iHeartMedia, Inc. (IHRT) Earnings Call Transcript & Summary

Okay. Ladies and gentlemen, you may start the presentation.

Great. Good morning, everyone. My name is Bryan Kraft. I'm the media, telecom, cable analyst at Deutsche Bank. And I'm here this morning with -- from iHeartMedia, Bob Pittman, Chairman and CEO; and Rich Bressler, Chief Operating Officer and Chief Financial Officer. Gentlemen, good morning, and thanks for joining us.

We're delighted to be here. Thank you.

Thanks, Bryan.

Why don't we start off with talking about listening trends? What have listening trends been like for the radio industry overall? How have audience levels held up in recent years as time spent on streaming has -- streaming audio has grown?

Well, it's interesting. I think the radio -- broadcast radio listening has been strong. For the last number of decades, the reach of broadcast radio has been over 90% of all adults and remains there. It remains equally strong with teens and millennials as it has in the past as well. So we've seen no real degradation as a result of streaming. As a matter of fact, I think we'd argue that it's additive. We are -- 90% of people say they listen to both FM radio and music collections but at different times and for different reasons, and I think that's consistent with the past, that people have always had a music collection, that they listen to when they are ready for their music and they listen to radio when they're ready for companionship, 2 different purposes. And whether that would -- those were CDs or LPs or streaming music, it's all the same experience today. And so I think, again, we remain robust. And probably, I'd argue that companionship is more important than ever in people's lives. I think also as you look at the sort of quantifying it, streaming reaches about half as many people as broadcast radio. And when you look at the quantity of listening, about 80% of all the audio time is spent with AM/FM radio. So all of the streaming services, even including streaming radio, like iHeartRadio, still are less than 20% of total listening. So we are encouraged by all the trends. And I think, especially in sharp contrast to declines in TV, puts us in a very strong position in terms of both impact with the consumer and probably more relevant impact with advertisers.

And can you talk about the overall size of the advertising industry revenue pool for radio, how fast it's growing and where the growth dollars are coming from?

Well, I do think that, again, I want to take one step back and do a little bit of context. Typically, people have been -- everything has been a silo. There's radio dollars, TV dollars, print dollars, digital dollars. I think we're seeing that change, and those lines are becoming blurring. Technology is allowing the advertisers and, indeed, the agencies are marching down this road to begin to plan across all media as opposed to planning and silos. That's very good for us because we over deliver. We have the lowest CPM among the major sources, lower than TV, lower than most of the premium digital. And we deliver a bigger audience than they all do. Looking at ROI, most people think radio is delivering about 3x the ROI of TV. Most people think radio and TV deliver about the same impact at the same weight levels. And by the way, that ties nicely because TV is about 3x CPM over radio these days, even though, decades ago, they were similar CPM. But as audiences shrank on TV, they managed to hold their average rate up. And therefore, you do the multiplication and they are triple the CPM of radio today. So when you look at the size, the dollars in radio depends on sort of how do you define it than -- or the digital radio products included or not sort of range -- I would say, range in sort of the $17 million -- $17 billion range. TV is $50 billion plus. Digital is approaching $100 billion. So for us, you don't have to be a genius to figure out what our strategy should be and what it's been over the past number of years. It's build out our capabilities so we can better compete for TV replacement and to fill in the holes with that reach that TV is experiencing today and begin to make our product digital-light to those advertisers now that are accustomed to the big digital giants' way of doing business. So we built out tremendous capabilities for SmartAudio, so we can deliver the analytics and the attribution metrics that they've come to expect from the digital players. So we are -- you're changing how we're selling for those players that are demanding that in order to adopt this.

And if you think about -- it's Rich. Just to add on a little bit. If you think about and as all of you start to think about building out and the opportunity for us and the size of the pools, Bob talked about how do you define that traditional radio bucket of $17 billion. Really, for the first time since I can remember, if you look at all the estimates out there, it shows it to some slight low single-digit revenue growth. And again, if you look at -- in terms of 2020 going forward, that's a long guidance that we gave when we gave 2020 guidance, but that's for the industry, the numbers I just gave, kind of very low single-digit revenue growth. If you look at our historical outperformance, last year, we outperformed the industry as measured by Miller Kaplan, which is just select markets, but a pretty good representative sample. We outperformed the industry by 350 basis points. In the last 10 years, we've outperformed the industry compounded annually by well over 200 basis points. And by the way, we should. We've got the only multi-platform alternative for advertisers, which we'll talk more about. So we fully expect that outperformance to continue. And then to Bob's point on the big digital bucket, where we see our digital line has been up over 30% in revenue each of the last 3 quarters that we reported on, we gave guidance of that being over 20% -- up over 20% in 2020 on revenue growth. So you can see, you don't need to take the stability of what you consider traditional broadcast radio network and our outperformance in those areas, coupled with even taking a very small piece of the $100 billion digital pie. You get a great return on -- great return, great free cash flow characteristics have -- as we've talked about and rapid deleveraging.

I know you mentioned a few things that relate to this question, but how would you characterize overall how you're uniquely positioned for growth and differentiated in your position?

Well, I think I would take a step back and say, I think from the -- any -- we're sort of a one of a kind company, so there's not a direct comparison. I think Rich talked about we outperformed the broadcast radio industry pretty substantially, and you should expect we should. I mean we're almost twice the size of the next largest broadcast radio company in terms of broadcast radio audience. And in terms of the digital listening to those stations, we're 5x times, so we do standalone. It's not like TV, where you've got 5 or 6 companies that are sort of equal size. And I think in terms of how we're prepared for the future, you also look at TV, and TV reach is down in the 80s overall. It's down in the 70% reach for millennials. I think you see that lower for teens, whereas radio has maintained that strong audience, 90-something reach, so we can fill that full of missing reach. What we also can do is Nielsen reported and, I guess, it was last year or the year before, they came out with the analysis. This shows that 40% of TV viewers are actually light TV viewers, very hard to reach no matter how much weight you have. Digital video only fills about 50% of that missing -- of that light TV viewer, and broadcast radio reaches 90%. So again, there's holes there. And I think in terms of the digital world, we provide an opportunity to really bring our scale to bear. So you've got this kind of math that's very important to the digital advertisers. And now that we can talk to them about SmartAudio, and audience is built on something that other than demographics and geography, we open ourselves up to that pool of money as well.

Okay. And you talked about ROI, but when you hit your value proposition to large national advertisers that historically had invested a lot into radio, if at all, what's that overall value proposition that you're pitching them?

I think it's a different value proposition for different advertisers. But I think, most importantly, as you get a very efficient way to have a big impact. So it's effectiveness and efficiency. And I think, probably, the best example is Procter & Gamble that it was not really a substantial advertiser in broadcast radio and certainly not with us as recently as 2016, '17. Last year, they were among the top 3 advertisers, sort of depends on how you slice and dice it. So tremendous increase. And what they had done is they had taken a look at their whole marketing budget and looked at what was producing. And as a result of a reexamination, they realized that digital was not delivering all-digital, what they had expected. I think the reported numbers were in kind of about $200 million out of digital advertising. I think they looked at TV and, of course, recognized the light TV viewer issue and the missing reach. And they looked at what media they had left to fuel all this digital spending over a 10- or 15-year period. And it was really print, radio and TV. I think they haven't put much back into print, but they realized actually that radio -- I'm sorry, and not TV and outdoor, they realized that radio and outdoor actually had very good performance characteristics, and they moved money back into those 2. So I think outdoor and radio were a major beneficiary. I think -- and by the way, of course, the punchline is that P&G has had record results after they've made this media change. I think you see that with lots of advertisers. They're all looking at -- especially advertisers that were very TV dependent, what do you do now that the reach of TV is down? So they're open to give us a suggestion because we have all these multi-platforms, we're big in broadcast radio, have this reach that's tremendous, we're the #1 digital radio streaming service, we're the #1 commercial podcaster by almost 2x, we do 20,000 events a year, we have a social footprint and could deliver social impact that's critical today as people use social to amplify messages, we have over 200 million social followers, which is, I don't know, what, 5, 6, 7x what the next largest audio player has in that world. So we're able to, for example, in our award show last year, we had twice the number of social impressions of the Grammys or the Super Bowl, and that really speaks to how we can pull these assets together for the benefit of the advertisers.

Bryan, and it's Rich. Just to add on to that and maybe just to take a step back. From just an investment standpoint, right, Bob talked about, I think, in your first question, in terms of the reach and the resiliency of the medium. And quite frankly, that reach and resiliency has been there since the 1970s. And really, listenership from a listening standpoint, maybe goes down a little, goes double each year, but it's been remarkably constant. And right now, it's at very high levels, all-time high. I think what's different, as you think about it from an investor standpoint, and we're fine to kind of saying, it sounded like with a little bit of a breeze that maybe it suddenly turned into a slight wind behind our back more and more with advertisers. And advertisers, it's always funny when they say, "OMG, like, we've kind of rediscovered radio or radio has kind of found itself again, audio." Well, we haven't really gone anywhere from a consumer standpoint to the point I just mentioned. But from the advertiser standpoint, I kind of think of and we kind of think of 3 major areas that have brought us back into focus. And by the way, you see it in our financial results for the last 3 quarters and you see it in the guidance we gave for 2020. One is podcasting, that I'm sure we'll talk a lot more about as we go through. I mean every one of our 60,000 advertisers, whether it's Procter & Gamble or the smallest pizza parlor, everybody wants to talk about podcasting. So it's really, again, raised the [ spectrum ] of audio and the effectiveness of audio. The second piece is smart speakers. AM/FM radio is the #1 use case on smart speakers, which most people don't realize. It's really enhanced, brought back, to some extent, but the radio returns in the home. I mean there's always -- there've been radios, obviously, with clock radios and everything else. But now, from a listening standpoint, whether it's the kitchen, the bedroom, the bathroom, the living room, it's really brought sound in a much more way back into the home. And the third piece is what Bob talked about in terms of light TV viewers. Clearly, the permanent decline of linear television because of all the streaming services' onboarding, so -- or watching the ones that have been launched and the ones to be launched. So you take the combination of those 3 factors, that what's brought us back from an advertising standpoint. And from the effectiveness that Bob talked about [ 6 to ] 1, it's gotten people to look at us more broadly, more broad set of advertisers in a different way. And the last thing just touch upon, it often takes like events in the world for people to look at their media mix models and make changes. Bob talked about Procter & Gamble. They have [ this activist ] shareholder in there, and we see the results, what happened now. If you look at when cable networks really took off from an advertiser standpoint, not the viewership, to broadcast networks that happened during the '87, '88 recession. People had to look at their media mix models. If you look at what Facebook and Google took off from an advertiser standpoint, that happened during the financial meltdown of 2007, 2008. People had to look at their media mix models. I don't -- we don't have to tell everyone on the phone what's happening today, coupled with the other 3 points I mentioned, in the environment that they were in, and again, we're not looking or obviously, none of us are saying it would be good to have a recession, but a little bit of headwind, a little bit of forcing people to look at their media mix model is a good thing for us. And I think you're starting to see it manifest itself in the numbers.

And I think, going to Rich's point, one of the things we talk to the advertiser about are our case studies, analytics. We're not presenting a hypothetical case about why you should use it. We're now able -- we've been doing this long enough that we're able to show the case studies. This is the issue the advertiser had. Here's how they solved it. Here are the results. And we're able to put the numbers to it, which I think is very important in this age of strong analytics. And so for us, we have unique assets, but we also have proof that these assets work and how they work.

Okay. Great. And you mentioned, Rich, the possibility of a recession. Are you seeing any impact from the coronavirus on your businesses yet? How significant -- and how significant of an impact would you expect if this continues?

Yes, we haven't seen an impact yet, believe me, as everybody, as we're watching it very closely. And if you think about our company, actually, we are only in the U.S., so we don't have the exposure to markets outside the U.S., where I think the coronavirus is having much more of an impact. And second, we are a business that is about companionship. So in times of need like this, they're hanging out with us more, and they're looking to us for information. Remember, we're not in the business of providing entertainment programs. We're in the business of providing companionship. We keep people company. And what that keeping somebody company is -- changes based on what's going on in the marketplace. So we think in times like this, they need us more than ever. We provide more valuable function and, I think, get embedded with the consumer more than ever. But again, we, like everyone else, look closely. I think all of this has not completely unveiled yet.

Okay. And what about on political? Can you talk about your expectations for political advertising this year, how you think it will compare to prior cycles and what you've seen so far?

Sure. I mean just to take a step back for a second, maybe on a couple of points. So 2016, last Presidential year; 2018 off-year election. Just to put in context, we did about $100 million of advertising revenue on political. By the way, that also includes, as a reminder, Cats. And to remind everybody, Cats, we sell national advertising for the rest of radio industry, also for Spotify. And we also have a TV rep business inside of Cats. So that's why you get the lumpiness in a political year, which is stronger as opposed to a nonpolitical year. Everything we're seeing this year at this point, looks like it's shaping up to be a decent and good year overall on political front. We haven't given any specific guidance, but it should be a good year when you put it in context compared to prior years. But just as a reminder to all of us, political, when we take the local advertising dollars, it's not in addition to. We've got one pool of inventory out there. There may be some addition to on the fringes. But what it really does is it kind of really tightens up the rest of the inventory and -- which helps drive the numbers that we gave for 2020 guidance of mid-single-digit revenue growth, upper single-digit EBITDA growth and significant free cash flow generation.

Okay. And let's switch to podcasting. You guys have established a leadership position in podcasting. What's the strategy? What's the source of competitive differentiation in podcasting for iHeart?

Well, when we think about podcasting, we think about it as an extension of radio. It is another form of companionship. It's the human voice, it's audio. People are not looking for a picture. They're looking for the voice. On a macro world, the consumers run out of time for their eyes, hard to add more video. I think the number is something like 80% of people watching TV are engaged in another electronic media activity at the same time. When you look at radio, I think the numbers are 70% or 80% of people are engaged in something else while they're listening to the radio, but it's not media. It's cooking. It's getting dressed. It's packing a suitcase. It's driving the car. It's doing work in the yard, work around the house, et cetera. We keep people company. And I think, from that standpoint, puts us in a very a valuable position with the consumer.

Yes. And then just, again, to kind of build on that from a podcasting standpoint, and Bob touched upon it. But if you look at the potential opportunities most, again, kind of bringing it back also from an investor standpoint, the overall podcasting pie last year is somewhere around $400 million to $450 million in the United States U.S. advertising revenue. People are talking about that pie going up to somewhere between, depending on who you read or project out, $800 million to $1 billion for 2020, doubling again and doubling again after that. And we really have 2 vectors, quite frankly, in the way to play that. One is to share the overall pool of money that I just talked about, and the other is to continue to look to try and increase our share of the podcasting dollars. Up to this point, we have gotten not the same share of podcasting dollars that we've gotten like on the broadcast radio side, and for one simple reason. Historically, podcasting has been more of a DR, a direct response advertising business. As it shifts now more -- to more mainstream advertising, what you'd probably think about like a Procter & Gamble, like a T-Mobile, more mainstream dollars will be coming to the pool. We have the opportunity to capture those also. That's why we really call it 2 vectors. Overall share, coupled with increasing to our fair share, like we have on the broadcast radio side.

And then I think as we talk about podcasting, we have this significant advantage that, because it is the similar business as radio, which is companionship, we're able to send radio listeners over to podcast. We can promote podcast and advertise them, so they can find them. I think somebody said they're -- how many podcast?

1 million podcasts.

1 million podcasts today. So the issue is discoverability, how do you find them, how do you make it hit. So we're able to promote podcast on broadcast radio using unsold advertising time. And I think the value of that time last year was somewhere around $100 million. So to replicate this as another company that is not in the radio business, you'd need to spend that kind of money to have the same kind of impact. So for us, we're -- we think that gives a distinct advantage. And when you look at the podcasting, some of our podcasts are actually directly off of stuff we do on the radio, some are not, but they're promoted on the radio. And most of our radio stations run a podcast every Sunday night. So we continue to expose the radio audience to podcasting as a form. And as Rich says, from an advertising standpoint, it's very valuable because it's, again, the same experience people understand where we've got very strong metrics and analytics port and a host red spots, in many cases. And we're winding up with CPM's pricing that looks more like online video than radio.

And one last point, right, which is also from -- bringing it back from a financial standpoint, we don't break out the podcasting numbers separately. There is a significant piece of our growth of our overall digital revenue, and that's where it is. Podcasting is profitable to us. I always enjoy reading other companies that get a decent amount of price out there. They say, we have an aspiration to be profitable. We are profitable right now. And on an EBITDA margin basis, podcasting is accretive to the company's overall EBITDA margins. And as a reminder, we provide guidance again for 2020 to be 28% to 29% EBITDA margins. So we continue to make significant improvement in our original margins and our commitment to get back over 30% EBITDA margins overall for iHeart.

I would also -- and I'll leave it with the sort of the file strategically. We think of podcasting as one of our platforms. We have AM, FM, digital and now podcasting, 4 different ways we interact with the consumer with very similar products. And we're able to move products and content and people across those platforms to create value for the consumer and value for our advertisers.

And podcasting across the industry has been very active from an acquisition perspective. Do you see additional assets out there that might be of interest to iHeart as acquisition targets?

After we bought Stuff Media, that sort of completed our need to build out our infrastructure, which is our content creation group, our marketing distribution group and managing our podcast business. So we don't see missing pieces there. And so for us, the investments we make are primarily podcast by podcast or group of podcast. We did an overall deal with Shonda Rhimes. We did an overall deal with Will Ferrell, which brings us a group of podcasting sort of the way in the TV and movie business over the years. They've done overall deals with various producers and production companies. We've done the same thing here, and we feel very comfortable about that strategy. And it winds up being a very efficient use of our capital versus acquisitions.

And by the way, to give you some context from an acquisition standpoint. What is now, as Bob talked about, StuffWorks, which is now obviously just iHeart podcasting, but, I guess, about 1.5 years ago, so we paid about $55 million, $60 million for all of StuffWorks. To put that in context today, watching what Spotify has done and they spent over $600 million, I think, is the number in acquisitions. They talked about paying over $6 per download off of those acquisitions. We have about 172 million, 173 million downloads last month according to Podtrac, which for those of you who don't follow Podtrac, think like independent service similar to Nielsen. And we've been -- we're always -- we've been bouncing around between 172 million and 177 million downloads a month. And just put a $6 number on that and it gives you some sense of the value creation we've done in the last 1.5 years, taking advantage of podcasting.

I'll give you one more stat, which I think helps illustrate the -- how we built this infrastructure that feeds on itself. We bought -- when we bought Stuff Media, I think we had -- iHeart had a little over 5 million monthly users. Stuff had almost 5 million. So together, I think there were about 11 million. Today, we have over 23 million users. So the organic growth component in the last year is bigger than Stuff and iHeart were when we made the acquisition. So I think we've got the machine now that can continue to build growth without us having to go buy growth.

What's the number? You said there's 1 million podcast roughly in the industry. I think it was an industry number. What -- roughly, what do you have on your platform right now?

We report in Podtrac, I think, about 350, but I think we have more like 500 or 600 on. But many of them are just small, and we don't bother measuring them.

Yes. But just to -- just let me go back to one point Bob made earlier. There's 2 ways to think about podcasting. There's the publisher and the distributor. We're both the publisher and distributor. And to be clear, in terms of following the money, the money is on the publishing side. It's on the content creation side. We will distribute everybody's podcast. And we'll allow our podcast, the ones we publish, to be distributed on all platforms out there.

Yes. Well -- and I'm sorry if I wasn't clear. I was talking about our publishing output. And in terms of carriage on the iHeartRadio app, we have hundreds of thousands of podcasts. And if you have one you want us to carry, just send it to us, we'll put it on. And that's really a service to the iHeartRadio user. But the money is with the publisher.

Publisher, yes.

Okay. And can you talk about how your SmartAudio initiatives are performing and also how might the ad builder product expand the market opportunity for iHeart?

Well, look, I'll tell you the proof in terms of how our SmartAudio is doing is, again, what I said earlier, go back to the growth in digital numbers, which has been over 30% revenue growth each of the last 3 quarters and then we gave a projection for 2020 to over 20% revenue growth. So we are starting to tap in to getting those digital budgets. And just a reminder, with SmartAudio, it's not 1:1. But it's really what advertisers are looking for, it's one to an informed data set of many. And when we made the Jelli acquisition last year, again, just as a reminder to everybody, we have the ability now to make a broadcast inventory look like digital inventory in terms of automated buying and selling, the reporting of results out there of one to an informed many.

And I think if you look at the SmartAudio, most of that probably is the benefit to the broadcast line. And probably one of the reasons we're outperforming the broadcast industry by such a half the percentage is because we are now able to make that broadcast inventory look like digital inventory in terms of targetability, attribution and the analytics. And there are 2 ways SmartAudio helps us. One is they actually come in and deal with SmartAudio on an automated basis using the technology. The other is the SmartAudio audiences and targeting are applied to traditional radio buys to get more precision for those buys, which, again, has value there and doesn't specifically show for SmartAudio, yet the benefit was derived from SmartAudio on those buys.

But -- and in terms of, I think, your second question, Bryan, in terms of self-serve...

Ad builder.

Ad builder, I'm sorry, thank you, Bob, ad builder. Look, we are -- we continue to roll it out in terms of the number of markets out there. I want to caveat it. It is not going to -- would not put anything into your models for this year and would not put anything into your models of any significance next year. The adoption of ad builder, again, which is our self-serve product, is going to look a lot more like a B2C, business-to-consumer adoption, even though it's B to small businesses out there for the most part. Why we are optimistic about it over the next few years as we go forward is that we know we have 60,000 advertisers. I think Facebook has like 7 million advertisers, to put it in context. And we know more than half of Facebook and Google's advertising revenue is long tail. So we believe that there's an opportunity out there for self-serve audio product. The early results are positive. And from an advertiser standpoint, getting new people to come to the medium that had an advertiser with us before, but again, I want to temper that. And from a credibility standpoint, it is going to be a slow adoption and a slow roll.

Yes. Typically, on stuff like this, it's a consumer adoption curve, not a B2B adoption curve. And indeed, early in the -- we're still in beta. We haven't rolled it out specifically to all the markets yet. But as we're rolling it, we do find that the people who are using it are people who have used Facebook self-serve and have not used radio. So it is hitting the target, and we're beginning to obviously play with all the characteristics to see how we maximize it.

Okay. Late last year, you announced modernization initiatives for the company. How will these initiatives impact 2020 in terms of CapEx and restructuring costs? And what do you expect the ongoing benefits to be post 2020?

Well, let me let Rich hit the financial. But let me -- we announced it in January this year. And what the modernization is, is exactly that modernization. We -- Rich and I have taken -- for the past number of years have sort of taken as our prism, what would this company look like and how would we manage it and how will we build our systems and our operations if we started the company from scratch today. And then we looked at that as sort of the North Star and said, "Okay. Where are we now? How do we modernize this, so our employees get much better, faster, more meaningful support using technology over old systems of people and paper and things like that. And two, how can we use it to help improve our decision-making." For example, when you look at our music selection and our music programming and how we put it together, there are about 3,500 data points we now have. That's too much for a human brain to absorb, so we're beginning to use AI to assist and help us both select the music and schedule the music. And by the way, that frees up people and our programmers to do more of the creative side of the programming and less of the manual rote work day after day. So we see it as a way for us to not only be more efficient, but also to be more effective and make our workplace one that people that are looking to work in modern companies will find attractive and want to work as well. Finally, the interface with our partners, whether it's the music industry or advertisers, gets much better once we can modernize and use technology to replace the rote work and save our people to do the smart work.

And just from a financial standpoint, we estimate about $45 million to $55 million of restructuring cost in 2020, additional $40 million to $50 million of capital expenditures. So look at that at about $100 million in total cost. The benefits of the modernization that Bob just described, obviously, they're going to be lasting for many, many years. We mentioned on the earnings call, we expect to see a run rate of approximately $50 million of savings by the end of 2020 and a run rate of approximately $100 million of savings by the second half of 2021. So one simple way to think about it is we're going to be spending $100 million, which will be for this year, of the components I just said and by the middle of next year, a little past the middle next year, we're getting back, on a run rate basis, $100 million. So very quick payback with a long-term benefit.

And I think from sort of just to putting the financial aside, I think it allows this company to be a lot more nimble and a lot more competitive and allows us to use the folks we have in a much more productive way.

Okay. So sounds like margins -- you expect margins to go higher over the next few years.

Yes. We've made a -- we've talked about -- you've started to see some real nice margin improvement since we've come out of the restructuring phase and the bankruptcy phase since May 1. I think in the fourth quarter this year, we got up to like 28.8% or 28.9% EBITDA margin. So I think the year before, we were at about 27%. We talked about full year guidance this year, 28% to 29%. So you see about 1 point of margin improvement in 2020 and our commitment to get back over 30% as we move forward.

Okay. Great. And turning to the balance sheet, how are you tracking toward reaching the 4x net leverage target? And what's the capital allocation strategy more broadly?

; Well, we -- let me take the second part first. Our #1 priority is put substantially all our free cash flow to pay down debt. We talked about getting below 4.5x or well into the 4s as you get to the end of this year, 2020. We're on target to reach our cash flow leverage talk of about 4x by the second half of 2021, so we feel good about that. The reason why we picked 4x is because just, quite frankly, listening to our current shareholder base and our prospective equity shareholder base out there, and people have told us from a risk-adjusted standpoint and looking at the capital structure of the company, that we have the best ability to broaden our shareholder base and broaden our appeal to get to about 4x. If you look at 2019, we ended the year with $400.3 million of cash, which is slightly above the $375 million to $400 million that we said we'd have on cash on the balance sheet at the end of the year. For this year, we gave guidance of $300 million to $330 million of free cash flow if you exclude the monetization effort that Bob and I have just been talking about, those onetime costs, you get to about $400 million to $430 million, which we feel very good about. And just as a reminder, this year, we're a full taxpayer in 2020, which we were not in 2019. And our capital expenditure number on an ongoing basis is $120 million to $130 million. And this year, it will be a little bit higher. It will be in the $160 million to $170 million range because it includes the $50 million of capital expenditures that we just spoke about due to the monetization efforts. So that should give you all enough pieces. But the #1 priority continues to be to pay down debt and expect to meet the 4x by the second half of 2021 is the highlights.

Okay. And turning to trading liquidity. This has been an issue for iHeart with most of the shares tied up in warrants. Is there any visibility into the timing and the process for the warrants to be converted into common?

Well, we -- look, we're looking at 2020 and we recognize -- and probably the question we hear most often is when you're going to have some more liquidity in the stock. You've been out there. You -- we need to continue to meet our numbers on our guidance, and we're well aware of that as we've done for the last 9 months. But we have 2, I think, significant events that will help us a lot in 2020 going towards liquidity. First is what we just -- we're talking about the last few minutes, getting our leverage down, getting our leverage below 5 and continue to make progress on our leverage also, I think, will help on liquidity. And the second piece is getting the waiver from the government. And I guess about a week or so ago, 1.5 weeks ago, there was a major first step in that process is that the FCC put for public comment on -- put for public comment the petition that the waiver be granted. That's a 30-day public comment period. Many companies, including Cumulus, have gone through that before. In Cumulus' cases, there were no comments. Then after you go through that public comment, there's more government process. There's something called Team Telecom, which I don't think I need to bore you on the call with right now, but there's more process -- a little more process going forward. But this was a major first step to get on a public comment. And everybody believes strongly, and we're optimistic that this is just a process and that we will get the wave and then people have the ability to convert the warrants into Class A common stock.

Okay. Great. Well, we're out of time. I want to thank you guys, Bob and Rich, for joining us. Thought this is a great discussion and hope that you have a great day. And thanks, everyone, for joining us on the webcast.

Thank you.

Thank you all. Thanks, Bryan.

Yes, my pleasure.