In accordance with the Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of iHeartMedia, Inc. and Its Debtor Affiliates (as further modified, the “Plan of Reorganization”), Clear Channel Outdoor Holdings, Inc. (“CCOH”) and its subsidiaries (collectively, the “Outdoor Group”), were separated from, and ceased to be consolidated with, the Company and its subsidiaries. As required by GAAP, the operations of CCOH are reported as discontinued operations in both the current and prior periods presented. Accordingly, the amounts presented below exclude the operations of the Outdoor Group from all periods.
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| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
| (in millions) | | Successor
May 2-June 30
2019 | | | Predecessor
April 1-May 1
2019 | | | Combined
Predecessor
and Successor
Three Months
Ended June 30,
2019 | | | Predecessor
Three
Months
Ended June 30,
2018 | |
| | | (estimated) | | | (estimated) | | | (estimated) | | | (actual) | |
Revenue | | $ | 635 | | | $ | 278 | | | $ | 913 | | | $ | 892 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 132 | | | | 48 | | | | 180 | | | | 181 | |
Depreciation and amortization | | | 60 | | | | 15 | | | | 75 | | | | 65 | |
Other operating expense (income) | | | (2 | ) | | | — | | | | (2 | ) | | | 1 | |
Share-based compensation expense | | | 3 | | | | — | | | | 3 | | | | 1 | |
Restructuring expenses* | | | 2 | | | | 5 | | | | 7 | | | | 7 | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 195 | | | $ | 68 | | | $ | 263 | | | $ | 255 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| * | Restructuring expenses primarily include severance and contract termination expenses in connection with cost-saving initiatives, as well as certain expenses which, in the view of management, are outside the ordinary course of business or otherwise are not representative of the Company’s operations during a normal business cycle. Also included in restructuring expenses is the amortization through May 1, 2019 of retention bonus amounts paid or payable to certain members of management directly as a result of the Reorganization. |
We define “Adjusted EBITDA” as consolidated operating income adjusted to exclude restructuring and reorganization expenses included within direct operating expenses, selling, general and administrative expenses, (“SG&A”) and corporate expenses and share-based compensation expenses included within corporate expenses, as well as the following line items presented in our Statements of Operations: depreciation and amortization; and other operating income (expense), net. We use Adjusted EBITDA, among other measures, to evaluate the Company’s operating performance. This measure is among the primary measures used by the Company’s management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of the Company’s management. We believe this measure is an important indicator of our operational strength and performance of our business because it provides a link between operational performance and operating income.
We are not able to reconcile our expected Adjusted EBITDA for the Predecessor Period from April 1, 2019 to May 1, 2019 and the Successor Period from May 2, 2019 to June 30, 2019 to net income (loss), the most directly comparable GAAP financial measure, without unreasonable effort because we have not yet completed the financial close process for the second quarter of 2019. Given the complexity of accounting for our emergence from Chapter 11 Bankruptcy, certain items impacting net income (loss) for the second quarter of 2019, particularly income taxes, require additional analyses which are not complete as of the date of this Form 8-K. Accordingly, we have presented a reconciliation of expected Adjusted EBITDA to operating income, the next most directly comparable GAAP financial measure. We anticipate presenting a reconciliation from Adjusted EBITDA to net income in our June 30, 2019 Form 10-Q which is expected to be filed in August 2019.
2019 Full Year Guidance
For the year ended December 31, 2019, on a consolidated and combined basis, the Company expects total revenue growth in the low single digits and Adjusted EBITDA margins in the range of 26% to 29%.
Adjusted EBITDA margin is anon-GAAP financial measure. We are unable to reconcile our Adjusted EBITDA margin guidance to the corresponding GAAP measure because the amount and timing of future changes that might impact these measures (such as amortization of future acquired intangible assets, impairment charges and provision or benefit for income taxes) are variable, uncertain or out of our control and therefore cannot be reasonably predicted without unreasonable effort, if at all. As a result, we are unable to provide a reconciliation of this measure. In addition, we believe such reconciliations could imply a degree of precision that might be confusing or misleading to investors. For the same reasons, we are unable to address the probable significance of the unavailable information, which could have a potentially unpredictable, and potentially significant, impact on future GAAP financial results.
Investor Presentation Materials
As noted in the Introductory Note above, the Company intends to participate in certain investor presentations prior to Listing. Copies of selected presentation slides to be used in those meetings are attached as Exhibit 99.1 hereto and incorporated by reference into this Item 7.01 in their entirety.
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