The savings, expense reductions, salary cuts and furloughs are all a result of the coronavirus crisis, according to an SEC filing from Tuesday. iHeart says the actions announced today will “substantially expand the company’s financial flexibility, provide sufficient liquidity to operate effectively even in an extended period of economic weakness, and position iHeart for a solid growth trajectory when advertising demand returns to normal levels.”
CEO Bob Pittman said, “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.”
CFO Richard Bressler: “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. 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.”
Many radio companies have had to dismiss and/or furloough large numbers of employees to survive the economic downturn the entire country is facing. While there are signs from the federal government, and some Governors, that the stay-at-home orders will be slowly lifted, the damage has been done, with estimates of ad revenue drops anywhere between 40% and 60%.
$200 million in “operational expense savings”… translation: more firings. Anyone want to guess the total number of iHeart employees that will be fired now? Although we will probably never know the real number.
Actually, iHeart would be “lucky” if their revenues are “only” dropping now, 40 to 60%. In our markets (mid size) the rates have totally collapsed because most businesses are closed, and we are down in billing over 80%. Scary.