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

Okay. Let's get started with our next session. My name is Stephen Laszczyk. And I'm the lead analyst for the music, sports and live event sector here at Goldman Sachs. We are excited to welcome back to Communacopia this year Bob Pittman, Chairman and CEO; and Rich Bressler, President, COO, and CFO of iHeartMedia. Bob, Rich, thank you for joining us today.

Well, thank you. Thanks for having us.

Great. So I wanted to start off at a high level. iHeart's business has recovered nicely from this point a year ago. Broadcast revenues are well off your lows. Your digital business is on track to double revenues versus 2019. And the audio advertising market is as hot as it's ever been. With that as a backdrop, how do you feel about the company's position into the back half of the year? And what are your main priorities heading into 2022?

Well, look, I think we don't want to give new guidance, but I think we're certainly standing by the guidance we've already given on the rest of the year and obviously, feeling good about things. And I think our main priority is, look, we've got a lot of usage on radio. We've got a lot of usage on digital. We got lot of usage on podcasting. We've got this big social footprint. And so our goal, obviously, we want more of it. But what we really have to do better is just monetize better, which, for me, if I have to pick a problem, I like that problem because eventually, advertising always follows usage. And so I think we're in a great position. We built out the tools we need to monetize better. We've taken our almost 2,000 person sales force, and we cross-trained them. This was a strategy we developed a few years ago, so that any seller, anywhere can sell anything, so that when we have a new product like podcasting instead of hiring 15 podcast sellers, we have 2,000 people selling it. And by the way, you see it in the results. And of course, we've added to our array of products for the advertisers. We've added the new digital and data opportunities so that we can make radio look like digital products with our smart audio suite of services. We've made that investment. We've built out the only unified audio tech stack in the business, in which we unify all forms of audio on one platform, and we can find audiences across the platform. And we're building rapidly with the major holding companies trying to build into their new unified buying systems, which I think holds great promise for us with the kind of reach we have with the decline of TV. Broadcast radio alone out of our platforms stands alone as this last of the mass reach media. So we're feeling good about the hand we're dealt, and we're laser-focused on what we need to do, which is turn these huge audiences into more and more money for us.

I might just said 2 things to what Bob just said. One is in terms of just not to go by too quickly. Even during this period of time, obviously, prior to the pandemic and during the pandemic, we continue to invest in our capabilities. And so when Bob mentioned the tech stack we had in the Unified tech stack, now as we emerge out of or come back to a period of time where advertising demand is strengthening, is strong and it continues to strengthen, we have the ability to capture it now in a way, quite frankly, we wouldn't have had the ability 1 year or 1.5 years ago. And the second thing I would say, pre-pandemic, during the pandemic, as we, again, see advertising demand come back, this is a great shareholder value of free cash flow generated as a company. The characteristics of iHeart have not changed. Fixed cost base, but tremendous conversion of EBITDA to free cash flow, which will generate shareholder value and we'll get into that more, but none of that has changed either during the pandemic or as we leave it.

That's great. And we'll dive into each of those topics a little bit -- in a little bit more detail. But first, I think you mentioned advertising trends into the back half of the year. And just to maybe put a finer point on this, you mentioned your guidance. And just to be specific, your guidance was for third quarter revenue, I believe, to be up 20% year-over-year. Is there anything you can say about maybe the pacing of ad trends or revenue you're seeing into the final weeks of the quarter? Anything that you would -- you're willing to highlight?

I don't think we can talk about it, but we stand by the guidance.

Great. All right. Let's dig deeper into the business then. And we can start with your digital audio segment. I know podcast seems a really big topic for the industry as a whole. And the category has gained tremendous traction over the last few years. And by some estimates, I believe ad revenue for podcast in the U.S. is expected to be about $1 billion this year. From your vantage point, why is podcasting caught on so quickly with both listeners and advertisers? And where do you see the industry going from here?

Well, look, I think with the -- the podcasting is sort of leading the charge on this incredible resurgence or growth of audio. And I think there are a couple of underlying trends is, one is the consumer, I think, before the pandemic because of social, a lot of other things we're feeling disconnected and they value media that feels like a companion. They are 2 of those. There's radio, and now there's podcasting. And what we're really doing with both of those is we're keeping people company. The reason they're tuning in is because they want that person there that they can connect to and hang out with. In the case of radio, the example we often use is like a cocktail party. Radios, when I walk in and I see my friend and go, hey, how are you doing, how's the family, blah, blah, blah. Podcasting is when you walk in that cocktail party, you see someone, you go, hey, Bob, I need to talk to you for a minute. Can you come over here, and we talk for something, one topic in depth. Podcasting, we go depth -- in-depth on one thing. Radio, we sort of got the breadth of talking about things, but both are that keeping people company. I think the second issue you've got going on is that there used to be this thing called peace and quiet. Then in everybody's day they go, ah, now I've got some peace and quiet, nothing going on. Nobody does that anymore. That's like a thing of the past, and they're filling up that peace and quiet time not with their eyes, not with video because they really run out of time for their eyeballs. If they had time to watch something, they're already watching it. But they have time for their ears. They're cooking, I can listen to podcast or radio. I'm walking, I can listen to podcast or radio. I'm doing yard work, I'm doing something that requires me to use my eyes or my attention there, but I can listen. And so radio has filled that up traditionally. Podcasting now is filling that up as well. And of course, what's happening with podcast, it gets us incredible engagement, which makes it super attractive to advertisers, and we're winding up getting CPMs that look like OTT, that look like the CPMs you've never seen in audio before. And I think that's a direct reflection of just how popular it is, how fast it's growing. Remember, now this has grown faster, podcasts has grown faster than streaming music grew, which has been a great success story, and now, outreaches the big streaming music services like Spotify or Pandora. And the question is, will it eventually reach as many people as radio does, which is now the last standing mass reach medium, and advertisers are following along. I've lived through the birth of cable networks. I've lived through the birth of online digital with AOL. And I've seen this before. And what always happens is usage precedes revenue. But eventually, the advertiser catches up. And so we hold out great hopes for podcasting, both for the usage continuing on this trend and for the advertising to catch up with it. Yes, it's been growing quickly. But if you look at usage, it says there's a lot more to come.

And [ interesting ] by the way, just because you refer to the advertising marketplace, I think in your opening question, and just to build upon what Bob was saying and as everybody kind of thinks about the opportunities and people kind of build out their models, the estimates are, as you articulate, it's about $1 billion, $1.1 billion, $1.2 billion for U.S.-based advertising for podcasting for 2021. And by the way, to put it in context in terms of the growth Bob talked about, if you went back about a year or so ago, people were talking about $400 million or $500 million for 2021. As you go forward, whether it's e-market or some of the other people out there, consulting firms, talk about podcasting getting to about $2 billion, so doubling from this year going into next year. And now we're starting to see some projections, 4, 5 years out that talk about, again, the U.S.-based advertising marketplace getting to approximately $4 billion to $5 billion, again, not our numbers, but projections out there. And if you think about it, there's really 2 vectors in the way we get to participate in that. One is just the overall market growing. And then 2, if you look at our performance within the podcasting industry, yes, the whole industry is growing, but we continue to significantly outperform in podcasting, so we have the ability to take revenue from both of those pools as they grow the absolute number and the outperformance.

I want to ask a little bit more about the second part. So the podcasting market has been -- become quite crowded over the last couple of years. There's some big names starting to get involved. Could you talk a little bit more about your strategy, in particular, how it's differentiated and why you think it's the best approach to take share, as you mentioned, of the growing broadcast market over the next several years?

Sure. Let me start with Rich's point about taking share is at this point, we're #1, #1 publisher in podcasting, and we're widening our gap over #2 and #3. And I think that's a direct reflection of the flywheel effect. We're #1. So if you're a podcast creator and you think you've got a great podcast idea, you're probably going to try and get on #1 first and move down to #2, #3 or #4 if you can't do a deal with #1. So we tend to get first look on almost everything. And our strategy for podcasting that's sort of behind this is that we want to -- that we're free, we're distributed everywhere, that there's a responsible platform we'll put it on. And we promote our podcast in ways others can't. If you think about this symbiosis between our broadcast radio, digital radio and podcasting, because podcasting is sort of the same experience as radio, this host-driven companionship model that it's really easy for us to combine the 2. So we have radio shows that become podcast. We have podcasts that run on radio. We're able to promote podcasting on radio. And since we've got a reach in the United States with our broadcast radio, then in excess of even Facebook and Google in the U.S., #1 reach of any media outlet, it gives us unique capabilities to continue to create these hit podcasts. So I think our model really works well because it's aligned with the creators, the advertisers and the listeners. Creators want the biggest audience they can get. Everybody wants a hit podcast. If you look at the few people who've gone behind the paywall, it's not been good news. Serial used to be the hottest podcaster and then -- podcast, and then they went behind to paywall with Pandora, and people sort of forgot about it. Joe Rogan went on a highly publicized deal with Spotify. We don't know the numbers, but there were some recent press reports that said his audience is actually down. So I think everybody, first and foremost, wants a big audience. So creators, we have what they need. 2, advertisers are looking for the biggest audience they can find. And obviously, the free distribution to the biggest audience by the biggest podcaster plays to that. And the third is the listeners want it free, and they want the biggest selection they can have, and we're able to offer that as well. So this model appears to be working. It's certainly the only example of big profitable podcast business is the free model. I know others are trying subscription, which a lot of businesses would like. Wouldn't it be great if we could charge a big premium for something that used to be free? The history of that in marketing is not great. Matter of fact, I can't think of any examples of going from free to I'm going to charge you, but people are trying. And by the way, since we are the #1 podcast room, we've got such a big library that no matter what models emerge, if there's a way for us to make money on it, we've certainly got the content and the promotional power and the monetization engine, which allows us to play there. So we're playing it. We think having the flywheel effect now going for both for creators and for advertisers, gives us a unique advantage in this new world.

And it's also interesting, maybe just to build upon a little bit what Bob was saying, if you go back from 2019 to today, the second largest podcaster is also a broadcaster, and PR, and we've grown 6x to 7x our competitor in podcasting out there. So just -- it reinforces, again, with some facts. The point that Bob mentioned about us outgrowing the industry, also, it's interesting, when you look at our success. We've got more shows in Podtrac. And for those of you do not know your Podtrac, it's effectively like the Nielsen rankings for podcasting. We have more shows in Podtrac than anybody else in terms of the rankings. We have more shows in the top 10 in Podtrac than anybody else out there. And we have more shows that have 1 million or more listeners in Podtrac than that was out there. So yes, it's people like the NFL, the MBA that could have chosen anyone to partner with, but chose iHeart in terms of -- to ensure success for their podcast and then you couple with the depth of our podcasting capabilities and the content that we have.

You mentioned the content. And one of the most frequent questions we get from clients on your podcasting business is on the trajectory of what you pay the content and then the margins of the broadcasting business more broadly, especially given some of the competition that's out in the marketplace. At a high level, I was wondering if you could speak about how your podcasting deals are structured and how that might vary based on the type of talent or content that you're partnering with.

Sure. Look, do we do deals in which we produce it in-house and have no profit participants. And then we do deals that with the NFL and others in which we share. Since we have so much larger base, so much more reach, that it stands the reason that people can make more money with us on -- somebody could actually pay somebody a greater percentage but they would make more money with us with a lesser percentage just because what's really a percentage of what and the size we can generate with this big monetization engine we have and the ability to really drive usage puts us in a unique position. So I think there are going to be some people who are going to pay uneconomic deals, trying to get in the business. That's obviously not sustainable, and that's not long term. And because we are #1, we have the luxury of getting to look at most deals, and we're pretty picky, that Rich and I look at our entire business not based on eyeballs, not based on revenue, but based on earnings and ultimately, free cash flow. And so we are pretty tight filter and feel very good about the position we're on. And as Rich said, again, even groups like the NFL, the NBA, Shonda Rhimes, Will Ferrell, people who could demand big money and are obviously big content engines chose to come with us. And again, I think size sort of begets size and I think the flywheels have work here and work on content. Now I think you're sort of inherent in your question is, what are others doing that could disrupt that? And I think, yes, people can pay big money and pick up onesies and twosies. But given the kind of numbers we're talking about, I don't think anybody is able to overcome it with just uneconomic deals. And eventually, uneconomic deals catch up with you. I mean there's one company that is in the business and recently was talking about publicly that podcasting is now a drag on their margins. And why? Because they're probably overpaying for it and not doing economic deals.

Makes sense. Heading a little within your digital segment. Earlier this summer, you announced deals -- deal with TuneIn, that made iHeart TuneIn's to ANS local ad representative partner, which essentially gives you the ability to sell some of their advertising supply. Could you maybe talk a little bit more about this partnership as well as the broader opportunity that you see to strike partnership representation yields to audio services more broadly?

Yes, sure. Look, in our company, we have -- we don't talk about the segment much, but it's -- we do have caps, which is this audio and media services in which we do representation for other audio players, both broadcasting and digital quite successfully, and I think people are happy with it. The acquisition of Triton sort of put the final piece in our ad tech stack, which allows us to build this unified audio platform and marketplace. And as we said when we did the Triton acquisition, it not only provides value for iHeart, and we needed it to fully to get the value and then monetize we have better. But it in itself can create value. It can be the -- there is no big other audio -- unified audio platform. This is it right now. And so I think you're seeing, in the case of the TuneIn, in case of NRJ in France, you're seeing deals that we are doing where people are adopting our platform. We're helping them and obviously, it's creating value for our ad tech platform as well. And it's things like subscription services revenue from the measurement business in Triton is an opportunity for us and already has revenue. Revenue as a service business, such as our Voxnest business and so we are -- and by the way, and a way for us also to monetize third-party content for people through these marketplaces. So all those are pieces and I think TuneIn is a great example of partnership we do with another company that's got an opportunity, but for some of the assets we have and booking those together creates value for us and creates value for them.

What's the white space in this opportunity? So TuneIn is, I think, a good example. What other types of companies are ad services out there? Have you either had discussions with or think that you can go after in order to be able to bring some of this ad supply on to your platform?

Well, look, if you think about a marketplace, what drives the marketplace is having an enormous amount of supply. That's what the buyers will be looking for is, okay, where is all the stuff I can buy? And because iHeart's got sort of critical mass anyway by us putting our stuff into a marketplace to sort of make the market. Now we are offering others the opportunity to join that and be a part of it. And so I think anybody who's selling audio ads probably is interested in this because it allows them to take advantage of and use our scale as well for their benefit.

All right. With all the attention on podcasting and then digital advertising on that side of the business more broadly, your other digital business has been less than focused, but the segment has been performing exceeding well with revenues up 100% year-over-year in the second quarter. Could you impact some of the key drivers of growth you're seeing in this segment? And how durable do you think these drivers will be over the next couple of quarters?

Sure. Look, first is our streaming business. Originally, we built the iHeartRadio app to allow our products to be heard on something other than AM/FM. I don't think we foresaw how many devices would be there when we first started the journey, but it's been pretty amazing. And it's interesting to just put it in context, we have twice the audience size of the next largest broadcast radio company on broadcast listening. We have 5x the lead in digital. That says that our digital platform is sort of way outperforming the AM/FM platform in terms of the uniqueness of it. So that's obviously one. And so if you want to listen to Z100 or KIIS FM or KFI, you can either listen to AM/FM or you can listen to these digital platforms, and we're pretty much agnostic. Today, about 85% of our listening is AM/FM, about 15% is digital and growing. When you look at young audiences, no one is migrating off of radio. They tend to be adding these new listening opportunities in addition to. And radio, unlike TV is not like, oh, it's time for me to sit down and watch TV, because we're keeping people company, they come to us about 6 or 7 times during the day. By being on these new digital platforms, it allows them to find more times and places they can come to us. During COVID, for example, we had a big increase in the use of home devices. People discovered us on their smart TV, and their smart speaker and new ways to do it. And now that the patterns are more back to normal with people back in the cars, the good news is they kept that listening up on those digital devices. So we found more occasions. So that's 1. 2 is display advertising. People forget we reach, I think, 140 million, 150 million monthly unique s with just our digital display advertising on our station sites, our personality sites, Z100.com, KISS FM, and that's a huge opportunity for us, and when we also have digital services where we are selling important digital services as part of a package often to our advertisers, combining our assets with other assets for the convenience of the client. And those are really the 3 major sources of revenue there and our major points of focus.

And by the way, just to maybe just bring back one thing that Bob mentioned earlier to bring it full circle. And then you take -- and then you go back to our 160 markets, our local salespeople, local sales management, in addition to our national sales force. So we've got, from a philosophical standpoint, execution standpoint, all the capabilities Bob just talked about, all our sellers across the country, 1,800 sellers can access those capabilities. And again, that's a unique skill set and asset base in addition to the hard assets, our people and salespeople that no one else has.

That's helpful. Let's maybe pivot over to your multi-platform audio group for a moment. You both, I think, have expressed a fair amount of confidence that your multi-platform audio revenues will not only return to 2019 levels, but grow well into the future. What factors give you confidence in this recovery? And how much of this outlook is predicated on the recovery in the radio industry more broadly versus iHeart continuing to take market share?

Well, look, I think the major reason for confidence is to follow the consumer. Again, I've been around a long time. Eventually, advertising follows the consumer. So let's take a look at the consumer. There's been a precipitous decline in the usage of broadcast television or cable television, television networks with advertising in it. Somebody has got to fill that reach. Radio can do it. And even with the TV viewing that's happening, I think it's about 40% of the TV viewers are considered light TV viewers, hard to reach. OTT only reaches about 50% of the light TV viewers. We reached 90% with broadcast radio. So that's encouraging because I think there's nowhere else to go. Two is that we are now able to take our broadcast radio and make it look like digital, which has been a journey we've been on for a number of years with our SmartAudio, and we want to get into that $160 billion TAM. And the only thing that sort of has been the negative on us being there because we now have the smart audio tools with attribution, targeting, et cetera. But people have said, well, you can't do one-to-one. Well, now one-to-one is going away for everybody. Even Google is saying today they're building the future around cohorts. Well, SmartAudio is built on cohorts. So suddenly, we're there. It doesn't take much of that for us to change the destiny of -- and I can't say the whole radio industry, but certainly for iHeart broadcast by putting our SmartAudio into it. Our broadcast inventory becomes basically like digital inventory, which, of course, is in high demand naturally. Third, I think, as Rich pointed out with our sellers, is we now -- we've cross-trained all of our sellers. So instead of having siloed sales forces, we now have sellers that can sell everything. So if somebody comes to us and they're interested in the big event or they're interested in digital, we can also package broadcast radio with it and extend it. One of the more exciting things we're doing is if you look at podcasting, which has this incredible engagement, we now can find that same podcast audience that an advertiser is super excited about and say, you know what, we can do the looks like not only in digital radio, audio, and other places, but also in broadcast radio with that enormous reach. So we can now scale up what you're trying to do in a very cost-effective way. And I think also, if we look another trend which underlies it all, is the ad agencies and the advertisers, all building out a unified buying platform. The history has been the kind of radio buying group, a television buying group, a digital buying group, an outdoor buying group, and they were all in silos. I think everyone realizes for a lot of reasons, that the best way to do it is put all those -- all that media on one platform and do the most of the optimal plan using all of them at one-time in one platform. Well, clearly, radio will benefit from that since we've tended to be an add-on to a buy that often started with TV and then they add on from other silos. If we start from a blank piece of paper, everybody's together when you start building fundamental and foundational, probably radio is going to be, by far, your most effective one there. And if you look at -- any time you put everything together, everything sort of moves towards the mean in terms of pricing. And if you look at the 2 big groups that are below the mean is outdoor and radio. So we probably stand the benefit from that movement and that enabling. And so for all of those reasons, I think, we're feeling really good about the future of broadcast radio because of what it can do and its needs and how it performs with the listeners and the role it plays there.

I would just say 2 quick points before your next question. One is just to remind us all, we talk a lot about -- we talk about digital, and we talk about streaming, approximately 83%, 85% of listening in the United States is still on AM/FM radio and digital is about 15%. So when you look what Bob talks about the listening trends and you look at the listeners out there, still 85%; and two, just to be clear, when we talk about going after that 100 -- the money in the $160 billion digital TAM, and I think we can all agree, and you start to see there our numbers, we don't need to take a lot of that to create tremendous shareholder value and make a real difference on our financial performance. I think most people very often think, gee, that's just with respect to the digital line, but I just want to emphasize again what Bob said. So it's not lost on everybody, is that on the multi-platform line, where we have smart audio and data infused buying that Bob articulated before. We're going after the $160 billion digital TAM that will result -- the results going out in the multi-platform line, also what many of you just think about as broadcast.

That's helpful. Real quickly on this topic, I want to touch on one of the risks I think people see in the traditional radio space, which is a listenership. And to the extent it's been declining over the last few years is radio services and streaming services has become more accessible in the car. What are your expectations for listenerships over the long term? To what extent could we see maybe some of these listenership trends start to accelerate? Is it...

Well, look, I've not seen listenership trends going down. So I don't know which trends you're looking at. But if you look at radio, the reach of radio has been rock solid. If you look at even the studies of in-car listening, streaming services have been going up, by the way, including our iHeartRadio app usage as well, but it's been coming at the expense of the CD player, not of AM/FM radio. AM/FM radios, again, usage in the car has been pretty rock solid. What's gone down a lot is the CD usage. Believe it or not, there have been people using the set players in the car. That's gone down a lot, and that's being fed into the streaming services. So I don't think there's an issue of listenership of radio. To me, the radio issue is not one of usage. The issue in radio is one of monetization. It fell out of favor with advertisers for a number of reasons, which I won't go into here. But I think we have solved those bringing radio into the modern age or at least our radio with a smart audio and the services and providing electronic trading platforms and doing things that advertisers today expect and have been trained to do by the big digital players over the last few decades. And on top of that, as a plus, if we're now available on hundreds of platforms, thousands of devices, so however you want to listen to Z100 is just fine with us. And we're seeing that big growth in smart speakers, we've seen the big growth in smart TV, Roku, video game players, et cetera. And that's a strategy we began probably 10 years ago, where we set our strategy. Our programming strategy is to be where our listeners are with the products and services they expect from us. And so what that let us do is we have every device we can find. And COVID, and I don't want to say there's anything good about COVID. But if there is some little light there of something good, it accelerated the consumers' adoption of new technology and one of the problems we've had with radio is we still don't have any in the car, but we did have a loss of the old bedside clock radio. And we have been for probably 5 or 6 years working on what can we do to get manufacturers to make more clock radios and then suddenly Alexa shows up and go, duh, that's the new clock radio. And what we found during COVID is that people have learned all these new devices so that they could take that morning radio habit with them when they were sitting around the house as opposed to getting in the car and now that they're back in the car, they are still using us in the home at higher levels on these big devices. So a positive for us and I think, again, an underlying trend, which is very positive for radio.

I want to turn to cost structure and margins quickly. iHeart announced 2 separate cost efficiency programs over the last 2 years, totaling about $300 million or 10% of your cost structure. 2 questions here. First, could you talk a little bit more about each of these programs and what portion of the $300 million you expect to remain permanent? And then second, given these cost efficiencies, how should investors be thinking about the long-term margin potential of your business?

Rich, do you want to jump in?

Sure, sure. So think about it, we have 2 cost programs and just to quickly touch upon both. Pre-COVID, we announced a $100 million annual on run rate basis efficiency program. And quite frankly, that was to take advantage of investments we've made, new technology, AI technology, cloud computing, technology take full advantage of that. We've achieved that as we've got as middle of this year, $100 million is on a run rate basis. So that's a permanent cost savings on efficiency. The second is we announced a $200 million cost program at the beginning of COVID. That ranged in everything from a reduction of compensation from bonuses and a number of other areas, real estate efficiencies. And what we've said publicly is a majority of that $200 million would be permanent. So if you look at it on a combined basis, a majority of the $300 million will be permitted. And by the way when you look at our financial results, like this, let's say, Q2, you saw that our multi-platform group increased EBITDA margins by 900 basis points. So we were back to 30% EBITDA margins in Q2. So I think that demonstrates, again, the flow-through nature and what I mentioned earlier in response to the first question, the great financial characteristics of this company, 80% plus of incremental revenue on multi-platform flows through to the bottom line. Depending on the line, 40% to 70% of the incremental revenue on the digital line flows through to the bottom line. And we got up to 27% EBITDA margins in Q2, but we had a few little onetime items. And I think long term, you should think about the digital business more like Q4 of 2020 on EBITDA margins and let's say, 30% to 35% margins. And by the way, included in that, just to come back to hit, again, the podcasting point head on, podcasting is incremental to our overall margin base. And I know Bob mentioned that before, but I just want to mention it again as we talk about the overall margin profile of the company.

That's really helpful. One more on adjusted EBITDA. I know you guys have guidance out in the market to return to 2019 levels of adjusted EBITDA by the end of 2021. What exactly those mean? We get some questions quite often from investors on whether this exactly means that fourth quarter adjusted EBITDA this year will be at or above 4Q levels of 2019? Or is there a greater nuance here?

Well, it means just -- maybe I'll start, and Bob could jump in. It means just what it said. But I think is that we expect to get back to overall company fourth quarter -- I'm sorry, 2019 EBITDA, not for all of Q2, but during Q4 -- I'm sorry, not of all Q4, but during Q4 of 2021 we expect to get back. And by the way, just to -- we're not stopping getting back to 2019 EBITDA levels as a company, I think, again, we haven't given out any guidance for next year. But just as we move on to next year, is a political year, and we and I think all the advertising companies benefit from political and because of now, all of our capabilities that we've talked about on this call, we expect to continue to significantly benefit from political, but we always respond to the 2019 question because that seemed to be the check that investors want to know, you're getting back to 2019.

And I would just add real quickly. We don't view that as a goal. We view that as a crossover point, and we fully intend to keep going.

All right. Turning to free cash flow in 2019, iHeart converted about 40% of its EBITDA into free cash flow. Looking out into 2022 and beyond, what are the puts and takes that investors should be mindful of as they think about your ability to convert EBITDA growth and EBITDA growth into free cash flow and then thinking from the terms of maybe CapEx and interest expense here?

Yes. Well, I think just a couple of really quick things. I know we're going to be short on time soon. Again, continues to be minimal working capital. That has not changed about the -- to the business. When you look at our Capex, this year is an abnormally high year for us. That would imply, based on our 6 months, I think we were about $51 million, which would imply about $125 million of CapEx in the back half of the year, so $51 million for the first 6 months. We're heavy on CapEx this year because we've made investments in real estate that will drive more -- drive significant reductions in square footage for us of real estate as we go forward and significant reductions in operating expenses and just to make sure nobody double counts. That's already included in the numbers I talked about earlier in responding to the cost questions earlier. And quite frankly, we continue to look at efficiencies and ways to generate free cash flow. And I'm always fine to saying, Bob and I, we've been around a long time, and we are free cash flow guys. In terms of what the measurement is, yes, we have to drive revenue, and we need to drive it at a good margin to EBITDA, but the ultimate result of creating shareholder value is the generation of free cash flow, and we understand that.

Let's use the last 2 or 3 minutes here and talk about what you're going to do with that free cash flow. So you've been clear about your intentions to delever the balance sheet until you reach about 4 turns of net leverage. Could you talk about your priorities once you get to that 4 turns net leverage? Do you see more opportunities maybe to ramp investment in the business, do more M&A or are capital returns on the table as well?

Well, I think -- go ahead, Bob.

No, go ahead, Rich.

No, I was going to say, look, first and foremost, just -- which I think everybody understands, we're here to drive shareholder value, right? And so that -- so 4x leverage is decision we've arrived at in working with our Board of Directors, again, under that goal. When we get to kind of 4x leverage, we'll take a step back and we'll say, okay, what's -- because I think we all agree, paying down debt to get the 4x leverage is another form of returning capital to the shareholders in terms of the value it creates for our equity holders. And then we'll look across the spectrum at that point in time. And I think everything will be on the table. And quite frankly, from an investment standpoint, we've continued to invest in the business. Bob talked about Triton a little bit earlier in the call. If you look backward at Triton, we talked about our broadcast inventory looking like digital, which that came about because of one significant piece of that was the Jelli acquisition we made a number of years ago. But if you look at what our acquisition strategy has been, since Bob and I have been here, we've spent maybe $500 million in total during our entire tenure running iHeart. So I'm not sneezing a $500 million, but I think we'll agree that's not a significant amount of money out there. And when you reach over 90% of the country, we don't need more reach, we just need assets like Jelli, light Triton that make the rest of the iHeart asset base more valuable. So we'll continue to look at those, but it's not like we've -- long for any investments we haven't made.

And just to add to that real quickly, I think what Rich and I spend our time doing is saying, what's our strategy, where are we going, what do we need to get there. And sometimes in that, you say, we -- there's something we don't have, and we make a make by our partner decision to get there. Most often, we make it. We often partner. Occasionally, we buy it. But if we do, it's in direct response to something we've already identified that has a great opportunity to increase the value of the company.

All right. Great. We'll have to leave it there, guys. Bob, Rich, thank you both so much for taking the time today. Really appreciate it.

Thank you. Thanks. Appreciate it.