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

All right. Let's get started with our next session. Thank you, everyone, for joining us today. We're excited to welcome back to go for you this year in person, Bob Pittman, Chairman and CEO; Richard Bressler, President, COO, and CFO of iHeartMedia. Bob, Richard, thank you for joining us today.

You're quite welcome.

So great. Let's get started off. So maybe from a high level, the operating environment has changed a fair bit from this point a year ago. For example, the macro outlook softened a bit. And that's had some follow-on weakness into the broader advertising market. That said, iHeart continues to execute against some of its main initiatives, including growing individual audio business, streamlining its cost structure, and deleveraging the balance sheet. Maybe with that as a backdrop, how do you guys feel about how the company is positioned heading into what could potentially be a slower growth environment? And what are your main priorities heading into 2023?

Well, I think as I look at it going into this, I mean, we talked about on the earnings call that I think we expected this year to be very robust. Clearly, I think with the invasion of Ukraine, et cetera, that didn't happen. But I think we're seeing this as a period of uncertainty. I don't think we got something looming. It feels like we're in it. In a very perverse way, there's something good about the pandemic. Can we cut this down a little bit, just to echo on this? Thank you. I think the -- in the 2020, everybody thought the world was coming to an end, and they cut back advertising enormously. It's a very bad year for us, bad year for the advertising business. The same people have made those decisions are the people making the ad decisions today. And what they all discovered was, "Oh, wait a minute, the world didn't come to an end. Whoops, I cut out my advertising." And I think it was... As an analytic partner… Put out a study that showed the people who cut back advertising lost about 17% of their sales. The people who kept advertising got about 17% or 18% increase. That's a huge delta. And I think people who cut back their advertising if they had it to do over again and knew it was coming back so quickly wouldn't have cut their advertising out. So I think that we're not seeing even normal behavior in a weak period. Normally a weak period, it's been 10 years since you've had one. People all panic and they go, "My gosh, it's terrible." Having something as recent as 2 years ago is I think the reason you're seeing not such big falloff because the question is, "Wow, I'm seeing all this terrible news." Why is it not hitting advertising the way you might think it would? I think that's it. And so for us, I mean, it's certainly not robust, not the year we expected. On the other hand, it's -- as Rich talks about often that this is close to, if not the best EBITDA year we're on track to do. And we expect to see on the other side of it, some real strength from the products we're creating, and the fact that the advertisers didn't make big pullbacks, I think is good because you can continue to build.

One thing I might just add to that to build on it is that back to Bob's point, just to put a fine point on it, I think there's a benefit to this year for us, even though it's as robust as we thought, it just shows the resiliency of the business. We talked about this at Q2, as Bob said, that we expect to be in about $1 billion on, and we still feel comfortable with that. But adding to that is we're going to generate about $350 million made most importantly, of free cash flow this year. We had a 54% conversion rate in Q2 of riveted free cash flow. And so we continue to delever very quickly. So we've got a highly leveraged capital structure that's generating a lot of cash and delevering very quickly. You have the ability to create a lot of equity value for our shareholders.

And I want to get into the EBITDA and free cash flow generation of the business. But maybe to start from a higher level at the top of the funnel, revenue generation and some of the activity you're seeing in the business. Your third-quarter guidance calls for revenue growth of 3% to 7%. And I think you called out July is trending towards 4% growth year-over-year. Is there anything maybe you can add to that conversation in terms of the ad activity you're seeing throughout the end of the summer, perhaps into the first couple of weeks of September and how that's trending?

We can't give you any information we haven't already put out. But I think we said in the last earnings call that we did -- we saw this interesting thing about in slow periods or uncertain periods, what happens is I think people hold a little bit back in the first month of the quarter to see how the quarter unfolds, and then we're seeing this trend of additional spending in the quarter. I think the only thing that may fall out of pattern on that, if that continues, is probably Q4 because October is, as you remember, a big political month. And there is no uncertainty and no slowdown in political advertising, just read the newspapers. And so I think we'll probably see that even if that's still going on, we'll see it fall out of pattern because of that.

One of the questions we get most frequently asked by investors is what is the right way to think about how a potential recession could affect your business the advertising business more broadly. I think most investors look at previous drawdowns over the last 3 or 4 recessions and sort of size or base case off of that. I'm curious, what framework do you both use when thinking about the potential outcomes of a possible recession? And what are some of the key businesses or some of the key differences in the business today versus what the business looked like the prior 2 or 3 cycles that you think are worth pulling out?

Well, again, as I started the conversation, I think this one is quite different than anything else because we just had one 2 years ago. Normally, I've been in the business. I think the first one that hit me in a management position was probably 87. And I've seen everyone since then. And -- but they usually come in 10-year waves. Having that 2-year out there, I think, has greatly moderated the impact of this one. And I think there's not, again, we're all guessing. But I don't sense that we're -- there's something looming, I think we're in it. So the question is, are we 25% in it? Are we 50% the way through? 75%? I have no idea. But I think this is what it is. And so we are building our business based on this is the environment in which we're operating. The good news is we have some new high-growth businesses like podcasting and digital that in 2020, we're about 10% of our business today. That's about 26% of our business. So our composition of revenue has changed rather substantially in just this 2-year period of time. And the growth rates in periods like this and periods of uncertainty are quite different between those very hot businesses like podcasting and the more general businesses we've been in our multi-platform group.

By the way, just one other aspect of diversification. Bob talked about our total revenue diversification. But just as a reminder, we have no one advertising category that's more than 5% of our revenue and no individual advertiser that's more than 2%. So again, whatever period of time, but particularly through challenging economic times, that's a great benefit.

Well, even in 2020, there were some categories that were up. There's always something doing well, something doing poorly in any environment. And I think by having this diversification, it allows us to moderate any tremendous impact from anyone.

There are some categories that didn't get back to full freight after the pandemic either. Is there any way to quantify that if you were to maybe think back and say where the audio market should have gotten to post-COVID recovery versus where it got to before we saw [ some of this ]?

Well, let me tell you, the big trend that's going on because I think in terms of the ins and outs and they even out. But I think what's going on is right now, audio is about the latest work study, I think it was done a year ago, showed 31% of media consumption every day is audio. It's 9% of revenue. Why is that? Because you've got somebody basically allocating money to sectors often based on emotionality and personal bias. And so somebody is saying, "I'm going to allocate 9% of my buy to audio." When if they were following the consumer, they'd be allocating 31%. I don't think we're going to change substantially people's minds or biases. That takes a long time. But what's coming in the ad business, and if you talk to the holding companies or the big ad agencies, they're all building out a unified buying platform, planning platform, data platform in which they put all of these inputs together in one platform. So instead of somebody allocating bias, I'm going to put 9% of radio. And then they plan that 9% or buy that 9% of radio or audio, in this case, they're putting everything together. And they're saying, "Based on the audience reach and the cost, let's come up with the optimal campaign for our clients." The great news about that is once you put it in, Logic would tell you that what's going to happen is it's going to move toward real distribution of usage, not somebody's bias about, "Oh, none of my friends do that. So I'll put it where my friends go." And so I would think that you will be moving much more toward 31% away from the 9%. Additionally, when you look at pricing, if you put all the pricing together, again, Logic would tell you you're going to go -- there's going to be a reversion to the mean. And so everybody whose CPM is below the mean should get a rise in CPM and people above probably a tempering of CPMs. Radio and outdoor are probably the lowest against the mean of any major media. So you'd expect those 2 sectors to benefit again from this. So for us, when I'm looking longer-term trends, I'm saying broadcast radio, which we have a lot of impressions that probably is going to benefit enormously from the unified buying platforms. And by the way, the -- all these are in process now of being built, whether they complete them in 1 year, 2 years, 3 years, I'm not sure. But as they do it, that's to me the biggest positive trend driving towards radio. And when you look at our company, if something improves radio that much, that's good for us. All of this is, by the way, on top of us continuing to have these growth assets in podcasting and our digital assets. And so I'm looking at future trends as being very positive for us, mainly because there's this macro trend happening in the way advertising is bought and sold.

If you put some of those more macro and secular trends together, where do you think radio advertising revenues can get back to in terms of today versus pre-COVID levels. And I think you've made the point that you think your multi-platform audio business can get back to pre-COVID levels and perhaps even grow. Do you think that's still the case? Or do you think getting -- approaching that level is in the cards...

By the way, I don't see why there would be a cap on it where we were because where we were in '19 was nowhere near our fair share based on usage. If we got 31% of the usage and 9% is being allocated to audio, it says we have a great growth. If you talk to us in 2019, we have said, "Wow, we're not getting anywhere near our share." So I think we're not growing -- it's not like we had capped out what we maximize every dollar we could get out of radio. I think we're way behind where we should have been, which is one of the reasons we built out our smart audio suite of services, why we bought a company called Jelli, why we bought Triton, why we've invested so heavily in AdTech is that radio of all the media is probably the farthest behind in catching up to the way advertising was being bought and sold, which was pioneered by Facebook and Google. And so we're playing catch-up there. So I think far from '19 being any cap on us, '19, I think, had tremendous upside based on the idea that if there's 31% of the usage and 9% on media. For some reason, advertisers are investing at too low a level against audio. I think a lot of that is just personal bias. I mean who's person doing it? Probably not highly sophisticated, lower-level person, basically making a judgment call. The beauty of what's going on today when you begin to move it to these automated tech stacks is facts override bias. And I think the facts are firmly on our size. And when you talk about radio in particular, if I look at newspapers, TV, et cetera, they all had a decline in reach. And when they had that decline in reach is when they started getting revenue pressure on them. We've had no decline in reach. Radios basically got about the same reach it does today as it had 20 or 30 years ago. And when you add -- and I'll add one more dimension to it. Why? Because what radio offers is something no one else does, it's companionship. We're not playing music. We're not doing a talk show. We're not doing sports scores. We're hanging out with you while you brush your teeth. We're hanging how we do while you're in the shower. We're hanging out with you while you're driving to work every day. We're hanging out with you while you're cooking. We're hanging out with you while you're in the gym. And it's that human connection. And when we -- whether we got Ryan Seacrest or Charlotte [ Galette ] or Steve Harvey or whoever, the power of those personalities is that it feels like a friend. And that is something that doesn't get diluted. And if I think about other media options, I would say actually, going forward, probably people want more and more opportunities for companionship in an ever-increasing fragmented world.

Yes. And by the way, one thing just that stability. I don't want to lose this point, that we reached over -- reached approximately 276 million people on a monthly basis, over 90% Americans. So you combine that stability with broadcast, which Bob says, has been remarkably resilient, not just financially, but in terms of listenership and then you look at 25%, 26%, 27% of our revenue base now comes from digital, which has helped supported by the multi-platform assets, which creates the awareness. Nobody else has that set of assets out there. And I would say, we talk about -- you talked about pools money in getting back to '19 on multi-platform. But remember, on the digital side out there, that pool is like $160 billion of advertising revenue. And we, as iHeart, through the combination of both multi-platform with digital, we only need to take a small piece of that to have a dramatic impact on our financial results.

And going to that point, what we're doing in assets, when we go to this unified buying platform, our broadcast radio begins to look like digital. And this pool of money that's digital's revenue suddenly is available for us to tap. And just I'll leave you one more point. When I say we reach 90% of Americans every month with our broadcast radio, there are only 2 companies that come close to that, Google and Facebook. The biggest TV network, I think, last month reached 38% of America. That's a broadcast TV network. Cable network was less than 20%. The largest streaming digital service on ad-supported was less than 20%. So when you say we've got the 90%, it's not only do we have the 90%, but it's unparalleled and unparalleled by quite a margin.

You mentioned the opportunity in digital. That's a good transition. I want to talk about your podcasting business a little bit more. You're currently the largest podcast publisher in the United States. I think you're 2x, the next 2 podcasting publishers here in the United States. Can you perhaps talk a little bit more about your podcasting strategy? More broadly, what are the keys to sustaining that business has momentum, that competitive advantage into the future as competition increases as more of your competitors invest in podcasting?

I'd actually flip it, and I think we're in the consolidation phase. So the top podcasters get bigger and it becomes harder and more fragmented for the smaller players to catch up. And I think that's exactly what you've seen as a trend line. Podcasting is basically an adjacent business to radio. Just as you might argue, Netflix is TV on demand. Podcasting is radio on demand. And some of the biggest podcast are actually radio shows. And so having something that's that similar gives us a natural advantage in terms of both content creation, in terms of ad sales and probably more importantly, in terms of promotion. Why did we get so big, how do we get so big? We are on cooking. We use radio to promote our podcast. And because we've got 90% reach, nobody else has 90% reach, we're able -- I mean we can't make a non-hit a hit. But if you got something that could be a hit, if people could find it, we can make sure they find it. Heretofore, you had to rely upon Apple promoting your podcast. "Man, if they pick our pipe gas to promote, will people find out about it?" We don't worry about that. We use our own power to do it. So we -- and by the way, so we're #1 now by quite a margin. If you think about creators who want to come to a publisher to create a podcast, one, we want to stay in the publishing business, not get in the sales rep business. because I created my podcast, I'll pay you whatever percent to sell the advertising for me, we go, "No, thank you. Not a business we want to get into." We're in the business of we'll be your partner. We'll help you build the podcast. We want a long-term relationship. We want to, in most cases, own the IP with you or own the IP. And we want to control how it's sold to the advertiser. We want to be able to control whether host can read stuff or whether we can build stuff together. We'll take our other hit podcast that promote hit podcast with them. We'll do the cross-promotion. And when we build podcasts like that, we get first look, if you've got a podcast you want to do, where do you start? You go to who's the biggest, iHeart. Let me talk to them first. Hopefully, we take every good economic deal off the table. So the deals we pass on are the ones that now go to #2 and #3 and #4 to take a look at. And they progressively take the best deals off the table. So by the time you're the fifth or sixth largest podcaster, you're getting some pretty bad deals are coming your way and you can take that or nothing. The only way to beat that is if you'll say, I tell you what, "I'll just pay you an uneconomic amount of money and do your podcast with me." And some people will take that. But at the end of the day, remember a show called Serial, a podcast called Serial, they took money. They were -- nothing was hotter than Serial. They took money for somebody to take their podcast and people forgot about Serial. That's a lesson that everybody in podcast learned. So somebody really wants to build a big podcast franchise, NFL, NBA, et cetera, they're generally interested in real economics. If you're an individual, you might say, if somebody is going to pay me $100 million, I don't care what happens to this podcast, I'll take the money, but that's not scalable. Nobody can build a lot. And eventually, even people doing that run out of steam and go, "Well, what am I buying if I'm not buying something that's future to it?" So I feel very good about our position is, number one. I feel like it's consolidating, and therefore, you should expect us to get bigger from it and not only bigger in terms of users but also bigger in terms of those users consuming more podcast episodes, look at the best metric for that look at downloads and how they're growing. That's both users and episodes they're using.

And the other thing I was going to build upon that if you think about it because you talked about the trajectory of podcasting does both from a user standpoint, as Bob talked about, from the people making the podcast all role in terms of the publishers. But from a financial standpoint, the podcasting industry today, advertising revenue, and just to remind the most revenue in advertising revenue is in the United States right now for podcasting. The estimates by eMarketer or Pricewaterhouse whatever is making these estimates, it's about a $2 billion industry right now in the U.S. and importantly, growing the $4 billion, $5 billion, $6 billion over the next 4 or 5 years. And if you think about it, taking what Bob talked about from a user standpoint and building upon that, a couple of points. One is we're going to participate in 2 vectors, both it's going to grow in terms of the total podcasting revenue stream growing. And the second piece is us continuing to gain our fair share, which we don't get today. So we have that benefit on both sides out there.

So you mentioned consumption of podcast growing. I'm curious about the other side of the revenue equation, which is monetization. It seems that ad load and broadcasting is much lighter than what we see in other forms of media. I'm curious if that's empirically the case if you guys are seeing that. And looking at how much room do you think there is to grow ad load in podcasting while balancing [ CPM ] engagement?

Well, look, I think there are 2 -- a couple of vectors there in 2 ways to look at it. One is that, yes, the amount of ads we run in a podcast are really low compared to other forms of audio. And our ad load is probably less than the general marketplace. And so can we grow it? Absolutely. We don't want to grow it until there's strong demand for it because we don't want to lower pricing. As we look at pricing within podcasts, there are 2 elements. There is the -- I'm going to sell you this podcast and get the host to read it, that is premium pricing. Those CPMs look like OTT are some of the best, most premium video product. There's also, though, the opportunity to take all these little podcasts that we have that you can't sell 100 downloads in Jackson Mississippian a podcast, but we can aggregate all those others together electronically, which is what was behind the acquisition of the Triton company so that we can build electronic trading platforms to sell audiences on podcasting. Those will probably be lower and they are lower CPMs, but still completely incremental money and revenue for us. So we will look at -- we've got inventory we control within the podcast. We've got how much inventory we can sell in terms of podcast, long tail, small stuff. And we've got pricing that we can play with as well as Rich said, the overall growth of the marketplace. So I think we've got a lot of headroom there. We're just seeing the beginning of the monetization of this business. And again, I'll point out that 2 years ago, where in 2020, our total digital revenue was 10% of our business. This last quarter, podcasting was 10% of our revenue. And again, coming in at a margin that's better than our overall company margin on the bottom line.

I wanted to ask you about margins and podcast. If you think about where we are in the monetization curve in the investment curve that you're making in podcast and the scalability curve of that over the long term, where are we at in terms of what that means for margin?

Yes, it depends on which -- who you're talking about. There are 3 segments of podcasting and again, I don't know how familiar people are, so I'll just go through them real quickly, there is the opportunity to be the publisher, which means we're partnering, we're trolling the podcast, generally pretty darn good margins. And that's where we focus and that's the reason we have pretty good profitability. The second element is sales rep. Somebody's got a podcast, they're not going to give you the IP, you don't control it, but they'll pay you a percentage of the revenue to sell it for them. That's a pretty low-margin business. We're in it with our cats operation, which reps radio stations, the iHeart audience network, and Triton marketplaces, do some of that. And then there's the distribution, Spotify, Apple, even the iHeartRadio app, we carry podcast. None of us make any money from carrying a podcast. So almost all the economics are publishing. And when you look at other companies reporting, I think we're the only company that's reporting that we're having really good margins and doing really well on the bottom line on podcast. If you listen to others, they're saying, "We're hoping to grow our margin into double-digit or we're hoping to become profitable." Why are they doing support? It’s because they're basically in the sales rep business. And I think you have to differentiate between those 2. As we look at it in the publishing business, we're just getting started, scale matters, as you well know. So the more scale you have over time, the better the margin. And we have a discipline. We're doing deals, and we're not willing to do the deals that are uneconomic. So as long as we do that, we're in good shape. And by the way, remember, we make a lot of our own podcast. Probably the biggest podcast of all time is how stuff works. That's owned by us. That's our IP. That's our show. We've been doing books off of it. And we're continuing to build out not only do deals with other people who have ideas like the NBA or the NFL or Will Farrell with Ron Burgundy, but we're building our own podcast. So having that breadth of content also gives us quite a bit of leverage.

And one thing just to build upon that team, we talk about early days of podcasting. From -- just as a reminder, all of us and everybody has -- from an advertiser standpoint, this is -- I don't know what the sports analogy is, but it's like the top of the bottom of the first inning, big advertisers, whether it's the AT&T of the world, the Procter & Gambles or the T-Mobile, they just really discovered podcast in the last couple of years. I think we all pinout podcasting has been around a long period of time. But until we really got involved and bought stuff works and created a scale business, it was primarily a DR, direct response advertising business. And the importance of that is not just the tonnage in terms of advertisers. I guess who pays the biggest numbers, the biggest CPMs, big advertisers out there. And so that's why we're so optimistic, another reason about the future.

It's a good overview. I want to turn to your cost structure and margins real quickly. So iHeart took out a material amount of OpEx out of the business over the course of COVID. At the same time, you're making these investments in the digital side of the business, tech stack, podcasting. I think for those 2 reasons, there's some concern from the investment community regarding the flexibility of your cost structure, especially heading into perhaps a more difficult economic backdrop. So 2 questions really for you. First, how flexible is your cost structure at this point? And second, given some of the flexibility you need the efficiency that you could potentially implementing the business? How should we be thinking about the margin progression as we come out through the cycle and over the long term?

Well, let me just -- I'll give the top to you and Rich will give you some more specifics on it, but it depends on what we see. Yes, we're a fixed -- high fixed cost business, which we have such a great operating leverage. That doesn't mean we can't adjust the fixed cost. And I think we demonstrated during the pandemic that we really can adjust the fixed cost. We also can adjust the capital spend quite substantially. Again, if you go back to 2020 as an illustrative example, you can see how much we were able to take out. And it depends on what the severity is. I mean, during the pandemic, everybody thought the world was coming to an end. And guess what, we cut out 401(k) matches. We cut out all travel and entertainment. We cut out -- we put people on furloughs. We've had layoffs. We had -- we gave people unpaid vacation. So in essence, reducing our compensation numbers. So there are ways we can do it. It's participants on the severity. Right now, as we say, we think this one is pretty mild in the grand scheme of things we've seen through our years of living through any downturn. And -- but depending on what we see, we will adjust.

It's interesting. You raised a question from a margin perspective, and it wasn't in terms of some concern out there. If you go to Q2, we got both of our -- the digital or group and the multi-platform we're well back over 30% margins. We've said to people to model out digital margins over the long term in the mid-30%. The incremental dollars coming in are 40% to 70% on the digital audio group, incremental with over 30%, 35% absolute margins, incremental dollars coming on the broadcast, a multi-platform line. We've talked about 75% to 80%. And I think if you look at Q1, where we didn't quite have those margins, we outlined to everybody and said, "Okay, we're investing in business based on built-up demand on the digital audio group, but we will get back over 30% by the time we get to Q2 from a cordability standpoint." I also would highlight so there's the EBITDA margins, but Bob and I are both were cash guys, we’re free cash flow guys. So this year, we've gone -- we've publicly said we're going to do about $350 million of free cash flow, deleveraging quickly. I point out that even in the depths of the pandemic and the toughest year any of us have ever seen, probably 2020, we generated significant free cash flow during that period of time. So this is a great business and iHeart company in terms of the financial profile, whether it's getting margin expansion or generating free cash flow.

And I mentioned the importance of free cash flow. I think your guidance for this year calls for free cash flow conversion from adjusted EBITDA into free cash flow, somewhere in the mid-30s range. As you look out and think into 2023, what are the puts and takes that investors should keep in mind in terms of free cash flow conversion from EBITDA in free cash flow?

I would say what we've done historically, I think we've done a really good job of aggressively managing working capital. I just articulated before, what the incremental dollars come in that don't require really any significant additional investments, which is why we get so high free cash flow conversions. And quite frankly, also our capital expenditures. I think Bob touched upon this very briefly. We have the ability to dial up and down our capital expenditures depending on the operating environment we're in. We also had invested -- I think this year, we're going to do about $160 million, $165 million of capital expenditures, probably $30 million to $40 million of that. And we've said this publicly before, relates to real estate investments and real estate consolidation, which get a very high ROI. So you should look at $110 million to $120 million of capital expenditures going forward. But again, we continue -- we talked about cost, laser-focused on cutting out the bottom end of the ROI producing capital expenditures. And again, I think when you look at the free cash flow conversion, we've had historically and are talking about in the future, like I said, we're cash guys. We have [ on ] that.

One of the other ways, I think you're managing your cash expenses is reducing interest expense. And I think the last quarter was a good example of this. You took out $114 million of debt earlier this year below par, which I think will result in about $10 million in interest expense savings annually. As you look out across the other parts of your balance sheet, where do you see opportunity to either pay down debt or refinance debt to lower your interest expense?

Well, if you look -- the debt, just for everybody's benefit that [ Steve ] referred to, we took out $114 million of the debt in Q2, which provided us about 11% return, so pretty good yield on that. And just also as a reminder to everybody in the audience, we don't have any debt maturities due to 2026, and we just refinanced our $450 million ABL and that doesn't come due until 2027. So we -- look, we just have a lot of flexibility out there and we'll continue to use our free cash flow to pay down debt and be most opportunistic to manage our interest expense.

You continue to make progress towards your net leverage target of approximately 4 turns. Could you remind us why you believe approximately 4x is the right leverage for your company? And any expectations for when iHeart potentially get close to that range?

Well, let me take them in reverse order. So one is we haven't given specific data in terms of 4x, but you could just look at our trend and see the significant progress we're making. And the reason for 4x is talking to all our current investor and potential investor base and just from a risk profile, what we've said -- what we've heard loud and clear is there's obviously some people, some people say, go to 0 leverage. Some people say, "Gee, we like what your leverage is right now." But in terms of opening up the widest possibility of shareholders being comfortable with the iHeart risk profile, the number that we've heard is about 4x. And we've heard that consistently over the years.

Maybe talk about some of the capital allocation priorities you would have once you get closer to that 4 turns leverage mark? Or are there opportunities to reramp investment in the business, potentially more M&A either in the tech stack or on the content side or capital return, I guess, at this point, in your opinion, the best use of capital once you get to that range?

We've not spent a lot on M&A over the years. We do -- as we look at every strategic need, we look at make, buy or partner. Today, there's enormous opportunities to partner for what you need. Given our size and given our scale, we are actually able to make a lot of what we need. So we don't -- there's not this pressing need for if "I have more capital, I'd like to do something." We're not a retail business or I'm opening stores or something like that. This is a business which doesn't consume a lot of capital, and we expect that to continue. I think the question is when you get to 4x, what do you do with this big cash flow? We've got free cash flow. And at that point, I think we -- the management of the company and the Board of Directors will figure out what we think is the best use of it.

And maybe just, Stephen, from an overarching comment, we've got one job here. We're not confused about that, which is drive the equity value of this company. And so the prism we look at in terms of making all this low decisions is really that prism. I just want to make sure, you mentioned in terms of ramping up investments, if you go back over the last 5, 6, 7 years, I think Bob articulated a number of these, whether it's Jelli, which makes our broadcast inventory look like digital, whether when we bought StuffWorks to really take advantage of what's happening in trends in the podcasting marketplace and look at the subjects we're talking about today. Both of those were formulated or helped by those acquisitions. And when you reach over 90% of the country, we don't need to make any significant acquisitions out there, as Bob pointed out, what we need to do is look and say, "Okay, what acquisitions can make the iHeart asset base more valuable?" So we have -- I guess, we have been investing during this. I wouldn't say we haven't been -- or I wouldn't say we've started. We've continued to feed our winners during this period of time and generate...

By the way, we set in terms of our radio operations, we built out the capabilities to move our studios into the cloud. we built out in terms of music selection, a lot of work that used to be done manually by lots of human beings. We now use AI to do it. We used to have 3 or 4 inputs into music decisions. We now have 3,000 every week. And -- but those are things you don't see because we didn't go make a big acquisition. We just built it out of our normal operating expenditure. And by the way, in this case, we found that added efficiency as well as made our product better.

Right. As a final point on this is it keeps coming up. But in terms of share repurchases and where the equities trading at today and the implied returns that you theoretically could get with the share repurchase. Is there leverage range that you have in mind perhaps where you could be signal or perhaps become more aggressive in terms of -- or opportunistic in terms of share repurchases? Is it mid-4s or once you get into the 4s? Or are you dead set on that 4 turns?

Well, based on every -- let me take one overall. We're never dead set on anything, just to be clear. We're flexible out there with the Prism again, no more objectives to drive the equity value of the company based on everything we've seen today getting to 4x both ourselves from a management standpoint, working with our Board of Directors has decided that 4x is the right number. And I would also point out, when you have a levered capital structure and you're paying down that, that's just another form of return to shareholders. You can do stock buybacks, you're going to do dividends, but this is also a form of getting money back to shareholders. And we'll continue to challenge that, but there's no change as we stand here today.

Makes sense. Bob, I want to end on a longer-term question, opportunities within the audio space, Web 3 is a big topic. The podcasting business has a lot of opportunity to grow and came out some partnerships in recent days. But as you look out over the next 3 to 5 years, where do you see the biggest opportunities or the biggest change in the audio?

I don't know because I don't know where the consumer -- what opportunities are going to present themselves. But our strategy is to be where the consumers are with our listeners are with the products and services they expect from us. And that has led us in the podcasting. It led us to create the iHeartRadio app. It led us into events, and it's led us into the Metaverse. We just launched Friday night. We had Charlie Puth on our iHeart land on Fortnite, huge success. We've got Roblox coming. Those are a Web 2 Metaverse plays. We've got Web 3 coming, which we think is a terrific opportunity for us. Tokenization is a great way to monetize loyalty that we have, but we've never had a way to do it prior to that. And we think there are opportunities to continue to expand this contact that we have with our users. Remember, we have over -- I think it's 270 million social followers. We are like -- I think it's 5x to 7x the number of social followers of the next largest audio group. That's again a point that we're following the consumer everywhere we go. So whatever emerges, I think you can count on us being there. And by the way, whoever is emerging wants us to be there because we bring this promotional power of reaching 90% of Americans to talk about it. So when we go to Fortnite, we not only do great content for Fortnite, we bring this promotional power, which very few partners can bring to something like that.

It's a good place to end. Bob, Rich, thank you very much.

Thank you.

Thanks.

Thank you. Really appreciate it.