to movies appeal.

In our case our broadcast stations use the iHeartMedia master brand to identify themselves and that increases the value of the individual station brands in the minds of both advertisers and consumers. The strength of our iHeartRadio measurement also helps us to build a successful writer event in digital and business. That is what makes us confident we'll continue to make the most of the power of audio, the power of Outdoor, the power of social, the power of data, the power of mobile, and the power of our national and local brands as well as our industry-leading personalities.

Now let's open up the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

The first question comes from the line of Avi Steiner. Please go ahead.

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Avi Steiner, JPMorgan - Analyst [2]

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Thank you, good morning. A mix here of business and balance sheet questions, if I may. The first one, Rich, maybe you can discuss the launch of iHeart Plus, All Access offerings. Any usage metrics you can give us there, and how they may contribute in 2017?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [3]

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Sure, thanks, Avi, and good morning, everybody. It is really -- we were in beta, I think as everybody knows, for a month, and then we officially launched right around January 1. It is way too early.

The reception clearly has been positive, and just to remind everybody on the call, and I suspect maybe I'll take just a minute or so and talk about iHeart Plus and iHeart All Access, which are our new on-demand subscription services, just to level set for everyone. It's our all-in-one streaming music and live digital radio service, and we include two of those iHeartRadio Plus and iHeartRadio All Access.

The way I think to think about it and put it in context, this is an example how we can add on additional products at extremely small incremental cost that allows us to participate in new revenue streams. From a functionality standpoint, you can now just push a button, and I would encourage you all to sign up and subscribe, to those of you that haven't. You have to just push a button to instantly replay songs from our live radio stations, and you can directly save those songs to a playlist.

This is the only service out there that can bridge the gap between radio and music collections, and both of these new on-demand services, both are on-line demand services building on real radio, building on music discovery, while the other music services are based on music collection experience. That's really descended from recorded music formats such as LPs and CDs. So, that's the way to think about it. You think about the other services out there, they're really descended from things like LPs and CDs, and think about how this has really enhanced radio.

From a cost basis, either in the fourth quarter or as you look going forward, the costs involved unlocking the expansion, as I alluded to a second ago, were minimal, and didn't have a material effect in our margins whatsoever. It is really just a great example of how we can add on additional product, how we can create additional value for our listeners, at small incremental cost that allow us to participate in new revenue streams. Again, unlike some of our other competitors whose models rely totally, and their business model relies totally, on the streaming services, these are expansion of our services and expansion of our brands.

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Avi Steiner, JPMorgan - Analyst [4]

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Okay, great. And then, given it is helpful to your liquidity, just shifting to the balance sheet here, can you talk about your comfort around extending the receivables-based facility into 2018, given the actions you've taken on the 10th?

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Brian Coleman, iHeartMedia, Inc. - SVP & Treasurer [5]

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Sure, Avi. I think the Company views it as probable that we can extend the ABL. I think we disclosed that in our public filings, and we will continue to work toward the goal of extending the ABL, posthaste.

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Avi Steiner, JPMorgan - Analyst [6]

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Great. And maybe getting to a bigger one here, in the December 20 8-K and then again today, the Company noted it's exploring global refinancing alternatives, and I want to make sure at least I understand or think about it correctly that -- is it fair to say it is holistic, and that the goal here is to create a sustainable capital structure that both reduces outstanding debts to be well below what one may view as enterprise value to create real equity value here? Relatedly, and perhaps more importantly, to turn the structure materially free cash flow positive. I know those are words that I can define but really to allow you to invest in the Business.

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Brian Coleman, iHeartMedia, Inc. - SVP & Treasurer [7]

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Avi, I feel like you're giving me the answer instead of the question. The way that I'd look at it is this: The ultimate goal of any type of holistic restructuring will be a sustainable capital structure. As Rich would tell you, we've experienced several quarters of consecutive operational growth, but we need to address our capital structure as well. An increase in free cash flow generation due to the reduction of cash interest is a way to get there.

But I don't want to get into the specifics; I think that general statement holds true. I think that is consistent with the disclosures that we have made. I think that is what we look to going forward.

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [8]

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And, Avi, the only thing I would add -- I do agree with Brian -- I think you gave us your answers before you gave us the question, but if you go back over, not just this year but in years, and years since we've been here, Bob, myself and the rest of the Management team, we've understood that our responsibility first and foremost is to create value for all of our stakeholders. We continue to do that every day, in addition to operating the Business, and that will continue.

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Avi Steiner, JPMorgan - Analyst [9]

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Great. I will end it on this, and I will make it much shorter. But I did not see the same language in the CCO 10-K around restructuring, et cetera. Is it safe to say that the focus here is going to be confined entirely to the parent level debt? And thanks for the questions.

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Brian Coleman, iHeartMedia, Inc. - SVP & Treasurer [10]

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We are talking about iHeart in our disclosures; we're talking about iHeart in the questions and answers. There has been no discussion or disclosure around CCOH.

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Avi Steiner, JPMorgan - Analyst [11]

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Terrific. Thank you.

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Operator [12]

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Our next question comes from the line of Marci Ryvicker from Wells Fargo. Please go ahead.

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Marci Ryvicker, Wells Fargo Securities - Analyst [13]

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Rich, when you talked about the Outdoor business, you mentioned a lot of things that you did not mention, the static billboards, you talked about airports, you talked about digital. Talk about the health of the static billboard business, both in the fourth quarter and maybe as it relates to the first-quarter pace.

Then, on the iHeart side, just any thoughts on the competitive marketplace post the announcement of the Entercom CBS radio transaction?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [14]

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On the Outdoor side, I think you saw our fourth-quarter results; you saw our first-quarter pacing. I think, in the last couple of days we've seen some of the people that are also in the business come out with our results, and it looks like we continue to perform well and continue to outperform. So, the fundamentals are good. I'm not going to comment on any specific thing with respect to any individual boards, whether it is static or digital.

But we continue to be encouraged by all the investments that we're making, taking advantage of emerging technologies, mobile data analytics. You hear that word a lot. It's this great new buzzword, in terms of data, data enriched, data infused, programmatic. Different platforms, but I think you have to look to the results that companies are having.

I'll point to our bottom-line results. At Outdoor America, we rolled out our data analytics tool, our RADAR, in early 2016. And before we launched what I believe is the industry's first programmatic out-of-home buying solution. The programmatic solution taps into RADAR's mobile, data-driven audience insights, which gives marketers and our advertisers the unique ability to buy digital out-of-home inventory with the same sophisticated buying that they have come to expect and the same sophisticated buying the way the world is going.

You couple that with our local businesses delivering a strong performance. Scott Wells, Bob McEwen, the rest of the Management team is doing a great job.

We've also seen the improvement from our national business, which remember we go back to the third quarter, we had some decline the third quarter, and November and December picked up nationally. The teams have executed on a number of large digital campaigns. So far in the first-quarter 2017, large national advertise renewals are going well.

We are only here in mid-February, so I always put a little bit of caution to that because it is early in the year, but feel really good about the team and the Business and their execution. I think you've seen that manifest itself in the fourth quarter and our first-quarter pacing.

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Marci Ryvicker, Wells Fargo Securities - Analyst [15]

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And on the radio portion?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [16]

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I am sorry. On radio, I apologize. On radio, we think it is great -- Bob and myself just have great respect for David Field, the leadership he has provided Entercom. He has been a great partner with us.

As you know, radio is now the biggest reach medium, and the merger or proposed merger that David is leading is another important validation of the value of radio and the value of audio. We are looking forward to continuing to work with David and his team to help new advertisers and marketers discover the full and unique power of radio, the effectiveness of radio, and to bring more money and advertising dollars to the radio market. We feel very, very good about the proposed deal, and really thrilled that it's going to be under David's leadership.

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Marci Ryvicker, Wells Fargo Securities - Analyst [17]

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Thank you.

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Operator [18]

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Your next question comes from the line of Jason Kim with Goldman Sachs.

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Jason Kim, Goldman Sachs - Analyst [19]

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Good morning, thank you for taking my questions. To start off, how should we think about the barter revenue and expense line for 2017? Also, corporate expense has also been running at a higher level; is this more or less related to your balance sheet-related activities, or is there a higher level of spending that is more of a norm going forward?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [20]

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Let's talk about barter trade, as you first mentioned. These are largely investments in the businesses that we might have otherwise made and used cash. As we've done in the past, we welcome barter and trade opportunities with growing companies that we can strategically -- and I think that is the key point in line with that can help us.

We have made investment in the companies by acquiring equity interest in exchange for advertising, which is provided in the future. And while each of these deals is different, the future benefits we expect to receive from these investments include a share of revenue, very often include a share of technical services that helps drive our operating businesses. In some instance, they include Board seats to enable us to influence the product roadmap and, therefore, enable us to improve into our products and our product road map.

By the way, it is one of the ways, just to point out, which I mentioned in the opening remarks, I mentioned in my quote in the release, we are incredibly proud, Bob, myself and, quite frankly, the entire team. This is a team effort that we have here, for 15 consecutive quarters. We have 15 consecutive quarters with the balance sheet that we have that you all know factually about and having that growth, I don't think there is pretty much any other media company or maybe many companies in America that have 15 consecutive quarters of revenue growth.

To do that, you have to use your assets, what you do best, and get the most out of them, and doing barter and trade deals is one of the ways we get the best out of our assets. And just the last thing I'd say is it's really common practice in our industry.

With respect to corporate expenses, really the increase in corporate expenses is related in part to additional spending on professional fees, as you would expect with everything we have going on.

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Jason Kim, Goldman Sachs - Analyst [21]

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Makes sense. And then a couple of housekeeping questions: At the end of the quarter, you had $55 million in your current assets line as assets held for sale. Does that number basically get converted to cash as part of the special dividend payment from CCO in the first quarter?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [22]

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Just repeat that question again.

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Jason Kim, Goldman Sachs - Analyst [23]

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At the end of the year, on the current assets line, there was $55 million recorded in current assets, assets held for sale.

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [24]

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Those are just the CCOA markets that were held for sale, that is all.

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Jason Kim, Goldman Sachs - Analyst [25]

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So that will become -- you have sold those assets, and now, therefore, they will just become cash?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [26]

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Yes. That is correct.

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Jason Kim, Goldman Sachs - Analyst [27]

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Okay. And maybe one for Brian: For the special dividend or the one-time dividend that CCO paid to the parent or the shareholders in the first quarter, did you use the general RP basket, which I think was about $280 million-some odd, or did you use any of the reinvestment carve-out?

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Brian Coleman, iHeartMedia, Inc. - SVP & Treasurer [28]

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The distribution from those asset sales used the general RP basket.

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Jason Kim, Goldman Sachs - Analyst [29]

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None of it was used for reinvest in carve-outs?

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Brian Coleman, iHeartMedia, Inc. - SVP & Treasurer [30]

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The asset sales, once the sales occur at Outdoor, they can be used to be reinvested or they can be distributed. In this case, if they are distributed, it uses the RP.

So I think we're talking apples and oranges. If they were reinvested, then they wouldn't have been distributed.

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Jason Kim, Goldman Sachs - Analyst [31]

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Got it. Thank you.

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Operator [32]

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Your next question comes from Lance Vitanza from Cowen.

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Lance Vitanza, Cowen and Company - Analyst [33]

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Thanks, guys, and congrats on the quarter. Two quick housekeeping items, and then I have a couple other more substantive questions, but I missed the radio pacing number. Could you repeat that for me?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [34]

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The radio pacing number is plus 2%.

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Lance Vitanza, Cowen and Company - Analyst [35]

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Okay. I got the Outdoor pacings. Those are, I heard pro forma for asset sales, but those are on a local-currency basis? Is that the way you disclose those?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [36]

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Yes.

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Lance Vitanza, Cowen and Company - Analyst [37]

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Great. Turning to the iHeartRadio app, great to see registered users and total listening hours continue to grow. Maybe that answers the question, which is: As registered users continue to grow, are the users themselves, on an individual basis, are they becoming more or less active? Is there any way to know, is the listener hour per registered user going up, as well as just total registered users and total listener hours?

More generally, how do you think about the value of a registered user? Presumably it is based on some level of engagement, and I guess I am just trying to figure out how we can track that.

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [38]

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I am not sure in terms of where you're going with the latter question. Remember, what we are looking to do, just to take a step back, from an iHeartRadio standpoint is we are looking to follow the consumer. That's why I said this is not about technology.

And then we connect our advertisers with our consumers; as I said, we rent the relationship with them. And the way you should track it, what I would invite you to do, because I can give you -- I went through in my opening remarks and I think we went through in the press release, we have 96 million registered users, to your point we've grown 21% year over year. iHeartRadio's cumulative downloads surpassed 1.3 billion, including updates, and total listening hours are up 11% year over year.

So if you think about that in one word, that also has more engagement. If you look at our -- just as a reminder, if you look at our social impressions, you come out of Jingle Ball, we had 11 billion social impressions through our Jingle Balls, which is over 3 times the number of social impressions the big game had a number of weeks ago. If you look at our social impressions as a Company, we had 143 billion or so social impressions last year in 2016. 143 billion, that is a staggering number.

Think about the iHeart music awards last year. We have this year's a week from this weekend, a week from this Sunday out in LA in The Forum, but if you go back to 2016, to put it in context, we had 115 billion social impressions for the 2016 iHeart music awards. The 2016 Academy Awards had about 40 billion social impressions; we had 115 billion. The 2016 Grammy awards had about 30 billion social impressions.

I think you should look at all of these things as -- and what is important to advertisers and important to our marketing partners is how do you engage consumers? How is it a two-way interaction? That is what drives effective advertising. That is why on a return-on-investment basis, we are 6 to 1 advertising, when television and other digital products are pretty much somewhere between 1 to 1 and 2 to 1. So I would suggest that is the way that you should track it.

Then you look at iHeart Plus, and I think with Avi's first question, I don't want to bore everyone or repeat everything back, but again the way to think about iHeart Plus is that is another way that we are following up consumers; it is an extension of our brand at a very minimal cost. It doesn't have a dramatic effect on our margin.

Another way to engage our consumers and, quite frankly, as I said, we are doing this in a way that nobody else can do it. That we can offer everything other on-demand services can do but will make our service extremely unique and very different and that nobody else can do is the ability to tie on-demand functionality and music collecting seamlessly.

And again, for those of you that haven't used it, I would encourage you to use it to live radio. It makes it easy for the user to find and collect their favorite music. For example, if you're listening to a great song on the radio, all you do is push a single button, it's on the front page. You can instantly replay that live song, and you can save it right to the playlist.

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Lance Vitanza, Cowen and Company - Analyst [39]

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That is actually really helpful. Thank you so much.

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Operator [40]

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We have a question from the line of Aaron Watts with Deutsche Bank.

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Aaron Watts, Deutsche Bank - Analyst [41]

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Thanks. Two questions from me: First, Rich, you alluded to this earlier, but to be clear on the streaming offerings across the board that, unlike some of your peers that are burdened with very high cost of content, you believe based on your agreements with the labels and publishers, you can scale profitably and in a margin-enhancing way.

I guess secondly, you also talked about CBS and Entercom earlier. You have been involved in various transactions on the Outdoor side. How do you see 2017 playing out in terms of M&A activity for the industry, new FCC Chair, new President, and do you see further opportunities for iHeart and Clear Channel to monetize assets within your portfolio worldwide?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [42]

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In terms of the new on-demand service, I'm not going to get into any details, other than to say we just have great, great, and they are true partnerships with the recorded music industry. Whether that is everybody from Lucian and Michele and the team at Universal, to Steve Cooper and the team at Warner Music, and Doug and Stringer and the team at Sony, and [Danny Grass] and just everybody within the music industry, so they have been great partners.

They understand about the value that we bring in terms of adding on additional products. They understand about our ability to work with them to add value for our listeners at small incremental cost and introducing new revenue stream. Just could not feel better about our position and partnership with the music industry.

In terms of 2017, one of the benefits about being old and kicking around aspects of recent history for a long time is never to predict anything. I'm not going to predict what is going to happen in terms of M&A industry. I'm not going to predict what is going to happen with the new FCC Chair. I do think he has made some very positive comments from an FCC standpoint in terms of being proactive in terms of radio. Bob and myself, and I assume the rest of the industry, we all feel very good about that.

Overall for 2017, I feel good about where we stand. We're pleased where we ended the year; I think you saw in our top-line results. The first quarter of this year, I think overall we are pleased where we stand at January, I think similar to maybe what you heard from other companies out there, you're seeing the same pattern.

January ended nicely; February has been a little bit weaker. And March is a little bit stronger. Overall, we're looking forward to a good year.

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Aaron Watts, Deutsche Bank - Analyst [43]

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Thank you.

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Eileen McLaughlin, iHeartMedia, Inc. - VP of IR [44]

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Operator, we can just take one more call and then we'll have to finish for today.

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Operator [45]

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Our last question comes from the line of David Phipps with Citi.

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David Phipps, Citigroup - Analyst [46]

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Hello, thank you for squeezing me in. Would you talk a little bit about your advertising business? As you mentioned, some of your competitors did a lot worse in the first quarter, and they cited some issues with national advertising. Can you talk about how iHeart was able to do much better than that?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [47]

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Sure, David, I'm going to go back to the fact, and I know I sound a little bit like a broken record, but it is good to keep repeating this; that is the benefit. That is what the advertising business is all about. You continue to reinforce the message. That is what we do.

We have had 15 consecutive quarters of growth, and one is, first and foremost, we really believe obviously in our radio and Outdoor business, and we are committed and we have seen this now for a number of years. I don't think it is any accident that we are committed to transforming ourselves into a digital and data-rich company built on the strength and power, in this case for broadcast radio, and we are benefiting quite frankly from the demand for mass reach media in a world of the dwindling TV reach.

I think we all look at the same statistics. We all look at the reach of radio, both among adults 18 plus among millennials, among teens, over 90%, and we see that television is down below 80% on its reach for millennials.

Just as a reminder, there are three reach medium's that reach more than 200 million people in the United States. There's facebook, there's Google, and there's ourselves, and we are the biggest at approximately 0.25 billion people we reach. I think it starts with that; it starts with our investments that we've been making for years.

We recognize that there is a transformation, and those of you that follow the advertising industry, you're all well aware of it. There is a transformation in terms of how advertising is bought and sold. And we are investing to make sure that we are at the forefront that's bought and sold, and we are making investments in our programmatic buying platforms; we are making the investments in our research analytics tools.

You take that with our audience size and ease of the programmatic tools, and then you have a company in iHeart that is in a unique position in advertisers and radio, and we anticipate that is going to enable us to really open up more digital revenue and more digital revenue streams as well. I think that is the differentiating factor, which is really our ability to create those national campaigns with national reach, as well as local campaigns.

The example I used this time for the first time in the prepared remarks, which I hope helps crystallize for everybody, is Pixar. And if you think about it, equate the iHeart brand to the Pixar brand, and then if you think about, Pixar does a lot of movies, and they do something like Toy Story or Finding Nemo, and think about our versions of Toy Story and Finding Nemo as our individual radio stations, you know, Z100 or Kiss or [Real] or any of our individual stations sitting under that iHeart umbrella. And that is why we are so uniquely positioned, and that is why we continue to outperform, and that is why you see the results that you do.

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David Phipps, Citigroup - Analyst [48]

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Just two quick follow-ups: Would you expect Cats media to grow organically in 2017, so ex political? And then how do you think that SG&A expenses will run through the year?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [49]

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On Cats Media, the answer is I don't expect them to grow organically because it is a non-political year. If you go back historically, and particularly because of the Cats TV side of the Business, I do not expect them to grow organically.

On expenses, I would look to -- if you look in overall basis, with everything I just talked about, and you have to look at our margins on an annual basis, with everything I just talked about in terms of the investments that we've been making as a Company, we still had some slight margin improvement on an annual basis. I suspect you will continue to see that.

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David Phipps, Citigroup - Analyst [50]

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Just to clarify, on the Cat's Media, if we ex out the political, would we grow organically?

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Rich Bressler, iHeartMedia, Inc. - President, COO & CFO [51]

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I am not going to comment on that separately.

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David Phipps, Citigroup - Analyst [52]

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Fair enough.

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Eileen McLaughlin, iHeartMedia, Inc. - VP of IR [53]

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Thank you very much. I want to thank everyone for joining us this morning. And Brian and I will certainly be available for any questions you have over the next few days. Thank you.

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Operator [54]

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Ladies and gentlemen, that does conclude our conference today. We would like to thank you for your participation and for using AT&T teleconference. You may now disconnect.